<p>My layman understanding of the Efficient Market Hypothesis is that there is so much brain power focused on the maximization of profit in the marketplace, that the market will find the best solution both in the short and in the long term.</p>

<p>The particular instance of "Tragedy of the Commons" I have in mind is global warming, for which there is a fair amount of scientific consensus that it will disturb our civilization to an extent that does not guarantee that markets will continue existing as usual (stable governments being somewhat important for markets).</p>

<p>So here is my question: It seems that market players are not investing in ensuring the effects of global warming are minimized (i.e. market players are not ensuring the continuing existence of a market place). <strong>Does this mean that the Efficient Market Hypothesis is a model that does not describe our actual reality?</strong> If that is the case, how is one supposed to know when the Efficient Market Hypothesis is a good model?</p>

<p>A side question: Is this whole "exploiting the commons before someone else exploits them, irrespective of the fact that we are all doomed without the commons" more closely described by a Prisoner's Dilemma? But if that is the case, would you not expect the intelligent efficient actors in the marketplace to decide to work together to save themselves?</p>

<p>My education is not in economics so maybe my question is not well defined. My hope is that even if this is the case, an explanation of why the question is not well defined would be useful on its own.</p>

CC BY-SA 4.0
2019-04-13T01:57:49.027Z
EMH is about asset prices, not what you say, at least according to Wikipedia. So a simple solution to your conundrum is that correct future price of Earth is going to be zero at one point.
fantastic peace and prosperity
CC BY-SA 4.0
2019-04-13T09:50:56.353Z
As for the other stuff, i.e. game theory and the tragedy of commons, you should ask that separately if you're still confused about it. There are a lot of good readings there about that, e.g. https://www.mdpi.com/2071-1050/4/8/1776/pdf
fantastic peace and prosperity
<externalities><efficient-markets>
Does the Efficient Market Hypothesis Solve the Tragedy of the Commons?
Krastanov
# Does the Efficient Market Hypothesis Solve the Tragedy of the Commons?

(Asked by: username_0 on 2019-04-13)

My layman understanding of the Efficient Market Hypothesis is that there is so much brain power focused on the maximization of profit in the marketplace, that the market will find the best solution both in the short and in the long term.

The particular instance of "Tragedy of the Commons" I have in mind is global warming, for which there is a fair amount of scientific consensus that it will disturb our civilization to an extent that does not guarantee that markets will continue existing as usual (stable governments being somewhat important for markets).

So here is my question: It seems that market players are not investing in ensuring the effects of global warming are minimized (i.e. market players are not ensuring the continuing existence of a market place). **Does this mean that the Efficient Market Hypothesis is a model that does not describe our actual reality?** If that is the case, how is one supposed to know when the Efficient Market Hypothesis is a good model?

A side question: Is this whole "exploiting the commons before someone else exploits them, irrespective of the fact that we are all doomed without the commons" more closely described by a Prisoner's Dilemma? But if that is the case, would you not expect the intelligent efficient actors in the marketplace to decide to work together to save themselves?

My education is not in economics so maybe my question is not well defined. My hope is that even if this is the case, an explanation of why the question is not well defined would be useful on its own.

**Tags:** externalities, efficient-markets

> **Comments:**
> **username_1**: EMH is about asset prices, not what you say, at least according to Wikipedia. So a simple solution to your conundrum is that correct future price of Earth is going to be zero at one point.  
> **username_1**: As for the other stuff, i.e. game theory and the tragedy of commons, you should ask that separately if you're still confused about it. There are a lot of good readings there about that, e.g. https://www.mdpi.com/2071-1050/4/8/1776/pdf  

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## 0 answers

