Iron Laws Of The Universe

by Daniel on November 4, 2003

Given that Paul Krugman is reminding us all of Stein’s Law (“Things that can’t go on forever, don’t”), I thought I’d remind everyone of Davies’ Corolloraries:

1. Things that can’t go on forever, go on much longer than you think they will.
2. Corollorary 1 applies even after taking into account Corollorary 1.

{ 16 comments }

1

Brian Weatherson 11.04.03 at 6:06 pm

Corollary n+1. Corollary 1 applies even after taking into account corollary n.

This has been verified for all finite n, and with a big enough, or at least long enough, grant I could figure out which infinite values it holds for.

2

Charles Stewart 11.04.03 at 7:14 pm

A famous quip attributed to Keynes: the market can stay irrational longer than you can stay solvent. (I’d love to know if this one is true or not)

3

Chirag Kasbekar 11.04.03 at 7:15 pm

Spellings, Mr. Davies. Spellings.

4

ben wolfson 11.04.03 at 7:16 pm

Seems like an elaboration of Hofstadter’s Rule, which states that everything takes longer than you think it will, even after you take Hofstadter’s Rule into account.

5

Joel B. 11.04.03 at 7:30 pm

You should have noted this before I played roulette…

6

Fergal 11.04.03 at 7:31 pm

I think you really should doff your hat to Mr Dornbusch for no. 1 (but no. 2 is your own…)

7

Doug 11.04.03 at 8:33 pm

The comment (“This can’t go on much longer”) is used, to hilarious effect, in Tibor Fischer’s _Under the Frog_, about Communist rule in Hungary.

8

zizka 11.04.03 at 10:05 pm

A sadder statement of the rule was made by a co-worker I had awhile back, originally from Bosnia: “Don’t EVER say ‘Things can’t get any worse'”.

9

Tom T. 11.05.03 at 12:38 am

Reading this almost gave me a coronorary.

10

Joe Buck 11.05.03 at 1:53 am

Yes, lots of people went broke shorting Internet bubble stocks in 1998 or so, because the bubble kept expanding for another year and a half and the short-sellers had to cover. Of course the thing popped eventually, but not soon enough for those who bet on it.

11

Patrick Nielsen Hayden 11.05.03 at 3:56 am

Keynes’s remark that “The market can stay irrational longer than you can stay solvent” is paralleled by (ahem) Teresa Nielsen Hayden’s observation that “The Invisible Hand is not to human scale.”

12

Keith M Ellis 11.05.03 at 8:35 am

Patrick: Teresa is your spouse? Well, whoever she is, that’s a great quote. I’ll definitely remember it and use it in the future. You should make sure it’s on a web page, or better, with proper attribution.

13

William 11.06.03 at 1:45 am

I prefer one of my PoliSci professor’s comments:

“We’ve discovered that The Invisible Hand often turns into The Invisible Finger.”

14

Damien Warman 11.06.03 at 2:08 am

Patrick and Teresa are spouse to one another. See details about their name.

15

zizka 11.06.03 at 2:31 am

A lot of self-help literature, futurology, and New Age spirituality makes sense as long as the bubble isn’t popped, and by and large it serves to postpone the pop.

As I understand the rule is, “This can’t go one, but no one can time the pop”. People who shorted the bubble lost money because they’re trying to time the pop, but are there anti-bubble investments which are profitable during the bubble (though less so than bubble investments), but which lose little or nothing, or even gain, afterwards?

16

Jonathan 11.06.03 at 8:50 pm

About an investment profitable through and after a bubble” insured bank accounts.

Fundamentally, you’re always otherwise balancing risk and reward, and the risk means there’s a downside.

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