Russell Sage "Rethinking Finance" Conference: Robert Solow Torments Burton Malkiel…
…by forcing him to defend Eugene Fama's version of the efficient markets hypothesis.
Solow, as always, puts his finger on it.
There is a huge difference between:
the efficient market hypothesis understand as a claim that it is very hard indeed to make lots of money, and you are never ever completely sure whether you are really smart or have been selling out-of-the-money puts and been lucky.
the efficient markets hypothesis understood as a claim that market prices are the true Langrangian multiplier values for a utilitarian social welfare maximization problem.
Malkiel's view: "Prices are always wrong, but nobody knows whether they are too high or too low. Eugene won't use the word 'bubble'. I know that there are bubbles. But I don't think any of us can be absolutely sure ex ante whether we are in a bubble or not...