ACT-R theory predicts that the "strength" of declarative memory in human brains decays as ∑i1√ti, where ti is the amount of time since the ith exposure to the fact. The power law here seems strange – surely things should either decay discretely or exponentially. My first reaction when I heard this was to think very confusedly about reaction rates between neurotransmitters, and my second reaction was to look for the empirical evidence. As it turns out, the power law relationship was empirically established in the late 90s. Ready for another shock? This matches closely with an empirical observation about information decay in financial markets! Our goal in this post is to give a theoretical explanation of this coincidence.
The... (read 1836 more words →)
There's probably more "bill-spotting effort per occupant" in grand central than elsewhere in life. Like maybe at a random train station there is on average $10/day available for the world to make watching the ground for abandoned cash, while at Grand Central there is $300/day. It is worth ~nobody's time to just sit around looking for bills in the random case, but in the grand central case maybe there is a kid who decides to try. If a bill drops within 20 meters of that kid, they are pretty likely (say > 30%) to notice it before anyone else does — just being the nearest person to the dropper isnt' good enough.
(If this is a claim about "market efficiency", then I'd say something like "the largest markets attract the most sophisticated participants".)