[extropy-chat] Re: peak oil debate framed from a game theory standpoint ?

[Robin Hanson]

At 02:02 PM 9/7/2005, Brian Atkins wrote:
>>>>So why are you not speculating in these markets to make all the money
>>>>you think is there to be taken.  Or are you also one of those fools?
>>>
>>>I'm sure there are plenty of "peak oilers" who are indeed already 
>>>spending their own money on futures, although I bet they also are 
>>>stocking up on gold and other end-of-the-world items.
>>>
>>>However, they seem to still be a small minority of the overall 
>>>market. The key question in my mind is: how useful really is it to 
>>>look to the current futures markets as key predictors of peak oil 
>>>when it seems that the majority (or "big money") players seem to 
>>>trade based on a six month or at most year out view?
>>
>>The percentage of traders who think about a certain issue is just 
>>not an indication of how well market prices reflect that 
>>issue.  That is just not how these things work.  All it takes is 
>>for a small minority to think about the issue, and for everyone 
>>else to have no opinion on the issue.  Almost all relevant issues 
>>are only considered by a small fraction of traders.  That is good - 
>>it allows a division of intellectual labor.
>
>Well, my question was more like: I don't think everyone else is 
>opinion-less; rather, I think they have an opinion based on current 
>data and near term projections going out maybe a year, but after 
>that they aren't using farther out guesses to significantly alter 
>their current opinion/trading.
>
>Essentially, they have a strong opinion that they aren't interested 
>in trying to trade based on guesstimates that are that far out in 
>time. They may rightfully decide that information that far out in 
>time (12 months+) is too unreliable to use for trading. Therefore 
>the market may potentially "wait" until closer to an event before 
>significantly pricing it in.

Having an opinion that you aren't interested in trading on a topic is 
very different from having an opinion on a topic and choosing to 
trade on that opinion.

>Is there any economic research to support such a market hypothesis?

There are surely hundreds and probably thousands of paper on this 
topic.  It is one of the favorite topics in finances for many decades.

>If not, what causes the typical 6 to 9 month limitation on the 
>stock/bond markets pricing in a recession?

I don't know what limitation you mean.  You said before that stocks 
"lead recessions by six to nine months."  Don't know why you think 
this is problematic.



Robin Hanson  rhanson at gmu.edu  http://hanson.gmu.edu
Associate Professor of Economics, George Mason University
MSN 1D3, Carow Hall, Fairfax VA 22030-4444
703-993-2326  FAX: 703-993-2323