On 20/10/2011 15:00:57,
John Kay's piece - The Map is Not the Territory: An Essay on the State of Economics makes some very relevent points on this subject. For example:
'What Lucas means when he asserts that deviations are 'too small to matter' is that attempts to construct general models of deviations from the EMH - by specifying mechanical trading rules or by writing equations to identify bubbles in asset prices - have not met with much success. But this is to miss the point: the expert billiard player plays a nearly perfect game, but it is the imperfections of play between experts that determine result. There is a - trivial - sense in which the deviations from efficient markets are too small to matter - and a more important sense in which these deviations are the principal thing that matters.
The claim that most profit opportunities in business or in securities markets have been taken is justified. But it is the search for profit opportunities that have not been taken that drives business forward, the belief that profit opportunities that have not been arbitraged away still exist that still explains why there is so much trade in securities. Far from being 'too small to matter', these deviations from efficient market assumptions, not necessarily large, are the dynamic of the capitalist economy.'