The Pretty Efficient Everything Hypothesis

Basil Halperin advances the Efficient Restaurant Hypothesis

'The efficient market hypothesis says that you can't pick out which stocks are undervalued versus which are overvalued. Likewise, I claim that you can't pick out which restaurants are underpriced versus which restaurants are overpriced.

Think you've found a great company, so that their stock will outperform on a risk-adjusted basis? Nope, someone else has already incorporated that information into the stock price and pushed the price up.

Think you've found a great restaurant which offers meals at a decent price? Nope, they've already raised their prices to the point where the extra cost just equals the extra utility you get from their extra delicious cuisine.

[...]

Conclusion: in equilibrium, assets or asset managers should not be undervalued or overvalued, on a risk-adjusted, fee-adjusted, search cost-adjusted, liquidity-adjusted basis. Likewise, in equilibrium, restaurants should not be underpriced or overpriced, once one takes into account their riskiness; the time spent searching for them on Yelp and reading reviews; and the ambience and other 'convenience yield' services provided by the restaurant.'

I learned this the hard way again recently after I came across a website trending on Hacker News with scraped Google Maps reviews of all of London's restaurants. I used the site's 'Hidden Gems' functionality, when I was in the market for a pub with a table recently, thinking I could beat the market. But sure enough the pub was too crammed to even stand for a drink. Alas, I knew a good quiet pub just around the corner where I got the table that is owned by some weird lady and plays no music. I'll take the pub's name to my grave.

Anywho. Corollarily, here I posit that there's a generalized broad market efficiency for utility pretty much everywhere for pretty much everything. In other words, you're unlikely to see a 1 SD improvement in your happiness, smarts, income, etc. lying on the sidewalk for you to just pick it up nor see that on a policy level.

Like, somebody tells you about a new thing that will change everything or make you happy/fulfilled, like:

Therapy — meta-analyses have often found it hard to find a large robust effect size of therapy, same for antidepressants
Drugs^[1]
Meditation
Philosophy or a new theory
Journalling
Some community
A different job
Some new relationship model
Big life decisions like buying a house vs. renting have real trade-offs

Your prior should be to be skeptical and assume there's usually some drawback.

For miracles to be true, by definition, you need evidence that an event is unlikely AND that it really happened.

But if you get evidence that the event is very unlikely, that's always also evidence that it hasn't actually happened.

And if you get evidence that the event really happened, that's always also evidence that it isn't unlikely.^[2]

That's why extraordinary claims require extraordinary evidence.^[3]

So, assume that:

nothing is that great
your mileage will always vary
no risk, no fun
It's all trade-offs
The grass is always greener on the other side

Some examples:

Someone tells you you can get stronger and more intelligent with creatine and everyone should take it?^[4] Maybe it's worth a try, but it does give many people terrible diarrhea.
In 'Inadequate Equilibria', it says you can use lumenators to help with SAD (IN SF!). These are very prominent in certain communities. I'm skeptical. Seems like a 0.1 SD improvement in SAD rather than a 1 SD improvement as with SSRI hyperresponders^[5]
In 'Inadequate Equilibria', it says that Japan lost trillions and had years and years of lost growth simply due to bad monetary policy. This is wrong: Due to aging populations, the gap between GDP growth per capita and GDP growth per working-age adult (or per hour worked) has widened in many advanced economies. Countries like Japan, which have shown lackluster GDP growth per capita, have performed surprisingly well in terms of GDP growth per working-age adult (or per hour worked). The ~1.7 percentage point growth gap between Japan and the US (0.83% vs 2.53%) shrinks to just 0.26 percentage points when measured per working-age adult.^[6]

Noting an error in Inadequate Equilibria — LessWrong
More here:

Appendix: Excerpt from Rogoff — 'Our Dollar, Your Problem'

'The rise and fall of Japan as an economic rival to the United States, and along with it the importance of the yen relative to the dollar, is one of the most disputed episodes in the modern history of international finance. Many believe that Japan's collapse happened because the United States forced Japan to drastically appreciate the yen in the mid-1980s, which crushed Japan's export engine. China's leaders have long bought into this view and have vowed never to submit to the same treatment. Much of the world agrees and views this as a prime example of the United States' willingness to let other economies do well, but not too well. I had long thought that this interpretation was wildly overblown given that the yen's appreciation had largely taken place by the end of 1988 but Japan's economic collapse did not start until 1992; in between, Japan's markets boomed.

Now I am not so confident. Sure, if Japan had had better financial market regulation when the boom came, its economy would never have overheated and then stalled as badly it did. On the other hand, it was U.S. pressure that forced Japan to adapt to a stronger yen faster than its politics, culture, and institutions could handle.'

'Is there any cost to just allowing the debt to rise? Some point to Japan, whose debt was over 250 percent of GDP in 2024, as having proved that high debt is not an issue. Not an issue for what? Japan suffered two decades of lost growth. As noted earlier, it is difficult to disentangle all the reasons for Japan's low growth, including demographic decline and rising competition with China. But this does not make it an example to emulate. True, Japan has not had a government-debt default crisis, and it need not given that virtually all its government debt is denominated in yen. Nevertheless, as highlighted in chapter 3, Japan's high debt unquestionably poses risks of a financial, debt, or inflation crisis if interest rates rise from their extremely low levels of late 2024, in which case the government risks having very little fiscal space to respond.'

The Pretty Efficient Everything Hypothesis

Further reading

Notes