NormR wrote:Now, move the time in question to an earlier era or go to a third world country
Ah, but they didn't (or don't) have the benefit of expert statistical advice, the way we do.
As the first part of my response said, these people are buying hope, not making a rational investment. Judging their decisions by standards of our rationality is inappropriate. We have to assess according to a rationality that is appropriate to their circumstances.
There's a book by Banerjee and duflo that's all the rage right now in the bien-pensant blogs, on Poor Economics ("poor" modifying the people it analyzes, not the quality of its reasoning). One of the point they make is that a poor family will go with inadequate food for a long time so as to afford a television. For them, often underemployed and with lots of time on their hands, entertainment takes priority. There's nothing irrational about it.
The rational person argument seems like the height of irrationality given the widespread evidence of human nature. But it seems to be a quaint bit of irrationality that more than a few academics seem to enjoy.
Well, if we're all irrational in different ways, there's nothing we can do except act randomly. Certainly any kind of financial analysis is doomed to failure. It's all predicated on detecting patterns, and if we all -- or even just "most of us" -- act irrationally, there are no patterns to detect.
The stock market as a random walk. Now there's a novel idea...