With a bang or a whimper?

Inconsistent pricing across traditionally segmented markets has been greatly reduced in recent years. Much of this improved market efficiency is due to the efforts of hedge funds. David Rowe argues, however, that the very success of these funds may be laying the foundation for a major shake-out, with potentially serious consequences

An old joke has an economist and a trader walking down the street. The trader says to the economist: “There’s a $20 bill lying on the sidewalk.” The economist replies: “No there’s not.” The trader responds: “But it’s right there!” “No,” the economist patiently explains, “if there was a $20 bill lying there someone would have picked it up already.” At this point, the trader leans down, picks up the $20 bill and they continue on their way.

The point of the story is that all too often economists