Daniel Gross writes:
This afternoon, while walking into the Congress Center, the main hub of Davos, I noticed a piece of gray paper on the floor. It looked like it might be currency of some sort—certainly not a dollar, but perhaps Swiss francs or something else. I started to bend over to pick it up, but then I caught myself. This is the World Economic Forum. It is populated by hundreds of economists and by thousands of business people schooled in the tenets of economics. This is possibly the most rational, profit-maximizing concentration of human capital in the world. These are the actors who make up an efficient market. And of course adherents to the efficient market hypothesis famously don’t believe in the concept of found money or found savings…
But I’m a connoisseur of economic irrationality. And so I bent down and picked up the paper. On one side, the grim visage of Queen Elizabeth. On the other, Charles Darwin. It was a 10 pound note, worth about $16.25. Just lying on the floor, unmolested by Nobel Prize-winning economists, CEOs of Fortune 500 companies, and financial journalists.
Gross concludes the efficient markets hypothesis must be false.
I’ve managed to lose a 100 Euro note before and as I read this, I can think of this irrational transaction as one of many that occurs daily. Then again, EMH describes the market as a whole whereby all actors can theoretically be wrong – in this sense – throw away cash.