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Fama's Efficient Market Hypothesis and Mises' Evenly Rotating Economy: Comparative Constructs

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  • Howden, David

Abstract

Mises created an artificial construct, the evenly rotating economy (ERE), from which to ascertain the source of entrepreneurial profit and loss. In particular, the ERE is characterized by two distinct elements. First is the elimination of the temporal element, second is the removal of changing market data. The second point necessarily arises from the first. Is it possible that the efficient market hypothesis (EMH), despite its practical flaws, may be used as a similar theoretical construct? If we envision a similar state of affairs as under the ERE, is it possible to grasp more fully the effect that information has on prices? We argue that it cannot, for two main reasons.

Suggested Citation

  • Howden, David, 2009. "Fama's Efficient Market Hypothesis and Mises' Evenly Rotating Economy: Comparative Constructs," MPRA Paper 79586, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:79586
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    File URL: https://mpra.ub.uni-muenchen.de/79586/1/MPRA_paper_79586.pdf
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    References listed on IDEAS

    as
    1. Cowen, Tyler & Fink, Richard, 1985. "Inconsistent Equilibrium Constructs: The Evenly Rotating Economy of Mises and Rothbard," American Economic Review, American Economic Association, vol. 75(4), pages 866-869, September.
    2. Fama, Eugene F, 1970. "Efficient Capital Markets: A Review of Theory and Empirical Work," Journal of Finance, American Finance Association, vol. 25(2), pages 383-417, May.
    3. repec:ucp:bkecon:9780226320625 is not listed on IDEAS
    4. Garrison, Roger W., 1984. "Time and money: The universals of macroeconomic theorizing," Journal of Macroeconomics, Elsevier, vol. 6(2), pages 197-213.
    5. Salerno, Joseph T, 1994. "Ludwig von Mises's Monetary Theory in Light of Modern Monetary Thought," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 8(1), pages 71-115.
    6. Meredith Beechey & David Gruen & James Vickery, 2000. "The Efficient Market Hypothesis: A Survey," RBA Research Discussion Papers rdp2000-01, Reserve Bank of Australia.
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    Cited by:

    1. Bagus, Philipp & Howden, David, 2010. "The Term Structure of Savings, the Yield Curve, and Maturity Mismatching," MPRA Paper 79592, University Library of Munich, Germany.
    2. Campos Dias de Sousa, Ricardo Emanuel & Howden, David, 2015. "The Efficient Market Conjecture," MPRA Paper 79792, University Library of Munich, Germany.
    3. Howden, David, 2013. "The Quantity Theory of Money," MPRA Paper 79601, University Library of Munich, Germany.
    4. William Luther, 2014. "Evenly rotating economy: A new modeling technique for an old equilibrium construct," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 27(4), pages 403-417, December.

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    More about this item

    Keywords

    efficient market hypothesis; evenly rotating economy;

    JEL classification:

    • B13 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Neoclassical through 1925 (Austrian, Marshallian, Walrasian, Wicksellian)
    • G0 - Financial Economics - - General

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