If Wishes Were Horses, then What Should Venture Capitalists Do?

Michael Giberson

Thinking about wishful thinking (see previous post), I am reminded of a minor error in George Stigler and Claire Friedland’s classic article, “What Can Regulators Regulate? The Case of Electricity.”

As part of their introduction, they write:

And if wishes were horses, one would buy stock in a harness factory.

I believe they have misapplied the unstated underlying comparative statics analysis.  If one were to learn sooner than competing investors that wishes were about to become horses, only then should one buy stock in a harness factory.  If wishes were horses already, there would be no particular reason to believe harness factory stock was under priced.


3 thoughts on “If Wishes Were Horses, then What Should Venture Capitalists Do?

  1. OK, how about if the horsiness of wishes were about to become widely known? Technological change is change in knowledge, not physics.

    But it still wouldn’t make much difference to the harness makers, because the relative prices that spawned the saying are long gone. Feeding and maintaining a horse is now so much more expensive than buying it that reducing the price of horses to zero wouldn’t much affect the total cost.

    The horsemeat industry, on the other hand… 🙂

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