I’ve always puzzled over one of economists’ central claim of markets – the idea that the market, in its chaotic efficiency, has already taken account all the available information in setting the current price for the commodity at hand.

It always seemed naively obvious to me that there must have been someone who got there first with the information, before the market reflected it, and made a killing. The question really seemed to be – how do we get to be the one who gets there first?

I was reminded of this today by James Annan’s economist joke:

Two economists are walking down the road, and one says to the other “Hey, do you see that? It looks like a 10 pound note in the gutter over there. I’m going over to get it”. The second replies “Don’t bother, if it really was a tenner someone would already have picked it up”.

The joke is in the midst of a nice post worth reading, the summation of which is that markets are not necessarily good predictors of the future (say, the price of oil in 2010 or something), but rather are good collectors of the best available current information about what the future might hold.