From: Robin Hanson (hanson@hss.caltech.edu)
Date: Tue Feb 18 1997 - 17:26:27 MST
>>Note the implication though: Most capitalists have never appreciated
>>the value of free markets, or they would have invested here instead of
>>elsewhere.
>
>Your response clarifies that you meant (I think) that investors should
>have been investing here in the U.S., rather than overseas, because
>that's where they could get the highest returns.
Yes, both U.S. and foreign investors should have preferred to invest
here, had they expected free markets to help U.S. investments so.
>It seems to me, though, that investors like to diversify. Even if
>they know (and it's doubtful that they had the kind of quantified
>knowledge of comparative investment returns in major world markets
>that the study you cited provided) where to get the best return, they
>might not want to put all their eggs in one basket.
I don't think desires to diversification can explain this difference
in returns, absent any increased riskiness of U.S. investments.
Standard finance theories just don't support this.
Robin D. Hanson hanson@hss.caltech.edu http://hss.caltech.edu/~hanson/
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