#19 - Specific Reference, Must Be True, Purpose

[dtodaizzle]

I eliminated (B) pretty quickly because the author of Passage A doesn't talk about transparency. But is the part for Passage B correct? In Passage B, the author states that "Success in the market can then be gained..." This appears that the author is saying Transparency Success in the market...

[Emily Haney-Caron]

Hi dtodaizzle,

I'm not sure I understand your question. Would you mind expanding on it a bit so I can make sure I'm answering what you want to know?

[dtodaizzle]

Thanks for answering my questions!

(B) "...whereas Passage B uses it as an example of an activity whose viability is conditional upon the transparency of the market."

Passage B (38-42)

"In a transparent market, information that influences trading decisions is available to all participants at the same time. Success in the market can then be gained only by skill in analyzing the information..."

My question is that in Passage B, does the author state a conditional relationship? (IE: Is success in stocks a necessary condition of transparency? (If it is, is that what (B) is saying?)

[Adam Tyson]

Thanks for asking, dtodaizzle! Author B is absolutely establishing some conditional relationships right off the bat in his passage. For example, he tells us that a transparent market is sufficient for all the info being available to everyone. The indicator is a bit subtle, but there is an implied "all" in there - in ALL transparent markets that's the case. Some conditional indicators are like that. When you think of one of our classics, "people who", that's on the list because "all" is implied there, too - ALL people who.

The conditional hits in B keep on coming, thanks to the word "only" - only if we have that info (based on transparency) can we succeed in the market. So, IF transparent, THEN all info is available, and IF we succeed THEN we must have analyzed all that info.

I think it's fair to say that the latter portion of answer B is good. I don't typically diagram conditional arguments in RC, and I wouldn't here, and while there may be some sort of mistaken reversal or negation going on in that part of the answer, I wouldn't get hung up on it. No, the problem with that answer is the first part, and what is going on in passage A. There's nothing about analyzing the available info that compensates for a lack of transparency, just a comparison to what happens in insider trading. Thus D is the better choice.

Good eye looking at the conditional relationship here, but like I said, in RC we almost never want to go down the paths of diagramming that we do so often in LR. Take a more "big picture" view of these relationships instead and you will be better served.

Keep up the good work!

[gweatherall]

I'll jump in here to say that I actually had problems with this one because I was tempted to choose B myself. I actually did see an argument for compensation in passage A- passage A mentions that stock markets work best when everyone knows what's going on, and then suggests in paragraph 4 that insider trading is a good way to spread that knowledge. In other words, one could argue, insider trading compensates for the market's lack of transparency. Clearly, though, B is wrong. So- how can I conclude that my "compensation" argument is wrong?

Thanks!

[Adam Tyson]

I think it's about what we mean by compensating, gweatherall. The author of passage A isn't saying that analysis of information about stocks not available to everyone performs the same function as transparancy, giving everyone equal opportunity and access, and that is what I think would be the correct interpretation of "compensates". Insider info doesn't take up the slack for a lack of transparency, but rather feeds off of that lack of transparency and gives some people an advantage over others. Yes, eventually that info spreads, but only after some have taken advantage of it and gained the upper hand. That's not compensation - that's exploitation.

[gweatherall]

Thanks for your response, Adam! Hm- I'm still puzzled about this though. Isn't passage A essentially arguing that insider trading is a good thing? Passage A doesn't seem to make the argument that insider trading is exploitation. Or perhaps what's confusing me is that it does make that argument, but it doesn't really say that such exploitation is a bad thing(?)

Thanks again,
Grace

[Adam Tyson]

I meant "exploiting" in its most neutral meaning here, Grace - using, or taking advantage of, without assigning any morality or judgment. Yes, the author of passage A is saying that insider trading is potentially a good thing because it results in passing information on to the market, although his main point is really that it's not a bad thing because it's just what the market is supposed to be about - using what you know to make smart choices. What I meant was not that the insiders were doing a bad thing, necessarily, but that they were getting an advantage from a lack of transparency rather than providing a solution that makes up for a lack of transparency.

I hope that clears it up!

[gweatherall]

Thanks for your help, Adam!

[harvoolio]

I read all the posts above.

I think the author of Passage (A) makes a case for insider trading compensating for (in addition to exploiting) the market's lack of transparency, but (B) is wrong because the author of Passage (A) is not stating that the analysis of information about stocks is compensating for the market's lack of transparency. Is this analysis of why (B) is wrong correct?

Thanks.