Index funds are one of the most important practical spin-offs of academic economics. If fund managers are unable, on average, to beat the market index, why not just buy-and-hold the market index, saving transactions costs? Millions of people have profited from this insight.
If you like movies, an analogous tool is available at movies.go.com. Instead of posting a review of a new movie, movies.com tabulates ALL the reviews of ALL the new movies, and archives them forever. I have used this tool for a couple years, and find that – unlike individual reviewers – this “index fund” of reviewers is amazingly informative. For example, based on today’s post, I’m going to try to talk my wife out of seeing The Village and into seeing The Manchurian Candidate. (Aside: If you haven’t seen the original, you must!)
Good as this index fund is, I do have three caveats:
1. Comedies are systematically under-rated. If half of a comedy’s reviews are positive or mixed, it is probably worth seeing.
2. If any review contains the words “measured pacing,” the movie is probably over-rated. I’d only go if the reviews are 80% positive.
3. Contrary to popular stereotypes, action movies are not graded more harshly. Lots of action movies get great reviews. The Bourne Supremacy, for instance, got 11 positive, 0 mixed, 1 negative.