Simply reading an introductory article on the efficient market hypothesis would be a good starting point here, because both of these are basic principles. Efficiency in this context means how quickly and accurately the market incorporates information into asset prices. A very simple example would be a company giving an earnings call, how quickly and accurately after the results are known does the stock price move to reflect the results. If it happens quickly and accurately, the market is efficient, if it takes a long time or is an overcorrection, the market is inefficient. Now expand this concept to all available information at all times for all assets and you roughly have the efficient market hypothesis. Naturally no one thinks that the market is perfectly efficient at all times, but depending on how clear of a signal there is based on available information, the market can be really darn efficient at times.
except in the case of the efficient market, if somebody manages to find some inefficiency, they can stand to profit off it by arbitraging that inefficiency (until it disappears).
So it's not quite the same as code inefficiency, unless an engineer could reap the reward for the fixing of said inefficiency.
This isn't true. If you manufacture inefficiency yourself, and control it, nobody can exploit it. In fact if they try to, you can exacerbate the inefficiency in the other direction. Try arbitraging against the inefficient pricing of GameStop.
I don't see how you can manufacture and control inefficiencies in the long term so that nobody can exploit them. How can you arbitrarily exacerbate the inefficiencies?
More money has been earned by removing the GameStop inefficiencies than by creating them. GameStop shot up in value driven by WallStreetBets, but those people mostly lost money by creating the inefficiencies.
Introducing them has made people money. Those people will seek to introduce them again under a different ticker.
The main inefficiency in GameStop is creating information and will to buy that runs completely orthogonal to the actual valuation of the stock. Like snake charmers, Roaring Kitty etc use memes and bots online to drum "bagholders" into a fervor, thinking they are righteously sticking it to some nebulous man by buying a stock that is worthless.
Ah, so it is like the "Bug Free Code Hypothesis". If someone is paid to write code, then theoretically that code should be making money for someone, and it should be making them more money if all the bugs were fixed.
Not exactly, but I think that analogies with everyday experiences can help to show how silly some of these hypotheses are when considered in more concrete terms. “People have lots of incentives to eliminate Xs, therefore there won’t be any Xs” is an argument schema for which counterexamples abound.
To be fair, the "Bug Free Code Hypothesis" is kind of true. Because there are lots of incentives to eliminate bugs, people do put a lot of time and effort into doing so – yielding modern miracles such as OS kernels with 30 million lines of code that almost always work as intended.
But while software is bug free to a perhaps surprising extent, it would be foolish to plan a software project on the assumption that there will not be any bugs to fix, or that a small number of bugs cannot have a big impact. Similarly, it seems unwise to assume the efficiency of markets in economic planning (though I don't know to what extent economists actually do this).
I'm wary to using analogies of smaller team dynamics for wider systems. Markets have a disconnected impersonal nature where things have a way of shaking out.
Most of those programming management memes come from big companies with giant teams that don't live or die on output, many of them are shielded from that sort of thing because of cash cows like Microsoft/Google or corporate megadeals like IBM/Oracle. So there's never any shake ups until it's long been obvious to the customers.
I'm not using an analogy of smaller team dynamics. One can talk about software bugs in general and the general incentives to fix them just as one can talk about the economy in general and the general incentives for people to make money.
I'm also not referencing any programming management memes.
I think maybe you're seeing a cynicism in my comment that's not there. I don't think that bugs exists because of dumb managers. I think they exist because it's very difficult to write code without any bugs, even when there are very strong incentives to do so. That's partly just because it's inherently difficult, and partly because there are also other incentives pulling in different directions.
