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Pastimes : Austrian Economics, a lens on everyday reality
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To: Don Lloyd who started this subject12/16/2001 8:40:07 PM
From: Don Lloyd  Read Replies (1) of 445
 
All -

Austrian Economics Advanced Placement Test Question #1 -

interactive.wsj.com

Whether or not the above article can be retrieved without subscribing, it begins as follows :

"Spinning Off Value?
Maybe the market knows more about value than it appears
By VIKRAM NANDA and M. P. NARAYANAN

On April 20, 2000, the market value of 3Com 's common shares stood at $13.76 billion -- less than its 94% equity stake of about $15.03 billion in the recently spun-off Palm . The 3Com-Palm spinoff is one of several recent ones in which parent firms, after a spinoff of their Internet divisions, emerged with stock-market valuations that were lower -- sometimes much lower -- than their stake in the divested division alone.

How could this be? Such market valuations imply a negative value for the parent's operating assets -- an implication flatly contradicted by the earnings and asset values of parent firms...."

Although the authors go on to postulate about the expectations for future dilution of 3com stock as being a reason for the alleged undervaluation of 3com shares, this is a little like trying to run before you learn to crawl.

Why would Austrian Economics begin from entirely different premises?

Regards, Don

Extra credit - Use Austrian Economics to explain the inability of SI to accept a post without returning an error message, or more likely one of an infinite series of randomly selected error messages. Or not so random.
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