The Markets Will Be Stable Before The Nuclear Apocalypse

August 15, 2017 in Daily Bulletin

Nuclear war with North Korea may be imminent. But the stock market seems relatively stable. Alex Tabarrok had some thoughts on why:

  • If investors think IBM’s stock will fall they can sell, and then buy one of the multitude of other more promising stocks.
  • In a nuclear war though all stocks will crash, so there’s not much point in buying shares in other companies. Or even in holding onto cash.
  • Rational investors may still choose to sell out of the market and blow their cash on drugs and sex workers if they think the end of the world is near.
  • But perhaps that’s just a bad caricature of humanity. Many would prefer to go for a walk in the woods or spend more time with their family.
  • And anyway, marginal benefit falls. The first line of Armageddon fueled coke may be pleasurable. The second a little less so. After a while there’s only so much fun people can have with their money.
  • All this means that the markets are probably poor predictors of nuclear war.

Read the entire fascinating argument on Marginal Revolution here.