Re: Fools

1

Did you see where they are dropping all the charges against former Alaska Sen. Ted Stevens?

Really.


Posted by: politicalfootball | Link to this comment | 04- 1-09 6:44 AM
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1: Not that big of a surprise. From what I read, the prosecution was shoddy at best.


Posted by: JP Stormcrow | Link to this comment | 04- 1-09 6:47 AM
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If you were prosecuting a budyy, wouldn't you fuck up the prosecution. It's not like the guy is a stoner or anything.


Posted by: John Emerson | Link to this comment | 04- 1-09 7:19 AM
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I don't think you guys are cheering up Becks in any way.


Posted by: JRoth | Link to this comment | 04- 1-09 7:21 AM
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5

So the point of this thread is to collect online April Fools jokes, right? Here's the Guardian.


Posted by: politicalfootball | Link to this comment | 04- 1-09 7:22 AM
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Remarkably lame.


Posted by: David Weman | Link to this comment | 04- 1-09 7:28 AM
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Jim Henley has a very good, subtle April Fools joke.


Posted by: Tiny Hermaphrodite | Link to this comment | 04- 1-09 7:28 AM
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8

This may well be the worst April Fools post of all time.


Posted by: PGD | Link to this comment | 04- 1-09 7:33 AM
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9

The Guardian article would have been much funnier if it was just the headline.


Posted by: micah | Link to this comment | 04- 1-09 7:38 AM
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10

Jim Henley has is a very good, subtle April Fools joke guy.

The Google thing is quite good in its way.


Posted by: OneFatEnglishman | Link to this comment | 04- 1-09 7:39 AM
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The google thing is hilarious. Worthy of google.


Posted by: PGD | Link to this comment | 04- 1-09 7:56 AM
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#10. I'm always fooled by Google's gags, at least until it dawns on me that it's the 1st of April.

Via David Weigel, Joe the Plumber has a new 1-900 number you can phone for some hot IRS-abolishing action.


Posted by: Populuxe | Link to this comment | 04- 1-09 8:04 AM
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13

NPR had an awful one this morning about the Economist opening up an "Econoland" amusement park in London. It was lame even by NPR standards.


Posted by: Spike | Link to this comment | 04- 1-09 8:32 AM
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The manager of a well-known online archive for which I used to work had a taste for completely over-the-top content in otherwise subtle April Fool's gags, such as the year he changed some text on the front page of the site to reflect that the site would no longer host historical archives of Linux distributions and that the site had, by coincidence, been funded by Microsoft. Unbelievable content, subtle presentation, and it made the front page of Slashdot. I thought it was dumb at the time and continue to think so.

I mostly hate pranks and what I perceive/assume to be the mindset behind them and so I find April Fool's Day to be a holiday devoted to idiots.

However, Google's gag is almost always funny on its own, as a joke as opposed to a prank, and so I look for it.


Posted by: Robust McManlyPants | Link to this comment | 04- 1-09 8:33 AM
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15

The fake email responses in the Google gag are pretty funny. "I ate an entire shark while it was still alive. I am doing quite well."


Posted by: oudemia | Link to this comment | 04- 1-09 8:40 AM
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ding over at B's place describes a pretty impressive effort.


Posted by: JRoth | Link to this comment | 04- 1-09 8:43 AM
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I saw the Google thing briefly when logging into Gmail. I was like "Whoa, that is fucked up", assumed it was read, then proceeded on with my morning. Am so very easily fooled.


Posted by: m. leblanc | Link to this comment | 04- 1-09 8:51 AM
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"read" s/b "real"

And I mean that in more ways than one.


Posted by: m. leblanc | Link to this comment | 04- 1-09 8:51 AM
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19

The institution of April Fool's Day implies that you shouldn't engage in pranks and other shenanigans the rest of the year, which is why I'm against it. (Also because so many people feel obliged to observe it, Sturgeon's Law kicks in.)


Posted by: Minivet | Link to this comment | 04- 1-09 8:53 AM
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I'm going to go ahead and rerun my post from three years ago (only three years?). Which I remain pretty proud of although subsequent events have rendered it less funny.


Posted by: Tom Scudder | Link to this comment | 04- 1-09 8:55 AM
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i thought yesterday was the 1st and paid for the bus all my quarters, coz thought i forget to buy the monthly pass, such a self-inflicted prank, not funny


Posted by: read | Link to this comment | 04- 1-09 8:56 AM
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The link in 20 seems to be broken, it points to this thread itself. Unless that's the prank.


Posted by: Cyrus | Link to this comment | 04- 1-09 8:59 AM
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23

Hmm. attempting that link again.


Posted by: Tom Scudder | Link to this comment | 04- 1-09 8:59 AM
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24

Is this post itself an April Fool's prank?!?!?!


Posted by: Adam Kotsko | Link to this comment | 04- 1-09 9:02 AM
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This comment is a prank.


Posted by: Eggplant | Link to this comment | 04- 1-09 9:06 AM
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26

You have to admit, though, that this post was a good april fools post.


Posted by: NickS | Link to this comment | 04- 1-09 9:07 AM
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27

Further to 26, I admit that the linked post is far less funny now. But it was funny at the time.


Posted by: NickS | Link to this comment | 04- 1-09 9:09 AM
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28

27. And spoiled by the apostophe in the update (/nosflow)


Posted by: OneFatEnglishman | Link to this comment | 04- 1-09 9:10 AM
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29

28.

Perhaps the (/nosflow) tag should have preceded the word (?) "apostophe".

Also, Robust & I will actually be in DC for sure this weekend. (See how we carefully scheduled it while Obama is out of town? Oh well.) Are we actually going to have anyone to drink with?


Posted by: Rah | Link to this comment | 04- 1-09 9:28 AM
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30

1, 5: Nice. You got me.


Posted by: David Weman | Link to this comment | 04- 1-09 9:52 AM
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I am generally put out by the jokes and pranks (the Google one is pretty good). My attitude is not helped by the fact that in my work the days just before and after quarter changes tend to be rather tense (so no fucking around on blogs or shit like that ...).

However, I will give credit to my (generally earnest) campus newspaper back in '75 or '76 for a tone-perfect piece in which it was ostensibly revealed that Patty Hearst had worked as a dishwasher at a campus dining hall while she was in hiding. There had been just enough campus connections to the SLA biz to make it not only seem plausible, but likely.

And be to be consistent, I guess if I am going to praise the few, I need to tolerate the many.


Posted by: JP Stormcrow | Link to this comment | 04- 1-09 9:53 AM
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32

I like this one. Are my tears from laughing or crying?


Posted by: Cecily | Link to this comment | 04- 1-09 9:58 AM
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33

Dudes, if you're more humorless than I am, you need to lighten up. There's something charming about major news organizations celebrating a kids' holiday. (and it's sort of good to be reminded to think about what you hear/read once a year.)


Posted by: Bitchphd | Link to this comment | 04- 1-09 10:15 AM
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34

Was I oversubtle in assuming 1 was an april fools joke?


Posted by: David Weman | Link to this comment | 04- 1-09 10:32 AM
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35

34: Sadly, it's real.


Posted by: Jesus McQueen | Link to this comment | 04- 1-09 10:32 AM
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36

No, I meant I assumed politicalfootball tried to make people think it was an april fools joke.


Posted by: David Weman | Link to this comment | 04- 1-09 10:37 AM
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34: It's actually the tail end (hopefully) of the running gag of the Bush-era Department of "Justice". As has been discussed here before, the DOJ has to be regarded as the part of the government with the most concentrated and hard-to-reverse damage. And can we get some new US Attorneys already?


Posted by: JP Stormcrow | Link to this comment | 04- 1-09 10:41 AM
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38

While I am saddened by 1, I am heartened that the Justice Department isn't going to stand behind prosecutorial fuckups. That's a pretty big change from the past 8 years.


Posted by: Spike | Link to this comment | 04- 1-09 10:55 AM
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Also, Robust & I will actually be in DC for sure this weekend. (See how we carefully scheduled it while Obama is out of town? Oh well.) Are we actually going to have anyone to drink with?

I'll be there. Have the details been hammered out yet?


Posted by: teofilo | Link to this comment | 04- 1-09 10:55 AM
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40

||
Fascinating piece on the collapse of the Icelandic economy. The gender aspects of the whole thing are interesting.
|>


Posted by: togolosh | Link to this comment | 04- 1-09 11:12 AM
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41

The post is totally right, btw. I hate April Fool's Day.


Posted by: teofilo | Link to this comment | 04- 1-09 11:21 AM
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42

i recalled a pro-moderation proverb 'shunal ixedvel shulam bolno'
'if greed will exceed you'll turn up devil (or your proceedings will turn up badly, either way)'


Posted by: read | Link to this comment | 04- 1-09 11:21 AM
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43

42:

"Everyone was learning Black-Scholes" (the option-pricing model)...."

Scholes personally had a hand in the LTCM collapse TEN YEARS AGO, which used to be thought of as a big deal. Are we going to give him a third chance? Is there any protocol for annulling Nobel prizes?

I understand that this is regarded as cranky, but a lot of the problems we're having are the result of egregious professional failures, both intellectual and ethical, on the part of economists and the whole economics profession.

But ten years from now, economics will be taught almost exactly the same, with a couple of little kludges patched in to handwave away reality one more time.


Posted by: John Emerson | Link to this comment | 04- 1-09 11:24 AM
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44

IT'S BACK!


Posted by: apostropher | Link to this comment | 04- 1-09 7:36 PM
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45

Whooo there.


Posted by: redfoxtailshrub | Link to this comment | 04- 1-09 7:36 PM
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46

I'm thinking some peoples productivity was waaaay up today.


Posted by: togolosh | Link to this comment | 04- 1-09 7:41 PM
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47

Y'know, you'd think that, but you'd be amazed how much time a person can spend anxiously clicking the reload button.


Posted by: apostropher | Link to this comment | 04- 1-09 7:43 PM
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48

Hmm. We are in some time zone in the Atlantic Ocean.


Posted by: oudemia | Link to this comment | 04- 1-09 7:46 PM
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49

The Knights of Malta have their fingerprints all over this one.


Posted by: John Emerson | Link to this comment | 04- 1-09 7:46 PM
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Scholes personally had a hand in the LTCM collapse TEN YEARS AGO

I know you don't care, but the formula for pricing stock options had nothing to do with LTCM's collapse, and all you're really doing is buying into LTCM's promotional material that they were run by a bunch of super-geniuses who could make money just by using super-genius-math.


Posted by: Barbar | Link to this comment | 04- 1-09 7:49 PM
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51

44-47 are amazing. 44-47 are like the sweetest honey. 44-47 make me weep ecstatically.


Posted by: Sifu Tweety | Link to this comment | 04- 1-09 7:49 PM
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52

48's terrific, too.


Posted by: Sifu Tweety | Link to this comment | 04- 1-09 7:51 PM
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53

47 gets it exactly right.


Posted by: Not Prince Hamlet | Link to this comment | 04- 1-09 7:54 PM
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54

51: Do not taunt 44-47.


Posted by: Josh | Link to this comment | 04- 1-09 7:54 PM
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55

We (and when I say "we", I mean people other than me) were supposed to be moving the site to a new dedicated server right about now, so it probably had something to do with that.


Posted by: apostropher | Link to this comment | 04- 1-09 7:56 PM
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50: Scjoles was a company director. If he was really just a dancing monkey used for promotional purposes, is that supposed to make me feel better about him?

Sorry: there was malfeasance, misfeasance, and nonfeasance. I'm sure glad that medical schools don't have the problems that economics departments do.


Posted by: John Emerson | Link to this comment | 04- 1-09 7:59 PM
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If he was really just a dancing monkey used for promotional purposes, is that supposed to make me feel better about him?

It's supposed to be irrelevant to whether or not people in Iceland were studying the Black-Scholes formula.

It's OK, I know you don't really care.


Posted by: Barbar | Link to this comment | 04- 1-09 8:01 PM
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58

If he was really just a dancing monkey used for promotional purposes

Also: the dancing monkey wasn't him, it was the math.


Posted by: Barbar | Link to this comment | 04- 1-09 8:03 PM
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59

I've been reading about the boom times of the late Nineteenth century. Parrington called it The Great Barbeque. A fair proportion of the population found out that they were not invited.

Where were economists when all this was happening?


Posted by: John Emerson | Link to this comment | 04- 1-09 8:04 PM
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60

London banks are falling down,
Falling down,
Falling down.
London banks are falling down,
Long live anarchy!


Posted by: minneapolitan | Link to this comment | 04- 1-09 8:05 PM
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61

Gee John, you should start a blog called Trollblog.


Posted by: Barbar | Link to this comment | 04- 1-09 8:05 PM
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62

OK, fine, Scholes was the dancing monkey for one disaster, and when people started actually paying attention to his math, they produced a different, much larger disaster. Two entirely different things. The guy's a Zelig of disasters. Can't someone just shoot him?

We each have things we care about and others don't care about. Precision in precisely unpacking Scholes' malign effects is not one of my desiderata.

Where were the economists, anyway? They're scurrying around like ants on a hot stove at the moment, trying to figure out what happened and what to do next. Per DeLong and many others, one thing that's absolutely out of the question is retribution.


Posted by: John Emerson | Link to this comment | 04- 1-09 8:09 PM
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60: I heard that some of the bankers were taunting the protesters by waving 10-pound notes at them out the window. Must be nice living in a place where class conflict is waged out in the open.


Posted by: Jesus McQueen | Link to this comment | 04- 1-09 8:12 PM
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64

Didn't someone around here start something indistinguishable from this?


Posted by: JRoth | Link to this comment | 04- 1-09 8:14 PM
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65

The Whole Foods web site is pretty good today. Wait for some of the featured items to be demanded at their local store by your swipple neighbors.


Posted by: Nathan Williams | Link to this comment | 04- 1-09 8:14 PM
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66

People started paying attention to Scholes' math thirty-six years ago.

It's OK to be ignorant; I think if your political outlook is shared by 5% of the population and no one influential, then it's probably completely right.


Posted by: Barbar | Link to this comment | 04- 1-09 8:14 PM
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Oh, and while 47 got it right, I did, eventually and grudgingly, start being productive. Then the site came back.

It was a good hour.


Posted by: JRoth | Link to this comment | 04- 1-09 8:16 PM
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68

They're scurrying around like ants on a hot stove at the moment, trying to figure out what happened and what to do next.

Sadly, most economists don't even give a shit, because they're busy pursuing whatever academic career goals they've set out for themselves.


Posted by: Barbar | Link to this comment | 04- 1-09 8:18 PM
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69

64: Yeah, that was me. But I totally didn't follow through, for two very adorable reasons. I kind of like that one better than mine, though.


Posted by: mrh | Link to this comment | 04- 1-09 8:18 PM
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65: Yeah, some of that Grackle Tetrazinni would sure hit the spot right about now.


Posted by: minneapolitan | Link to this comment | 04- 1-09 8:19 PM
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OT: The IRS is looking for a shitload of attorneys. Hopefully that's a sign of good things to come.


Posted by: Not Prince Hamlet | Link to this comment | 04- 1-09 8:23 PM
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72

I would totally eat a deep-fried pork eclair.


Posted by: Sifu Tweety | Link to this comment | 04- 1-09 8:25 PM
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73

One of the things I read in my despair was a Reason debunking of the QWERTY myth*. Interesting enough, but it was done as a screed against the concept of path dependency, since of course a recognition of path dependency would be a recognition that we're not all perfectly rational, perfectly spherical, perfectly elastic decisionmakers. Anyway, the most toolish aspect was that they kept denying that Mac/DOS was an example of path dependency, since DOS users switched to Windows. Umm....

Incredibly stupid, and they wouldn't shut up about it.

* the only part of it that is true is that alphabetical layouts did cause the arms to catch on each other, but QWERTY didn't "slow typists;" it separated often-used arms, without slowing down word production.


Posted by: JRoth | Link to this comment | 04- 1-09 8:25 PM
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68: Oh, I see, that's OK then. My bad.

If you have a more sophisticated, accurate explanation of why your profession let us down, I'd be happy to hear it.

The Great Barbecue is over with, and as people figure that out, the 5% will increase.


Posted by: John Emerson | Link to this comment | 04- 1-09 8:28 PM
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...one thing that's absolutely out of the question is retribution.

Pitchforks are still in stock at Home Depot, and a torch can be improvised using a greasy rag and a stick.

More seriously, I for one do not intend to let any positive mention of Milton Friedman pass without a kick to the groin mentioning the decisive refutation of his preferred policies that has taken place over the past few years.

Getting traction with the idea that the entire discipline of economics is brain damaged is likely to be hard. Putting the focus where it belongs, namely the Chicago School and their toadies, acolytes, fellow travellers, sympathizers and dupes* might actually shift the discussion in promising directions.

Friedmanites got traction because they followed one of the most tried and true routes to success: Tell rich people what they want to hear.

* IOW, the entire discipline of economics [Rimshot]


Posted by: togolosh | Link to this comment | 04- 1-09 8:30 PM
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76

The QWERTY debate is oddly intense for some people. Tools is a good word.


Posted by: Barbar | Link to this comment | 04- 1-09 8:32 PM
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69: Yeah, it's nicely presented.

As were your excuses, I might add.


Posted by: JRoth | Link to this comment | 04- 1-09 8:32 PM
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78

If you have a more sophisticated, accurate explanation of why your profession let us down, I'd be happy to hear it.

Not an economist, John. You push my buttons not by attacking my chosen career path, but by acting like an ignoramus.

I personally attribute the financial crisis to the end of feudalism and the rise of the nation-state.


Posted by: Barbar | Link to this comment | 04- 1-09 8:34 PM
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79

i thought maybe Unfogged has succumbed to that worm


Posted by: read | Link to this comment | 04- 1-09 8:36 PM
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80

Actually now that I think about it, isn't it suspicious how Bush was all talking about bringing homeownership to poor minorities, and then we had a housing bubble that caused the entire global economy to collapse when it burst? Have you heard of the Community Reinvestment Act? What about ACORN? Franklin Raines? Fannie and Freddie? Take a look at the timeline; yup, that's the ticket. It was feel-good liberalism with its misguided concern for helping intrinsically inferior minorities, that's what did us in. Yup.


Posted by: Barbar | Link to this comment | 04- 1-09 8:38 PM
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So you have no stake in this at all, but just want me to spiff up my argumentation? Everyone has their own little obsession, I guess.

I think that we've been let down by the economics profession. It's as though the medical profession told us that AIDS was no big deal, with a third of them pushing AIDS as a good thing. And for decades they've had a lock on what's possible for government.


Posted by: John Emerson | Link to this comment | 04- 1-09 8:39 PM
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82

Could we go back to your claims that Scholes was just a dancing monkey at LTCF

No. No more talking about Scholes.


Posted by: Barbar | Link to this comment | 04- 2-09 11:03 AM
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83

No. No more talking about Scholes.

Scholls lets monkeys dance longer.


Posted by: apostropher | Link to this comment | 04- 2-09 12:00 PM
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355

As soon as I joined Facebook, I found out that everyone from my family to my old Scout master was on it, too. They were all, where the fuck have you been?

Posted by: Jackmormon | Link to this comment | 04- 2-09 5:24 PM
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356

I may be the sole believer in a forthcoming Friendster comeback.

Posted by: Stanley | Link to this comment | 04- 2-09 5:30 PM
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357

In other non-news, Angela Merkel looks a lot like my mother and her sister, which makes all the news photos with Merkel feel completely unheimlich to me.

Posted by: Jackmormon | Link to this comment | 04- 2-09 5:40 PM
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358

I'm also resistant to Facebook because it doesn't seem as if I can look around it without joining up, and that makes me cranky.

Posted by: LizardBreath | Link to this comment | 04- 2-09 5:44 PM
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359

Did they feel a special thrill when Our President of that time groped Angela?

Posted by: John Emerson | Link to this comment | 04- 2-09 5:48 PM
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360

Not that I know of! But both my mother and her sister tense up as though they're about to leap out of their seats when unpleasant things happen, so I recognized that move on Merkel's part instantly.

Posted by: Jackmormon | Link to this comment | 04- 2-09 5:52 PM
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361

I missed the day in health class when they taught us the Unheimlich Maneuver. Damn.

Posted by: John Emerson | Link to this comment | 04- 2-09 5:53 PM
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362

Man, those are some fine-tuned genetic correlations there.

Posted by: John Emerson | Link to this comment | 04- 2-09 5:54 PM
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Since no one protested...

363

Ima gonna chalk that one up to nurture.

Posted by: Jackmormon | Link to this comment | 04- 2-09 5:55 PM
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364

361: You shove a piece of partially masticated food into the patients' windpipe. The key is to avoid the teeth.

Posted by: togolosh | Link to this comment | 04- 2-09 5:59 PM
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Posted by: David Weman | Link to this comment | 04- 2-09 7:14 PM
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365

Certainly with economics you're dealing with a lot of nonlinearity. But that's not unique to the social sciences, either.

it's different in kind. "Non-linearity" often serves as just a fudge word for complexity, but the type of complexity in social sciences is different than the natural sciences. If a social science analogous to the natural sciences were to exist, it would have to be based on a very complete and powerful predictive theory of human behavior, that worked under a very wide range of cultural circumstances. That would have to be the underpinning of the social science in the same way that physics or biology underpins natural sciences and their applications such as medicine. But human behavior cannot be studied in isolation from culture in the way, that, for instance, physics can be studied separately from earthquakes or cells from the human body. You're always dealing with the entire system all at once. (In this sense, the closest natural science analogy is ecology, but the difference there is how simple the behavior of lower-order living beings is compared to humans, in particular they have no culture, language, technology, etc.).

This is why you'll often find big believers in the social sciences also following along with obviously flawed reductionisms about human behavior, like evolutionary psychology -- they are trying to find a basis for a human behavioral science that is independent or separable from the higher-level entities like culture that they are trying to explain by their theory of human behavior.

Social "science" disciplines are important because we can't help theorizing about ourselves and try to support those theories with evidence, but thinking of them analogously to the physical sciences is problematic.

Posted by: PGD | Link to this comment | 04- 2-09 6:19 PM
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366

If a social science analogous to the natural sciences were to exist, it would have to be based on a very complete and powerful predictive theory of human behavior, that worked under a very wide range of cultural circumstances.

To be clear, a very great many economists think they have exactly this. In fact, they openly put down other social "sciences" (the scare quotes are theirs, not mine) that they believe lack this, and the scientific rigor that can accompany it.

Posted by: Brock Landers | Link to this comment | 04- 2-09 6:25 PM
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367

In history I frequently see failed reductions. My favorite is the climatic explanation of the Mongol invasions. At this point, the Mongols are known to have begun their expansion either because of increased rainfall or because of decreased rainfall, but we can't be sure yet, because we don't know what the rainfall actually was.

That's a caricature, but not by much. My opinion that climatic explanations of history need four well-defined elements: a climate record, a historical record, a correlation of the two, and a plausible explanation of why. I don't think that I've ever seen all four together, with regard to the steppe at least.

If you do find a non-human, reductive causal factor (e.g. the Little Ice Age in Europe), the historical description / explanation you end up with will seldom or never be completely reductive, because all the other factors are still in play. You've just found and described a new factor.

Posted by: John Emerson | Link to this comment | 04- 2-09 6:33 PM
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366: well, the fact that economists came at some level to believe their own reductionisms is at the heart of the problem.

I like economics as a sophisticated attempt to think out the implications of universal opportunism, but if you really took universal opportunism seriously you'd see it undermines markets just as much as other forms of social organization.

Posted by: PGD | Link to this comment | 04- 2-09 6:33 PM


Posted by: David Weman | Link to this comment | 04- 2-09 7:15 PM
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86

Am I on a thread that will survive?

Does someone want to talk about the fact that Alan Greenspan says we should nationalize the banks.

Is the ghost of Ayn Rand floating around somewhere wishing she could unfuck him?


Posted by: rob helpy-chalk | Link to this comment | 04- 2-09 7:21 PM
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87

What's the difference between Alan Greenspan and a lightbulb?

I can unscrew a lightbulb.


Posted by: Ayn Rand | Link to this comment | 04- 2-09 8:02 PM
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88

I see the rancorous back and forth in this thread over the culpability of economists continuing with many other commenters joining in.


Posted by: The Amazing Criswell | Link to this comment | 04- 2-09 8:08 PM
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89

At least we can all agree that, whatever else has gone wrong, we can rely on economists to help understand the science of this crisis.


Posted by: Sifu Tweety | Link to this comment | 04- 2-09 8:54 PM
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90

With their big models.


Posted by: JP Stormcrow | Link to this comment | 04- 2-09 8:57 PM
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Posted by: | Link to this comment | 04- 2-09 10:56 PM
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92

Well, in actuality, Mr. Tweetybird, I think Comrade Emerson is correct in this instance, even on Black-Scholes, and Barbar is correct to some extent about not-Black-Sholes matters related to LTCM but WRONG WRONG WRONG about his contention with Emerson.

To the extent that the argument against being mean to finance people/economists is a variant of 'Guns don't kill people, people kill people' I'm sympathetic, but must point out the scale problem. Most people, including cowboy gun nuts (but not Randroids!), have enough sense to realize that the precautions involved in allowing possession of handguns must change when nuclear weapons are substituted for said handguns.

One must also pretty much be a true believer in perfect ('efficient') markets to use Black-Scholes and to then be surprised when you lose lots of money during a big downturn. Or an idiot who doesn't understand what the hell you're messing with.

max
['This group apparently includes Black-Scholes.']


Posted by: max | Link to this comment | 04- 2-09 11:51 PM
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If you're a true believer in perfect efficient markets, then you don't play the markets at all, because they're already efficiently priced and there are therefore no profit opportunities available.

People who underestimate the probability of a downturn will not hedge enough against the possibility of a downturn. Of course Black-Scholes doesn't tell you the probability of a downturn, it basically says that if you make an assumption on what the probability of a downturn is, then you can put a price on insurance against it. What I don't understand is how Black-Scholes caused the downturn, or generally played a key role in our current crisis.

To the extent that the argument against being mean to finance people/economists is a variant of 'Guns don't kill people, people kill people' I'm sympathetic

We should be mean to finance people, they're the "people" who killed people. We should also be mean to the economists who specifically blocked regulation (just as we should be mean to the economists who fuck up developing countries). My point has been that people seem to think that people on Wall Street would be too scared to take any risk if it wasn't for mathematical models, and this really doesn't seem to be true. I don't want to oversimplify, because obviously one of the points of the mathematical modeling is to facilitate greater risk-taking, but a lot of the talk about fancy maths imbues it with mystical properties that it really doesn't have.

(I think I'm actually capable of having a reasonable conversation with people and I recognize that I'm not right about everything and there's a lot I don't know about, but if someone suggests that this comment is evidence of me ruining the blog by "harping on Scholes" even though no one is defending what Emerson said about Scholes then I will die, people. Please don't kill me.)


Posted by: Barbar | Link to this comment | 04- 3-09 10:44 AM
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Emerson is completely correct. It is Black-Scholes fault! Let's have 300 more comments arguing about this!


Posted by: PGD | Link to this comment | 04- 3-09 11:28 AM
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88: I win.


Posted by: The Amazing Criswell | Link to this comment | 04- 3-09 11:31 AM
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one of the points of the mathematical modeling is to facilitate greater risk-taking

I was wondering as I read something about "the quants" somewhere or other how often their model outcomes showed increased risk. As an initial rough cut, it should be about half the time, no? If their models only ever came up with decreased risk, I might suspect that they had an agenda.


Posted by: Megan | Link to this comment | 04- 3-09 11:38 AM
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Theoretically, you facilitate risk-taking by spreading risk around more, and by finding ways to let people make exactly the bets they want to make. If some financial wizardry allows anyone to make a bet on whether or not there will be an earthquake in California next year, that doesn't change the risk of an earthquake in California, but now there's a greater source of funds that can be used to support earthquake insurance in California.


Posted by: Barbar | Link to this comment | 04- 3-09 12:02 PM
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The quants facilitated increased risk-taking on Wall Street, there's no question. The regulators bought the idea that you could hedge away risk and so let regulated institutions take greater risk. Plus new unregulated pockets of the system were allowed to grow. This all had to do with confidence in new financial technologies that allowed risk to be spread.

Emerson really is basically correct.


Posted by: PGD | Link to this comment | 04- 3-09 1:12 PM
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I see the question being about how fine a distinction does one have to make in order to provide a sensible comment.

Emerson's main point is that when it comes to finance, we should not make fine distinctions at all, we should bring pitchforks and burn shit down. I actually think there is some merit to this. I don't feel sorry for finance people who made bucketloads of money. I don't feel sorry for economists who bragged about theirs was the one true social science and about how everyone who disagreed with them was just a stupid innumerate ignoramus. And the angry mob may be a better political force than the unangry association of calm reasoned professionals (but to be honest, when the elites tell us that they need to give more taxpayer money to the banks for the good of the economy, the angry mob is not going to be any better at making heads or tails of the situation).

That said, it's not as if there's a shortage of simple-mindedness when it comes to politics and economics. There are plenty of people who just know that all our problems were caused by heavy-handed government regulation, by interference with the wisdom of the marketplace, by do-gooder liberal interference with the natural racial order, by Ivy League intellectuals, by community activists, by immigrants, etc.

Blaming the quants gets some things right but gets a lot of things wrong. In particular, it's strange for me to see people blaming mathematical models and then seeming pretty satisfied with their understanding of the crisis. Do you think that mathematical models should disappear from Wall Street, and that in the brave new world people are going to be quantifying risk on napkins, and there will never be a financial crisis again? Or do you just think that the physicists and the economists tricked their Wall Street bosses into having too much confidence in the models, and that in the brave new world we will return to a situation where billionaire financiers understood every little detail about where their money comes from?


Posted by: Barbar | Link to this comment | 04- 3-09 2:22 PM
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Mostly, I think that part of what drove the bubble was stupid faith in models people didn't understand properly; whether it was sincere or disingenous stupidity doesn't really matter if the takeaway message is "don't bet the financial system on models you don't understand properly."


Posted by: LizardBreath | Link to this comment | 04- 3-09 2:26 PM
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what drove the bubble was stupid faith in models people didn't understand properly

What drove it was people were getting rich by inflating it. Even if they had understood them properly, I doubt much would have changed ("Oh sure, it will all come crashing down eventually, but I'll have millions in the bank.").


Posted by: apostropher | Link to this comment | 04- 3-09 2:28 PM
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(Assume the following is said without naive faith that it would have any effect if everyone listened to me.)

101: Yeah, that's what I meant by alluding to disingenously stupid faith in models -- someone who knows they don't work, but thinks he can justify relying on them for long enough to get rich and get out, is still causing the same problem. But the models are still being used as cover, making unreasonable risks look reasonable -- if regulators and so forth stop with the stupid faith, it might help some.


Posted by: LizardBreath | Link to this comment | 04- 3-09 2:33 PM
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101: yep. Same as the Tulip bubble, which doesn't usually get blamed on inadequate understanding of Botany.


Posted by: Sifu Tweety | Link to this comment | 04- 3-09 2:34 PM
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101: yes, exactly. If a physicist came to Wall Street and told people they shouldn't be making the same investments that their competitors are profitably making, because his model says that in the long run there will be a painful ending, all these poor stupid Wall Street dupes would suddenly become extremely aware that he had an abstract ivory-tower model that no one could understand properly.


Posted by: Barbar | Link to this comment | 04- 3-09 2:35 PM
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I'm on the record as being specifically opposed to models, especially those that yield finegrained results. I learned to hate them when I worked on some well-regarded models of water systems and have stayed skeptical through all the recent technical presentations I've been to. There always comes a point where an assumption or simplification becomes a real serious flaw. I'm willing to take rough results from models, especially if there are a lot of them and they all point in the same direction and if I don't know the subject matter firsthand so I'm not annoyed by a detail that I know isn't right and when they are confirmed by the anecdata around me.

But I'll say right here that any discipline that bets a lot of (other people's) money on getting complicated models right in detail is of itself a problem. There may not be a better way to do the things that models do (leverage risk), but if that is the case, I'd say those things shouldn't be done. Maybe transactions with that degree of complexity (requires a model that takes math Ph.D's to understand or a genius financier to know every detail) are inherently wrong.


Posted by: Megan | Link to this comment | 04- 3-09 2:35 PM
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I don't think the faith in models, per se, is what the regulators can (or should) stop; they should cap the amount of leverage and regulate the transparency of the products by forcing them to be traded on exchanges.


Posted by: Sifu Tweety | Link to this comment | 04- 3-09 2:37 PM
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103 - But you didn't have botanists running around explaining that tulip stamens would transform into gold.


Posted by: Megan | Link to this comment | 04- 3-09 2:37 PM
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106: continued: although I'm willing to concede that the regulatory impulse should in the first place come from an acknowledgement of the inherent unreliability of financial modell...

AIEEE! I'M TRAPPED IN A TIME VORTEX!


Posted by: Sifu Tweety | Link to this comment | 04- 3-09 2:38 PM
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107: then what caused that bubble?


Posted by: Sifu Tweety | Link to this comment | 04- 3-09 2:39 PM
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I wrote before about how modelers serve as oracles and priests. If it is a problem in public policy and is also a problem in finance, that's two major areas where it has been shown to be a problem.


Posted by: Megan | Link to this comment | 04- 3-09 2:40 PM
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Greed and magical thinking in people? Since we know that's what people do, among the regulations to address those consistent behaviors should be taking away one of the things that amplify them (models providing cover for what people tend to do anyway).

There's room for a lot of blame here.


Posted by: Megan | Link to this comment | 04- 3-09 2:42 PM
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109: The "greater fool" problem. Everyone thought the next buyer would pay a little more.

You don't need complicated financial instruments for a bubble -- the complicated stuff isn't (mostly) what drove house prices up. ('Mostly' there is that I believe the profitability of the complicated mortgage-backed stuff caused banks to loosen lending standards, which put more people in the market, and so on and so forth.) On a fundamental level it's the same thing as tulips: once you have people thinking "I'll pay this crazy price because the next guy will pay a crazier one, that's a bubble.

But if we'd just had a housing bubble without all the complicated stuff, I don't think there's any reason to think that it'd be bringing down banks, is there?


Posted by: LizardBreath | Link to this comment | 04- 3-09 2:44 PM
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111, 112: so, right, bubbles happen because of human nature. The banks wanted a bubble. The Bush administration wanted a bubble. It was handy, but tangential, that there were models -- which were used incorrectly, by the way, in the examples I've read, or at least which were made to do things that were never intended by the people who developed them -- which could be pointed to by way of excuse. But if it hadn't been the models, it would have been something else. They were an excuse. Pointing to "models" per se is no more going to stop the next bubble than banning dotcoms would have stopped this one.


Posted by: Sifu Tweety | Link to this comment | 04- 3-09 2:48 PM
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('Mostly' there is that I believe the profitability of the complicated mortgage-backed stuff caused banks to loosen lending standards, which put more people in the market, and so on and so forth.)

Well, the huge amounts of excess capital led banks to cast around for a profitable financial instrument, and since the rest of the economy was more-or-less fucked, they settled on the one remaining segment they hadn't put through the wringer, which was housing, and they looked for ways to make that more profitable.


Posted by: Sifu Tweety | Link to this comment | 04- 3-09 2:51 PM
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113: Pointing to "models" per se is no more going to stop the next bubble than banning dotcoms would have stopped this one.

But, you know, no one's going to fall for "Buy my stock because it's an Internet Business! You can't lose!" anymore. Just because a new swindle is going to show up next week is no reason not to put the last swindle on the list of things not to fall for.


Posted by: LizardBreath | Link to this comment | 04- 3-09 2:52 PM
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115: well, right, and people won't fall for "you can buy this bond with zero risk! It's true, computers say so!" for the next while here. It'll be something different.


Posted by: Sifu Tweety | Link to this comment | 04- 3-09 2:53 PM
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Also, when you're yelling "It was all a swindle, the models were crap!" saying (as I roughly understand you to be) that there's no reason to worry about the models, if the models hadn't been there it would have been some other kind of swindle is missing the point. The point of the outrage is that it was a swindle: people excusing their malfeasance by pointing at models are either morons or crooks.


Posted by: LizardBreath | Link to this comment | 04- 3-09 2:55 PM
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Or both!


Posted by: apostropher | Link to this comment | 04- 3-09 2:56 PM
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I mean, I would put a lot more blame on the rating agencies than I would on, you know, math.

I also think there's something slightly pernicious to the "only a PhD could understand these things" line; probably it helps to be a PhD if you want to develop them, but you know, that guy who wrote the most commonly used CDO software barely graduated from college. From what I've seen, it's a lot of gaussians, and a lot of lack-of-transparency.


Posted by: Sifu Tweety | Link to this comment | 04- 3-09 2:56 PM
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people excusing their malfeasance by pointing at models are either morons or crooks.

Agreed. But this is the fault of the morons and crooks, not the models.


Posted by: Sifu Tweety | Link to this comment | 04- 3-09 2:56 PM
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120: Um, yeah. Assigning fault or blame to a mathematical model, rather than the people using it, would be really weird. I don't think Emerson or anyone else did that, but if that's what you're arguing against, I can see why you think it's a silly position.


Posted by: LizardBreath | Link to this comment | 04- 3-09 2:58 PM
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119: I mean, I would put a lot more blame on the rating agencies than I would on, you know, math.

You betcha. The only thing the math is doing in this conversation is that it figleafed the rating agencies (etc.) malfeasance.


Posted by: LizardBreath | Link to this comment | 04- 3-09 2:59 PM
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121: There has also been blamed assigned to the very use of mathematical models in finance.


Posted by: Barbar | Link to this comment | 04- 3-09 3:00 PM
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121: well, right. And in the right hands, used correctly, with understanding of their limitations, mathematical models of finance can be useful, and even usefully predictive.

I'm just pro-math, is all.


Posted by: Sifu Tweety | Link to this comment | 04- 3-09 3:00 PM
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Look, it's true that models don't kill people, morons and crooks use models to kill people.

But given that models are so handy at the thing they're used for (looking complicated and giving assurance) in persuasion and since I don't trust the ones I understand, I take heavy reliance on them as a sign that things are going wrong.


Posted by: Megan | Link to this comment | 04- 3-09 3:02 PM
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We were all the innocent victims of those models. The bankers were in some ways the biggest victims of all; they staked their professional reputations on those models. And the models let them down.


Posted by: Brock Landers | Link to this comment | 04- 3-09 3:02 PM
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123: I think if you go back to whatever comment or comments you're thinking of, it can probably be more reasonably read as an objection to the use of models as obfuscation, rather than as an objection to using mathematics in finance at all.


Posted by: LizardBreath | Link to this comment | 04- 3-09 3:04 PM
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127: I don't think that's correct, but anyhow, let's not spoil the comity.


Posted by: Sifu Tweety | Link to this comment | 04- 3-09 3:05 PM
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it can probably be more reasonably read as an objection to the use of models as obfuscation

Or inappropriate reliance on models that weren't properly understood. Crooks or morons, remember. (Or, as apo notes, both.)


Posted by: Brock Landers | Link to this comment | 04- 3-09 3:06 PM
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124, 125: And as between these two comments, while I agree with both of them, Megan's strikes me as the one more people would do well to internalize. A complicated model is going to have flaws that will be hard to spot for anyone who didn't develop it, and it's difficult to assess how much reliance to put on something like that.


Posted by: LizardBreath | Link to this comment | 04- 3-09 3:08 PM
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I take heavy reliance on them as a sign that things are going wrong.

I dunno, this seems partly a problem of modernity. We live in a big complex world in which each person can only understand a small part. If you don't rely on a model, then you rely on "common sense" or "this is what we did yesterday." Both of which are useful but neither is as comforting as you suggest.

I think if you go back to whatever comment or comments you're thinking of, it can probably be more reasonably read as an objection to the use of models as obfuscation, rather than as an objection to using mathematics in finance at all.

This isn't strictly true as can be quickly discovered by doing a "find" on "Scholes" in this thread. Not that I want to dwell on that.


Posted by: Barbar | Link to this comment | 04- 3-09 3:08 PM
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130: so climate change is a fraud?


Posted by: Sifu Tweety | Link to this comment | 04- 3-09 3:09 PM
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Eh. I'm a fringe voice expressing doubt about using complicated models in finance at all. I don't know where I'd start getting real suspicious (somewhere not too far past my personal ability to understand) but since:

1. every model that I do understand has what I consider to be real flaws in the assumptions
2. people are suckers for model output
3. people are greedy
4. The combination just went drastically wrong.

I might go as far as saying that people shouldn't be allowed to make large bets if modeling results are the primary justification.

(I can say things like that because my blog comments are law. But I'll claim that position.)


Posted by: Megan | Link to this comment | 04- 3-09 3:09 PM
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131: I actually searched Emerson's comments in this thread (which would have had largely the same effect) before I made that comment, and I'm comfortable with it.


Posted by: LizardBreath | Link to this comment | 04- 3-09 3:10 PM
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132 to 133, with slight modification.


Posted by: Sifu Tweety | Link to this comment | 04- 3-09 3:11 PM
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132: See Megan's 105, which seems sensible to me: I'm willing to take rough results from models, especially if there are a lot of them and they all point in the same direction.


Posted by: LizardBreath | Link to this comment | 04- 3-09 3:12 PM
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88: I see the rancorous back and forth in this thread over the culpability of models continuing with many other commenters joining in.

I not only win, I FUCKING RULE!


Posted by: The Amazing Criswell | Link to this comment | 04- 3-09 3:12 PM
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I think the finance models have been criticized for both being too simple (like the normal distribution assumption) and too complex (not comprehensible by non-PhDs). Just pointing out a tension here.

In any organization that relies on modelers, there is an inherent political struggle about the use of models and the status of modelers. I don't know if there's a universal solution to the question of how this struggle should be resolved.


Posted by: Barbar | Link to this comment | 04- 3-09 3:14 PM
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I was thinking of climate change models as I wrote my qualifications, 'cause I quote climate change models a fair amount.

I'm willing to take rough results from models, especially if there are a lot of them and they all point in the same direction and if I don't know the subject matter firsthand so I'm not annoyed by a detail that I know isn't right and when they are confirmed by the anecdata around me.

I'm gathering faith in the climate change models because the predictions are manifesting now. And, they by-and-large are converging, and because the rough predictions are all I'm going to need to know for the length of my professional career. So I'll lean on them. But I'd feel less secure on that if I weren't getting real world validation.


Posted by: Megan | Link to this comment | 04- 3-09 3:15 PM
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138: I think the finance models have been criticized for both being too simple (like the normal distribution assumption) and too complex (not comprehensible by non-PhDs). Just pointing out a tension here.

It's not really a tension: you can move from too simple through too complex without ever passing through 'reliable enough to be useful'. The complaint is that they're relied on more than can be justified by their accuracy -- simplicity or complexity is a secondary issue.


Posted by: LizardBreath | Link to this comment | 04- 3-09 3:17 PM
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134: you're killing me here.

You don't have to search through everything that comes up, just the first one.


Posted by: Barbar | Link to this comment | 04- 3-09 3:17 PM
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Not a contradiction. My critique is that they are flawed but people really want to believe them (and unscrupulous people abet that). It doesn't matter to me in which direction they are flawed, and both too simplistic and too complex seem like errors that will consistently come up.


Posted by: Megan | Link to this comment | 04- 3-09 3:18 PM
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136: well, look, there were a lot of financial models, and all of them pointed in roughly the same direction (to wit: "nah, this won't all fall apart") but that's because they were using similarly flawed data sets and/or asumptions, which was happening in the most part because the people who were paying for them wanted them to say that.

Roughly, I would argue that rather than trying to judge the validity of a concern based on the use of models you don't understand, you should look at the believability and entrenched interests of whoever's trying to use it to sell you something. Climate change, looking at the interests arrayed against it provides a powerful clue. Financial models, looking at the interests arrayed behind them should have provided an equally powerful clue.

If you don't understand a model, then, sure, you have no more information than the trustworthiness of the person explaining it to you. But that's true in any situation where you're dealing with limited information.


Posted by: Sifu Tweety | Link to this comment | 04- 3-09 3:19 PM
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We were separated at birth, LB.


Posted by: Megan | Link to this comment | 04- 3-09 3:20 PM
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Hey, since we're cautiously retreading ground here, can I just note that the Enron example was total bullshit? Someone said blaming "fancy maths" for the current crash would be like blaming debt accounting (or something) for Enron.

But, in fact, a major* component of Enron was their gaming of CA dereg. And, what do you know, all of the knowledgeable economists** (including a very, very good friend of mine who left academia to work at the fucking DOE) said that there was no way that what happened in CA in 2000 was the result of system-gaming. A massive criminal conspiracy (helped along, incidentally, by economic orthodoxy that says dereg's a good idea most, if not all, the time) right under their fucking noses, and they insisted it couldn't be happening, because their models said it shouldn't happen. Completely fucking wrong.

Did any economists lose their jobs or their place in public discourse from it? Fuck they did. Eight years after it came to light, people are even using it as an example of how economists are never to blame for, and can never be expected to raise red flags about, corporate malfeasance.

* I have a feeling someone will suggest that the CA fraud was only a minor component, but I'm sticking with explicit intent to defraud poor grandmothers as a major criminal act, whatever accounting shenanigans may also have happened
** Except Krugman, of course, who was ridiculed for saying it


Posted by: JRoth | Link to this comment | 04- 3-09 3:21 PM
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I don't actually have a ton of faith in the climate change models. They're all probably directionally right, but it wouldn't surprise me at all if things turn out in 50 years to be much worse than the "worst case" projections. (Or the "worst case" 50 year projections show up in 15-20 years.) This is already happening to some extent. It seems like it would be foolish to put a tremendous amount of faith in the specific accuracy of their results (rather than the directional accuracy).


Posted by: Brock Landers | Link to this comment | 04- 3-09 3:21 PM
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My critique is that they are flawed but people really want to believe them

Really? Does ExxonMobil really want to believe in your climate change models? How badly?


Posted by: Barbar | Link to this comment | 04- 3-09 3:22 PM
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141: You mean Emerson's 43? He doesn't say anything that could be reasonably read as "The problem with economists is that they use mathematical models, models are the problem."

Emerson's 43 reads as follows:

42: "Everyone was learning Black-Scholes" (the option-pricing model)...."

Scholes personally had a hand in the LTCM collapse TEN YEARS AGO, which used to be thought of as a big deal. Are we going to give him a third chance? Is there any protocol for annulling Nobel prizes?

I understand that this is regarded as cranky, but a lot of the problems we're having are the result of egregious professional failures, both intellectual and ethical, on the part of economists and the whole economics profession.

But ten years from now, economics will be taught almost exactly the same, with a couple of little kludges patched in to handwave away reality one more time.

He's blaming Scholes personally, and economists generally, but not on the grounds that they're using models at all (if that were the problem, the 'professional failures' he mentions wouldn't be 'ethical', they'd be purely intellectual.) If you read 43 as introducing a jihad against mathematical modeling, rather than against the intellectual and ethical standards of the economics profession, I think you misunderstood it.


Posted by: LizardBreath | Link to this comment | 04- 3-09 3:23 PM
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This "inevitability" fatalism that ascribes social breakdowns to "human nature" is very politically regressive. I think it's a major factor in why even now most of the regulatory fixes are pretty incremental.

You need to think about why the regulators abdicated doing their jobs. This was because they were basically bamboozled by a free market ideology that was pushed by economists. The ideology of economics uses mathematics as a way to cover up doubtful assumptions. Of course, free market ideology has many other sources besides that, but it's one enabler.

I don't think the faith in models, per se, is what the regulators can (or should) stop; they should cap the amount of leverage

Regulators already had all kinds of caps on permissible leverage for all kinds of entities, but they loosened them because they had faith that mathematical modeling made leverage less risky. So the two halves of your sentence contradict each other.



Posted by: PGD | Link to this comment | 04- 3-09 3:23 PM
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But look. The existence of models I don't understand is an easy, visible, blatant marker. I can know there's a problem as soon as I step into a room and the powerpoint presentation names the model.

That establishes the way my presumption of doubt runs and the rest of the presentation can alleviate it or make it worse.


Posted by: Megan | Link to this comment | 04- 3-09 3:23 PM
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143: I have to run, but this: "well, look, there were a lot of financial models, and all of them pointed in roughly the same direction (to wit: "nah, this won't all fall apart")" is, I believe, just flat wrong. I'll come back and pick at it later if no one else does.


Posted by: LizardBreath | Link to this comment | 04- 3-09 3:24 PM
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148: you've got to be kidding me. I don't want to kill this thread again.


Posted by: Barbar | Link to this comment | 04- 3-09 3:25 PM
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132: If you could actually show me how every climate scientist in the world would profit from anti-climate change regulations, then I would have at least some suspicion of the models.

If a known charlatan (which is the definition of pretty much everyone in finance, as Barbar helpfully noted) tells me that his black box that I may not look inside says I should give him lots of $$, I'm going to be skeptical. If an NTSB investigator tells me that this black box that I may not look inside says that a plane crashed for reason X, I'm pretty much going to accept his finding.

If an architect tells me that his input will make my building better, even though I'm not legally obliged to hire him, I'm going to be skeptical. At least that's been my experience.


Posted by: JRoth | Link to this comment | 04- 3-09 3:27 PM
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Regulators already had all kinds of caps on permissible leverage for all kinds of entities, but they loosened them because they had faith that mathematical modeling made leverage less risky. So the two halves of your sentence contradict each other.

They loosened them because things hadn't fallen apart, and extremely powerful interests were lobbying to loosen them, and it was a very bad climate for regulation. The models were, as ever, cover.


Posted by: Sifu Tweety | Link to this comment | 04- 3-09 3:27 PM
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It also doesn't help that the way they pointed was felicitously self-dealing and contra-common sense. That's not proof that the model is wrong, but another way to judge the situation.

No one in the seminars, public meetings and conferences I sit in want to see the results they're getting from their climate change models come true.


Posted by: Megan | Link to this comment | 04- 3-09 3:29 PM
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153: you and I don't disagree.

150: but, again, you're talking about somebody misusing models to sell you something. If they said "now, we think that it'll happen for this and this reason, and we do have a model which shows that, conditioned on X and Y assumptions which obviously mean we can't trust it too far", then that would still reduce the likelihood of your trusting their conclusion?


Posted by: Sifu Tweety | Link to this comment | 04- 3-09 3:29 PM
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Someone said blaming "fancy maths" for the current crash would be like blaming debt accounting (or something) for Enron.

That's what Cala said (I think it was debit accounting). I really don't understand how this claim can logically be addressed by blaming fancy maths for Enron, however. That seems like a logical mixup.


Posted by: Barbar | Link to this comment | 04- 3-09 3:29 PM
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I feel like I'm not saying anything that controversial, and that there really isn't much disagreement: 1. if you are aware of a models assumptions, then it can be useful within limits to help you understand something, 2. if you don't understand a model, it is not useful to help you whether to decide to trust somebdy. 3. if somebody you trust is using a model that they understand, then you have reason to believe that the things they tell you can help your understanding. 4. whether or not somebody uses models is not an intrinsic reason to trust or distrust them.

So the problem in the financial crisis was trusting bankers. The solution to climate change comes from trusting climate scientists. This seems so much more sensical to me than other ways of parsing it.


Posted by: Sifu Tweety | Link to this comment | 04- 3-09 3:33 PM
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150: but, again, you're talking about somebody misusing models to sell you something. If they said "now, we think that it'll happen for this and this reason, and we do have a model which shows that, conditioned on X and Y assumptions which obviously mean we can't trust it too far", then that would still reduce the likelihood of your trusting their conclusion?

That is actually what I always hear. I'm lucky enough to get first-hand explanations from the grad student who is the keeper of the model for a few years and the professor who is herself skeptical of the results and wishes the newspaper hadn't characterized her results so absolutely. They are really good about making the assumptions explicit, which I how I am able to catch them at all. From there I can decide how much faith to put in the direction of their predictions and stuff like that.

But the second you leave that room, that first degree of separation, it become a miracle oracle that no one understands but people want to trust because it came from a computer.

So, a model is the first alert.
Self-dealing is the second.

and the default rule when you haven't been convinced is No Large Bets.


Posted by: Megan | Link to this comment | 04- 3-09 3:35 PM
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A quote from the fine book, "Traders, Guns, and Money" by ex-derivatives trader Satyajit Das:

Risk management is the fig leaf behind which risk taking hides. The risk manager is there as the fall guy to protect the chairman, directors and management. Risk management is an insurance plan for directors and senior management. Mathematical finance is there to lend credibility and false precision to this dismal reality of risk management.

Posted by: PGD | Link to this comment | 04- 3-09 3:38 PM
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If I had a more sophisticated model, I could have known that 153 would be egregiously pwned. But I still kind of like the little joke at the end.


Posted by: JRoth | Link to this comment | 04- 3-09 3:39 PM
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160: right, yes, that's how it's used. True.


Posted by: Sifu Tweety | Link to this comment | 04- 3-09 3:40 PM
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157: I'm not saying Enron had anything to do with fancy maths (and didn't before; it was an analogy violation by Cala*). I'm saying that Enron, like Bear and Lehman and the rest, was engaged in behavior that shouldn't have passed the smell test for economists. Instead, economists either played dumb, were dumb, or actively abetted the bad behavior. And have suffered no ill consequence from it.

This is all stuff you implicitly agreed with in your 298 (or whatever it was) - it's a flawed discipline with inadequate policing and some bad incentives. The only substantive disagreement we have is, I think, whether the discipline has an actively malign influence, or simply aligns with bad actors who would do everything the same regardless of what economists said.

* Who was probably hoping that the server switch would hide her perfidy from future generations


Posted by: JRoth | Link to this comment | 04- 3-09 3:45 PM
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148: I'm not especially eager to chew this cabbage any longer, but what I wanted to be my main point in my original past was:

I understand that this is regarded as cranky, but a lot of the problems we're having are the result of egregious professional failures, both intellectual and ethical, on the part of economists and the whole economics profession. But ten years from now, economics will be taught almost exactly the same, with a couple of little kludges patched in to handwave away reality one more time.

The Black-Scholes part was intended as a snarky, semi-well-informed leadin. I would have left it out entirely if I had known what would happen. In any case, when I asked "Where were the economists when this all happened", I was not diverting attention from my Black-Scholes booboo, as Barbar has claimed. I was trying to return the conversation to the main point of my original post, and not the thing Babar wanted to talk about.

I still am not completely sure about the reasons for the intensity of Barbar's animus toward my posts. The triggering incident or proximate cause seldom justifies his level of intensity; I think that there's something deeper that's unexpressed.

My only attempt at an overall explanation of the crash wasn't about the quants. my suggestion was that it was toxic optimism and madness of crowds fueled by amphetamines and anti-depressants. (At my URL.) And yes, I think that that was a factor, and no, I don't think that it (or anything else) was the sole cause or even the prime cause.


Posted by: John Emerson | Link to this comment | 04- 3-09 3:48 PM
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Emerson, if you can explain what the words "third chance" mean in your comment, be my guest. But can we please move on?


Posted by: Barbar | Link to this comment | 04- 3-09 3:53 PM
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164.3: John, what puzzles me is that I don't see the intensity of animus that you claim. Maybe there is a longer history there than I know, but it appeared similar to many of the discussions you get involved in here, unsurprisingly given many of your rhetorical techniques and stances.


Posted by: JP Stormcrow | Link to this comment | 04- 3-09 3:53 PM
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158: I think the element that Megan's heuristic is adding is that the complex model adds a red flag that you could be hoodwinked.

To violate the all-but-dead analogy ban myself, if I talk about building a house using 2X lumber and such, all but the most ignorant layman can, at least somewhat, critique my proposed design ("2x4s going up 30'? 2x6s spanning 20'? Really?"). But once I introduce a less familiar material (say fiber-reinforced concrete) and sophisticated calculations to size it, then the layman is wholly at my mercy, and he has to rely solely on Randian no-contractor-would-ever-stiff-a-customer* thinking.

To come back to finance, "X is a good investment because they have a good product and sound management" is entirely comprehensible; "Y is a good investment because our opaque models say so" is more problematic.

Personally, I'm invested in Unfogged futures, so this is all theoretical for me.

* an actual example from Greenspan in his High Randian era


Posted by: JRoth | Link to this comment | 04- 3-09 3:58 PM
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To come back to finance, "X is a good investment because they have a good product and sound management" is entirely comprehensible; "Y is a good investment because our opaque models say so" is more problematic.

But everyone in the finance world knows this.
People only buy Y because other people are making money on Y, or because the opaque models have consistently made money before, or because there's nothing better to buy.

People on Wall Street aren't hoodwinking people they meet at Wal-Mart, they're trying to hoodwink other people on Wall Street.


Posted by: Barbar | Link to this comment | 04- 3-09 4:02 PM
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The only substantive disagreement we have is, I think, whether the discipline has an actively malign influence, or simply aligns with bad actors who would do everything the same regardless of what economists said.

When I look at the list of Nobel Prize winners in economics, I see a mix of liberals and conservatives with varying degrees of commitment to free-market ideology and politics in general.

There can be too much intellectual uniformity in economics, but that's a different problem from how economics interacts with business or government. These things really aren't all the same.


Posted by: Barbar | Link to this comment | 04- 3-09 4:04 PM
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Barbar, if you shut up, I'll shut up. For Christ's sake.

As for "third chance", there's nothing to explain. You know what I meant, and you disagree furiously. What I meant was, first Scholes screwed up LTCM, and then he screwed up Iceland -- should we leave him free to kill again? And it wasn't a deep technical explanation of what happened in either case. Consider "Black-Scholes" as a metonymy for "high-powered mathematical econ", and consider me to have said something like "These whiz kids don't seem to be very helpful to the people who listen to them".

JP, Barbar has a furiously reiterated intensity of attack that I've never seen from anyone else. He also insists that my Black-Scholes error (and not everyone agrees that it was one) invalidates everything else I've ever said before or since, and refuses to let the discussion move on. I don't believe that he's ever really expressed what exactly it is that he hates so much. (And yes, there's a considerable history).



Posted by: John Emerson | Link to this comment | 04- 3-09 4:09 PM
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How did Scholes screw up Iceland, Emerson?


Posted by: Barbar | Link to this comment | 04- 3-09 4:10 PM
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See what I meant about the relentless intensity, guys?

Maybe I was wrong, Barbar! You asked me to explain what I said, and I did. I also said that I know you disagree. Iceland was the deregulation / high finance Utopia only two or three years ago. I have no idea whether Scholes, or his math, was specifically involved.

I have no idea what I'd have to say to get Barbar to shut up, but I am hardly inclined to say it.


Posted by: John Emerson | Link to this comment | 04- 3-09 4:19 PM
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The reason I asked whether you were related to Scholes is because you're acting like some hillbilly avenging his grandpappy's honor. Pistols at dawn.


Posted by: John Emerson | Link to this comment | 04- 3-09 4:21 PM
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168: My sense of things is that the path to massive leverage and/or 30:1 PERs is fancy maths hiding shenanigans; if everyone's on the up-and-up, you're stuck with reasonable amounts of leverage and PER. Old-fashioned bubbles (tulips, internet) were based largely on fantasies of ever-increasing value, but the current mess turns out not to be that story: it was predicated on housing prices going up, but the actual instruments that have us deeply fucked are the fancy maths ones. Aren't AIG's liabilities several times global GDP? You don't get there merely by betting that housing prices in AZ will go up another 10% next year. (I'll concede that I could be wrong on this, but it'll take a lot of hard evidence, not hand-waving that greed causes bad stuff no matter what)

169: Well, that gets to my point in the last thread - the liberal economists* focus on saying things that "everyone" in the profession agrees with, which means only things that the Chicago School will endorse; but the Chicago School doesn't reciprocate - in public, they won't admit that Keynes was right, or that the Treasury View was wrong.

Economics in business is one thing; I don't much expect honesty from anyone pulling a corporate paycheck. But economists talking about business, or talking to policy-makers, are in a position to call BS on rightwing shibboleths; I think that they rarely do, and that this has a real effect.**

* Talking about the types who get on TV, radio, op/ed pages, and Congressional hearings, and who aren't famously iconoclastic (by which I basically mean PK and Stiglitz)
** Current real world example - these crap-ass Dems in the Senate who are voting for deficit-increasing cuts in the estate tax while claiming to abhor deficits. You will undoubtedly hear economists agree that deficits are a long-term problem (which will be treated as supporting Bayh and Nelson); you are unlikely to hear them say, "Bayh and Nelson are supporting increased deficits with their estate tax vote." That would be "too political."


Posted by: JRoth | Link to this comment | 04- 3-09 4:22 PM
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People on Wall Street aren't hoodwinking people they meet at Wal-Mart, they're trying to hoodwink other people on Wall Street.

I have to say, the idea that all those modeling departments in financial firms were just an arcane form of arms race that weren't really intended to diagnose anything but had to be there to make a show for the other investment firms is nearly as bad as using the models to fool the rest of us.

What a waste of ten years of mathematician and physicists' time.

This doesn't detract from my argument that the presence of models is a reason to worry and to increase the burden of proof.


Posted by: Megan | Link to this comment | 04- 3-09 4:24 PM
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In other words, the rebuttal to 123 is that your words (like "Black-Scholes" and "Scholes screwed up Iceland") have no meaning because you don't actually understand anything. Fair enough.

I count about 70 comments and 8 other commenters before you came back because I "refused to let the discussion move on."

Later baby!


Posted by: Barbar | Link to this comment | 04- 3-09 4:24 PM
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153: Climate Scientists don't benefit from AGW regulation, but they sure as hell do from AGW fears. It's absolutely clear that we can't predict climate response to all the various inputs in part because we don't actually know what the inputs are, not to mention the fact that the models are horribly primitive (which they have to be in order to run on sub-decade timescales). The solution? More research, which means more research grants, which means moving up the tenure ladder.

To be clear: I'm not suggesting AGW is some sort of climatologists' conspiracy - it's clearly happening, and we'd be brain dead not to pour money into climate research in order to better inform policy. That said, it's worth bearing in mind that peoples' (often subconscious) biases are not necessarily towards an end so much as they are towards a process.

Deviating from the main point: I wholeheartedly endorse Megan's Modelling Mistrust Maxim.


Posted by: togolosh | Link to this comment | 04- 3-09 4:25 PM
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The scary thing is that Krugman is extremely moderate in political terms, but far left in journalistic and, it seems, in economic terms (if you exclude the Marxists and a few other pariahs).


Posted by: John Emerson | Link to this comment | 04- 3-09 4:26 PM
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you're acting like some hillbilly

In fairness, John, Barbar's grammar has been pretty good through all this.

Perhaps, "you're acting like some royal elephant with a strong sense of honor"?


Posted by: JRoth | Link to this comment | 04- 3-09 4:29 PM
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70? 8? That sure proves whatever point you think it does.


Posted by: John Emerson | Link to this comment | 04- 3-09 4:30 PM
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There has to be some kind of erotic or blood relation. The guy won't quit.


Posted by: John Emerson | Link to this comment | 04- 3-09 4:30 PM
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I have to say, the idea that all those modeling departments in financial firms were just an arcane form of arms race that weren't really intended to diagnose anything but had to be there to make a show for the other investment firms is nearly as bad as using the models to fool the rest of us.

That's not what I meant to say.

Lots of different models used on Wall Street for lots of different purposes. It's not helpful to think that they're all the same thing.

Or maybe it is, because otherwise there would be nothing to talk about.


Posted by: Barbar | Link to this comment | 04- 3-09 4:31 PM
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People at Walmart got burned too, even if they weren't playing the stick market. What was Barbar's point., anyway, except about Scholes and Iceland?


Posted by: John Emerson | Link to this comment | 04- 3-09 4:32 PM
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People on Wall Street aren't hoodwinking people they meet at Wal-Mart, they're trying to hoodwink other people on Wall Street.

I don't think this is quite true. Lots of institutional investors aren't Wall Street sharks. They rely heavily on the rating agencies to tell them what's a safe investment and what isn't; they don't have the capacity or the desire to do their own due diligence. You have to hoodwink the rating agencies, but they are to some degree part of the scam and let things go by with a wink (50%+ profit margins for Moody's during the bubble period). You also have to hoodwink the regulators, but there the ideology/political stuff weighs heavily.


Posted by: PGD | Link to this comment | 04- 3-09 4:34 PM
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You mean like cities or retirement funds looking for a place to put their money?


Posted by: Megan | Link to this comment | 04- 3-09 4:39 PM
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Or small banks. Or even bit players on Wall Street.

No true, that's a good point.


Posted by: Barbar | Link to this comment | 04- 3-09 4:44 PM
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Actually, the rating agencies are probably the biggest villains in the entire piece, and, more importantly, most amenable to a regulatory fix. While we're at it, fix the credit agencies.

I don't know if there's good reason not simply to make the entire ratings system a government function, but there's certainly no good reason to come out of this mess with the same system we entered it with.


Posted by: JRoth | Link to this comment | 04- 3-09 4:56 PM
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Well, this thread has become interesting. Lots of good stuff. Let me get caught up through 145, with apologies if these points have been made better elsewhere:

LB in 112:

But if we'd just had a housing bubble without all the complicated stuff, I don't think there's any reason to think that it'd be bringing down banks, is there?

This reverses cause-and-effect. It would be more accurate to say that were it not for all of the complicated stuff, we would not have had the housing bubble.

I mean, there are feedback loops in this, but I feel comfortable arguing that the complicated stuff caused the housing bubble and the resulting calamities at least as much as, or more than, the housing bubble caused the complicated stuff and the resulting calamities.

101: What drove it was people were getting rich by inflating it.

A number of folks endorsed apostropher's 101, but I still think this his point is underappreciated: Given the opportunity to do it all over again, the people that drove us into the ditch would have every incentive to do it again. They made money.

Megan in 133, for instance, thinks that the models failed. By-and-large, they did not.

JRoth in 145:

And, what do you know, all of the knowledgeable economists** (including a very, very good friend of mine who left academia to work at the fucking DOE) said that there was no way that what happened in CA in 2000 was the result of system-gaming.'

Krugman gets a little too much credit for anticipating the current meltdown, but as JRoth notes, he absolutely nailed the California energy scam - including how it was carried out and the illegality of it - in real time. He didn't just express his suspicions, he fucking proved it.

It is a contingent fact that academic economics is grotesquely corrupt. (That is to say, Emerson is 100% correct.) Krugman demonstrated that academic economists have the tools to call bullshit on this stuff, but (mostly) didn't do so - even after Krugman did so in the New York Fucking Times.


Posted by: politicalfootball | Link to this comment | 04- 3-09 7:18 PM
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PGD's 149:

This "inevitability" fatalism that ascribes social breakdowns to "human nature" is very politically regressive. ... You need to think about why the regulators abdicated doing their jobs.

I respectfully disagree. The "inevitability" fatalism (if I understand how you use this phrase) illustrates precisely why we need serious-minded progressive legislation and regulation.

You need to think about why the regulators abdicated doing their jobs. This was because they were basically bamboozled by a free market ideology that was pushed by economists.

Implicating economists in this catastrophe doesn't let regulators off the hook. Economists and regulators were bought.


Posted by: politicalfootball | Link to this comment | 04- 3-09 7:35 PM
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Sifu's 154 = my 189.


Posted by: politicalfootball | Link to this comment | 04- 3-09 7:41 PM
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I don't see how you can be an engineer and not believe in models. What's thermodynamics? Newtonian physics?


Posted by: Walt Someguy | Link to this comment | 04- 3-09 8:03 PM
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Barbar's comments here and in previous threads sound pretty animus-filled to me. I'd assumed that Barbar was a liberal economist who was pissed off about being lumped in with the Chicago School. I'd be pissed off too if I lived in a world where the media served up McMegan as an expert on my field.


Posted by: Walt Someguy | Link to this comment | 04- 3-09 8:23 PM
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Barbar seemed to deny my right to say anything at all. In many cases I enjoy troll fights, but in this case I actually wanted to talk about the topic. Maybe I'm losing my oomph.

The trollery was mutual at best. My original post was put up before he was even around, and after his first attack it was back and forth.

I still haven't figured the guy out (he tells us nothing about himself) but there's absolutely no love lost. I don't actually give a shit if he's a liberal.


Posted by: John Emerson | Link to this comment | 04- 3-09 8:29 PM
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McMegan

I was in a cab today when she came on the radio. I was so shocked it took me a minute to be sure it was happening -- I'm so accustomed to thinking of her as an imaginary Internet flash-point that it was slightly scary to realize she's out there being an on-air expert.


Posted by: Witt | Link to this comment | 04- 3-09 8:32 PM
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192: Radio!? WTF? NPR? Christ.


Posted by: JRoth | Link to this comment | 04- 3-09 8:38 PM
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191 makes a swell point that I (honest!) had thought about earlier but not been able to phrase.


Posted by: Sifu Tweety | Link to this comment | 04- 3-09 8:40 PM
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I disagree with the use of "slightly" in 194.


Posted by: Sifu Tweety | Link to this comment | 04- 3-09 8:40 PM
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I'm going to assume that 194 describes a dream that Witt had, because I'm not ready to cope with the reality of it right now.


Posted by: Walt Someguy | Link to this comment | 04- 3-09 8:40 PM
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Witt: serious question--was the cab driver listening to right-wing talk radio? Because that would make sense. Nothing else would make sense.


Posted by: Brock Landers | Link to this comment | 04- 3-09 8:44 PM
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Did the cab driver think that the world was flat? Was he exotic and foreign, maybe from Cape Verde? Any nice Cape Verdean proverbs.


Posted by: John Emerson | Link to this comment | 04- 3-09 8:48 PM
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No, it was Marketplace. That's on NPR, right? I was so busy being irritated at the glibness of the guy doing the interview and the shallowness of the analysis that I didn't even catch anyone else's name.

The cabbie was Eastern European and didn't say word one the whole ride, so I have no idea about his political leanings.


Posted by: Witt | Link to this comment | 04- 3-09 8:49 PM
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109

then what caused that bubble?

What causes all bubbles, momentum traders.


Posted by: James B. Shearer | Link to this comment | 04- 3-09 8:49 PM
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I second togolosh's endorsement of (our) Megan's rules for modeling, but I see the point in Walt's 191.

I'm fumbling my way towards a distinction that feels meaningful to me, but I can't get it. It's not descriptive vs. predictive. Help!


Posted by: Witt | Link to this comment | 04- 3-09 8:53 PM
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This is why I hate marketplace. I don't want to hear mcmbagan lecturing about economics. Or amity schlaes. Or David fucking frum.


Posted by: Turgid Jacobian | Link to this comment | 04- 3-09 8:54 PM
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Turgid Jacobian is having a little meetup of his own, it seems.


Posted by: Sifu Tweety | Link to this comment | 04- 3-09 8:57 PM
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Mc MBA gan.not clear I know


Posted by: Turgid Jacobian | Link to this comment | 04- 3-09 9:01 PM
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112

But if we'd just had a housing bubble without all the complicated stuff, I don't think there's any reason to think that it'd be bringing down banks, is there?

Sure there is. The 1920s florida real estate bubble brought down banks. See here .

... In 1928 there were thirty-one bank failures in Florida; in 1929 there were fifty-seven; in both of these years the liabilities of the failed banks reached greater totals than were recorded for any other state in the Union. ...


Posted by: James B. Shearer | Link to this comment | 04- 3-09 9:01 PM
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It's because I like Krimpets, isn't it?


Posted by: Walt Someguy | Link to this comment | 04- 3-09 9:02 PM
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193

Barbar seemed to deny my right to say anything at all. In many cases I enjoy troll fights, but in this case I actually wanted to talk about the topic. Maybe I'm losing my oomph.

Well maybe you shouldn't have smeared Scholes then with claims you weren't prepared to defend at all.


Posted by: James B. Shearer | Link to this comment | 04- 3-09 9:06 PM
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Banks in the 20s had all kinds of problems. We've had 80 or so years of reforms of many types intended to keep massive failure from happening, and up until about two years ago almost everyone thought that the new system was stable. So it's possible that the sophisticated math contributed to disabling or evading the safeguards.


Posted by: John Emerson | Link to this comment | 04- 3-09 9:07 PM
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I think the main negative effect of the models was to dazzle regulators, Greenspan in particular. What caused the bust to bring down banks is the ratings agencies handing out AAA ratings like candy. While I'm sure that the ratings agencies used models, AAA is a subjective judgment (and the evidence is that the main function of subjective judgment at S&P and Moody's was to improve the bottom line). The AAA ratings allowed the banks to use subway tokens and Domino's Pizza fliers as collateral.


Posted by: Walt Someguy | Link to this comment | 04- 3-09 9:10 PM
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211: Actually, not everyone even agrees that what I said about Scholes was wrong. It pushed Babar's buttons, and maybe yours, but he's full of shit.


Posted by: John Emerson | Link to this comment | 04- 3-09 9:11 PM
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So it's possible that the sophisticated math contributed to disabling or evading the safeguards.

The key here is to understand that this doesn't represent a flaw in the sophisticated math, but rather the purpose of it.


Posted by: politicalfootball | Link to this comment | 04- 3-09 9:15 PM
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125

But given that models are so handy at the thing they're used for (looking complicated and giving assurance) in persuasion and since I don't trust the ones I understand, I take heavy reliance on them as a sign that things are going wrong.

I agree with this. See here .

It is true that often important decisions have to be made in the presence of uncertainty. Policy makers find agonizing over such decisions painful. For this reason they are often very susceptible to claims that there is a way to reduce or eliminate the uncertainty. In ancient times this might involve consulting an oracle. Today it might involve running an elaborate computer model. In my view the value added is often about the same.


Posted by: James B. Shearer | Link to this comment | 04- 3-09 9:16 PM
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I think the main negative effect of the models was to dazzle regulators, Greenspan in particular.

Greenspan was a rube who wanted to be convinced. It didn't take sophisticated models to do it - he just read The Fountainhead, and that was all he needed to know.


Posted by: politicalfootball | Link to this comment | 04- 3-09 9:17 PM
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212: You want to dance? Let's dance. Do you know who would have prevented the economic crisis, and who we should turn to in our time of trouble? W. V. O. Quine, that's who. Nietzsche can't really be considered a legitimate philosopher until Brian Leiter's book justified him in retrospect. The laws of physics are reversible. Economics wasn't really scientific until they got rid of that Polanyi fellow. William James eats dog food.


Posted by: Walt Someguy | Link to this comment | 04- 3-09 9:19 PM
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213: from what I understand of the math, that's essentially nonsense.

I could just not understand the math, but look, if people had treated (say) VAR the way it was meant to be treated, it wouldn't have been the patsy.


Posted by: Sifu Tweety | Link to this comment | 04- 3-09 9:21 PM
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212

Actually, not everyone even agrees that what I said about Scholes was wrong. It pushed Babar's buttons, and maybe yours, but he's full of shit.

I didn't say you were wrong, I said you weren't prepared to defend your claims. As soon as Barbar challenged you, you started trying to change the subject.


Posted by: James B. Shearer | Link to this comment | 04- 3-09 9:22 PM
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216 makes me lol happily about.


Posted by: Sifu Tweety | Link to this comment | 04- 3-09 9:22 PM
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212: it wasn't that what you said about Scholes was wrong -- I agree people should stop listening to him -- so much as that Scholes and the Black-Scholes formula have very little to do with each other, and Icelandic traders learning Black-Scholes has very little to do with anything, except maybe the propensity of finance types to over-rely on models, which we haven't really talked about in this thread.


Posted by: Sifu Tweety | Link to this comment | 04- 3-09 9:24 PM
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Actually, not everyone even agrees that what I said about Scholes was wrong.

This is true, but it overlooks the fact that you agree that what you said about Scholes was wrong - or, at a minimum, that you lacked the expertise to know whether it was true or not.

Poor ol' Barbar misread your point in a way that's very typical of JB Shearer - as Shearer confirms in 209. They both indulge in spurious literalism.

Scholes was a scam artist whose scam was typical of a lot of the scams of the last 10 years. Noting this fact is not a "smear."


Posted by: politicalfootball | Link to this comment | 04- 3-09 9:29 PM
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217

213: from what I understand of the math, that's essentially nonsense.

I don't think so. The whole point of CDOs based on mortgages and split into tranches was to create an illusion of greater value (so you could take $100 million worth of mortgages and sell them for say $105 million). This involved creating bogus mathematical models to justify overrating some of the tranches.


Posted by: James B. Shearer | Link to this comment | 04- 3-09 9:34 PM
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217: if people had treated (say) VAR the way it was meant to be treated, it wouldn't have been the patsy.

I'm not sure what you're trying to convey here.

I suppose VaR had some theoretical valid purpose, but in its actual use, it concealed risk. Given that smart people designed and implemented VaR, and given the actual results of its use, including the immense profitability it had for its implementers, it's hard for me to suppose that VaR was meant to accomplish something else.


Posted by: politicalfootball | Link to this comment | 04- 3-09 9:38 PM
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221

Scholes was a scam artist whose scam was typical of a lot of the scams of the last 10 years. Noting this fact is not a "smear."

Smears don't have to be false. And what was Scholes scam?


Posted by: James B. Shearer | Link to this comment | 04- 3-09 9:39 PM
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Eh, I mean, the way the models were used was horseshit, but the idea of something like VAR is not inherently foolish.

The copula function I find myself less able to defend. Generally, models of correlation are likely to fail in this kind of system.

So, okay, maybe those models were nonsense in any practical sense.


Posted by: Sifu Tweety | Link to this comment | 04- 3-09 9:40 PM
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This involved creating bogus mathematical models to justify overrating some of the tranches.

That's not the way I'd say it. Sifu is right, as far as it goes, that the models themselves aren't to blame - max expressed it neatly above when he suggested that models don't kill, people do.

You can model mortgages with certain attributes perfectly well. The key to the current fuckup is not the invalidity of the model, but the false assumptions plugged into the model about the attributes of the mortgages.

Likewise, a lot of these CDOs were "insured" by Triple-A rated AIG. What could go wrong?


Posted by: politicalfootball | Link to this comment | 04- 3-09 9:45 PM
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Smears don't have to be false.

Webster on "smear": "a usually unsubstantiated charge or accusation against a person or organization."

You seemed to be using "smear" as though it involved claims that were indefensible. If you grant that the "smear" was factually sound, then we agree.

And what was Scholes scam?

Long Term Capital Management.


Posted by: politicalfootball | Link to this comment | 04- 3-09 9:50 PM
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203

I'm fumbling my way towards a distinction that feels meaningful to me, but I can't get it. It's not descriptive vs. predictive. Help!

The distinction is whether the model can be readily validated by checking its predictions against reality. So for example we know roughly how reliable weather forecasting models are because we have a lot of data on how well they do. But we have much less idea how reliable climate forecasting models are because we have much less data to validate them with.


Posted by: James B. Shearer | Link to this comment | 04- 3-09 9:50 PM
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227

Webster on "smear": "a usually unsubstantiated charge or accusation against a person or organization."

Dictionary.com says

4. to sully, vilify, or soil (a reputation, good name, etc.).

And Emerson hasn't substantiated his charge.

You seemed to be using "smear" as though it involved claims that were indefensible. If you grant that the "smear" was factually sound, then we agree.

Given Emerson's quick retreat he didn't seem to think his claims were defensible. I don't grant that his claims were factually sound in so far as they were blaming the Black-Scholes formula for LTCM or Iceland.


Posted by: James B. Shearer | Link to this comment | 04- 3-09 10:03 PM
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You can model mortgages with certain attributes perfectly well.

No you can't. I disagree with this.

The key to the current fuckup is not the invalidity of the model, but the false assumptions plugged into the model about the attributes of the mortgages.

tell me the method that gives you reliably true assumptions about events in the unknowable future.


Posted by: PGD | Link to this comment | 04- 3-09 10:10 PM
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226

You can model mortgages with certain attributes perfectly well. The key to the current fuckup is not the invalidity of the model, but the false assumptions plugged into the model about the attributes of the mortgages.

The assumptions are part of the model. Just because the arithmetic is correct doesn't mean the model isn't bogus.


Posted by: James B. Shearer | Link to this comment | 04- 3-09 10:10 PM
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230

No you can't. I disagree with this.

Sure you can, the problem is mortgages with those attributes don't actually exist in the real world.


Posted by: James B. Shearer | Link to this comment | 04- 3-09 10:12 PM
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tell me the method that gives you reliably true assumptions about events in the unknowable future.

Classical mechanics.


Posted by: Sifu Tweety | Link to this comment | 04- 3-09 10:14 PM
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Poor ol' Barbar misread your point in a way that's very typical of JB Shearer - as Shearer confirms in 209. They both indulge in spurious literalism.

politicalfootball, please read comments 121, 123, 148, 164, 165, 170, 171, 172, and 176.1.

K thx bye.


Posted by: Barbar | Link to this comment | 04- 3-09 10:31 PM
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232: sure, that's what I meant.

233: Ugh. Physics envy. Mortgages are not molecules.

By `uncertain' knowledge, let me explain, I do not mean merely to distinguish what is known for certain from what is only probable. The game of roulette is not subject, in this sense, to uncertainty...The sense in which I am using the term is that in which the prospect of a European war is uncertain, or the price of copper and the rate of interest twenty years hence...About these matters there is no scientific basis on which to form any calculable probability whatever. We simply do not know.

JM Keynes


Posted by: PGD | Link to this comment | 04- 3-09 10:39 PM
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Or since I'm an apparently unreliable narrator, just read 220.


Posted by: Barbar | Link to this comment | 04- 3-09 10:40 PM
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235.2: ask the question you want answered.


Posted by: Sifu Tweety | Link to this comment | 04- 3-09 10:51 PM
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when people started actually paying attention to his math, they produced a different, much larger disaster.

Would it be "spurious literalism" to say that this blames the use of mathematical models for the financial disaster? Reading is fundamental, people.

tell me the method that gives you reliably true assumptions about events in the unknowable future.

The Keynes quote makes it seem like it would be impossible for society to have an insurance industry.


Posted by: Barbar | Link to this comment | 04- 3-09 10:56 PM
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227

Long Term Capital Management.

In what sense was LTCM a scam? As far as I know their financial results were reported honestly and the principals involved believed in the fund and in many cases were heavily personally invested. Of course their claims proved optimistic but if excessive optimism equals scam there are a lot of scams around.


Posted by: James B. Shearer | Link to this comment | 04- 3-09 10:58 PM
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Long-Term Capital Management is a scam in the same way that any financial institution is a scam -- the people in charge pretend that they know what they're doing and that everything is under control. Some commenters here are just bitter because Meriweather didn't provide the returns he promised.


Posted by: Barbar | Link to this comment | 04- 3-09 11:01 PM
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220 except maybe the propensity of finance types to over-rely on models

Yeah, classical physics envy. It's the same sort of thing that the experimental psychologists got into decades ago, lots of equations predicting not much of anything, and on any larger scale it's quite apparent Hari Seldon hasn't arrived.


Posted by: Biohazard | Link to this comment | 04- 3-09 11:06 PM
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241: Not true. Financial models are perfectly well predictive 95% of the time, which make everyone that much more surprised when they go kerblooey.


Posted by: Walt Someguy | Link to this comment | 04- 3-09 11:12 PM
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237: the exchange was perfect actually, your naive answer exactly reflected the historical origins and progression of mathematical economics.

The Keynes quote makes it seem like it would be impossible for society to have an insurance industry.

right. People obviously do predict stuff all the time. But the future *is* unknowable, it is even statistically unknowable, and we can never assume that beliefs about it that are drawn from the past are completely reliable or true. Even statistically so. This is why we build social institutions to try to force the future to be more predictable and to buffer the consequences when it isn't. For finance and insurance, these include traditional underwriting and also regulation limiting the risks that can be taken based on forecasts. The notion that these social institutions could be replaced by mathematical projections using statistical methods analogous to classical mechanics was exactly the problem.


Posted by: PGD | Link to this comment | 04- 3-09 11:15 PM
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243: PGD, Sifu was being flippant, not naive. He's not volunteering to be the strawman of your dreams.


Posted by: Walt Someguy | Link to this comment | 04- 3-09 11:27 PM
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242: They're not all that good at big and complex things otherwise the current mess wouldn't have happened. (Either that, or the conspiracy theorists are right.) It's not as if 1920s and 1930s disappeared in a fit of collective amnesia.


Posted by: Biohazard | Link to this comment | 04- 3-09 11:30 PM
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Financial models are perfectly well predictive 95% of the time, which make everyone that much more surprised when they go kerblooey.

I don't know what this means. Since 1987, there have been a large number of major crisis-level events on financial markets that no model predicted and took everyone by surprise. On the other hand, it's certainly true that if you predict that some individual security will bounce around in value sort of like it has in the past and sort of like the rest of the market does then you will usually be right, or at least not too far off. You will not have understood or successfully modeled the financial system, though.

I can forecast your health by saying there is a 95% chance that tomorrow it will be the same as it is today, but I won't be a good doctor.


Posted by: PGD | Link to this comment | 04- 3-09 11:32 PM
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I have no idea what argument you're trying to make, PGD. Financial engineering is not claimed to be predictive in the sense you're arguing, even by its most devoted practitioners.

Anyway, the failure here is not one of Knightian uncertainty. The fact that US housing prices were going to fall was the surest bet since, well, the last obvious bubble whose outcome was also completely predictable. Knightian uncertainty arguably claimed Gneral Motors as a victim; the destruction of the banks was eminently predictable.


Posted by: Walt Someguy | Link to this comment | 04- 3-09 11:47 PM
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212: You started trying to change the subject.

No, I tried to draw attention to lines 2-4 of my first post, of which the Black-Scholes line was line 1. (A post which was a response to a link posted by someone else). And I thought the the Black-Scholes line was recognizable as a snarky leadin to that. I was not making a serious claim that Scholes personally was really responsible for everything bad that ever happened. I was even eventually willing to drop the point to go on to the rest of my original post, but that was "changing the subject", and Babar was already raging.

"Not prepared to defend": Babar wants the whole thing handled internally, with no external criticism from ignorant people who were never part of the problem.


Posted by: John Emerson | Link to this comment | 04- 4-09 6:04 AM
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Perfectly well predictive 95% of the time

A phrase for the ages. Maybe by tranching our predictive models we can get one tranche that's 100% predictive and then descending orders of models down the the cutrate "Surprise Me" tranche.


Posted by: John Emerson | Link to this comment | 04- 4-09 6:09 AM
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Financial engineering is not claimed to be predictive in the sense you're arguing, even by its most devoted practitioners.

This is the economists' two-step. They're urbane, ironic, and modest in sophisticated company, but when they're allowed out in the real world they wreak havoc by letting people think what they want to think. It is, after all, a free market in ideas, and if the buyer leaps to over-optimistic conclusions, it's not your problem.

J. H. Hexter on prediction:

What the erroneous notion of historians and others that prediction of the future is impossible boils down to is (1) that total prediction of the future is impossible; (2) that precise prediction of many future events is impossible; (3) that among the future events not precisely predictable are especially those that from a sense of anxiety and uncertainty, itself a consequence of this unpredictability, men most desire to predict precisely' ; but (4) the prediction of future events is not only often possible but is often accurate, precise, and important; (5) and that historians and others have deluded themselves on this point not because such predictions are rare and unimportant, but because although very important indeed, they are both easy and commonplace.

"Predictivity" means "predictions overwhelmingly more detailed and reliable than the historian's common sense predictivity". Classical physics attained that, and classical economics tried to do the same thing by the same methods, but was much less successful. And theoretical economics recognizes this, but applied economics fudges. That's the two-step.

And every improvement in predictions, real or imagined, justifies the taking of what had been thought to be (in terms of the previous model) greater risks, thus making greater profits. (A claim sometimes made about seatbelts, though I think wrongly.)


Posted by: John Emerson | Link to this comment | 04- 4-09 6:30 AM
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J. H. Hexter on prediction:

What the erroneous notion of historians and others that prediction of the future is impossible boils down to is (1) that total prediction of the future is impossible; (2) that precise prediction of many future events is impossible; (3) that among the future events not precisely predictable are especially those that from a sense of anxiety and uncertainty, itself a consequence of this unpredictability, men most desire to predict precisely' ; but (4) the prediction of future events is not only often possible but is often accurate, precise, and important; (5) and that historians and others have deluded themselves on this point not because such predictions are rare and unimportant, but because although very important indeed, they are both easy and commonplace.

Posted by: John Emerson | Link to this comment | 04- 4-09 6:31 AM
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250 - It sounds like you're disagreeing with me, but you're agreeing with me.

Classical economics is successfully predictive 0% of the time. Macroeconomics, despite years of effort, does no better than predicting tomorrow is the same as today. Wall Street is full of weird predictive ideas: astrology, technical analysis, probably all kinds of weird shit I've never heard of. None of these work any better than a coin flip. Financial engineering is considerably more successful than that. This allows people to turn 50/50 coin flips into 0.001/99.999 coin flips. Then someone promptly rounds 0.001 down to zero. Financial engineering enables the driving-with-a-seatbelt behavior because it works better than random chance. (Which is my interpretation of Biohazard's 241 that I was trying to disagree with.)


Posted by: Walt Someguy | Link to this comment | 04- 4-09 7:59 AM
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I said:

You can model mortgages with certain attributes perfectly well.

This phrasing implies a broad claim that I didn't intend, and I retract it. My intent was much narrower and (I think) uncontroversial: Sensibly applied models are useful in a viable mortgage industry.

Berkshire Hathaway and AIG have had very different trajectories in the current crisis. Wells Fargo and Wachovia likewise. This is not because Warren Buffett's business associates eschewed modeling - it's because (if you'll permit a bit of simplification) Buffett isn't a crook.


Posted by: politicalfootball | Link to this comment | 04- 4-09 8:04 AM
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Some commenters here are just bitter because Meriweather didn't provide the returns he promised.

I'm not aware that he did this, but yes, if he did, he was certainly engaged in a scam, pretty much by definition, no?

Meriweather's scam, by my reckoning, was that he was playing with money that wasn't his. He was levered up in a way that was designed to put the upside in his pocket, and the pockets of his cronies, while leaving the downside to others and creating a financial emergency in the process. I'm comfortable characterizing this as a "scam." As in the case of what constitutes a "smear," there might be some disagreement about appropriate terminology, but it is what it is.


Posted by: politicalfootball | Link to this comment | 04- 4-09 8:29 AM
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Via Atrios, a very relevant Bill Moyers segment with William Black (former regulator from the S&L stuff in the '80s, he's a "good" Black). Much preaching to the choir, but also some things to chew on relevant to the various claims and counterclaims in this thread (both this one and the Beta release). And JRoth is right at 187; ratings firms are ... The Devil!


Posted by: JP Stormcrow | Link to this comment | 04- 4-09 8:29 AM
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My basic idea is that we've been failed by our leaders, and that the economics profession is among those who failed us because they're the dog that didn't bark and in many cases were ethically compromised enablers.

I have a long standing grudge, as people know, but am I not right? Economists have been vastly overestimating their wisdom for half a century, and anyone in history, sociology, philosophy, left politics, etc., has had to get used to their cocky sneers and complacent chuckling and their death grip on policy (Rubin v. Reich). . When things were going well they got away with it, but things aren't going well any more, and they're got a lot to answer for.


Posted by: John Emerson | Link to this comment | 04- 4-09 8:34 AM
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I have no idea what argument you're trying to make, PGD. Financial engineering is not claimed to be predictive in the sense you're arguing, even by its most devoted practitioners.

yes it is, implicitly so. Because the success of any financial instrument within the system is dependent on the stability of the entire system, prediction cannot ignore systemic stability.

This allows people to turn 50/50 coin flips into 0.001/99.999 coin flips.

Not true at all, it's nothing like that reliable.

Financial engineering enables the driving-with-a-seatbelt behavior because it works better than random chance.

it works no better than the assumption that the future will be like the past. The same way macro forecasting works. There are two reasons it seems to work better than macro forecasting. First, it's operating within a more much structured and rules-based environment (the financial market). Second, because you are trying to predict minute-to-minute changes and can make money off that, so things have to be stable for a much shorter period of time and you have many more data points to work with.

Anyway, the failure here is not one of Knightian uncertainty. The fact that US housing prices were going to fall was the surest bet since, well, the last obvious bubble whose outcome was also completely predictable.

as you suggest, there was a conspiracy to ignore a likely macro event, but there was also Knightian uncertainty. There was plenty of credit enhancement on the various debt securities. The question wasn't simply whether housing prices fell, but exactly how much they would and what would happen to peoples capacity to repay (and by extension the broader economy) when that did occur. As it happens, the fall in housing prices set off a massive liquidity crunch among mutually dependent financial institutions -- was that predictable? There is *still* no agreement on how to model the cash flows from the bad assets on bank balance sheets over the next 1-3 years, because we don't know how what the economy is going to look like over this period, which should tell you how important uncertainty is.

My intent was much narrower and (I think) uncontroversial: Sensibly applied models are useful in a viable mortgage industry.

I agree. But I'd say the value in many future models will be more based on data gathering and crunching than fancy math. The big technological breakthrough to make use of is computers, not modeling. I think the ideal would be really good non-parametric analyses with transparent outputs that make it clear to non-specialists what the data is telling us today. Then use those as an input to forecasts that are recognized as unavoidably subjective. Although aspects of underwriting can be automated, you would constantly have to revisit subjectively to make sure people weren't adapting to your metrics in a way that made them less useful. But Cosma is the guy to opine on this.


Posted by: PGD | Link to this comment | 04- 4-09 8:39 AM
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the ideal would be really good non-parametric analyses with transparent outputs

this is perilously close to being analytically impossible from the meaning of "parameter" (one of the many things which ruined my economics career was the Impulse Response Functions of Vector Autoregressions Are Not Measures Of Marginal Effect Wars).

In all honesty, the good old-time religion linear approximations of ordinary economics as she is done, would have helped us avoid this crisis (the only lacunae in those models being easily cleared up by equally basic applications of actuarial science, which you don't hear much about these days and should). But old time religion wouldn't have facilitated a massive power grab by economists (and particularly economists of the free market kind) over all sorts of related fields (in particular, the almost complete eclipse of the actuaries by economists in all areas other than the actuaries' protected regulatory niche).


Posted by: dsquared | Link to this comment | 04- 4-09 10:34 AM
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Re 191: The difference between models in Physics and Engineering is that we beat the living shit out of them before we rely on them for any guidance other than in designing experiments. Models that are out there on the cutting edge (i.e. not sufficiently clobbered with experimental attempts at refutation) are not used for design of real world applications. In Plasma Physics there are a number of models (specifically codes) that are used and every time one is used to design an experiment or device code validation is part of the design objective. Some codes, having been in use for decades, are considered fairly reliable within their regime of validity, but even so they still occasionally fail due to not taking into account some subtle (or not so subtle) effect.

The huge difference between models as used in the natural sciences and those used in finance is that the people using the results do apply some version of Megan's Maxim, and strive to maintain an awareness of the limitations of the model. IOW, the best codes are known to give the correct results when all of their assumptions are fulfilled, but the people using the results are very aware of the fact that the particulars of the application at hand may violate the assumptions.

This is all right at the forefront of my mind because my current job is driven by a tightly couple model-test-refine cycle in which we are using some of the best plasma simulation codes to optimize a device and we are constantly finding little effects the code can't handle. Divergences between modeling and measurement of up to a factor of two are considered good agreement because we know that the code can only do so much. In financial modeling a factor of two difference between prediction and actual outcome is potentially a market-collapsing disaster.


Posted by: togolosh | Link to this comment | 04- 4-09 10:41 AM
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Milton Friedman proved fifty years ago, to the satisfaction of the profession at least, that unrealistic models are no problem at all. ("Introduction" to Positive Economics. Keen in "Debunking Economics", Ch. 7, has discussed this question in detail. I've had economists quote Friedman's claim to me as an axiomatic truth, with the ignorance of which by me proving that I had no right to say anything about economics (a common opinion, as we have seen).


Posted by: John Emerson | Link to this comment | 04- 4-09 10:53 AM
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258: Thanks, interesting and timely mention for me of actuarial science, as this thread had compelled me to go out and do some searching and reading on actuaries this morning. I realized that I did not really know to what extent they were involved in risk management for the more high-flying parts of the biz, although it would seem to me that much of their expertise would be spot on. It does appear that they are still pretty much specific niche players, but I do not have enough context or domain knowledge to really be sure of that. I did find this article, "Financial crisis boosts opportunities for actuaries", somewhat interesting, Actuaries invented many techniques for managing risk; now they should take on a wider role in finance, says Seamus Creedon. He also talks about proportionality, ORSA and other Solvency II issues.

In part I was interested because a roommate of mine in college went on to become an actuary. This led him to become permanently rooted in the Sodom of the Midwest, Des Moines, Iowa (sorry guys, he's married). A more sober and straightshooting individual I could not imagine, (I know, that's what the shocked neighbors always say) and from his descriptions of his work, he did not appear to be far from the norm. Although I am sure there is a fair bit of, "Couldya run this model again for me assuming that magic unicorns stop 50% of risk X group from ever participating?" and the like. (In some brave new world, we'll tranche people up by risk, capability, ...what have you.)


Posted by: JP Stormcrow | Link to this comment | 04- 4-09 11:32 AM
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[Sorry, guys, but I can't stand bad writing, especially by me].

Milton Friedman proved fifty years ago, to the satisfaction of the profession at least, that unrealistic models are no problem at all. ("Introduction" to Positive Economics. Keen in "Debunking Economics", Ch. 7, has discussed this question in detail).

I've had economists quote Friedman's claim to me as an axiomatic truth, and further claiming that my ignorance this obvious principle showed that I had no right to say anything about economics. (A common opinion, as we have seen.)


Posted by: John Emerson | Link to this comment | 04- 4-09 11:38 AM
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250

And every improvement in predictions, real or imagined, justifies the taking of what had been thought to be (in terms of the previous model) greater risks, thus making greater profits. (A claim sometimes made about seatbelts, though I think wrongly.)

An excuse to advertise my blog and cite my Merton story .


Posted by: James B. Shearer | Link to this comment | 04- 4-09 11:52 AM
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Meriweather's scam, by my reckoning, was that he was playing with money that wasn't his.

I'm sure this came as a big shock to all of his investors.


Posted by: Barbar | Link to this comment | 04- 4-09 12:10 PM
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The big difference between the insurance industry and other parts of finance is cultural. Insurance people are content making money hand over fist doing the same boring stuff they did yesterday, and innovation is generally mistrusted. The mathematical models, the daring to make bets on the future, the playing with other people's money, all that stuff is the same.


Posted by: Barbar | Link to this comment | 04- 4-09 12:17 PM
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When you say cultural, don't you mean regulatory? Insurance companies don't (AFAIK) avoid exciting new products out of distaste, but because they're regulated up the yingyang (and right back out the wazoo).


Posted by: LizardBreath | Link to this comment | 04- 4-09 12:24 PM
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It's both regulatory and cultural.


Posted by: Barbar | Link to this comment | 04- 4-09 12:27 PM
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How can you tell?


Posted by: LizardBreath | Link to this comment | 04- 4-09 12:32 PM
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they're regulated up the yingyang (and right back out the wazoo).

And since finance wasn't, we're now up the Yazoo with out a wingwang paddle.


Posted by: JP Stormcrow | Link to this comment | 04- 4-09 12:33 PM
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I should also note that actuaries often serve in the role of risk management as described in 160, and that insurance policies are often issued where no one will know the exact results for a decade or so, creating incentives for management to under-price and get more business in the door before they leave and move on to their next job.

Shocking, I know.


Posted by: Barbar | Link to this comment | 04- 4-09 12:35 PM
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Part of my interest in the actuarial stuff is that it is one possible career path I have considered recommendng for one of my offspring who is currently (dare I say it here) majoring in Economics as an undergrad.


Posted by: JP Stormcrow | Link to this comment | 04- 4-09 12:41 PM
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Catastrophic insurance actually does have lots of problems with undercounting of black swan type events. I mean, shit, the whole industry has to be bailed out every time a big hurricane hits the southeast.


Posted by: Sifu Tweety | Link to this comment | 04- 4-09 12:42 PM
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And actuarial models suffer from some of the same problems at Black-Scholes; does the fact that named storm insurance gets cheaper in a given region every year that region doesn't suffer hurricane damage mean that the risk of a storm has decreased? I would argue no.


Posted by: Sifu Tweety | Link to this comment | 04- 4-09 12:44 PM
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Catastrophic insurance is a scam, as politicalfootball would say. You should pay 10 times as much for insurance on a 1-in-1,000-year event than for insurance on a 1-in-10,000-year event. But how on earth can anyone tell the difference? Scam.

does the fact that named storm insurance gets cheaper in a given region every year that region doesn't suffer hurricane damage mean that the risk of a storm has decreased?

Well, the risk hasn't decreased, but your best estimate of the risk has decreased.


Posted by: Barbar | Link to this comment | 04- 4-09 12:49 PM
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Well, the risk hasn't decreased, but your best estimate of the risk has decreased.

Right, for the same reasons that Black-Scholes is bad at pricing long-term options, as best I understand things.


Posted by: Sifu Tweety | Link to this comment | 04- 4-09 12:51 PM
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272, 273: Agreed. I did have a big argument with my actuarial friend way back on the nature of some of the assumptions behind Life Insurance. Measured in terms of human lifespans these instruments in there modern form have not been around all that long (I "delighted" my father on the occasion of his recent birthday by pointing out that he was born closer to the start of the Mexican War than the present.) Of course they attempt to manage some potential correlations by clauses such as:

The rider will not be payable if death or dismemberment results from or is accelerated by: ... War, terrorism, invasion, act of foreign enemy, hostilities (whether war be declared or not), civil war, martial law, rebellion, revolution, insurrection, military or usurped power, riot or civil commotion. War means any war whether declared or not.

Posted by: JP Stormcrow | Link to this comment | 04- 4-09 12:52 PM
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268: lots of things in finance are sociological and cultural, and I don't think you can reduce it all to regulatory policies.


Posted by: Barbar | Link to this comment | 04- 4-09 12:53 PM
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Stormcrow, demography is an honorable profession. Interesting, uses some of the same math, won't shame your family. If being an actuary doesn't take, you could suggest demography.


Posted by: Megan | Link to this comment | 04- 4-09 12:56 PM
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256: I agree completely.


Posted by: Walt Someguy | Link to this comment | 04- 4-09 12:57 PM
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And yes, things like 100-year flood estimates are notoriously tough in a world with changing land-use patterns (not even worrying about climate change).

The primary adjustment factor, or index of urbanization, is the basin development factor, a measure of the extent of development of the drainage system in the basin. This measure includes evaluations of storm drains (sewers), channel improvements, and curb-and-gutter streets. The basin development factor is statistically very significant ...

Posted by: JP Stormcrow | Link to this comment | 04- 4-09 12:58 PM
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When things are going well, economists sneer at "culture" as a kind of unscientific, occult, hand-waving New Age illusion.

When things are going badly, though, "culture" explains everything. (Same for subjectivity, psychology, etc.) If everything were economic, everything would be rational, good, and predictable.

When fundamental physics gets into a bind, physicists sometimes revert to The Mind, as in the Schrodinger's cat thingy. I presume that this is a vestige of German Kantianism.


Posted by: John Emerson | Link to this comment | 04- 4-09 1:02 PM
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John I think you should take on the flood insurance people. They could use it.


Posted by: Sifu Tweety | Link to this comment | 04- 4-09 1:02 PM
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When things are going well, economists sneer at "culture" as a kind of unscientific, occult, hand-waving New Age illusion.
When things are going badly, though, "culture" explains everything. (Same for subjectivity, psychology, etc.) If everything were economic, everything would be rational, good, and predictable.

There's something right about this. I mean, there's something right about this putative attitude of the economists. Which is not to say that culture is a bad thing.


Posted by: beamish | Link to this comment | 04- 4-09 1:04 PM
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Fargo has had two 500-year-floods and a 50-year flood in 12 years. What are the odds on that?

I don't see how the factors in 280 can be much of a factor. It's an extremely rural watershed.


Posted by: John Emerson | Link to this comment | 04- 4-09 1:06 PM
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278: Stormcrow, demography is an honorable profession. Interesting, uses some of the same math, won't shame your family.

Shame the family? I just want him to rake in a bundle. We need to compensate for our reduced family finances due to the crisis. We're thinking globally and acting locally here ...


Posted by: JP Stormcrow | Link to this comment | 04- 4-09 1:06 PM
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There's something right about this putative attitude of the economists.

Which attitude? You mean the economis two-step of denying the relevance of culture whenever possible, but dragging culture out to blame when economics fails?


Posted by: John Emerson | Link to this comment | 04- 4-09 1:10 PM
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By "rake in a bundle", do you mean "be a grad student for six years living on a stipend but going to neato places to do neato work on important stuff" and then "graduating into a luck-driven academic job hunt that will take him who knows where for a medium salary and demanding hours"? I think demography could provide that.


Posted by: Megan | Link to this comment | 04- 4-09 1:10 PM
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Speaking of sociology and culture, do people here read OrgTheory? One of my favorite academic blogs.


Posted by: Barbar | Link to this comment | 04- 4-09 1:13 PM
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I just want him to rake in a bundle.

If he's good at taking tests, actuarial's a pretty good option.


Posted by: Barbar | Link to this comment | 04- 4-09 1:17 PM
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The most intellectually interesting discipline to me right now is Geography, which I used to think of as an eighth-grade class. A lot of virtues of history but with more data, completely tied in to physical reality, insights on almost every big political issue.....


Posted by: John Emerson | Link to this comment | 04- 4-09 1:17 PM
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284: There are less significant, but still non-trivial changes that have come about from changing agricultural practices. Also dams and channel straightening etc., some of which have some non-obvious effects at a distance. (For instance, channeling and thereby "speeding up" river flow can cause significant erosion far upstream. Paired examples illustrate (1) the almost telegraphic rapidity with which the first phases of the reaction of a graded stream to a number of artificial changes are propagated upvalley and downvalley and, (2) the more or less complete readjustment that is effected over a period of thousands of years to analogous natural changes. Changes can also be triggered merely by changes in sedimentary load.


Posted by: JP Stormcrow | Link to this comment | 04- 4-09 1:19 PM
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The Red River certainly is a good place to go to study those questions, because the change has been massive.

I know that in similar cases protections put in in one area just moved the problem to a different area. IIRC you can even customize your own flood protection in such a way as to shift the problem to a downstream enemy.


Posted by: John Emerson | Link to this comment | 04- 4-09 1:23 PM
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290: My big regret was not pursuing Geography post-grad. I even took the Geography GRE (long gone now as a subject test), prompting snickers in the test room. Sigh.


Posted by: JP Stormcrow | Link to this comment | 04- 4-09 1:23 PM
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John I think you should take on the flood insurance people. They could use it.

You want John to take on the Feds?


Posted by: CJB | Link to this comment | 04- 4-09 1:23 PM
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Yeah, people in my old office talk a lot about sediment transfer and sediment-starved streams. I wish I understood it better than rough concept, but every fall I seem to miss the fluvial geomorphology class.


Posted by: Megan | Link to this comment | 04- 4-09 1:24 PM
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It is only partially the Feds. I see exactly this story a lot. Feds come in and say that your flood risk is higher than we thought, you'll have to pay more, and the locals protest. Sometimes the locals go to a Congressman and get a delay. Sometimes the Feds hold firm. But the locals fighting the insurance rate increases are the other half of the story.


Posted by: Megan | Link to this comment | 04- 4-09 1:30 PM
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I can only destroy two or three disciplines at a time.


Posted by: John Emerson | Link to this comment | 04- 4-09 1:38 PM
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I mean, shit, the whole industry has to be bailed out every time a big hurricane hits the southeast.

Not actually true of that part of the industry which actually uses actuarial science (ie, the privately owned global reinsurance industry) - it occasionally needs to be recapitalised but this is part of the normal operating model. Certainly true of the politicised and regulated part which sells hurricane insurance to people who want to live in hurricane zones but don't want to pay the price for doing so, but that isn't the actuaries' fault - the actuarial profession can (and does) even calculate reasonably precise estimates of exactly how fucked-up the system is.

Actuaries (particularly life assurance actuaries) do often get bullied to change their estimates, but they tend to be much better at resisting this pressure, because they have a proper professional body which performs the twin functions of a) oversight of standards in the name of the profession as a whole, in the long term and b) ensuring a severe structural undersupply of qualified actuaries. The second is more important than the first, as it means that an actuary always has another job to go to.


Posted by: dsquared | Link to this comment | 04- 4-09 1:41 PM
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You mean the economis two-step of denying the relevance of culture whenever possible, but dragging culture out to blame when economics fails

I would rather put the first step as denying that the study of the idiosyncrasies of culture is a proper part of economics. Anyway, I don't really know that they deny that the study of culture is part of economics. But some part of some social science should deal with the rational agents qua rational agents, and abstract away from the details of the Incas or the Belgians.


Posted by: beamish | Link to this comment | 04- 4-09 1:42 PM
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292.2: Yes, the simplest example is that your levee does not allow the flood to spread out over the flood (duh)plain (which serves as a natural reservoir) and instead speeds the water on downstream thereby generally raising the crest level there. And here's a disheartening article on floodplain development since the big 1993 floods around St. Louis. But official resolve to depopulate the floodplain has given way to development fever in Missouri: over $2.2 billion worth so far on land that was underwater in 1993.

The folks in the USGS and the Army Corps of Engineers have gotten a lot better at this stuff over time (often through hard experience), but the political will at almost all levels is lacking (and the Corps of Engineers itself is till suspect). A few towns were actually moved after the '93 flood, but the article claims 28,000 new ones have been built on floodplain around St. Louis (which has a massive stock of underused 19th century housing within the city).


Posted by: JP Stormcrow | Link to this comment | 04- 4-09 1:46 PM
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298: b) ensuring a severe structural undersupply of qualified actuaries.

As I recall, I took the first two tests as an undergrad. It looks like the same (or similar) structure is still in place over here, with I believe seven tests in the whole sequence.


Posted by: JP Stormcrow | Link to this comment | 04- 4-09 1:49 PM
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The abstracting-out part might be OK, but it's normally accompanied by some sort of idea that economics is foundational, and culture superstructural and imaginary. Combined with "We're more scientific than you and use more math, neener-neener". And heavily influenced by the fact that economists get cushy consulting jobs and the others don't.

"The rational is not the real" (Stambaugh). The fact that Factor A is more understandable than Factor B does not mean that Factor A is more real, more important, or more fundamental. It's not sentimentalist, reactionary, Luddite, or Know-Nothing to advocate for the consideration of Factor B.


Posted by: John Emerson | Link to this comment | 04- 4-09 1:52 PM
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NB that US actuaries are looked on by other countries' actuaries the world over as hick country cousins because their exams are not difficult enough.


Posted by: dsquared | Link to this comment | 04- 4-09 1:56 PM
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"The rational is not the real" (Stambaugh).

That's true if she means: not everything real is rational; false if she means: everything real is irrational.

It's not sentimentalist, reactionary, Luddite, or Know-Nothing to advocate for the consideration of Factor B.

Yes, that's true.

Anyway, almost implicit in your initial claim was the consequence that economics describes at least part of the world pretty well when things go well. It's not heartless, blind, or foolish to be interested in that.


Posted by: beamish | Link to this comment | 04- 4-09 2:01 PM
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but they tend to be much better at resisting this pressure, because they have a proper professional body which performs the twin functions of a) oversight of standards in the name of the profession as a whole, in the long term and b) ensuring a severe structural undersupply of qualified actuaries. The second is more important than the first, as it means that an actuary always has another job to go to.

This is somewhat touching, but ignores the fact that actuaries sometimes have ambitions beyond maintaining a source of income. Emerson has argued both that economists have too much job security and that they are untrustworthy.

that part of the industry which actually uses actuarial science (ie, the privately owned global reinsurance industry)

This is also touching. The global reinsurance industry largely covers risks that can't be quantified by primary insurance companies. What is more scientific, coming up with a premium for someone's car insurance based on their age, gender, location, and accident history, or coming up with a premium for a policy that covers only relatively rare hurricane events?


Posted by: Barbar | Link to this comment | 04- 4-09 2:09 PM
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I'm going to give you one, only one, precisely one chance to back away from "somewhat touching", sunshine. Please bear in mind that you are about to enter into a discussion with someone who knows really quite a lot about both financial economics, actuarial science and the global insurance industry. You, on the other hand, appear to believe that hurricanes (of which there are at least four or five every year, and records of which have been kept for two centuries) are rare events which cannot possibly be the subject of actuarial tables.

This is the proverbial arse-kicking contest, and you might be well advised to do a quick leg count before entering. Be aware that collateral damage may also include the pretty ferocious bullshitting about Myron Scholes which can be found attached to your name above.


Posted by: dsquared | Link to this comment | 04- 4-09 2:15 PM
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The global reinsurance industry largely covers risks that can't be quantified by primary insurance companies.

also hilariously untrue, by the way. One might as well say that the global equities market covered investments that couldn't be made by individual shareholders.


Posted by: dsquared | Link to this comment | 04- 4-09 2:17 PM
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"Portrayal of actuaries as math-obsessed, socially disconnected individuals with shockingly bad comb-overs '97.28892 percent incorrect'."

And I had to laugh when the post at the top of an Actuarial Forum was: "Does anyone know if I need to know the Black Scholes formula for calculating the price of options for the Exam FM?"


Posted by: JP Stormcrow | Link to this comment | 04- 4-09 2:20 PM
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Anyway, almost implicit in your initial claim was the consequence that economics describes at least part of the world pretty well when things go well.

No, I meant that it is a tendentious false description of the world that can skate along up to the point when it collapses, and during that period allows some people to cash in in ways that survive the crash. There's a cost even when things are going well, but people are willing to pay the cost because they think that they're set for a cut of the booty. But they're only being paid off temporarily.


Posted by: John Emerson | Link to this comment | 04- 4-09 2:22 PM
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Not even the littlest corner of economics is even in the least bit useful or approximately right? Supply chain management, say? Gresham's Law?


Posted by: beamish | Link to this comment | 04- 4-09 2:25 PM
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284

Fargo has had two 500-year-floods and a 50-year flood in 12 years. What are the odds on that?

Less than the odds that the 500 year flood was figured incorrectly.


Posted by: James B. Shearer | Link to this comment | 04- 4-09 2:26 PM
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There's a cost even when things are going well, but people are willing to pay the cost because they think that they're set for a cut of the booty

in fairness John, neoclassical economics certainly does predict that people will be willing to pay the cost if they think they're set for a cut of the booty. In general, as a social science prediction, the prediction that economics as a science will become corrupted in the interests of rich people is pretty easily derivable from basic propositions of economics, and has been empirically verified.

(still a favourite joke; that evolutionary psychology and neoclassical econ are the only two fields where you can gravely insult a man by saying that his theory of human behaviour is correct)


Posted by: dsquared | Link to this comment | 04- 4-09 2:26 PM
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The big difference between the insurance industry and other parts of finance is cultural.

The big difference is regulatory.

AIG's regulated insurance businesses are said to be doing just fine, were it not for AIGFP, and the reason AIGFP went bad is not because of "culture," but because it wasn't regulated appropriately.

Monoline insurers managed to find themselves in a whole heap of trouble, despite whatever cultural contstraints limited their risky behavior.

Newsweek did an article recently suggesting that AIG's regulated insurance businesses are about to go belly-up. I find the Newsweek piece implausible because regulators are watching those businesses - not because their "culture" wouldn't permit destructive behavior.


Posted by: politicalfootball | Link to this comment | 04- 4-09 2:27 PM
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Yes; it was Enron's skill in negotiating and lobbying a cut-out from CFTC regulations that allowed it to effectively run a commodity futures trading firm with a fraction of the capital required for a regulated firm - and therefore, inevitabiy to its bankruptcy, because those regulations were there for a reason. I actually called that one in 1999, when a mate emailed me Paul Krugman's rather embarrassing article, with the subject line "An investment bank by another name?" and I replied "yes - specifically, an undercapitalised investment bank by another name".


Posted by: dsquared | Link to this comment | 04- 4-09 2:30 PM
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When economics is junked and parted out, many valuable components will be available for recycling. This is one of the (not terribly many) questions on which I am confident of being in agreement with Dsquared, because he's said something to that effect which I'm too lazy to track down.

But the profession, the institutional reality, is unrecoverable.

I feel the same way about lots of thing, for example Marxism. Marxists make fools of themselves by trying to keep Marxism alive, rather than junking it and parting it out. Lots of good stuff there.


Posted by: John Emerson | Link to this comment | 04- 4-09 2:31 PM
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In general, by the way, the initial set of regulations in any area of finance are set by old hands and white beards of the industry, set at levels halfway between what the old farts regard as prudent, and the cutting edge of what the young guns of the day are trying to get away with. Subsequent revisions to those regulatiojns are in general drafted by successive generations of regulatory economists, and almost always (cf, in spades, Basel 2) end up weakening them, often catastrophically. Progress in financial regulation is almost always retrograde, except in the rare cases where it is in response to immediate crisis.


Posted by: dsquared | Link to this comment | 04- 4-09 2:33 PM
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Bring it on, dsquared. In all the Bruce Lee movies I've seen, he spends at least five minutes screaming "Do you know who I am?" before unleashing the whoop-ass.

In addition to being wrong about the two things I mentioned above, you seem to be under the impression that global reinsurance companies use different "actuarial" models to price catastrophe risk than other parts of the insurance industry, when in reality there are a handful of industry-wide models that anyone can pay for (with some proprietary models that are not distinguished by the fact that they use "actuarial methods").


Posted by: Barbar | Link to this comment | 04- 4-09 2:36 PM
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You appear to be as bad at getting "impressions" as you are at insurance analysis, laddie. How do you think Florida flood insurance is priced to the consumer? If your answer contains the word "model" you are incorrect.


Posted by: dsquared | Link to this comment | 04- 4-09 2:40 PM
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You, on the other hand, appear to believe that hurricanes (of which there are at least four or five every year, and records of which have been kept for two centuries) are rare events which cannot possibly be the subject of actuarial tables.

Nope; I was simply stating that the hurricane risk that gets ceded to reinsurance companies is less "scientifically" understood than the hurricane risk that is retained by the primary companies.

Now it's true that small insurance companies should buy reinsurance even if they can quantify all their risk, because that allows for greater efficiency of capital. But global reinsurance companies mostly sell their services to already-gigantic primary insurance companies.


Posted by: Barbar | Link to this comment | 04- 4-09 2:46 PM
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and to reiterate, I am of course not wrong about "those two points". You asserted that hurricanes were "relatively rare events" which insurance companies could not price for, and you asserted that global reinsurance mainly dealt with risks which could not be quantified by primary insurers. In fact, hurricane insurance is substantially eassier to price than motor (because there is no moral hazard - you don't get more prone to hurricanes when you're insured, but you do get more prone to car theft), and the bread and butter of global reinsurance is simply trading portfolios of generic risks with primary insurers so that they don't build up concentrations. Specialty syndicates are a small part of the Lloyd's market, dwarfed by generic motor syndicates.


Posted by: dsquared | Link to this comment | 04- 4-09 2:47 PM
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There is no fucking mystery of hurricane reinsurance pricing, mate. The frequency of storms is well understood (with a bit of disagreement over the impact of global warming). The severity of storms follows a well-understood actuarial law. The expensiveness of stuff is the main driver of claims. That's it. The bit that goes to the reinsurers goes there because it's big, not because it's difficult to understand.


Posted by: dsquared | Link to this comment | 04- 4-09 2:51 PM
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313: I find the Newsweek piece implausible because regulators are watching those businesses

You may be right here, I have no inside information to indicate otherwise, but given the happenings of the last year or so (really the last decade), the last part of that statement says almost nothing to me. I have no confidence that anyone is coming clean on anything right now, One of the big takeaways for me from the Moyers/William Black interview I posted in 255 is to reinforce my impression that right now the government is complicit in an ongoing coverup of the whole situation and in light of that, I am skeptical of most everything that is even remotely associated with the crisis.

And it is this which I think is the huge and immediate crisis of the Obama presidency. And I see it as having potentially great negative implications for progressive politics in the US.


Posted by: JP Stormcrow | Link to this comment | 04- 4-09 2:51 PM
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hurricane insurance is substantially eassier to price than motor (because there is no moral hazard - you don't get more prone to hurricanes when you're insured, but you do get more prone to car theft)

Comical. The variability in hurricane damage is orders of magnitude larger than the variability in auto accident losses. After Katrina happened, all the hurricane models had to be updated to basically double the loss values. But yeah, on the other hand there's "moral hazard" for motor theft insurance.

Isn't this embarassing? I'll just repeat this:

Actuaries (particularly life assurance actuaries) do often get bullied to change their estimates, but they tend to be much better at resisting this pressure, because they have a proper professional body which performs the twin functions of a) oversight of standards in the name of the profession as a whole, in the long term and b) ensuring a severe structural undersupply of qualified actuaries. The second is more important than the first, as it means that an actuary always has another job to go to.

Chuckle.


Posted by: Barbar | Link to this comment | 04- 4-09 2:54 PM
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Let me just reassert one of the main points: we cannot allow these questions to be resolved internally. Not within government, not within finance, and not within the economics profession.

And that means that ignorant people like me have to be brought into the process.


Posted by: John Emerson | Link to this comment | 04- 4-09 2:55 PM
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ignorant people like me have to be brought into the process.

New mouseover?


Posted by: Bave Dee | Link to this comment | 04- 4-09 2:57 PM
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But some part of some social science should deal with the rational agents qua rational agents, and abstract away from the details of the Incas or the Belgians.

no, no, no. This is social science malpractice. I mean, sure, there's a division of labor and some people work on more abstract things, but everything that happens in a society happens in and through a culture. You have to put the abstractions back together with the culture before you can apply anything in any area. Don't worry, you will still be able to use math and run big computer programs if you want.

Market microstructure is an interesting area where you can see economists groping their way back toward sociology.


Posted by: PGD | Link to this comment | 04- 4-09 3:00 PM
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After Katrina happened, all the hurricane models had to be updated to basically double the loss values

This might have been a terribly embarrassing blow to me and a massive triumph for you were it not for the fact that ...

no they didn't.

Everyone knew exactly how much a direct hit on New Orleans would have cost. Accurate loss estimates were available days after landfall. You may also notice that Berkshire Hathaway, Swiss Re, Munich Re and the Lloyd's market all continue to trade, as they had reserved for something like their actual loss experience. Similarly, when the San Andreas Fault finally shakes, it will not call for a reassessment of anything either.

Chuckle. Fuck me, you're stupid and you don't even know it. A great career in economics would have awaited you, pre-2008...


Posted by: dsquared | Link to this comment | 04- 4-09 3:00 PM
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How do you think Florida flood insurance is priced to the consumer? If your answer contains the word "model" you are incorrect.

Actually, could you explain this to me? I thought it was by models, with the additional constraint of government regulation capping year-over-year price increases. Would appreciate being corrected if I'm wrong.


Posted by: Barbar | Link to this comment | 04- 4-09 3:02 PM
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no they didn't.

Yes they did. Which caused problems when everyone needed to double their hurricane insurance rates but couldn't because of regulation.


Posted by: Barbar | Link to this comment | 04- 4-09 3:04 PM
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You may also notice that Berkshire Hathaway, Swiss Re, Munich Re and the Lloyd's market all continue to trade, as they had reserved for something like their actual loss experience.

Reinsurance industry didn't have very big losses from Katrina, plus they got to a chance to boost their rates.


Posted by: Barbar | Link to this comment | 04- 4-09 3:05 PM
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Wall Street is full of weird predictive ideas: astrology, technical analysis, probably all kinds of weird shit I've never heard of. None of these work any better than a coin flip. Financial engineering is considerably more successful than that.

What you said about technical analysis is by no means proven . I think any method that sensibly applies modern technology to the wealth of data available on financial market transactions has the potential to succeed in the sense of forecasting prices marginally better than a random walk (and only a small improvement makes a lot of $ when it is levered up). An issue with technical analysis is that a lot of it was developed before the modern computer.

The claims of financial economics go beyond that form of success. The idea of being able to hedge away risk is really central. I think the notion that encouraging lots of derivative bets will improve market efficiency is a central implication too.


Posted by: PGD | Link to this comment | 04- 4-09 3:35 PM
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Anyway, speaking of animus, D^2 seems to have become furious at me for daring to challenge two claims:

1. actuaries are specially resistant to fudging the numbers because they have job security
2. the global reinsurance industry is the part of the insurance industry that actually uses actuarial science

Both of these claims are ridiculous and will apparently never be defended, but apparently I did something very very bad by gently mocking them.

I'm supposing that by claim #2 he meant that reinsurers rely on catastrophe risk models while primary companies are bound by onerous government regulation, but: (a) catastrophe models are not really the hallmark of actuarial science, because their value really depends on estimates from engineering and climate experts; (b) catastrophe models are exactly the kind of untransparent black box model with disturbingly little real-world correspondence that everyone's been railing about in this thread.

It's like someone sat D^2 down at some point and gave him a good speech about why reinsurance companies know what they're doing. There's definitely an element of truth to it but in the midst of a discussion of how everyone in finance is an untrustworthy shark I found it, well, touching.


Posted by: Barbar | Link to this comment | 04- 4-09 3:53 PM
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Babar is the King Elephant of animus. Take it from me, Dsquared.


Posted by: John Emerson | Link to this comment | 04- 4-09 4:00 PM
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Have you checked out OrgTheory, Emerson? It's a terrific blog.


Posted by: Barbar | Link to this comment | 04- 4-09 4:04 PM
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I personally find the economic sociology stuff fascinating (like Kieran Healy's work). What do you think of it, John?


Posted by: Barbar | Link to this comment | 04- 4-09 4:05 PM
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http://orgtheory.wordpress.com/

What do you think these orgtheory guys would think of you, Barbar?


Posted by: David Weman | Link to this comment | 04- 4-09 4:09 PM
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Why don't you tell me, David? Which of my beliefs are so objectionable?

Who am I? What do I do for a living? What's my educational experience? What are my interests?

I'd love to find these things out.


Posted by: Barbar | Link to this comment | 04- 4-09 4:14 PM
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NB that US actuaries are looked on by other countries' actuaries the world over as hick country cousins because their exams are not difficult enough.

Let's see:

http://www.actuarialoutpost.com/actuarial_discussion_forum/showthread.php?t=21284

At the other end you have the North American bodies (SOA/CAS) where the average travel time to Fellowship is close to ten years. Neither of these bodies gives credit for university course work either. The UK is somewhere in the middle. The Institute gives credit for university course work and average travel time is significantly less. According to Peter Clark (a Past President of the Institute) the average travel time through that system has decreased to five and a half years.

I was surprised to find this, because D^2 is the world's foremost authority on actuaries and reinsurance.


Posted by: Barbar | Link to this comment | 04- 4-09 4:25 PM
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Who am I? What do I do for a living? What's my educational experience? What are my interests?

Your name is Thurgood Mickelthwait. You're a landscape engineer. You've got a Ph.D. in Pharmacy. You like long walks and pina coladas.


Posted by: beamish | Link to this comment | 04- 4-09 4:27 PM
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336: I think what they or anyone who happened upon this thread would think (perhaps unfairly!) is that you're a very angry man.


Posted by: David Weman | Link to this comment | 04- 4-09 4:29 PM
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Maybe you're just not yourself today?


Posted by: David Weman | Link to this comment | 04- 4-09 4:31 PM
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David, stop baiting me and why don't you point to comments where I say actually say something unreasonable?

In my exchange with D^2, who is angrier?
In my (non-)exchange with Emerson, who is angrier?


Posted by: Barbar | Link to this comment | 04- 4-09 4:34 PM
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337: I've looked at Orgtheory and might like it, but you and I have a personal relationship, not a good one at all, and Orgtheory can't save you.

I would certainly like to know more about who you are and what you do, but you are free to continue to keep that information private, as is everyone here.

I can't believe that anyone could switch from multiply iterated stupid attacks to sweet victimized kindness as suddenly as you have done, but that's what I see. Well-played, Gandhi.


Posted by: John Emerson | Link to this comment | 04- 4-09 4:50 PM
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In my (non-)exchange with Emerson, who is angrier?

You. I was mostly just trying to move the discussion from sentence 1 to sentence 2 of my original statement, but you wouldn't allow that. Eventually I even conceded sentence 1, possibly wrongly, to try to move the argument along, but you wouldn't accept that. You were raging.

Everyone else: sorry, this has become a duel of honor for me too, just as it was for Babar in his first 30 raving posts. We seem to have stunk everyone else out, even Dsquared. Sorry guys.


Posted by: John Emerson | Link to this comment | 04- 4-09 4:55 PM
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Emerson, you continually mischaracterize what I've been doing in this thread. There's a public record; anyone who wants to bother to read through the comments is free to do so. But this is becoming a horrendous unsatisfying time sink for me.

As far as I what I do for a living, I'll just say that as an actuary pricing (among other things) catastrophe risks for a global reinsurance copany, I found the following pretty unthreatening.

Please bear in mind that you are about to enter into a discussion with someone who knows really quite a lot about both financial economics, actuarial science and the global insurance industry.

Bye guys. Take care.


Posted by: Barbar | Link to this comment | 04- 4-09 4:58 PM
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You're a liar, Babar. You've been raging all along, though the memory hole seems to have eaten your more isane comments.

I'm happy for you to leave, though.


Posted by: John Emerson | Link to this comment | 04- 4-09 5:05 PM
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Wait, how do you feel about pina coladas?


Posted by: beamish | Link to this comment | 04- 4-09 5:22 PM
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What I wish that this had been about, and intended that it be about, and what it would have been about except for The King of the Elephants:

43: I understand that this is regarded as cranky, but a lot of the problems we're having are the result of egregious professional failures, both intellectual and ethical, on the part of economists and the whole economics profession. But ten years from now, economics will be taught almost exactly the same, with a couple of little kludges patched in to handwave away reality one more time.

And when Babar and I weren't here together, that's what the thread was actually about!

But the dude apparently thinks I peed on his cornflakes at some point. Or maybe he has some kind of familial or intimate relationship with Scholes. In any case, my original post was followed by a flood of raging Babar posts, and we never escaped from that.

Though he's now the victim, of course.


Posted by: John Emerson | Link to this comment | 04- 4-09 5:42 PM
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Triumphant victim, I mean, too busy to waste his time on us, after 70 or so posts.


Posted by: John Emerson | Link to this comment | 04- 4-09 5:55 PM
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Reinsurance industry didn't have very big losses from Katrina

"not very big losses" which caused them to have to completely recalibrate their models, because they were twice as large as anything that might have been expected?

Hurricane risk is not that difficult actuarially. It does not require catastrophe models, and indeed lots of regulators forbid the use of such models for reserving purposes. Simply reserving according to the actuarial model and charging a fair return on capital will give you a perfectly adequate hurricane risk insurance business. Some damn-fool reinsurers have at various points in the past fallen into the hands of economists with cat models, and usually ended up taking a bath as a result.

In the circumstances, I frankly do not believe Barbar's claim to be a professional actuary.


Posted by: dsquared | Link to this comment | 04- 4-09 5:59 PM
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(and further to 370, if Barbar can provide proof of his (I rather assume Barbar is a man) qualification, this will not go particularly well for Barbar, as my opinion of his knowledge and reasoning with respect to actuarial matters is fixed - it will just prove that every profession has a couple of cunts and halfwits hanging around. I know lots and lots of good actuaries, so the Bayesian update if I were to find out that Barbar was one would be small weight).


Posted by: dsquared | Link to this comment | 04- 4-09 6:04 PM
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I know y'all are familiar with the whole "lurkers support me in email" conceit. I thought I'd report that I've lurked, reading the entirety of the this thread on the old server and the bulk of this one, and I am very unfit to comment on many of the factual issues involved, but I think I see exactly what made Barbar so frustrated, what motivated him getting pissed off last night, and because I think I understand and am broadly sympathetic, I'm reporting my broadly sympathetic lurkerdom.

As I understood it last night, he'd never meant to mount a full-throated defense of the economics profession. I think he was particularly goaded when JRoth responded to his 154 on the old thread, calling it "pathetic" (or something) because Barbar said point 1 of the dynamic was "propose a thesis: economics has egg on its face," which JRoth took to mean, "econ doesn't have any egg on its face." Maybe Barbar meant that, and my some of my sympathy is misplaced, but I did not read it that way. It can get rather aggravating when one feels one is repeatedly misunderstood. Frankly, I think he's been right when he's noted some reading comprehension problems, although I suppose its possible the errors are mine.

There's an exchange upthread here where LB says no one has tried to blame mathematical models per se for economic catastrophe, Barbar says obliquely that some people have tried to do exactly that, LB contradicts him, Barbar, as far as I can see, rightly points back to that first Scholes comment, and then John Emerson jumps in to say, "Aha, he is obsessed." Barbar is rather in a bind when a subject becomes relevant again but he's a regular Captain Ahab for referring to something that other people, by implication, are also talking about.

Further, as a lurker I've frequently enjoyed John Emerson and dsquared's comments, but they are each deep in the weeds of hypocrisy to accuse anyone else of being nasty or mean-spirited, at any time, ever. I would not, contra David Weman, come away from these threads with the idea that Barbar is a particularly angry person.

I have never met this Barbar and I don't think I have anything at stake in any of the issues in this thread. One issue I'm curious about when people discuss financial models though--are strategies like the ones quantitative hedge funds use "models" in the sense everyone is talking about? Maybe they're better thought of as algorithms for when to buy and sell what; they certainly don't describe market behavior at any decent resolution, but there are some that reliably make money out of sample over at least some decent window of time. If hedge fund manager X said "la-la-la I can lever myself way up now," just because his strategies had been humming along for a year, he'd be crazy, but that's not the same as saying all math in finance is a fraud, which it very nearly sounds to me like some people here are saying.

Also, to John Emerson: you use "econ" and "finance" interchangeably and it is honestly confusing to this reader what you mean when. When someone remarks that you do this, you ask what the difference is. I don't know if that's rhetorical or if you honestly don't know. I'm the last person in the world to be an authority on this, and I'll probably mess it up, but I'm going to attempt to answer you in the hope that if you have more of a sense of the distinction you'll use the word that applies to the sense you mean. Finance is the endeavor of trying to make a bunch of money in the financial markets. Strategies in finance are generally proprietary and secret. Academic finance is, well, the academic study of how to make a bunch of money in the financial markets. Strategies discussed in academic finance are not proprietary. Economics is the academic study of cause and effect in all kinds of markets, not just financial markets, and to the extent that economics studies the financial markets, it's not concerned with the markets as instruments to make some individuals lots of money, but all the factors that might effect the financial markets, and how the financial markets would in turn effect the rest of the economy. Apologies if I am responding naively to some purposeful rhetorical device of yours, but it does confuse.


Posted by: a lurker, delurking for a bit | Link to this comment | 04- 4-09 6:09 PM
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298 seems to nearly make my point about both models and the fundamental causality generally residing in the black hearts of men.


Posted by: Sifu Tweety | Link to this comment | 04- 4-09 6:21 PM
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As I understood it last night, he'd never meant to mount a full-throated defense of the economics profession.

He explicitly said that, late in the game, but only after he'd stunk up the place with about 30 raging posts. Only posts that Barbar never posted were "misunderstood". He was angry that we didn't read his mind. Almost all of his early posts were attacks on my 43.1.

Also, to John Emerson: you use "econ" and "finance" interchangeably and it is honestly confusing to this reader what you mean when.

As far as I know, academic econ and finance were together up until a certain point, and then separated for some reason. I'd like to know more about the history of that. Applied econ and theoretical econ are still together, AFAIK, in a devious and confusing way.

My general point is above, in 348: we've been let down by the watchdogs. I do tend to lump theoretical and applied econ together with theoretical and applied finance, but as I understand, these professions have all failed or doublecrossed us. I'm disinclined to respect departmental boundaries of the handwashing type.


Posted by: John Emerson | Link to this comment | 04- 4-09 6:24 PM
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There's an exchange upthread here where LB says no one has tried to blame mathematical models per se for economic catastrophe, Barbar says obliquely that some people have tried to do exactly that, LB contradicts him, Barbar, as far as I can see, rightly points back to that first Scholes comment,

I have literally no relevant expertise on the subject matter of this discussion. In terms of interpersonal dynamics, though, once you're making points 'obliquely', any subsequent confusion is your problem to straighten out.(Nothing wrong with being elliptical, but being elliptical means you're not entitled to bitch about having been misunderstood).

Also, if you're going to say something, pick a name. What if you wanted to say something else later on?


Posted by: LizardBreath | Link to this comment | 04- 4-09 6:24 PM
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The black hearts of men are as explanatory as God. Probably we should worship them.


Posted by: John Emerson | Link to this comment | 04- 4-09 6:26 PM
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Barbar, as far as I can see, rightly points back to that first Scholes comment.

Quel suprise.


Posted by: John Emerson | Link to this comment | 04- 4-09 6:31 PM
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Also, if you're going to say something, pick a name.

May I suggest 'Thurgood Micklethwait'?


Posted by: beamish | Link to this comment | 04- 4-09 6:34 PM
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354

... but as I understand, these professions have all failed or doublecrossed us. ...

So what do you think of the legal profession?


Posted by: James B. Shearer | Link to this comment | 04- 4-09 6:36 PM
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Guess.

I have actually proposed many times that economics be redefined as a form of highly skilled mercenary advocacy, on a par with law, rather than as a science.

My claim has never been that economists know nothing -- just that they're corrupt, professionally blind, and skewed in their priorities, and that their science is so ill-formed that they can produce almost any answer that their employer wants.


Posted by: John Emerson | Link to this comment | 04- 4-09 6:45 PM
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So why don't unions hire economists? Surely we could get one or two of the cheaper models.


Posted by: foolishmortal | Link to this comment | 04- 4-09 6:50 PM
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They do exactly that, FM. Greg Palast was a cut-rate union economist at one time. Dean Baker and Max Sawicki are/were more or less that, AFAIK. But economists are the most likely of any profession to judge their own personal worth by the pay they're getting.


Posted by: John Emerson | Link to this comment | 04- 4-09 6:54 PM
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..they're corrupt, professionally blind, and skewed in their priorities, and that their science is so ill-formed that they can produce almost any answer that their employer wants.

By your standards, three out of four of these (and maybe all four) could be accurately applied to the majority of working sciences, and scientists, in the world.


Posted by: arthegall | Link to this comment | 04- 4-09 6:54 PM
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I have never met this Barbar and I don't think I have anything at stake in any of the issues in this thread.

For someone who doesn't have anything at stake, you certainly wrote a lengthy and detailed comment about it.


Posted by: Mary Catherine | Link to this comment | 04- 4-09 6:55 PM
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lurker, for awhile, I was genuinely sympathetic to Barbar, on the grounds that he perhaps hasn't seen Emerson develop this sort of argument before, and thought that Black-Scholes was a crucial component of that argument. Heck, in the original comment, Black-Scholes was prominent, and I suppose that with a small misreading and a lack of context, one could have misunderstood Emerson's point.

That sympathy was strengthened by Emerson's tardiness in acknowledging his error (or acknowledging, at least, his lack of expertise in discussing that particular matter).

But once Emerson took care of that piece of business, how many comments did Barbar make failing to note Emerson's acknowledgment? A lot.

And, further, the aggressive bad-faith readings of comments by Barbar is really pretty awful. Look at 264 as a response to 254. In context, it was clear that I was talking about the use of leverage when I referred to "other peoples' money". But in Barbar's rendering of my comment, I was suddenly talking about the solicitation of funds from investors.

It's just bullshit. Any sympathy I had has evaporated. He really is a destructive troll and needs to go away.


Posted by: politicalfootball | Link to this comment | 04- 4-09 6:57 PM
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363: Some sciences are well-formed and not corrupt, and in may cases the professional blindness and the skew in priorities, although there, are no big deal.


Posted by: John Emerson | Link to this comment | 04- 4-09 6:58 PM
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For someone who doesn't have anything at stake, you certainly wrote a lengthy and detailed comment about it.

I don't see anything specially bizarre about this. It seems like one fairly natural consequence of sitting through a whole long conversation where you feel like you are watching people talk past each other. It's the conversational equivalent of watching someone struggle to open a large, elaborately wrapped box. Even if you don't care about the package or its contents, the urge to grab the box and the cutter and be very systematic about taking it apart can be very strong.


Posted by: redfoxtailshrub | Link to this comment | 04- 4-09 7:01 PM
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arthegall!


Posted by: eb | Link to this comment | 04- 4-09 7:02 PM
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Some sciences are well-formed and not corrupt...

No, no, you can't just say "some." Which ones do you think are "well-formed" and "not corrupt?" Any part of modern biology? (Say, genetics? or the modern marriage of genetics and biochemistry, which we might call 'genomics'?) Any part of physics? Some fraction of the earth sciences?


Posted by: arthegall | Link to this comment | 04- 4-09 7:03 PM
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eb!


Posted by: arthegall | Link to this comment | 04- 4-09 7:04 PM
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364: Please. David's comment was begging for a response like lurker's; if it hadn't been lurker who gave it, I probably would have myself.


Posted by: Josh | Link to this comment | 04- 4-09 7:05 PM
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||

Except on special festive occasions, I smoke exactly one cigarette per day. However, because it would be much better if I only smoked at all on special occasions, I have deliberately allowed myself to run out of cigarettes. This is perhaps the tiniest, weakest version of quitting smoking known to man, and it is not even the time of day when I would be having my one cigarette, yet, but even so, it is making me sad.

|>


Posted by: redfoxtailshrub | Link to this comment | 04- 4-09 7:08 PM
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365: It's just bullshit. Any sympathy I had has evaporated. He really is a destructive troll and needs to go away

Fucking bullshit yourself ( and Emerson too). You folks seem to have let yourselves be driven completely around the bend by some relatively normal discourse. In the world of Internet and Unfogged potential misreadings 264 to 254 is a freaking nit. What is your guy's agenda?

It really is to laugh.


Posted by: JP Stormcrow | Link to this comment | 04- 4-09 7:09 PM
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Sorry, but "destructive troll" and "needs to go away" in this context were just too much to let pass.


Posted by: JP Stormcrow | Link to this comment | 04- 4-09 7:12 PM
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Orgtheory is indeed well worth reading. If anyone is inclined to hold its fans against it, they should not. I have nothing to say about the rest of this thread, which I have barely skimmed.


Posted by: eb | Link to this comment | 04- 4-09 7:12 PM
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I appreciate Ald Fab's comment in 352. It's useful to have a different voice and POV when a discussion gets as mistrustful as this one.

I read the "not having anything at stake" as meaning, generally, "I don't have a strongly held personal position akin to those that Emerson, Barbar, or Dsquared have been putting forth."

Regardless, though, if LB's still in this thread, I'm actually going to ask/suggest that it be closed. I know we don't usually do that until the 1000-comment point, but this has dragged out over several days now and it seems as though it would be a good time to encourage new topics.


Posted by: Witt | Link to this comment | 04- 4-09 7:12 PM
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I've just realised, btw, that "some actuaries have ambitions beyond ..." upthread almost certainly refers to the process of nipping off to a jumped-up hedge fund off Bermuda to try and play your "superior modelling skills" into a fortune by writing bits and pieces of cat contracts. Not something you tend to find the cream of the profession doing, but quite popular with people who think that they're being underpromoted for their genius skills, a category of actuary which is often marked out by its excessive respect for flashy financial economics.

btw, sadly, lurker is IMO incorrect to say:

If hedge fund manager X said "la-la-la I can lever myself way up now," just because his strategies had been humming along for a year, he'd be crazy, but that's not the same as saying all math in finance is a fraud

Basically a lot of it is as brutally uncomplicated as that. If you substitute, say "Long Term Capital Management" for "a hedge fund manager" and "the work of Myron Scholes" for "all math in finance", then you've pretty much got the kernel of my argument to the effect that Emerson was right right right about Scholes. Most quantitative finance is very very dependent indeed on a totally inappropriate assumption of ergodicity (I started my own blog in order to fight that war)


Posted by: dsquared | Link to this comment | 04- 4-09 7:14 PM
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373: JPS, I cited 264 as an example, and cited a bunch of others, to wit: every time Barbar accused Emerson of misrepresenting Black-Scholes after Emerson backed away from his characterization of Black-Scholes.

And goddamit, Black-Scholes was trivial and tangential to Emerson's point in the first place. But as I said, I think Barbar could be excused for failing to grasp that.

So, in my opinion, you are quoting me out of context, and I think this is a bad thing - but well within the realm of "relatively normal discourse," to use your phrase. I think there is a distinction between (what I perceive as) your error here, and Barbar's bad faith.


Posted by: politicalfootball | Link to this comment | 04- 4-09 7:17 PM
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Sorry, but "destructive troll" and "needs to go away" in this context were just too much to let pass.

How thoroughly have I been brainwashed by Emerson? So thoroughly that I feel the need to distinguish between "destructive" trolls and, well, Emerson.


Posted by: politicalfootball | Link to this comment | 04- 4-09 7:20 PM
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All respect to aldfab for giving enough of a shit to comment. By the way, why are latter-day unfogged arguments so very bitchy?


Posted by: foolishmortal | Link to this comment | 04- 4-09 7:21 PM
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378, 379: Fair enough.


Posted by: JP Stormcrow | Link to this comment | 04- 4-09 7:22 PM
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Baabar (Babur) is one of the Mogols, it means a tiger cub
it's just for so that JE would feel a little sympathy to B
Barbar is a different word i guess, well, he attacked first saying you are ignorant, wrong etc, b/c was feeling defensive perhaps if he's an economist, then perhaps he realized he was rude and tried to amend the hurt feelings
so perhaps one can be a bit forgiving, no? b/c of the shrub eaten that flourishes
though if applied to economics, that principle, there would be like instant communism i guess or heaven


Posted by: read | Link to this comment | 04- 4-09 7:23 PM
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249 might be my favorite comments ever.

And from 260: Milton Friedman proved fifty years ago, to the satisfaction of the profession at least, that unrealistic models are no problem at all. ("Introduction" to Positive Economics. Keen in "Debunking Economics", Ch. 7, has discussed this question in detail. I've had economists quote Friedman's claim to me as an axiomatic truth, with the ignorance of which by me proving that I had no right to say anything about economics (a common opinion, as we have seen).

"Proved" s/b "argued". But that's a minor quibble. I was taught exactly this, as axiomatic truth. Friedman's sleight of hand was using the predictive power of classical mechanics in her arguments, which economics can't hope to match. With predictive power at the level of classical mechanics, it's true that you don't generally much need to worry about the "realism" of your model (although you do still need to have the assumptions in mind, so you don't inadvertently end up trying to use your model to build a spaceship). The best results in economics--the results championed in the field--have predictive power in the mid-60s. At that point, keeping very close watch on the realism/applicability of your model is critical.


Posted by: Brock Landers | Link to this comment | 04- 4-09 7:23 PM
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"her" s/b "his"


Posted by: Brock Landers | Link to this comment | 04- 4-09 7:26 PM
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I think I'm in love with a read.


Posted by: foolishmortal | Link to this comment | 04- 4-09 7:27 PM
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Sorry to hear you were laid-off, Shearer. Hope something turns up.


Posted by: Brock Landers | Link to this comment | 04- 4-09 7:29 PM
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Instant Communism or Heaven

Band name, boat name, mouseover or some damn thing. (Eliding the "i guess", purists may wish to leave it in.)


Posted by: JP Stormcrow | Link to this comment | 04- 4-09 7:34 PM
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btw, I would never criticise anyone else for being aggressive or mean-spirited - simply to note that if that's how they're going to be with me (or at a pinch, my mates), they're not going to get the kid gloves treatment in return.

The best results in economics--the results championed in the field--have predictive power in the mid-60s

tangentially, in the LBS course I took on quantitive & computationalk methods in finance (a rather souped-up technical analysis course, whisper it!), my old prof Athanasios Orphanides demonstrated that forecasting accuracy of 55% is all you need to make a shit-load of money, as long as you use a sensible stop-loss method to limit your losses.


Posted by: dsquared | Link to this comment | 04- 4-09 7:36 PM
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I think I'm in love with read.

Post your photo to the Flickr pool; she'll have to do her physiogomy comparison.


Posted by: Witt | Link to this comment | 04- 4-09 7:38 PM
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... my old prof Athanasios Orphanides demonstrated that forecasting accuracy of 55% is all you need to make a shit-load of money...

In some fields, a forecasting accuracy of 55% is all you need to make a forecasting accuracy of 99%...


Posted by: arthegall | Link to this comment | 04- 4-09 7:41 PM
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ah! I've just realised what struck a false note with Barbar - it was the use of the example of Hurricane Katrina as the astounding event. Anyone really familiar with cat reinsurance would have said "Hurricane Andrew", because that was the one that really did freak some people out. Katrina was about twice as expensive as Andrew, but the possibility of seeing something twice as bad as the worst thing you've seen so far is the sort of thing actuaries live off - Andrew was much worse than twice as bad as the previous case (not that it was a wildly unusual storm - it was just amazingly precise in its tendency to hit expensive things).

NB of course that the conventional reinsurance industry did in fact survive Andrew just fine - like bridges, tunnels and other things designed by proper professionals, reinsurance companies are designed to be massively more robust than anyone realistically thinks they need to be. The main malign effect of Andrew was to draw a lot of financial economists into the reinsurance industry, many of whom later showed up in the investment departments (fun fact - the investment losses on subprime-related bonds have dwarfed Katrina in terms of the financial cost imposed on the insurance industry).


Posted by: dsquared | Link to this comment | 04- 4-09 7:43 PM
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In some fields, a forecasting accuracy of 55% is all you need to make a forecasting accuracy of 99%...

From the URL I thought that might be a candidate Boost::Probability library or something.


Posted by: nosflow | Link to this comment | 04- 4-09 7:44 PM
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369: More or less the hard science / soft science distinction, with a special regard for conflict-of-interest possibilities. You could even put in the predictive / contingent contrast. Econ comes out badly on all fronts.

373-4: Fuck you too!

376: Amidst the hatred some interesting things have come out of this thread. There's no paradox there at all. I would be sad to see it closed.


Posted by: John Emerson | Link to this comment | 04- 4-09 7:47 PM
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390: It was a standard complaint of prof. Orphanides (who came from an AI background) that the AI crowd were absolutely determined to reinvent the econometrics literature on forecast combination (David Hendry's book "Forecasting" is the ref that sticks in my mind).


Posted by: dsquared | Link to this comment | 04- 4-09 7:49 PM
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Boost::Probability

Perl is for people who don't see the value of abstraction.


Posted by: arthegall | Link to this comment | 04- 4-09 7:49 PM
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(You could start a blog, Witt.)


Posted by: eb | Link to this comment | 04- 4-09 7:49 PM
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prof. Orphanides (who came from an AI background) that the machine learning crowd were absolutely determined...

Fixed that for you.

"Overfitting" is a nice concept -- more people outside of statistics/machine-learning/whatever should be familiar with it, at least as a metaphor.


Posted by: arthegall | Link to this comment | 04- 4-09 7:51 PM
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Boost is actually a fearsome C++ library, "::" being the namespace scoping operator in that language. There's a Boost::Python but no Boost::Perl, I believe.


Posted by: nosflow | Link to this comment | 04- 4-09 7:52 PM
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393.2: Hi, John.

Let's see Black-Scholes - 1973, so ~ 2045 there will be a nasty metaverse thread precipitated by a comment on the role of Boosting algorithms in the financial meltdown at the end of Jenna Bush's afdministration.


Posted by: JP Stormcrow | Link to this comment | 04- 4-09 7:53 PM
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(actually I'm currently reading Ken Binmore's book on "small world" Bayesianism and he sensibly points out that the sort of world in which you might be able to say that your model had a 55% forecasting accuracy is precisely the sort of world in which you ought to be ale to achieve 99.9999%, and that the problem of not being able to say with any reasonable sense what your accuracy is, is exactly the same problem as not being able to make decent forecasts)


Posted by: dsquared | Link to this comment | 04- 4-09 7:53 PM
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If it's C++, it must be fearsome indeed.


Posted by: arthegall | Link to this comment | 04- 4-09 7:53 PM
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(I prefer to be a remora, eb.)


Posted by: Witt | Link to this comment | 04- 4-09 7:54 PM
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397: /rimshot/


Posted by: foolishmortal | Link to this comment | 04- 4-09 7:54 PM
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400-- you and C/sma Sh/lizi probably have deathly boring conversations at parties.


Posted by: arthegall | Link to this comment | 04- 4-09 7:58 PM
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JP, as you know, I've claimed that Wagner caused Hitler, and I've also claimed that the insane German noun declension system caused Hitler, and I can't remember what else I've said about Hitler.

For about the last 200 comments I've been trying to get away from my snarky Black-Scholes leadin in order to talk about more interesting things. Babar is vaguely excusable since he's not a regular here, but fuck you.

As far as I know, Scholes, is a very bright, profiteering jerk, probably with an inoperative reality sense, but HE DID NOT CAUSE THE BANKRUPTCY OF ICELAND.

I ADMIT IT! SO SHOOT ME! I WAS WRONG1


Posted by: John Emerson | Link to this comment | 04- 4-09 7:59 PM
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405: STOP CONCEDING THIS EMERSON YOU JERK YOU WERE BASICALLY RIGHT


Posted by: dsquared | Link to this comment | 04- 4-09 8:02 PM
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Ok. To soon to joke about, I see.

The Aristocrats!


Posted by: JP Stormcrow | Link to this comment | 04- 4-09 8:02 PM
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Too soon


Posted by: JP Stormcrow | Link to this comment | 04- 4-09 8:03 PM
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D^2, I was just trying to shift the conversation to more interestind ground. And I can't clinch the case on the internets.

Where's Barbar? Conserving his valuable time somewhere?


Posted by: John Emerson | Link to this comment | 04- 4-09 8:05 PM
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I was just trying to shift the conversation to more interestind ground

I think the ground you are looking for is over there, on the other side of my dead body!!!!!!!!!!!!!!!!!!!!!!


Posted by: dsquared | Link to this comment | 04- 4-09 8:20 PM
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OK, but hang around in case Babar comes back. You're my bog brother in this case.


Posted by: John Emerson | Link to this comment | 04- 4-09 8:21 PM
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Big brother.


Posted by: John Emerson | Link to this comment | 04- 4-09 8:22 PM
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dsquared, I know the paper, but not the Binmore book, on "small world" Bayesianism... which one is it?

(I've got an Amazon gift certificate burning a hole in my pocket...)


Posted by: arthegall | Link to this comment | 04- 4-09 8:25 PM
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"bog brother" is good, though.


Posted by: parsimon | Link to this comment | 04- 4-09 8:26 PM
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I thought it was perhaps a typo of blog brother.


Posted by: JP Stormcrow | Link to this comment | 04- 4-09 8:29 PM
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I thought Emerson was trying to start a new flame war by calling him Irish.


Posted by: Witt | Link to this comment | 04- 4-09 8:30 PM
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You have to bleed your comments together ritualistically to become a blog brother.


Posted by: eb | Link to this comment | 04- 4-09 8:32 PM
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"Best in Show" is coming on TCM in a couple minutes. I recommend it.


Posted by: foolishmortal | Link to this comment | 04- 4-09 8:37 PM
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By the way, for those of you whose generalized rage at the current state of affairs is insufficient, I want to point out that the Moyers interview linked by JPS in 255 is quite good for rage inducement.

And quite good otherwise, too. Thank God for Bill Moyers.


Posted by: politicalfootball | Link to this comment | 04- 4-09 8:44 PM
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I find myself weirdly implicated in this thread, even though I haven't read it.


Posted by: Kieran | Link to this comment | 04- 4-09 8:48 PM
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I can never remember Moyers' name. My mnemonic is "'once worked for LBJ' + media", and I go down the alphabet and come up with "Newton Minow". But I always know that's wrong.


Posted by: John Emerson | Link to this comment | 04- 4-09 8:49 PM
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418: I'm switching between "Real Life" and the B-ball right now. Mockumentary night on TCM. Woody Allen's "Take the Money and Run" on earlier and Spinal Tap after BiS. And coincidentally, Dennis Hartley has a Top 10 mockumentary list at Digby's place.


Posted by: JP Stormcrow | Link to this comment | 04- 4-09 8:49 PM
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360

My claim has never been that economists know nothing -- just that they're corrupt, professionally blind, and skewed in their priorities, and that their science is so ill-formed that they can produce almost any answer that their employer wants.

Some of them are. So what?


Posted by: James B. Shearer | Link to this comment | 04- 4-09 8:50 PM
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I can never remember Moyers' name.

Yeah, I know what you mean. I always get him mixed up with that other guy, I forget his name.


Posted by: Mary Catherine | Link to this comment | 04- 4-09 8:52 PM
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406

405: STOP CONCEDING THIS EMERSON YOU JERK YOU WERE BASICALLY RIGHT

Scholes did cause the bankruptcy of Iceland?


Posted by: James B. Shearer | Link to this comment | 04- 4-09 8:53 PM
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The profession as a whole is culpable, because it doesn't censure the bad apples. And it isn't just "some" in any real sense. It's more like "lots".

And of course, you can shove you're "so what" up your ass.


Posted by: John Emerson | Link to this comment | 04- 4-09 8:53 PM
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Moyers really is great. But god was he a lying shit when he worked for Johnson. Just goes to show you can't learn much about a person when they're still an adolescent.


Posted by: ari | Link to this comment | 04- 4-09 8:54 PM
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Much more directly than Wagner causing Nazi Germany, and about as directly as Karl Marx causing the gulag.


Posted by: dsquared | Link to this comment | 04- 4-09 8:55 PM
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No, Shearer. You did. This whole thread has been designed to get you to confess. But we failed!

Just don't go to Iceland. They're make you into hakarl, and you darn well deserve it.


Posted by: John Emerson | Link to this comment | 04- 4-09 8:56 PM
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The Wagner Act was just one of the many Nazi aspects of the New Deal.


Posted by: eb | Link to this comment | 04- 4-09 8:56 PM
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Just goes to show you can't learn much about a person when they're still an adolescent.

Hear, hear.


Posted by: parsimon | Link to this comment | 04- 4-09 8:58 PM
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John, if you're still around, you should read this book. It's good history, good geography, and draws from some of the parts of Marxism that I expect you appreciate (Though I could be wrong on that last count. Come to think of it, I could just be wrong. Whatever.) Oh, it's also about the Midwest and lays the blame for many of the region's problems at the feet of commodities traders (Who are sort of like economists, right?).


Posted by: ari | Link to this comment | 04- 4-09 9:05 PM
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I caused the bankruptcy of Iceland. I wanted to reduce them to a state of medieval penury so that they would write more sagas.


Posted by: Walt Someguy | Link to this comment | 04- 4-09 9:06 PM
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432: I want to re-read that. I didn't pay all that much attention to the captial/insurance maps at the end the first time.


Posted by: eb | Link to this comment | 04- 4-09 9:08 PM
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433: Oh, now that you're here, I have to credit you for whatever comment you made upthread that was so funny. "William James eats dog food." [/possible paraphrase] Funny!


Posted by: ari | Link to this comment | 04- 4-09 9:08 PM
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I didn't pay all that much attention to the captial/insurance maps at the end the first time.

Nobody does. That's the point at which an otherwise great book betrays the ugly fact that it's based on a dissertation. Cronon fell in love with his research and couldn't bear to cut it. Or at least that's my theory.


Posted by: ari | Link to this comment | 04- 4-09 9:10 PM
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432 is startling because somebody just recently asked me for help finding that book. And it's not new, I don't think.

All I know of Cronon is his essay Only Connect, which I liked a great deal when I first read it. It still stands up, and I've probably given copies to at least a dozen people.


Posted by: Witt | Link to this comment | 04- 4-09 9:10 PM
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422: Weirdly, I just watched Drop Dead Gorgeous on dvd. I own it only because I loaned the first season of Lost to the guy who does my hair and he lost one of the disks and gave me a bunch of his own dvds to make up for it (and boy is it a weird bunch of dvds).


Posted by: oudemia | Link to this comment | 04- 4-09 9:11 PM
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I loaned the first season of Lost

I'm still watching Lost, but at this point only out of force of habit. I can't take all of those closeups that are meant to show us 'the softer side of Sawyer' or what have you. Cheesy! And increasingly tiresome.


Posted by: Mary Catherine | Link to this comment | 04- 4-09 9:15 PM
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Daniel: Basically a lot of it is as brutally uncomplicated as that. If you substitute, say "Long Term Capital Management" for "a hedge fund manager" and "the work of Myron Scholes" for "all math in finance", then you've pretty much got the kernel of my argument to the effect that Emerson was right right right about Scholes. Most quantitative finance is very very dependent indeed on a totally inappropriate assumption of ergodicity (I started my own blog in order to fight that war)

Thank you, Daniel!

405: STOP CONCEDING THIS EMERSON YOU JERK YOU WERE BASICALLY RIGHT

Also, amen. Really John, as a generic comment that did not appear in a finance lit forum (where there are theoretically higher standards of precision), what you said was just fine.

I caused the bankruptcy of Iceland.

I did not have a goddamn thing to do with the bankruptcy of Iceland, or anything else, actually. And I have, as a badge of honor, many instances of being yelled at for discouraging people from getting into a bubble market near the top and for discouraging them from staying in no matter what.

max
['Nyah!']


Posted by: max | Link to this comment | 04- 4-09 9:17 PM
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Guess we're not google-proofing. Anyway, Cronon has a pretty good website.


Posted by: eb | Link to this comment | 04- 4-09 9:19 PM
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Guess we're not google-proofing.

Whoops. Obviously a Freudian slip on my part.


Posted by: Witt | Link to this comment | 04- 4-09 9:25 PM
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I can never tell what the google-proof conventions are anymore. Some historian was google-proofed in the last few days by someone, I thought, but maybe not. At this point the internet's been around long enough for it to not matter as much in this kind of context (probably).


Posted by: eb | Link to this comment | 04- 4-09 9:31 PM
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And since I'm handing out recommendations, you, Witt, should read "The Trouble with Wilderness", which can be found here (the "pretty good website" eb mentions above). Though, having said that, I wonder if I shouldn't be linking there from here. If I've transgressed, sorry.


Posted by: ari | Link to this comment | 04- 4-09 9:31 PM
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438: That may be my favorite of the genre.

Amber Atkins: This is bullshit!
Iris Clark: That is not American Teen Princess language!
Amber Atkins: Well this isn't an American Teen Princess Pageant! This... This... This is Nazi Germany!


Posted by: JP Stormcrow | Link to this comment | 04- 4-09 9:31 PM
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Anyway, ari was first.


Posted by: eb | Link to this comment | 04- 4-09 9:32 PM
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426

The profession as a whole is culpable, because it doesn't censure the bad apples. And it isn't just "some" in any real sense. It's more like "lots".

What professions in your opinion do an adequate job of censuring bad apples?


Posted by: James B. Shearer | Link to this comment | 04- 4-09 9:32 PM
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Still haven't read the archives, have you, ari? Actually, your link is now the correct one.


Posted by: eb | Link to this comment | 04- 4-09 9:34 PM
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Compared to economics, most of them not involved in direct sales.

There's really no profession there. Has any economist ever been disbarred, defocked, or decommissioned? There are no standards.

And why do you put quotation marks around "bad apples"?


Posted by: John Emerson | Link to this comment | 04- 4-09 9:35 PM
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428

Much more directly than Wagner causing Nazi Germany, and about as directly as Karl Marx causing the gulag.

For this to make any sense at all, Scholes would have to have the same relationship to free market ideology as Marx has to communism. I think you overrate the man.


Posted by: James B. Shearer | Link to this comment | 04- 4-09 9:36 PM
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There's really no profession there. Has any economist ever been disbarred, defocked, or decommissioned? There are no standards.

I've started looking into the turn of the 20th century life insurance scandals recently. Apparently one of the changes that followed the abuses revealed by the Armstrong investigation was the use of professionalization to start enforcing higher standards in the field.


Posted by: eb | Link to this comment | 04- 4-09 9:40 PM
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What professions in your opinion do an adequate job of censuring bad apples?

The profession of blogcommenting, James. Consider yourself duly censured.

Ari, you were born too late (and of the wrong sex, I guess). You would have made a wonderful salonnière.


Posted by: Mary Catherine | Link to this comment | 04- 4-09 9:47 PM
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Thanks, MC. I've long considered this body merely a decrepit vessel that contains the intact (and transcendent -- not to mention resplendent) spirit of Mabel Dodge Luhan. Anyway, here's a recommendation for you.


Posted by: ari | Link to this comment | 04- 4-09 9:51 PM
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449

There's really no profession there. Has any economist ever been disbarred, defocked, or decommissioned? There are no standards.

Could not the same be said of physics or mathematics?


Posted by: James B. Shearer | Link to this comment | 04- 4-09 9:51 PM
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James, rather than nibbling around the edges of John's point/allegations, why not take a big bite from the creamy center: are you mounting a defense of economics? Or not? Decide, okay? Otherwise, you're just accusing John of overstatement. And really, everyone already knows that he's a hyperbole recidivist when it comes to this issue.


Posted by: ari | Link to this comment | 04- 4-09 9:57 PM
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453: Aw, thanks for the rec, Ari. You know me too well.

I had to google Mabel Dodge Luhan, I have to admit. Racy! And here I thought you were channelling the somewhat less transgressive (but still a bit racy!) Mabel Loomis Todd. I read about the latter Mabel in a book by Peter Gay, I think, who made too much of her idiosyncracies, I thought.

Has anyone named a daughter Mabel in the past 30-40 years?


Posted by: Mary Catherine | Link to this comment | 04- 4-09 10:09 PM
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I pushed "Mabel", after my grandmother, on my brother when he had a daughter, but he was an asshole about it.


Posted by: John Emerson | Link to this comment | 04- 4-09 10:13 PM
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If you're into Marxist geography, or even if you're not, you might want to check out this interview with David Harvey about the financial crisis.


Posted by: eb | Link to this comment | 04- 4-09 10:14 PM
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455

James, rather than nibbling around the edges of John's point/allegations, why not take a big bite from the creamy center: are you mounting a defense of economics? Or not? Decide, okay? Otherwise, you're just accusing John of overstatement. And really, everyone already knows that he's a hyperbole recidivist when it comes to this issue.

I am defending economics against Emerson's charges. If you care to identify what you believe to be the kernel of truth behind Emerson's hyperbole I can tell you if I agree or not.


Posted by: James B. Shearer | Link to this comment | 04- 4-09 10:17 PM
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456, 57: Sad for me, but I do recall that "Mabel" is what Paul and Jamie named their daughter on Mad About You.


Posted by: oudemia | Link to this comment | 04- 4-09 10:20 PM
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James, in saying that economics isn't really a profession, John doesn't literally mean that it's not a profession. He means, as he's said a thousand times, that economists have a lot to answer for in the current crisis. And really, I'm not choosing sides in this fight. I'm just trying to offer you a shortcut around your hyper-literalism.


Posted by: ari | Link to this comment | 04- 4-09 10:23 PM
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461: I'm in Cleveland now. Know any good salons here?


Posted by: ari | Link to this comment | 04- 4-09 10:24 PM
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I have yet to find a really consistent haircut person here.


Posted by: redfoxtailshrub | Link to this comment | 04- 4-09 10:26 PM
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Were it not for the cursed Shearer's flinty resistance, I would have destroyed economics by now. They'd all have their furniture on the sidewalk, their children gathered around them crying hopelessly. But I have been checkmated.


Posted by: John Emerson | Link to this comment | 04- 4-09 10:26 PM
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462: I'm sure rtfs and snark or CA would have you over.


Posted by: oudemia | Link to this comment | 04- 4-09 10:27 PM
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465: I am forever transposing Foxytail.


Posted by: oudemia | Link to this comment | 04- 4-09 10:28 PM
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I have yet to find a really consistent haircut person here.

As you know, I'm a DIY kind of guy. Anyway, it's cold here. And windy. Stupid family crises interrupting my California spring.


Posted by: ari | Link to this comment | 04- 4-09 10:30 PM
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Meanwhile, everytime someone on the internet exhorts someone else to read the fucking manual, I think they are talking to me.


Posted by: redfoxtailshrub | Link to this comment | 04- 4-09 10:30 PM
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Anyway, it's cold here. And windy.

It is. I just went and stood around outside as a cigarette-weaning bereavement abatement strategy.


Posted by: redfoxtailshrub | Link to this comment | 04- 4-09 10:32 PM
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a cigarette-weaning bereavement abatement strategy

You have a problem with drinking?


Posted by: ari | Link to this comment | 04- 4-09 10:33 PM
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I brought my drink outdoors with me! Then I brought it back indoors.


Posted by: redfoxtailshrub | Link to this comment | 04- 4-09 10:38 PM
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461

... that economists have a lot to answer for in the current crisis. ...

A lot to answer for in the sense that economists were not very good at understanding what was happening and predicting future events perhaps. A lot to answer for in terms of causing the current problems not really.

Emerson seems to overrate academics influence on the real world. If he had been deciding who got tenure in economics departments for the last 30 years does he think this would have had much real world effect?


Posted by: James B. Shearer | Link to this comment | 04- 4-09 10:42 PM
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From the interview I linked above:

AMY GOODMAN: Your assessment of President Obama?

DAVID HARVEY: I think he needs a really, really strong, powerful social movement behind him to do the things he really needs to do. Right now, he has to deal with Congress. And, you know, there's a group in Congress I would call the party of Wall Street, that is deeply implanted in the Democratic Party, it's deeply implanted in the Republican Party. And so, he can't do battle with Wall Street, given the significance of the party of Wall Street in Congress. I mean, for example, our New York senator, Charles Schumer, has raised immense moneys from Wall Street, and he's a great friend of Wall Street. And so, the Democrats are not going to go against Wall Street. And one way or another, the Republicans are not going to go against Wall Street. So. I don't know exactly where Obama would like to go, but certainly he can't go against Wall Street, unless a whole bunch of people really force him to.

Harvey is Emerson.


Posted by: eb | Link to this comment | 04- 4-09 10:44 PM
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One issue I'm curious about when people discuss financial models though--are strategies like the ones quantitative hedge funds use "models" in the sense everyone is talking about? Maybe they're better thought of as algorithms for when to buy and sell what....Also, to John Emerson: you use "econ" and "finance" interchangeably and it is honestly confusing to this reader what you mean when.

This thread (including my posts) has consistently not differentiated three different types of modeling: cash flow modeling for rating credit securities, modeling arbitrage opportunities for e.g. quantitative hedge fund strategies, and mathematical economic theory as applied to understanding equilibria in financial markets, efficiency in financial markets, etc. All three are problematic in their own way, but the specific criticisms would differ.

Also, "finance" and "economics" are effectively the same. Finance is a subset of economic theory. The economic efficiency arguments about how financial innovation brought us closer to the magic world of complete markets were and are a central ideological underpinning of finance capitalism.

Mathematical modeling is completely ubiquitous in the financial markets and will obviously not disappear. The problem is the way regulators trusted particular mathematically/theoretically based strategies for managing risk, and also the way they bought into the ideology of financial innovation.

Finally, I don't think Barbar was out of bounds, even though I think I probably disagreed with him. He should get to argue with people. John and D-squared can take it, right?


Posted by: PGD | Link to this comment | 04- 4-09 10:55 PM
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How insensitive, ari. I'm eating dog food right now.

The one positive thing I can say about economics is that they (though sadly, only a subset of "they") are almost the only ones capable of keeping the big picture of the economy in mind. The comments on Unfogged are fine, but go to practically any other blogs, and people make the most elementary mistakes of not understanding that everything in the economy has to add up, that every dollar that's owned by somebody is a dollar owned to somebody, and that the only thing outside the economy is the natural world.


Posted by: Walt Someguy | Link to this comment | 04- 4-09 11:02 PM
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I'm in Cleveland now. Know any good salons here?

At least when I lived there, Laura Lee Salon on Coventry was good. Lee, the owner, was good.

The one positive thing I can say about economics is that they (though sadly, only a subset of "they") are almost the only ones capable of keeping the big picture of the economy in mind.

There are lots of positive things one could say about economics. The problem is that the actual influence of the discipline is way out of proportion to the positive stuff it has to offer, and has thus become pernicious. It's easy for me to imagine some alternate world where ideology was different and the insights of economics would be very valuable because insufficiently appreciated. I just don't think that's our world.


Posted by: PGD | Link to this comment | 04- 4-09 11:08 PM
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In summary, in the distant past, applications of mathematical models hadonly limited and sidestream effects on finance practice. But in the last quarter century since the publication of the Black-Scholes option-pricing theory, such models have become mainstream to practitioners in financial institutions and markets around the world. The option-pricing model has played an active role in that transformation. It is safe to say that mathematical models will play an indispensable role in the functioning of the global financial system.

Even this brief discourse on the application to finance practice of mathe-matical models in general and the option-pricing model in particular wouldbe negligently incomplete without a strong word of caution about their use.At times we can lose sight of the ultimate purpose of the models when their mathematics become too interesting. The mathematics of financial models can be applied precisely, but the models are not at all precise in their appl-cation to the complex real world. Their accuracy as a useful approximation to that world varies significantly across time and place. The models should beapplied in practice only tentatively, with careful assessment of their limita-tions in each application.


Posted by: Robert C. Merton | Link to this comment | 04- 4-09 11:11 PM
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Scholes would have to have the same relationship to free market ideology as Marx has to communism. I think you overrate the man

With respect to the specific economic proposition that model valuations can be established by no-arbitrage conditions based on dynamic replication trading strategies (and therefore, the collapse of LTCM through attempting to replicate long-dated ut options, and large parts of the current disaster via the assumption that CDS trading data could be used to establish copula for CDO pricing), he is Patient Zero. You underestimate the man.

474: as I said, happy to argue with the guy, but if his argument is "oh, that's somewhat touching", he had surely better be ready for a mouthful in return? I even gave him a chance to walk away from it and make the same point.


Posted by: dsquared | Link to this comment | 04- 4-09 11:15 PM
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What's the cite for 477? Searching for the text turns up a publication so gated it won't even show the bibliographical information for us commoners.


Posted by: eb | Link to this comment | 04- 4-09 11:18 PM
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Oh, like the real Merton doesn't read Unfogged.


Posted by: Walt Someguy | Link to this comment | 04- 4-09 11:21 PM
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The cite for 477 is Merton's 1997 Nobel Prize speech. Last two paragraphs, appropriate place for CYA.


Posted by: PGD | Link to this comment | 04- 4-09 11:24 PM
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The problem is that markets weren't complete enough. If we could make side bets on which financial firms are run by crooks, then the magic of the market would fix everything.


Posted by: Walt Someguy | Link to this comment | 04- 4-09 11:28 PM
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Thanks, I'm surprised that didn't come up in the search, though I see now that I could have found it in google scholar. (The first text of the speech I've found in pdf isn't OCR'd, so that could explain why it's not in google.)


Posted by: eb | Link to this comment | 04- 4-09 11:29 PM
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Also, I have a replicating portfolio in my pants.


Posted by: Walt Someguy | Link to this comment | 04- 4-09 11:29 PM
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PGD, I was curious what this statement meant: "Market microstructure is an interesting area where you can see economists groping their way back toward sociology."


Posted by: Walt Someguy | Link to this comment | 04- 4-09 11:31 PM
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475: You have dogfood? Lucky. I've long since moved from crawdads to sand.


Posted by: ari | Link to this comment | 04- 4-09 11:32 PM
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Market microstructure is an interesting area where you can see economists groping their way back toward sociology

this statement seems very, very wrong to me. Market microstructure theory (my field, back when I had a field) is really as close as financial economics gets to control engineering. It's also one of the few bits of financial economics to have come through the crisis with flying colours.


Posted by: dsquared | Link to this comment | 04- 4-09 11:36 PM
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Dammit, Ari, you always have to one-up me in the suffering department. Now to pull ahead I have to eat broken glass. I'm guessing that this'll be my final Unfogged comment, but know that I finally beat you!


Posted by: Walt Someguy | Link to this comment | 04- 4-09 11:38 PM
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Ich kann Glas essen.


Posted by: eb | Link to this comment | 04- 4-09 11:42 PM
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I am sorry I ever defended Scholes. Forgive me, I was in an emotional state at the time, and not responsible for what I was doing.


Posted by: John Emerson | Link to this comment | 04- 4-09 11:44 PM
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Myron Scholes once rushed into a burning building to rescue my retirement portfolio (Barry Bonds rookie cards). In my book, he can destroy the world economy three times over, and I won't say a word against him.


Posted by: Walt Someguy | Link to this comment | 04- 4-09 11:48 PM
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Rescue? You mean securitize?

"Tell you what would make sense, is to loan all of these cards to people around the globe, who will promise not to lose or burn them, and even if a few of them do, surely there won't be some crisis in which everyone who knows who Barry Bonds is hates him and wants to end all association with any of him. Meanwhile you're raking in the interest, over one million Eric Munson and Warren Morris cards per year; well before retirement you'll have more wealth of that sort than actually exists in the world."


Posted by: Cryptic ned | Link to this comment | 04- 4-09 11:55 PM
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Would that really work, Ned? Do you have a prospectus that I can study? I like to do my homework before I trust my card portfolio to just anybody.


Posted by: Walt Someguy | Link to this comment | 04- 5-09 12:01 AM
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Buy Barry; sell Treasury.


Posted by: eb | Link to this comment | 04- 5-09 12:13 AM
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Emerson seems to overrate academics influence on the real world.

Economists have had a large and pernicious influence on events. Lawrence Summers, Robert Rubin and Alan Greenspan (to pick three obvious examples) are among the economists who have a lot to answer for, regardless of whether they are, or were, academics.


Posted by: politicalfootball | Link to this comment | 04- 5-09 6:39 AM
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487: I thought all sorts of quantitative finance was closely related to control engineering. No?


Posted by: Sifu Tweety | Link to this comment | 04- 5-09 6:54 AM
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Economists are not generic academics. The Federal Reserve, Council of Economic Advisers, and the Department of the Treasury are staffed by economists. Contrast, for example, anthropology.

The pretense that economics is a pure science is part of the problem. It's no purer than Foreign Relations and only somewhat more scientific. It's less scientific than Veterinary Medicine, and equally impure.

The failure to recognize and distinguish applied economics is a big part of the problem. Applied economics would especially require a code of ethics and en enforcement board, but actually most human sciences have codes of ethics. Maybe it would be better to jettison the scientific pretensions entirely and reconstitute the field as entirely applied.

The failure to distinguish is what makes the economists two-step possible. An economist can retreat into academic mode when he wants to in order to avoid being confronted on the real-world consequences of economic doctrine.

Making the separation would bring its own problems, though.


Posted by: John Emerson | Link to this comment | 04- 5-09 7:43 AM
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IR has always seemed less scientific to me than the other social sciences.


Posted by: David Weman | Link to this comment | 04- 5-09 7:53 AM
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Foreigners say IR. We say FR.


Posted by: John Emerson | Link to this comment | 04- 5-09 8:12 AM
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478

With respect to the specific economic proposition that model valuations can be established by no-arbitrage conditions based on dynamic replication trading strategies (and therefore, the collapse of LTCM through attempting to replicate long-dated ut options, and large parts of the current disaster via the assumption that CDS trading data could be used to establish copula for CDO pricing), he is Patient Zero. You underestimate the man.

So are you saying without Scholes none of this would have happened?


Posted by: James B. Shearer | Link to this comment | 04- 5-09 8:46 AM
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Reports say that Richard Poplawski was a big fan of Scholes.


Posted by: John Emerson | Link to this comment | 04- 5-09 9:02 AM
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That's the point at which an otherwise great book betrays the ugly fact that it's based on a dissertation. Cronon fell in love with his research and couldn't bear to cut it. Or at least that's my theory.

Totally the case with AB's thesis that she's turning into a general interest book. I mean, we've gotten past it now, but there've been some discussions.

OTOH, there were also thesis-derived bits that she was quite keen to jettison.


Posted by: JRoth | Link to this comment | 04- 5-09 9:07 AM
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Several times I've skipped the introduction and the conclusion of thesis-derived book, where the methodological discussions were concentrated. In one case I skipped a ten page history of hermeneutics from the beginning until the present, which was followed by a longer description and justification of the author's own hermeneutical method. One book had only about 20 pages of that kind of thing, which I skipped, but turned out to be an abridged popular version of a professionally-oriented book which was 200 pages longer.


Posted by: John Emerson | Link to this comment | 04- 5-09 9:11 AM
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||
Finally watched Hearts and Minds (Peter Davis, 1974). Man alive! It helped to have a basic grounding in recent Vietnamese history, and the history of the American War in particular, but even so. If you have not seen it, I highly recommend that you do.

"People go around with their heads high because they've lost a son in Vietnam...that's nothing to be proud of -- they've lost more than they'll ever gain for the rest of their lives."
--Lora Sowders, mother of one of the 500,000 US deserters.

||>


Posted by: minneapolitan | Link to this comment | 04- 5-09 9:18 AM
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501 is a bit tasteless, but I'm chuckling.

I finally saw a map showing where the shooting was. I got lost once in that rabbits' warren tangle of streets - normally I have a good sense of direction, even in Pgh's goofy semi-grids, but the combination of rolling terrain, cookie-cutter houses, and lack of through-streets nearly did me in.


Posted by: JRoth | Link to this comment | 04- 5-09 9:20 AM
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495

Economists have had a large and pernicious influence on events. Lawrence Summers, Robert Rubin and Alan Greenspan (to pick three obvious examples) are among the economists who have a lot to answer for, regardless of whether they are, or were, academics.

Why are you attributing their pernicious influence on the fact that they are economists rather than the fact that they have political and social views that you disagree with? If Scalia does something that you don't like, do you blame the legal profession?


Posted by: James B. Shearer | Link to this comment | 04- 5-09 9:27 AM
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Part of AB's problem, as I recall (this was almost a year ago), was figuring out what, if anything, of value resided in the academic bits. She had been assuming that the solution was trimming down the suspect chapter, but in fact the solution was adding a new, different one, and scattering the useful bits around.


Posted by: JRoth | Link to this comment | 04- 5-09 9:29 AM
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506: This is just silly. Summers, in particular, had no existence aside from being an economist. His entire career, and all the political influence he has and does wield, derive from his background as a well-regarded economist. Had he gone into corporate planning, he might have been just as big a bastard, and even had a malign effect in whatever company employed him, but he never would have been part of the Committee to Save the World. That was an economists-only club.


Posted by: JRoth | Link to this comment | 04- 5-09 9:33 AM
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Speaking for myself, economics was the dog that didn't bark, and in many respects they cheered on and enabled the disaster we just had. (The honorable exceptions are not typical of the profession, but I give them due credit). People in economics were chief among those who might have warned us, and might have tried to prevent the disaster. But by and large they didn't.

I shouldn't have to keep explaining this, but my ignorance of economics is one of the legitimating factors of my criticisms, not a discrediting factor. Our system of intellectual division of labor means that nobody can be expected to know everything, and we all have to trust that the people who know what's going on are on top of things. But economists weren't.

In the same way, I'm ignorant of medicine, but I have the right to expect that the medical profession is doing its job well and honestly, and I have the right to demand accountability if they fuck up, even if I don't understand exactly what they did wrong.

And because of the possibility or likelihood of conflicts-of-interest, corruption, ass-covering, rent-seeking, and hidden agendas, an in-house post mortem is unjustifiable. But that's what we're getting. Careers should be ended and reputations destroyed, but I doubt that that will happen. A lot of them won't even lose their plunder.

As far as "having political views I disagree with", that's one of my motivations, but what I've been talking about is the fact that they fucked up on their own terms.


Posted by: John Emerson | Link to this comment | 04- 5-09 9:42 AM
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Again, the big policy economists aren't "just academics" any more than Kissinger and Brzezinski were just academics. Their PhDs are part of their operation, but these aren't Dead Poet Society types.


Posted by: John Emerson | Link to this comment | 04- 5-09 9:45 AM
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508

This is just silly. Summers, in particular, had no existence aside from being an economist. His entire career, and all the political influence he has and does wield, derive from his background as a well-regarded economist. Had he gone into corporate planning, he might have been just as big a bastard, and even had a malign effect in whatever company employed him, but he never would have been part of the Committee to Save the World. That was an economists-only club.

And what existence does Scalia have apart from being a lawyer? And the Supreme Court is a lawyers-only club.


Posted by: James B. Shearer | Link to this comment | 04- 5-09 9:49 AM
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509

In the same way, I'm ignorant of medicine, but I have the right to expect that the medical profession is doing its job well and honestly, and I have the right to demand accountability if they fuck up, even if I don't understand exactly what they did wrong.

So if we have a pandemic you will automatically blame the medical profession?


Posted by: James B. Shearer | Link to this comment | 04- 5-09 9:53 AM
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This is an old populist poem about The Poor, but with a few changes it could be about the American citizenry: ox-like, limp and leaden-eyed. The only ones with any spirit are batshit insane wingers.

Let not young souls be smothered out before
They do quaint deeds and fully flaunt their pride.
It is the world's one crime its babes grow dull,
Its poor are ox-like, limp and leaden-eyed.

Not that they starve, but starve so dreamlessly;
Not that they sow, but that they seldom reap;
Not that they serve, but have no gods to serve;
Not that they die, but that they die like sheep.

My presumption is that the effects of the crisis and bailout haven't been felt yet and will be very bad. Even after the economy as a whole has recovered there enormous permanent damage to large groups and to the public good will remain. In other words, I'm on full McManus status now. If this is not true, then much of what I've been saying is pointless.


Posted by: John Emerson | Link to this comment | 04- 5-09 9:56 AM
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Don't be so fucking stupid, Shearer. Can you read?

But yes, if the medical profession had ignored AIDS, I would blame them. But they didn't. And still less were people in medicine working on behalf of the AIDS virus, whereas in the case of the last 20 years of deregulation and bubbles, a lot of economists were making the problem worse. Greenspan was the point man, but the profession (including DeLong) backed him.


Posted by: John Emerson | Link to this comment | 04- 5-09 10:02 AM
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The human body has an interest in being healthy, so the immune system will take care of itself. No need for preventive medicine or medical intervention. But in the unlikely event that anyone gets very sick and is too important to die, of course they'll get treated; otherwise, everyone else will develop similar symptoms, and many of those people weren't as healthy to begin with, so they'll suffer more. Fortunately everyone's health has been improving for years, so that trend is likely to hold up forever.


Posted by: eb | Link to this comment | 04- 5-09 10:02 AM
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515: Neoclassical econ as Christian Science. I hadn't thought of that.


Posted by: John Emerson | Link to this comment | 04- 5-09 10:07 AM
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NPR implied that a housing bubble was allowed to grow to enormously dangerous levels because everything was so complicated as opposed to the possibility that those in charge were either corrupt and/or incompetent.

"It's complicated" seems to be the default explanation for people who don't want to deal with issues.

Policy-making needs a good dose of simplism. People who accuse you of simplism are just trying to take you out of the debate. No simplism for the masses.

And yes, Bush, Cheney, and Rove were simplists, but effective, progressive leaders would have been too. Obama could use a bit more simplism of the right kind, though it may be that he's properly simplistic in the back room when it counts.


Posted by: John Emerson | Link to this comment | 04- 5-09 10:31 AM
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487: I realize the one zillionth article on the causes of some tiny difference in bid/ask spreads does not feel very sociological. I also get that the market microstructure people are resistant to thinking about how trust is maintained outside of specified rules in existing exchanges, and that they retain the standard economist's contempt of sociological techniques like e.g. talking to participants. But I have faith that taking apart the black box of the market eventually leads you to interesting and fundamentally sociological questions about how and why buyers and sellers trust each other given that contracts are necessarily incomplete (even in exchanges), how and why prices fail to convey information as well as how they do convey information, etc. The latter set of questions has been tackled through game theory stuff on information aggregation that is still too abstract/theoretical and too focused on rational agents, but you could see it getting interesting.

Perhaps I am naively hopeful.


Posted by: PGD | Link to this comment | 04- 5-09 10:50 AM
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Indeed, AIDS occasioned a lot of self-searching, criticism, and meta criticism in the med profession, even tho they were far less culpable and their assumptions thrown into far less question than econ in the current crisis.

WRT Scalia and lawyers,
I think that if people told, What do you call 100 dead economists at the bottom of the ocean? jokes, John would be satisfied.


Posted by: JRoth | Link to this comment | 04- 5-09 11:38 AM
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Q: What do you call 100 dead economists at the bottom of the ocean?

A: Revealed preference


Posted by: beamish | Link to this comment | 04- 5-09 11:42 AM
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Q: What do you call 100 dead economists at the bottom of the ocean?

A: Excess inventory


Posted by: beamish | Link to this comment | 04- 5-09 11:44 AM
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Q: What do you call 100 dead economists at the bottom of the ocean?
A: Really, the important question is what you call the 100th dead economist.


Posted by: beamish | Link to this comment | 04- 5-09 11:51 AM
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520: That's very funny. If you just made that up, then kudos.

I find the argument that since economists are biased that economics should be reconstituted along the lines of law or medicine unconvincing. To the extent that it's worth it to the ruling class to corrupt a profession, they will do so. Most medical questions are fairly neutral from the point of view of power; where it's really mattered, medical ethics has not proved much of a constraint at all. Pharmaceutical companies have not had much trouble in corrupting the process by which drugs are evaluated and sold, for example. I suspect the same thing is true with respect to law.

At the same time, for a certain kind of mind, economics offers a framework that permits a heartfelt belief of the superiority of markets. The Chicago School is more like Opus Dei than it is like a K Street lobbying firm. They think of themselves as the only ones who can think clearly about the economy, while the rest of us are hopelessly confused.


Posted by: Walt Someguy | Link to this comment | 04- 5-09 12:05 PM
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449

And why do you put quotation marks around "bad apples"?

?


Posted by: James B. Shearer | Link to this comment | 04- 5-09 12:11 PM
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The argument that since economists are biased that economics should be reconstituted along the lines of law or medicine

Not my argument at all. My argument is first, that economics is both an applied and a theoretical science, but pretends to be purer than it is. Second, that it's not a very well-formed science, with the result that an economist (like a lawyer) can honestly serve any client as a mercenary.

The ill-formed, open-ended nature of law and the adversarial, mercenary nature of the profession are well-recognized; those traits are pretty much essential to any free, liberal society in real time. But economics has false pretenses on these points.

Dsquared pointed out way up above that economics has succeeded in remaking the group mind in its own image, via pop econ and Econ 101. Besides the universities and government economic agencies such as the Federal Reserve, it's pretty pervasive in the op ed pages, the minds of most political players, ordinary public opinion, and in non-economic areas of government such as the EPA and the supreme court.


Posted by: John Emerson | Link to this comment | 04- 5-09 12:18 PM
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"Bad apples" is a well-known, easily understood term with a known meaning. When you put the scare quotes around the term, it made it seem that you in some way questioned the use of the term or didn't understand it. But that was stupid.

Soetimes I get tired of wiping your butt for you, James.


Posted by: John Emerson | Link to this comment | 04- 5-09 12:21 PM
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Why are you attributing their pernicious influence on the fact that they are economists rather than the fact that they have political and social views that you disagree with?

James, professional economists, acting in their professional capacities, brought ruin to the U.S. economy. I disagree with their views the same way I would disagree with an engineer whose bridge fell down the first time a car drove over it - and if the engineering profession continued to graduate people who couldn't design bridges, and if that profession continued to endorse their work even after the bridges fell down, then I would argue that the engineering profession had some serious problems.

If Scalia does something that you don't like, do you blame the legal profession?

The legal profession makes different claims about its work than the economics profession does. The legal profession, for instance, makes no claim to being engaged in science.

People like Scalia (I would argue) act within the accepted norms of the profession, and further, I would argue that those norms are appropriate.

I believe that people like John Yoo have acted outside those norms. If I'm wrong about that - if Yoo's behavior is ultimately deemed acceptable in the legal profession - then yes, that's an indictment of the profession, and not just Yoo. With apologies to Godwin, Wilhelm Stuckart wasn't merely a bad person, he was a practitioner in a corrupt profession.

So if we have a pandemic you will automatically blame the medical profession?

James, this country locks up human beings for committing murder all the time. My support for this policy doesn't in any way suggest that I would support locking up human beings for murder who didn't commit murder.

I think that economists are implicated in the current crisis in a way that medical professionals would be unlikely to be involved in a pandemic.

But yes, if medical professionals grew the bug that escaped the lab and caused the pandemic, and if the doctors responsible continued to be honored by their profession for their conduct, then yes, I'd blame the medical profession.

Economics, as a profession, is an outlier - most other professions have codes and standards that prevent misbehavior on this level. To understand my thinking, you ought compare economics to a profession that has been similarly derelict - say, journalism.


Posted by: politicalfootball | Link to this comment | 04- 5-09 12:26 PM
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Beamish may be the only one who's come out of these threads looking better.


Posted by: JRoth | Link to this comment | 04- 5-09 1:11 PM
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I actually thought beamish sounded delusionally pollyannish about the positive contribution the economic theory of utility-maximizing agents has made to understanding the economy.


Posted by: Walt Someguy | Link to this comment | 04- 5-09 1:15 PM
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526

"Bad apples" is a well-known, easily understood term with a known meaning. When you put the scare quotes around the term, it made it seem that you in some way questioned the use of the term or didn't understand it. But that was stupid.

This might make sense if I had put scare quotes around the term (in 447) but since I didn't it doesn't.


Posted by: James B. Shearer | Link to this comment | 04- 5-09 1:18 PM
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Point Shearer. Mea culpa. I misread and don't know how.


Posted by: John Emerson | Link to this comment | 04- 5-09 1:25 PM
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I actually thought beamish sounded delusionally pollyannish about the positive contribution the economic theory of utility-maximizing agents has made to understanding the economy.

Q. What do you call 100 dead economists at the bottom of the ocean?

A. A move upward on the utility curve.

There. Happy?


Posted by: beamish | Link to this comment | 04- 5-09 1:30 PM
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A positive externality.


Posted by: JP Stormcrow | Link to this comment | 04- 5-09 1:41 PM
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The people to whose ideas many remain in thrall.


Posted by: keynes | Link to this comment | 04- 5-09 1:50 PM
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528: PF in 527 makes much sense. I can only fault his not mentioning heads on pikes as part of any remedial actions.


Posted by: Biohazard | Link to this comment | 04- 5-09 2:00 PM
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Well then, we must disenthrall ourselves.


Posted by: Lincoln | Link to this comment | 04- 5-09 2:01 PM
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Minor procedural note to Witt way above -- it's no use suggesting that I close a thread, because I don't know how. (Oh, I'm sure it's perfectly obvious if I poked around, but I haven't and wouldn't be likely to unless something about a thread struck me as a dire emergency,)

This one, eh. I don't really get what lots of the disagreement was about, except that I hadn't realized before reading it that the financial collapse of Iceland was all Shearer's fault. Really, Shearer, you should be ashamed of yourself.


Posted by: LizardBreath | Link to this comment | 04- 5-09 3:50 PM
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My feeling is that it was personal between Barbar and me. Perhaps based on something in the pas, perhaps exacerbated by an averson on Barbar's part to laymen's outside attacks on the professionals. Or perhaps some kind of attachment to Scholes.

I have irrefutable direct evidence that by the end it was personal for one of the parties.


Posted by: John Emerson | Link to this comment | 04- 5-09 3:57 PM
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I love 520 because "revealed preference" could actually be the punch line of the majority of all elementary-school jokes.

What do you call a boomerang that doesn't work?
Revealed preference.

What do you call four bull fighters in quicksand?
Revealed preference.

What do you call a pig that does karate?
Revealed preference.

Why do gorillas have big nostrils?
Revealed preference.

Why was Cinderella thrown off the basketball team?
Revealed preference.


Posted by: Cryptic ned | Link to this comment | 04- 5-09 4:12 PM
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Why was Cinderella thrown off the basketball team?

Shot-clock violation.


Posted by: eb | Link to this comment | 04- 5-09 4:14 PM
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Is it tangent time? Oh good.

most other professions have codes and standards that prevent misbehavior on this level

On the question of academic disciplines setting standards, some anecdata.

During the Viet-Nam war there were serious questions raised about the propriety of anthropologists using their professional knowledge and expertise in support of US military efforts (to put the question more politely than was usual). At the general meetings of the members of the American Anthropological Association there were motions introduced, impassioned speeches from the floor (including some from quite senior and influential members), accusations and epithets hurled, etc. My information is second hand, and my recollection foggy, but I believe there were standards adopted and careers affected.

Skimming of a few anthro blogs suggests that similar questions arose - with similar if prehaps more muted discussion, with respect to Iraq and Afghanistan.

Perhaps among academic economists there were discussions about using their prestige and expertise in dubious efforts that have resulted in mass transfers of wealth from me to them - but I haven't heard of any.


Posted by: Michael H Schneider | Link to this comment | 04- 5-09 4:51 PM
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Beamish may be the only one who's come out of these threads looking better.

I believe I came off very well.


Posted by: Robert C. Merton | Link to this comment | 04- 5-09 5:36 PM
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Mr. Merton! Long time. How's your son? I haven't seen him since high school.


Posted by: Sifu Tweety | Link to this comment | 04- 5-09 5:39 PM
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He is proceeding optimally along his balanced growth path, thank you!


Posted by: Robert C. Merton | Link to this comment | 04- 5-09 5:42 PM
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That'd be a change from when I knew him.


Posted by: Sifu Tweety | Link to this comment | 04- 5-09 5:45 PM
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I think meta-comity could be acheived in this thread if every single appearance of "economist" or "economics" were replaced with "Chicago-school economist" or "Chicago-school economics" (not referring to the school itself, but to the mode of thinking that's popularly associated with it). That's the stuff that offends Emerson (and others), and the stuff from against which Barbar (and others) is trying to defend the rest of the profession, and the stuff that's responsible for all the stereotypical "Econ 101"-type bullshit, and the stuff that has brought western civilization to its knees. And I think everyone here can agree on all that (and indeed more or less has in this thread at one point or another).

The only thing that's missing is an explanation for how this quite-ideological thinking became so incredibly influential in the discipline (vastly more influential than would be expected based on its inherent (relative lack of) persuasiveness or its (relative lack of) empirical results). That's essentially what I was trying to provide with the Hanson link in the thread on the old server, although others have hinted at the same thing in comments here and there: basically, it's a view that's very favorable (read: profitable) for moneyed interests, so it's received enormously disproportionate funding within the discipline, and its proponents have been appointed to highly visible and influential positions, and etc. Combined with the fact that the science as a whole remains somewhat rudimentary, and its theories still open to questioning, and it makes it difficult for economists who view things differently to denounce it sternly (without themselves becoming ideologues, by stepping beyond the available evidence), although some have anyway. (I've heard an econ. prof informally denounce Krugman as an "ideologue" for exactly this reason--even though the prof fully agreed with Krugman politically--since he clearly lets his political views inform his scientic opinions. The whole point is that it's impossible not to do this if you intend to say much of anything significant at all in the discipline, since the "science" itself has relatively few well-formed and well-supported conclusions.) And remember that this is a push that's been in full swing for 50 years now. It's not much different than, say, climatology would be if (1) denying global warming with vastly more profitable for established interests (largely true, although this is starting to change), (2) global-warming-denying climatologists found themselves with incredible opportunities both insude and outside of academia (research funding, consulting, political appointments, speaking gigs), (3) the evidence was ambiguous enough that either position could be argued in good faith (as was true in the very early days of the global warming debate, and has been true for a long time in economics, although it's becoming less true now, not only as a result of current events but also due to academic research that's been accumulating over the last 10-15 years), (4) this had been going on long enough so that at least half of every department in the country (and nearly all visible appointments outside academia) was global-warming deniers, so all incoming students got it in very heavy doses (even if its limits and the arguments of the other side were acknowledged in the classroom).

So, Emerson, "the dogs didn't bark" because the dogs are largely goddamn no-name academics, whose voices are entirely drowned out, and also because they had only a tentative basis on which to bark anyway. ("That's a prominent and internally consistent theory, but evidence in its favor is ambiguous, and although some of its claims are attractive and possibly true, many others seem likely to be overreaching" is about the best that could honestly be said, and it isn't exactly perceived to be damning criticism.)

Unfortunately, though, it's possible that Emerson's right that the only way to remedy to the situation is for every living economist to be burned at the stake. (Unless of course factor (3) above begins to play a much more significant role, and the Chicago-school claims become discredited and very difficult to defend with a straight face and a good conscience, which actually seems entirely possible. But that's a point on which there was disagreement above: will current events force a fundamental rethinking of the discipline, or will there best at most some tweaks at the edges while the ideological core remains intact? I actually do think this is an open question, although I expect change, if it comes, will be more from younger economists pushing new views than from established voices rethinking their positions.)


Posted by: Brock Landers | Link to this comment | 04- 6-09 8:41 AM
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Also, back to the original topic, this is the best April Fools prank ever. (And by "best" I mean "most hilariously stupid".)


Posted by: Brock Landers | Link to this comment | 04- 6-09 9:08 AM
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546

... And I think everyone here can agree on all that (and indeed more or less has in this thread at one point or another).

I doubt I agree. What do you mean by Chicago school and how is it different from the rest of economics?

The only thing that's missing is an explanation for how this quite-ideological thinking became so incredibly influential in the discipline (vastly more influential than would be expected based on its inherent (relative lack of) persuasiveness or its (relative lack of) empirical results). ...

Is it mathematically elegant?

... and the stuff that has brought western civilization to its knees. ...

This is silly. Modern economies are complicated systems and we don't understand all the failure modes.

... and the Chicago-school claims become discredited and very difficult to defend with a straight face and a good conscience, which actually seems entirely possible. ...

Which claims are these?

... it's a view that's very favorable (read: profitable) for moneyed interests, ...

What is inherently favorable about the Chicago view? Obviously anybody can emphasize the parts they like and ignore the parts they don't.


Posted by: James B. Shearer | Link to this comment | 04- 6-09 10:49 AM
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I don't know any of Cryptic Ned's elementary-school jokes.


Posted by: Wrongshore | Link to this comment | 04- 6-09 10:59 AM
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549: A stick; cuatro sinko; pork chop; big fingers; she ran away from the ball.


Posted by: apostropher | Link to this comment | 04- 6-09 11:07 AM
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Combined with the fact that the science as a whole remains somewhat rudimentary, and its theories still open to questioning, and it makes it difficult for economists who view things differently to denounce it sternly (without themselves becoming ideologues, by stepping beyond the available evidence), although some have anyway. (I've heard an econ. prof informally denounce Krugman as an "ideologue" for exactly this reason--even though the prof fully agreed with Krugman politically--since he clearly lets his political views inform his scientic opinions. The whole point is that it's impossible not to do this if you intend to say much of anything significant at all in the discipline, since the "science" itself has relatively few well-formed and well-supported conclusions.)

I mostly agree. For some reason, Chicago school economists can be as loud and as public as they want to be, but when Krugman speaks up he's unprofessional. I've heard several people say that Krugman has damaged his professional reputation by doing what is, in real world terms, exactly what he should be doing. (Notably Diana Coyle in a book, "The Soulful Science", which was supposed to be explaining to people that econ really is totally OK.)

I'd be delighted to see Chicago School be thrown under the bus, though it's a bit late -- it would be like locking the barn door after the train had already left the station and the horses had already run back into the burning barn. (Tom Freedman, where are you?)

But I do think that the problem is bigger than that. I had and have problems with the old NAFTA Krugman too.


Posted by: John Emerson | Link to this comment | 04- 6-09 11:16 AM
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What's this all mean? There seem to be a lot of big names involved.


Posted by: John Emerson | Link to this comment | 04- 6-09 11:18 AM
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Galbraith's pro-Nafta too.


Posted by: David Weman | Link to this comment | 04- 6-09 11:22 AM
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Unfortunately, though, it's possible that Emerson's right that the only way to remedy to the situation is for every living economist to be burned at the stake.

Whoa, whoa. Hold it right there, sonny. There are hogs to be fed.


Posted by: JRoth | Link to this comment | 04- 6-09 12:08 PM
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Shearer's questions in 549 are verily easily answered, which is exactly why I won't be doing so. It's very hard to believe that the last 2 questions, in particular, are asked in good faith.


Posted by: JRoth | Link to this comment | 04- 6-09 12:11 PM
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553: Did you know that? Free trade just isn't a rightwing issue, no matter how many angry kossacks insist on it.


Posted by: David Weman | Link to this comment | 04- 6-09 12:16 PM
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I've always called myself a free-trade skeptic. "Globalization" seems to be more definitely malign, with all the bullying and double standards.

DeLong and Krugman supported a two step free trade program, with re-education and other compensating programs for individuals and groups who were hurt. But Clinton could only get the program through with lots of Republican help, and the compensating programs were stripped out -- for Republicans, punishing labor is a desideratum, not a problem.

It sort of tells you how technocratic and apolitical our politics has become when both Bush the First and Clinton declared free trade to be their major goal and major accomplishment.


Posted by: John Emerson | Link to this comment | 04- 6-09 12:31 PM
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This (via Greenwald) contains an interesting account of how Greenspan, Rubin, and Summers derailed a serious attempt at regulating derivatives under Clinton.


Posted by: Bave Dee | Link to this comment | 04- 6-09 12:57 PM
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"Free trade" can mean all kinds of objectionable things, which I object to.

US tariffs are currently overall quite low, and they should stay that way. Any drastic changes would harm the US and world economy.

A lot of fair trade folks seem strategically vague about whether tariffs should be considerably higher than they are now (I may be wrong about that). I don't think strongly anti-free trade voters would be happy with anything less.


Posted by: David Weman | Link to this comment | 04- 6-09 1:05 PM
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Though of course they would probably be unhappy anyway. They blame trade for problems that in the vast majority of cases were mostly or wholly caused by other things. They blame some poor mexican when they should be blaming their boss, his lobbyist, and the republicans and the blue dogs, etc.


Posted by: David Weman | Link to this comment | 04- 6-09 1:10 PM
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I doubt I agree. What do you mean by Chicago school and how is it different from the rest of economics?

I'm not sure I share James B.'s objection, but this is my question, too. The Chicago school has its distinct problems, but I don't think Rubin and Summers, for example, were "Chicago" acolytes in a meaningful sense, and yet they are two of the three that first came to my mind when I was describing the problem above.

I mean, the corruption and intellectual depravity of "Chicago" is in many ways exemplary of what's wrong with economics, but it doesn't encompass the whole problem.

(That said, in a shorthand way I don't object to Chicago being used as a stand-in for the problem - but like James, I don't think that's what Brock was doing.)


Posted by: politicalfootball | Link to this comment | 04- 6-09 1:20 PM
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The other things being 1) technological change 2) weak labor unions 3) predatory and bad management 4) crappy safety net.


Posted by: David Weman | Link to this comment | 04- 6-09 1:22 PM
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Rubin and Greenspan aren't economists.

Summers is thoroughly neokeynesian I think. I was going to point that out before, but didn't want to keep the discussion alive.


Posted by: David Weman | Link to this comment | 04- 6-09 1:26 PM
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Back in Portland I knew someone who worked for a company that boomed under free trade, exporting the chains used in chain saws. It has a very narrow range of products, but it's the best in the world. It started out as a one-man company and grew from there.


Posted by: John Emerson | Link to this comment | 04- 6-09 1:28 PM
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They've never been academic economists, and Rubin only has an 1960 B.A. in economics from Harvard College.

Greenspan's situation is odd.

"He then attended New York University (NYU) and received a B.S. in Economics (summa cum laude) in 1948 and an M.A. in Economics in 1950.[citation needed] Greenspan went on to Columbia University, intending to pursue advanced economic studies, but subsequently dropped out.[citation needed] ... Much later, in 1977, NYU also awarded him a Ph.D. in Economics. He may not have done a dissertation, normally required for that degree.[13]"


Posted by: David Weman | Link to this comment | 04- 6-09 1:30 PM
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What does it mean to say Greenspan isn't an economist? Do you only mean that he's not an academic -- any employment outside a university makes you not-an-economist? He's got a doctorate in economics, served on Ford's Council of Economic Advisers... was he ever an economist, and if so, when did he stop being one?


Posted by: LizardBreath | Link to this comment | 04- 6-09 1:30 PM
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Also, Greenspan's "an accomplished saxophone player who played with Stan Getz.[11]" !


Posted by: David Weman | Link to this comment | 04- 6-09 1:30 PM
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"Are you now or have you ever been a member of the economics profession?"


Posted by: M/tch M/lls | Link to this comment | 04- 6-09 1:31 PM
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Greenspan was an ABD economist when they decided to accept the global economy as his PhD thesis. DeLong spoke worshipfully of him even a year or two ago. You really can't deny that he was an economist because he didn't have a PhD and a facuty position. In fact, he exemplifies the applied economist.


Posted by: John Emerson | Link to this comment | 04- 6-09 1:32 PM
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566 crossed with 565. So, if Greenspan had had the same career he actually did have, but his doctorate wasn't sketchy, he'd be an economist? I'm not getting where the line is.


Posted by: LizardBreath | Link to this comment | 04- 6-09 1:32 PM
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The explanation is simple: I didn't know what I was talking about. I've read people saying Greenspan doesn't actually know that much economics. It's not obvious they were wrong, but I suppose they were.


Posted by: David Weman | Link to this comment | 04- 6-09 1:38 PM
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571: Not you, particularly, given that it was momentary confusion rather than anything deeper, but that sort of interaction is what makes talking about economics as a profession so maddening: the rapid shifts from broad to narrow definitions of economics as a profession and field of study.


Posted by: LizardBreath | Link to this comment | 04- 6-09 1:44 PM
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One of Greenspan's secrets may have been that he didn't take the scientific economics part completely seriously. DeLong was mystified and awed by his methods.

Unfortunately, what he did take seriously was an updated version of Ayn Rand.


Posted by: John Emerson | Link to this comment | 04- 6-09 1:45 PM
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I think you're being somewhat unfair to DeLong in this instance. He praised Greenspan as a central banker, and later changed his mind. He didn't respect his political ideas or think of Greenspan as an oracle.

Greenspan was quite dovish, which is traditionally leftwing.


Posted by: David Weman | Link to this comment | 04- 6-09 1:55 PM
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Dovish as in anti-war? I didn't know that he was, but does that have anything to do with his economic thinking?


Posted by: LizardBreath | Link to this comment | 04- 6-09 2:01 PM
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David, I see that others have implicated Greenspan in the profession of economics, so I'll add Wikipedia on Rubin.

In 1960, Rubin graduated summa cum laude with a B.A. in economics from Harvard College[3]. He then attended Harvard Law School for three days before leaving to see the world.[5] He later attended the London School of Economics after graduation and received an LL.B. from Yale Law School in 1964[3].

I wonder if there's every been a Treasury Secretary who wasn't a formally trained economist.


Posted by: politicalfootball | Link to this comment | 04- 6-09 2:03 PM
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No as in central banking. He generally kept rates low, whereas the ECB and earlier the Bundesbank are hawkish. Volcker was a rare hawkish American.


Posted by: David Weman | Link to this comment | 04- 6-09 2:04 PM
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576: I mean, since there have been formally trained economists.


Posted by: politicalfootball | Link to this comment | 04- 6-09 2:04 PM
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Fair enough, at least a semester after his BA. That still doesn't make you an economist.


Posted by: David Weman | Link to this comment | 04- 6-09 2:12 PM
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"576: I mean, since there have been formally trained economists."

Still nearly all of them, I'd wager.


Posted by: David Weman | Link to this comment | 04- 6-09 2:12 PM
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579: That still doesn't make you an economist.

Rubin doesn't have a doctorate in economics, but he was secretary of the treasury, has founded an economic policy think-tank, and is now an economic adviser to the president. Doesn't that suggest that the proper description of the field in which he works is 'economics'?


Posted by: LizardBreath | Link to this comment | 04- 6-09 2:17 PM
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...lacked even a BA, I mean.


Posted by: David Weman | Link to this comment | 04- 6-09 2:19 PM
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Wiki says Rubin worked in risk arbitrage at Goldman Sachs, where he made partner. Is this finance or economics? Doesn't seem to be a meaningful distinction in this case.

Was director of Clinton's National Economic Council before becoming Treasury Secretary. This would seem to be a job for an economist.

Donald Judd got a philosophy degree from Columbia and took some night classes at the Art Students' League. He somehow turned out to be an artist, not a philosopher.


Posted by: Bave Dee | Link to this comment | 04- 6-09 2:23 PM
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581: No. Is Gordon Brown an economist?


Posted by: David Weman | Link to this comment | 04- 6-09 2:25 PM
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I've checked: There were no one w an econ degree between Carter's Blumenthal and Rubin. Since then only Paulson had no econ degree. Snow (!) and Summers had phd:s.


Posted by: David Weman | Link to this comment | 04- 6-09 2:29 PM
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Donald Judd got a philosophy degree from Columbia and took some night classes at the Art Students' League. He somehow turned out to be an artist, not a philosopher.

Only a philosophy major could self-consciously devise a high art career out of making modular shelving units.

/Before art schools all started teaching "theory" and all that.


Posted by: Byron the Bulb | Link to this comment | 04- 6-09 2:37 PM
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DeLong has had a major change of heart, but it's very recently (last year or two) and was subsequent to the disaster. He didn't endorse everything Greenspan did, I suppose, but he did endorse the big things.

The most toxic product of economics is econ BAs like Rubin. Dsquared mentioned somewhere (not on this thread, apparently) that a lot of pop culture is now Econ 101.

Rubin and Greenspan, whatever their level of credentials, have backgrounds predominantly in econ.

On Summers being a neo-Keynesian, I haven't signed on to the idea that the Chicago School is the only problem.


Posted by: John Emerson | Link to this comment | 04- 6-09 2:42 PM
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584: Well, I was trying to move away from "who's an economist" to "what field are we talking about". As Chancellor of the Exchequer, Brown was setting economic policies, right? To the extent those policies were good or bad, you'd expect economists to opine on them.

Now, if academic economics is simply unable to speak to matters of economic policy -- as a field of study, it doesn't have anything useful to say about macroeconomics -- that would mean that academic economics was innocent of responsibility for good or bad policies. But if that were the case, I'd like to see academic economists forthrightly saying "Nothing we understand well is any use on a policy level."


Posted by: LizardBreath | Link to this comment | 04- 6-09 2:42 PM
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If you take the Federal Reserve Board, the Council of Economic Advisers, and the Treasury Secretaries and their top lieutenants, what proportion of econ PhDs (and MAs and BAs) will you find?

Given that econ is simultaneously a science (supposedly), an applied trade, and an ideology or cluster of ideologies, if someone's education is primarily economic with nothing else interfering, he's an economist for my purposes.

The Econ and Law people are another example. They may not be econ PhDs, and not every economist agrees with them, but they're reshaping the law on a basis borrowed from econ.

My guess is that before the crash economists were more willing to accept Greenspan as one of their own than they are now. AFAIK very few were criticizing him back then.

It's the same with Econ and Finance. They're very closely related fraternal disciplines who haven't been long separated, and I'm reluctant to let that be used for handwashing purposed.

Do people in finance and in econ get into big fights a lot? Because sociologists and political scientists are also adjacent to economics, and a big contingent of them attack econ as often as they can effectively do so.


Posted by: John Emerson | Link to this comment | 04- 6-09 2:53 PM
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"handwashing purposes".


Posted by: John Emerson | Link to this comment | 04- 6-09 2:54 PM
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588b: You're being too kind in pretending to consider this possibility. I know a few Ph.D. (from top schools) economists, and the career options seem to be government (including Treasury and Fed), international technocracy (IMF and such), investment banking, and academia. Experience on one of these tracks only makes you more attractive to employers on another track -- maybe you save a national currency or two for the IMF and get offered a nice teaching job, or a lucrative research position at Goldman Sachs. Academic macroeconomics certainly claims to have a lot to say about policy.

It occurs to me that the situation is a bit like with law school. Most law professors' research doesn't have much to do with how their students will practice law, and I've even read arguments that most of the law school curriculum has little relevance to what most lawyers do in their jobs -- you learn to practice law in your first few years as an associate, having imbibed a value system and some general knowledge about citations.

Economists don't have bar associations, so you get people like Gordon Brown practicing economics without a license.


Posted by: Bave Dee | Link to this comment | 04- 6-09 2:58 PM
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"Economists don't have bar associations, so you get people like Gordon Brown practicing economics without a license."

I'm not sure what you mean, but I t think finance ministers w a background in economics is generally a bad idea.


Posted by: David Weman | Link to this comment | 04- 6-09 3:01 PM
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591: Well, right. The point I was circling around without quite making is that the sort of things that Rubin and Greenspan and Brown do are the subject of academic macroeconomics. If saying that they're not economists means anything, it seems to me to mean either that placing them in charge of economic policies was insanely irresponsible ("Are you crazy, man! You hired someone to design a fighter plane with no formal training in aeronautical engineering?"), or that academic macroeconomics is tacitly recognized to be not all that much use. (This may not apply so much to Brown -- Chancellor of the Exchequer isn't appointed like US cabinet members, right? You have to be an MP?)

If the latter is the case, I'd like that to be an explicit part of the public discourse around economics.


Posted by: LizardBreath | Link to this comment | 04- 6-09 3:07 PM
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589: I haven't criticised anything you said apart from being a little harsh on DeLong.


Posted by: David Weman | Link to this comment | 04- 6-09 3:08 PM
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581

Rubin doesn't have a doctorate in economics, but he was secretary of the treasury, has founded an economic policy think-tank, and is now an economic adviser to the president. Doesn't that suggest that the proper description of the field in which he works is 'economics'?

Don't want to admit Rubin is a lawyer?


Posted by: James B. Shearer | Link to this comment | 04- 6-09 3:08 PM
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I think finance ministers w a background in economics is generally a bad idea.

That may be true. I was just trying to point out that what finance ministers do is basically what many economists, uncontroversially so-called, do within finance ministries, at the IMF, etc.


Posted by: Bave Dee | Link to this comment | 04- 6-09 3:13 PM
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Well, in the sense that someone who hasn't practiced law since the sixties is a lawyer, sure, of course he is. But he hasn't been working as one lately.


Posted by: LizardBreath | Link to this comment | 04- 6-09 3:14 PM
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588

Now, if academic economics is simply unable to speak to matters of economic policy -- as a field of study, it doesn't have anything useful to say about macroeconomics -- that would mean that academic economics was innocent of responsibility for good or bad policies. But if that were the case, I'd like to see academic economists forthrightly saying "Nothing we understand well is any use on a policy level."

First I think microeconomics has policy implications. Second it is not so much that academic economics has nothing useful to say about macroeconomics it is that their knowledge is very incomplete.


Posted by: James B. Shearer | Link to this comment | 04- 6-09 3:18 PM
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561: I'm using "Chicago" more lossely than is fair. I mean by it only a hard-line ideologic commitment to pro-market, pro-business policies. (The Chicago school is equally notorious for applying simplistic economic analysis not just to economic interactions but to everything under the sun--see, Gary Becker--but that's less what I'm referring to.)

Economic analysis need not be inherently pro-market/pro-business. It has become, in fact, overwhelmingly pro-market/pro-business, because businesses have poured enormous resources into promoting the ideas (and the careers) of pro-market/pro-business economists.


Posted by: Brock Landers | Link to this comment | 04- 6-09 3:20 PM
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s/b "loosely"


Posted by: Brock Landers | Link to this comment | 04- 6-09 3:20 PM
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"I mean by it only a hard-line ideologic commitment to pro-market, pro-business policies."

That's not true of Summers either, he presumably supports say Obama's tax policies and health care proposal and may even prefer single payer. He's still destroying the world economy.


Posted by: David Weman | Link to this comment | 04- 6-09 3:22 PM
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Don't want to admit Rubin is a lawyer?

I have no problem with this admission. Do you think it's relevant in some fashion, or are you just flinging poo?


Posted by: politicalfootball | Link to this comment | 04- 6-09 3:22 PM
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IOW, yes, Rubin and Summers would broadly be "Chicago-school", in the manner in which I'm speaking.


Posted by: Brock Landers | Link to this comment | 04- 6-09 3:23 PM
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Shearer is generally no fun, but that was a really funny comment.


Posted by: David Weman | Link to this comment | 04- 6-09 3:23 PM
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Anyway, that's not a correct way to define the chicago school. Mankiw's a rightwing nutcase, but neokeynesian.


Posted by: David Weman | Link to this comment | 04- 6-09 3:25 PM
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598: Okay, how about "Nothing we [academic economists] understand completely and that requires formal economic training to understand is much use on a policy level"? Qualified enough?


Posted by: LizardBreath | Link to this comment | 04- 6-09 3:26 PM
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Fuck, I need to work before I have to go to bed. Curse you, Unfogged!


Posted by: David Weman | Link to this comment | 04- 6-09 3:27 PM
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I mean by it only a hard-line ideologic commitment to pro-market, pro-business policies.

My gripe with the economics profession is not that it's "pro-business." Very few in the Unfoggetariat are anti-capitalist; therefore, very few are anti-business.

The problem with economics, as practiced, is that it's corrupt and stupid.


Posted by: politicalfootball | Link to this comment | 04- 6-09 3:29 PM
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s/b "market-worshiping, business-worshiping policies"


Posted by: Cryptic ned | Link to this comment | 04- 6-09 3:31 PM
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Very few in the Unfoggetariat are anti-capitalist

Huh. As between 'capitalists' as a class and working people as a class, where their interests are opposed (which is neither always or never) I'd call myself anti-capitalist.


Posted by: LizardBreath | Link to this comment | 04- 6-09 3:31 PM
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The problem with economics, as practiced, is that it's corrupt and stupid.

I'm not sure what exactly you mean by that, but I'd be surprised if it didn't line up fairly closely with corrupt=pro-business and stupid=pro-market.

Regardless, my attempt at meta-comity was a clear failure.


Posted by: Brock Landers | Link to this comment | 04- 6-09 3:31 PM
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606: I don't know. Macroeconomics can't settle ideological debates, but the details of a specific program is pretty important sometimes.


Posted by: David Weman | Link to this comment | 04- 6-09 3:33 PM
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606: I would have gone the other way from Shearer on your dilemma. (i.e. placing them in charge of economic policies was insanely irresponsible.)


Posted by: Brock Landers | Link to this comment | 04- 6-09 3:35 PM
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605: right, it's absolutely an incorrect way to define it. Right-wing nutcasery is what I'm getting at, using "Chicago school" (as I admitted, unfairly) as a stand in.


Posted by: Brock Landers | Link to this comment | 04- 6-09 3:36 PM
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613: This seems implausible to me -- that is, saying that putting someone who isn't a formally trained economist in charge of economic policy is irresponsible appears to me to imply that a competent formally trained economist is going to know the right thing to do for at least an important subset of economic questions (by 'right thing to do' I mean 'will know with some degree of reliability what policies will lead to what set of results') in a manner that formal economic training is necessary for.

And really, econ doesn't seem to me to have that level of reliability -- if it did, we wouldn't be in messes like the current one.


Posted by: LizardBreath | Link to this comment | 04- 6-09 3:40 PM
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No, it doesn't have a "know the right thing to do" level of reliability. But it has a "more likely to have a better idea about the right thing to do" level of reliability. (I don't care about "formal training", ie. a phd, but they need the relevant macroeconomic training or experience, formal or informal.) Do you think Rubin and or Summers would have been better served with less training in macroeconomics?


Posted by: Brock Landers | Link to this comment | 04- 6-09 3:46 PM
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I think that most economists of any school have a base-superstructure udnerstanding of the relationship between economics, politics, society, and culture. and that's all wrong. Likewise they have the idea that their kind of knowledge is science, and that everything else is just handwaving crap -- whereas the other stuff is better than they think, and their stuff is not as good.

And then, ideology and conflicts of interest.


Posted by: John Emerson | Link to this comment | 04- 6-09 3:50 PM
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606

598: Okay, how about "Nothing we [academic economists] understand completely and that requires formal economic training to understand is much use on a policy level"? Qualified enough?

You can say that but then you should say the same with "academic economists" replaced with "climatologists" and "economic training" replaced with "scientific training". Are you prepared to do this?

Sometimes people have to make important decisions about systems they don't understand completely.


Posted by: James B. Shearer | Link to this comment | 04- 6-09 3:51 PM
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Sometimes people have to make important decisions about systems they don't understand completely.

I can agree with that. At the moment it looks like the score is climatologists 1, economists 0. And economics has permeated every nook and cranny of our society and culture in a way climatology hasn't, and it's effectively and sometimes explicitly made much more extreme claims to truth than climatology has.

And also, climatologists have lots of data and use lots of complicated math too, but economists still sneer at them as though they were lyric poets and New Age mystics anyway, because that's the normal way economists relate to everyone except mathematicians and physicists.


Posted by: John Emerson | Link to this comment | 04- 6-09 3:58 PM
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599

I'm using "Chicago" more lossely than is fair. I mean by it only a hard-line ideologic commitment to pro-market, pro-business policies ...

But that is a political distinction not a professional distinction.


Posted by: James B. Shearer | Link to this comment | 04- 6-09 4:00 PM
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re:593

Chancellor of the Exchequer isn't appointed like US cabinet members, right? You have to be an MP?

Yes, although I'd imagine you could be in the House of Lords, too. Some of the junior government ministers are Lords rather than MPs.

Brown's PhD is in History (political history, I think) and was, briefly, a university lecturer in politics.


Posted by: nattarGcM ttaM | Link to this comment | 04- 6-09 4:03 PM
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Probably every Chicago economist except Greg Palast is a hardline winger, but not all winger economists are Chicago school.


Posted by: John Emerson | Link to this comment | 04- 6-09 4:06 PM
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The leader of our social democrats has no education beyond high school.


Posted by: David Weman | Link to this comment | 04- 6-09 4:06 PM
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re: 623

That's not that unusual here. Quite a few Labour politicians [at least until the party was captured by fucking lawyers and career wonks] came up through the unions, and labour movement. Even a few Tories, too -- John Major, for example -- only had high school educations.


Posted by: nattarGcM ttaM | Link to this comment | 04- 6-09 4:10 PM
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613

I would have gone the other way from Shearer on your dilemma. (i.e. placing them in charge of economic policies was insanely irresponsible.)

This is ridiculous, you don't need advanced technical training to manage economic policy, you need good general knowledge, a sense of what is politically feasible and good judgement in picking advisors and evaluating their advice.

If economics is like other technical fields today, experts will tend to know a lot about a narrow niche which is not very helpful for the treasury secretary or the fed head.


Posted by: James B. Shearer | Link to this comment | 04- 6-09 4:12 PM
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Wikipedia notes: "After graduating from Independence High School (now William Chrisman High School) in 1901, [Harry] Truman worked as a timekeeper on the Santa Fe Railroad, sleeping in "hobo camps" near the rail line [...]."

But also that: "Truman was the only president who served after 1897 not to earn a college degree: poor eyesight prevented him from applying to West Point (his childhood dream) and financial constraints prevented him from securing a degree elsewhere."


Posted by: Stanley | Link to this comment | 04- 6-09 4:16 PM
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During the period 1880-1940, a lot of the most progressive American politicians were mostly self-educated, with less than ten years of formal schooling in many cases (but including a law degree). Small town lawyers and small town newspapermen were especially prominent.

During WWII the university and the government more or less merged, and since then the road to political prominence has become much more restricted. Even the few non-Ivy non-college types tend to be part regulars, union bureaucrats, and other organization men.


Posted by: John Emerson | Link to this comment | 04- 6-09 4:19 PM
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Treasury isn't the "economists" position. The Federal Reserve is and so is the Council of Economic Advisors. Greenspan is certainly an economist, if anyone is.

I now think Emerson is being a little too rough on economics. It's not a field of scientific expertise, but I think at some level people get that. People have to think about this stuff and econ has something to offer. Economists don't fully understand and can't manage capitalism, which is inherently prone to cyclic breakdowns, but the state of knowledge in all the social sciences is pretty elementary, about like medicine in ancient times. Piling on economics because it failed as a "science" is just as lame as the pretensions of economists to be scientists.

And also, climatologists have lots of data and use lots of complicated math too, but economists still sneer at them as though they were lyric poets and New Age mystics anyway,

this isn't true at all, not even a little.


Posted by: PGD | Link to this comment | 04- 6-09 4:24 PM
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Yeah, the SAP had a lot of working class politicians until lately, and not so much now I think, though I don't have like any statistics. Sahlin's case is odder though, she's middle class but decided not to attend university for whatever reason. She's actually the first non-working class SAP leader since Palme was killed in 86. Lindh who would have been leader if she wasn't murdered, was working class.


Posted by: David Weman | Link to this comment | 04- 6-09 4:27 PM
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re: 629

Yeah, both main parties are, I think, almost entirely captured by 'professional' politicians and lawyers. At least among those who entered parliament for the first time in the past, say, 15 years or so.

That said, it's not the case that the political class and academic class have merged, it's just that the political class is relentlessly bourgeois and professional, which means, degree'd.


Posted by: nattarGcM ttaM | Link to this comment | 04- 6-09 4:29 PM
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"Piling on economics because it failed as a "science" is just as lame as the pretensions of economists to be scientists."

It's not what he's doing really. But I think that while there's a connection between econ's science pretensions and its post 60s rightward tilt and the exclusion of lefty ideas from overton window, it's looser than John would have it.

And right now, it's the prestige of economists help give criticism of Obama from the left visibilty. Sachs, Stiglitz and Krugman, etc.


Posted by: David Weman | Link to this comment | 04- 6-09 4:40 PM
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628: In debates about global warming I think it's true. It's a version of the idea that environmentalists are all hippies. Economists seem perfectly happy to dismiss climatological conclusions for no particular reason.

Maybe the profession is shifting. It would nice if they were to figure out that it's not good for them to be represented mostly by their most demented and loathsome specimens.


Posted by: John Emerson | Link to this comment | 04- 6-09 4:42 PM
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And also, climatologists have lots of data and use lots of complicated math too, but economists still sneer at them as though they were lyric poets and New Age mystics anyway, because that's the normal way economists relate to everyone except mathematicians and physicists.

A lot of climatologists are physicists. But I guess the physicists economists respect are the ones doing completely useless crap, like me.


Posted by: essear | Link to this comment | 04- 6-09 4:45 PM
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Samuelson was one of the worst of the scientism-ists. And he was a liberal, in the sense of administrative liberal.

As far as I know, economists still use their pretensions to Science to get the advantage over, e.g., historians and sociologists. When that stops ever happening I'll shut up.

Econ 101 pop econ is a lot of what I'm talking about. I won't let the profession disavow that with all their smirky little jokes. Some of the shittiest people I've ever known were pumped full of Econ 101, and I've seen quite nice people degenerate after taking one or a few econ courses. The profession has to accept responsibility. (And anyway, a lot of economists aren't a whole hell of a lot better than Econ 101 free-market fanatics).


Posted by: John Emerson | Link to this comment | 04- 6-09 4:49 PM
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http://en.wikipedia.org/wiki/Overton_window


Posted by: David Weman | Link to this comment | 04- 6-09 4:49 PM
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There seem to be a lot of refugee physicists and mathematicians on the highways and byways looking for work. Econ, linguistics, oceanography, climatology, etc.


Posted by: John Emerson | Link to this comment | 04- 6-09 4:50 PM
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There is mutual loathing between economists and environmentalists. Perhaps climatologists are getting caught in the crossfire.


Posted by: James B. Shearer | Link to this comment | 04- 6-09 4:52 PM
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Overton-window wise, I might be willing to reuce the economists' sentence to life imprisonment under humane conditions, with family visits allowed, rather than the being torn apart by starving hogs thing. Maybe a compromise solution is possible. I'm not as inflexible as I seem.


Posted by: John Emerson | Link to this comment | 04- 6-09 4:54 PM
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638: Maybe they could clean up shit at the hog farm. In fact, have you explained as of yet where the farm's labor even comes from? Are they paid fair wages, etc., or what? These are important points to clear up.


Posted by: Stanley | Link to this comment | 04- 6-09 4:59 PM
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As between 'capitalists' as a class and working people as a class

I should have said "pro-capitalism" rather than "pro-capitalist" in the interest of clarity. I did say "pro-business" rather than "pro-businesspeople," which conveys the sentiment I intended.



Posted by: politicalfootball | Link to this comment | 04- 6-09 5:04 PM
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Maybe a compromise solution is possible.

Never let it be said that Emerson lacks bipartisan spirit.


Posted by: politicalfootball | Link to this comment | 04- 6-09 5:13 PM
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628: Piling on economics because it failed as a "science" is just as lame as the pretensions of economists to be scientists.

Seriously, the only reason I'm participating in the piling on is those pretensions (and even if the word 'science' isn't used, pretensions to be engaging in a field of study that can make reliable predictions of any kind.) Understood as a field of study that might as well be called "History and sociology of finance", I've got nothing against it.

618: Nope. Climatology appears to be making predictions about climate change that are being borne out by data. It's doing better than economics. (Generally, you're right that there's no reason that someone setting policy in a technical area has to be an expert themself, rather than relying on experts. That was vaguely what I meant to address above when I started talking about what field Rubin etc. were working in, rather than whether it would be reasonable to call them economists.)


Posted by: LizardBreath | Link to this comment | 04- 6-09 5:32 PM
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Are they paid fair wages, etc., or what?

I'd volunteer.


Posted by: apostropher | Link to this comment | 04- 6-09 6:01 PM
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642

Nope. Climatology appears to be making predictions about climate change that are being borne out by data. It's doing better than economics. ...

Not really. Both economics and climatology make predictions of varying reliability. Some are borne out by data and some are not. In both cases there are important decisions that have to be made about systems we don't completely understand.


Posted by: James B. Shearer | Link to this comment | 04- 6-09 6:17 PM
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climatologists have lots of data and use lots of complicated math too, but economists still sneer at them as though they were lyric poets and New Age mystics anyway, because that's the normal way economists relate to everyone except mathematicians and physicists

I don't think this is true at all. Do you have an example?


Posted by: Brock Landers | Link to this comment | 04- 6-09 6:32 PM
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I may have made that up. But I'm surprised that climatologists haven't been able to pull the "I'm right because I know more math than you" trick on the world, the way the economists have.


Posted by: John Emerson | Link to this comment | 04- 6-09 6:43 PM
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They can't influence the weather and then point to their influence of evidence of objective rightness. Figurative rainmaking is more highly valued in society.


Posted by: eb | Link to this comment | 04- 6-09 6:47 PM
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646

I may have made that up. But I'm surprised that climatologists haven't been able to pull the "I'm right because I know more math than you" trick on the world, the way the economists have.

It isn't from lack of trying so perhaps that argument isn't as powerful as you think.


Posted by: James B. Shearer | Link to this comment | 04- 6-09 6:52 PM
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The problem with the trick is that it doesn't actually work, but economists are too slow to notice.


Posted by: Walt Someguy | Link to this comment | 04- 6-09 6:52 PM
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I've sat in rooms with several people who run the GCM's, and I have never once heard one of them claim "I'm right because I know more math than you."


Posted by: Megan | Link to this comment | 04- 6-09 6:54 PM
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I was reading the nytimes fluff piece article about Summers and DE Shaw earlier today and wondering if that was an indicator that Shaw's fortunes will plummet before this is all over.


Posted by: eb | Link to this comment | 04- 6-09 6:56 PM
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650: I've sat in plenty of rooms with economists and have never once heard one of them claim that either.


Posted by: Brock Landers | Link to this comment | 04- 6-09 6:56 PM
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Both economics and climatology make predictions of varying reliability. Some are borne out by data and some are not.

"X makes predictions of varying reliability. Some are borne out by data and some are not" is sort of a trivially true thing to say about any science X. But climate science is largely based on well-understood physics and chemistry, while economics is based on spherical-cow assumptions about human behavior. I'm notably ignorant about economics, so I could be way off, but it seems like it pretty frequently gets important things wrong at zeroth order. Climate science gets things right at zeroth order, gets less important details wrong, and is pretty honest about what approximations it's making and what their failings are. I'm pretty sure you're not making a fair comparison. But, as I said, I don't know so much about economics.


Posted by: essear | Link to this comment | 04- 6-09 7:00 PM
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The new economic history, done almost entirely in econ departments now, pushed out the old economic history, done in both history and econ departments. The new econ history is much more quantitative and not below sneering at the qualitative historians for their foolish impressionistic anecdotal stories. It's not clear that the percentage of good work being done in the new econ history is higher than the percentage of good work done in other historical methods, but don't tell the sneerers that.


Posted by: eb | Link to this comment | 04- 6-09 7:01 PM
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This thread is awesome.

But Emerson should extend his vendetta against economics to other Science as well -- If we're talking about "refugee mathematicians on the highways and byways," I'd like to hear why we should be more comfortable with Eric Lander as a presidential advisor for science than with Larry Summers as an advisor on economics.


Posted by: arthegall | Link to this comment | 04- 6-09 7:05 PM
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Is there a record for number of days a thread is still active? This post isn't even on the front page anymore!


Posted by: mrh | Link to this comment | 04- 6-09 7:13 PM
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This doesn't even come close to the record.


Posted by: nosflow | Link to this comment | 04- 6-09 7:16 PM
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This thread's longevity owes more to Emerson's superior trolling skillz than anything else...


Posted by: arthegall | Link to this comment | 04- 6-09 7:16 PM
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Is there a record for number of days a thread is still active?

Off-Unfogged, apo's thread about Obama the Antichrist seems like a good candidate.


Posted by: essear | Link to this comment | 04- 6-09 7:21 PM
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Possibly the record for time between first and last comment.


Posted by: eb | Link to this comment | 04- 6-09 7:23 PM
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And the record for time between post and first comment.

Helpful n00b hint: back then, there weren't any timestamps.


Posted by: nosflow | Link to this comment | 04- 6-09 7:29 PM
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if every single appearance of "economist" or "economics" were replaced with "Chicago-school economist" or "Chicago-school economics"

nah, this is like the sort of thing the Trotskyists used to try to do to distance themselves from the Stalinists. I mean obviously the Stalinists were worse - they supported Stalin - but with the perspective of history, you can see that the Trotskyists believed just as much rubbish, and were basically part of the same problem.

The ur-text of "I am right because I know more math than you", btw, is the Krugman vs Galbraith fils debate in Slate. Krugman was once a total economist in the pejorative sense, and has moved on from it largely AFAICS out of a wish to retain his reputation for making unpopular and difficult predictions and getting them right (he wrote an article on how he did this, calling it the "MIT Method" IIRC.


Posted by: dsquared | Link to this comment | 04- 6-09 7:30 PM
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650: A straightforward statement of the principle counts as parody or hyperbole. It's not hard to find economists pulling rank and bragging about how smart they are, though.


Posted by: John Emerson | Link to this comment | 04- 6-09 7:39 PM
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It's the combination of trolling skills plus being right.


Posted by: John Emerson | Link to this comment | 04- 6-09 7:42 PM
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I can see that while I was away crazy talk has taken over. Any definition of "economist" that would end up including McMegan, Amity Shlaes, and any talking head on CNBC is too broad. Eliding the distinction between "economist" and "economic policy maker" loses important information necessary to make sense of the world. The President is the Commander-in-Chief, but that doesn't make him a military general.

Greenspan is an economist, but with a fringe-y career. Rubin is not an economist. (Summers, on the other hand, is probably the exemplar stored in Paris to represent the Standard Economist Unit.)

Also, there's a distinction between "economics" and "academic finance", in that in the abstract sense academic finance is a branch of economics, but they live in distinct departments and have distinct training. Academic finance is much more clearly implicated in the crisis, since they have been the big promoters of the efficient market hypothesis, and since they taught all of the MBAs that have just destroyed the world economy.

A much bigger distinction is between "economics" and "finance" the sector of the economy. While some people cross back and forth between the finance industry and academic finance, the vast majority of workers in the industry -- the bankers and stockbrokers and floor traders and securities analysts -- are not economists in any way, shape, or form.


Posted by: Walt Someguy | Link to this comment | 04- 6-09 7:43 PM
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It's not that you're right, Emerson, it's that you're not right enough.

A simple modification would let you easily boost your rightness levels into the stratosphere-of-righteousness. Of course it's not hard to find economists "pulling rank" and "bragging about how smart they are!" Given a sufficiently competitive field, it's not hard to find any scientist bragging and pulling. If climatologists are still concerned with data and predictions, then that's only because their field has only recently come to prominence in the wider culture! Give 'em a couple of centuries in the public eye, just like physics and biology have had, and you'll see a dramatically different sociology.


Posted by: arthegall | Link to this comment | 04- 6-09 7:46 PM
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Back in 2001 or 2002 I was watching a Krugman talk on C-SPAN (or somewhere on tv) and Krugman's response to a question about some possible-but-not-quite-clearly-an-economist began with him saying something like "the thing about economics is that there's no licensing requirement" and then explained why that person's views were wrong. I can't remember who it was, but I think it was someone promoting the Bush tax cuts.


Posted by: eb | Link to this comment | 04- 6-09 7:49 PM
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I mean to add, "But that doesn't mean you can't blame all three groups."

Krugman still completely believes in the superiority of mathematical modeling as a tool for understanding. Economists are right to be impressed by math, though. It would be even better if chicks were impressed by math. But no, they always go for the rock stars and movie actors.


Posted by: Walt Someguy | Link to this comment | 04- 6-09 7:49 PM
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For the purpose of the hog farm, economists and finance are the same.


Posted by: John Emerson | Link to this comment | 04- 6-09 7:51 PM
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As I've said several times, "the dog that didn't bark" is a big part of the accusation. Flooding the world with Econ 110 true believers is another big part. (Thet's the only part where Chlaes and McMegan are relevant at all). Quite considerable but not universal complicity and conflict of interest is another.


Posted by: John Emerson | Link to this comment | 04- 6-09 7:56 PM
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Jeffrey Sachs: not a fan of the Geithner Summers plan.


Posted by: eb | Link to this comment | 04- 6-09 7:59 PM
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In the social sciences, anthropologists and sociologists do not pull rank. How could they? Even historians and political scientists have trouble doing so. Economists are the worst. Some psychologists and linguists try to match them, but they have much less influence on public policy.


Posted by: John Emerson | Link to this comment | 04- 6-09 7:59 PM
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I'm now #1 for "Fargo + mortgages + underwater".


Posted by: John Emerson | Link to this comment | 04- 6-09 8:04 PM
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Hey, John: if you want to be mad at someone else for a bit, you can return to Canadians.


Posted by: Stanley | Link to this comment | 04- 6-09 8:08 PM
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anthropologists and sociologists do not pull rank ... even historians and political scientists have trouble doing so

Of course -- but that's only because you've just chosen four of the academic fields that are at the bottom of the scientific totem pole (I wouldn't have even put "historian" on there, but then you get around to reading a guy like Franco Moretti...)

Economists are the worst.

If you honestly think this, it's because you don't spend enough time around certain kinds of physicists, who have made a cottage industry out of invading other fields and telling them they're doing it wrong. Economics, computer science, most subfields of biology, all have had to deal with ex-pat (or vacationing) physicists lecturing them on their methods.

But really, there's a scale. Abstract mathematicians are somewhere near the top, with physicists right below them. Economics below them. Then computer science below that, followed by chemistry, then biology. After that, you start to get down to political science and anthropology. Anything that requires you to put on boots and walk through mud, like the people who count birds or do things on boats.

It's a pecking order, all the way down. Math is at the top, because it's got names like Euclid and Pythagoras. Physics wouldn't be half as popular if it weren't for Newton and Einstein. Economics at least has Adam Smith. Computer Science: every computer movie villain you've ever seen. Biology: Darwin.

Everyone sucks up to the fields above them, by poaching their methods. Everyone pulls rank on the fields below them.

It's not unique to economists (although surely, with them, it is almost as bad as with anyone else).

But seriously: stop capitalizing "Science."


Posted by: arthegall | Link to this comment | 04- 6-09 8:11 PM
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I'm only prepared to support the hog farm if proper paperwork is first filled out for each of the farm's "clients".

I find the effect of math in econ puzzling. If you looked at the totality of the evidence of mathematical argument, you would never conclude that markets are the perfect method of social organization, and that we should leave everything up to them. (You could make the case that the weight of mathematical argument shows that markets don't work at all.) But somehow the market-gullible are always impressed by the math and take it to "prove" that markets are perfect, while the market-skeptical tend to reject the mathematics rather than use the mathematics as evidence. (You can certainly make the case that the mathematics is completely useless, but it's a question that's distinguishable from the question of the efficacy of markets.)

Here's an example. Law-and-economics people are terrible impressed by a pseudo-mathematical argument known as "the Coase theorem" (it's not really a theorem), that in the absence of "transaction costs" markets can do everything. If you take the argument seriously, then you can show that in the absence of transaction costs, Communism works. In the absence of transaction costs, anarchism works. And yet, the argument is only ever deployed in the defense of markets, not in the defense of Communism.


Posted by: Walt Someguy | Link to this comment | 04- 6-09 8:16 PM
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Abstract mathematicians are somewhere near the top laydeez.


Posted by: Walt Someguy | Link to this comment | 04- 6-09 8:17 PM
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I don't really give a shit about whether physicists pull rank on chemists. I'm not talking about the evils of the human heart.

Economists are the worst among the social sciences.. And it makes a big difference, because they get extra muscle in policy disputes that way.


Posted by: John Emerson | Link to this comment | 04- 6-09 8:24 PM
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If you had ever cradled the head of a crying chemist in your lap, John, you wouldn't be so sanguine.


Posted by: Walt Someguy | Link to this comment | 04- 6-09 8:26 PM
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Economists are the worst among the social sciences.. And it makes a big difference, because they get extra muscle in policy disputes that way.

I'd say the causality goes the other direction -- economists are the worst, because they have the most muscle in policy disputes.

You may not give a shit about the evils of the human heart, and you may be more pissed about the Econ 101 than any other college course, but I guarantee you that the course of our lives over the next thirty years will be more affected by the silent decisions made today by physicists-in-biologist-clothing than by any mathematical model that Larry Summers or Greg Mankiw ever used to pull rank over anyone else.


Posted by: arthegall | Link to this comment | 04- 6-09 8:33 PM
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Any definition of "economist" that would end up including McMegan, Amity Shlaes, and any talking head on CNBC is too broad

no, this isn't right. It clears things up if you remember that "Economist" should be compared to "Trotskyist", not to "Physicist". It's an ideology, not a subject (that's a sociological statement about economics since about 1980, btw). Which means it's entirely intelligible that there should be economists who haven't got MSc in economics, just like there were plenty of good Party members who didn't really know much about the ideology.


Posted by: dsquared | Link to this comment | 04- 6-09 8:45 PM
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Art, I can't send someone to the hog farm for what they're going to do in a decade or too.


Posted by: John Emerson | Link to this comment | 04- 6-09 8:46 PM
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680, 682: However, I'm willing to rfranchise you to do it yourself. It's not as though I can destroy the whole university single-handed.


Posted by: John Emerson | Link to this comment | 04- 6-09 8:50 PM
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681: Does that make Stiglitz not an economist?


Posted by: Walt Someguy | Link to this comment | 04- 6-09 8:52 PM
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684: I believe he was occasionally described before the crunch as a "dissident economist", which fits well.


Posted by: dsquared | Link to this comment | 04- 6-09 8:56 PM
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Anyway, we now know that Stalinism was more effective in minimizing transaction costs than Trotskyism.


Posted by: Walt Someguy | Link to this comment | 04- 6-09 8:57 PM
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And yet sending them to the farm six months after they've done what they've done seems oddly unsatisfying as well.

Look, I'm not trying to tell you to lighten up on economists -- God knows, they deserve whatever they get.

But the criticisms of economics as excessively corrupt, or politically-motivated, or skewed by money or outside interests, or as insufficiently empirical, are imprecise -- not that they don't apply to economics, but that they would also capture a huge proportion of the rest of science that's conducted in the public sphere, with socially relevant consequences, as well. These things just aren't the criteria on which "science" is judged. To paraphrase John Holbo, you're "not thinking about what you're saying. Because what you are saying more or less instantaneously implies an indefinitely large cloud of things you really - really, really - don't think."


Posted by: arthegall | Link to this comment | 04- 6-09 8:58 PM
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I think what's happened is that before 1980 microeconomics was more explicitly ideological and macroeconomics was more practical, while since then they switched.

687 is completely wrong. Physics is not a realm of dispassionate philosopher kings, but physics really is scientific in a way that economics is not. Generally, if a theory in physics is a) implausible and b) contradicted by the evidence, then it's not long for this world. As the example of Ricardian Equivalence demonstrates, having a theory that's both implausible and contradicted by the evidence is more of a minor puzzle than serious evidence that you've just gotten it wrong.


Posted by: Walt Someguy | Link to this comment | 04- 6-09 9:05 PM
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When the history of economics since 1980 gets written, the first volume will be called "The Profit Armed."


Posted by: eb | Link to this comment | 04- 6-09 9:08 PM
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As the example of Ricardian Equivalence demonstrates, having a theory that's both implausible and contradicted by the evidence is more of a minor puzzle than serious evidence that you've just gotten it wrong.

This argument suggests that economics is basically a form of psychology.

"I think people will behave this way in situation X, because the human brain works this way."
"I disagree, because the human brain also works this way."


Posted by: Cryptic ned | Link to this comment | 04- 6-09 9:10 PM
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650

I've sat in rooms with several people who run the GCM's, and I have never once heard one of them claim "I'm right because I know more math than you."

I have had internet encounters with climatologists in which they make spurious claims of scientific precision. Try telling them their fancy climate modeling codes are worthless because they can't be validated and see how they respond.


Posted by: James B. Shearer | Link to this comment | 04- 6-09 9:13 PM
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they would also capture a huge proportion of the rest of science that's conducted in the public sphere, with socially relevant consequences, as well

Examples would be nice. The example Shearer brought up runs the other way: climate science generates good, empirical, precise work despite active outside interests funneling money into undermining it. Nothing comes to mind immediately that's largely distorted by outside interests and money (maybe pharmacology? even there I would guess most researchers are doing good science, despite the big companies funding studies).


Posted by: essear | Link to this comment | 04- 6-09 9:13 PM
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Try telling them their fancy climate modeling codes are worthless because they can't be validated and see how they respond.

Probably rudely, because they can be validated; indeed, that's sort of a huge part of what modelers do.


Posted by: essear | Link to this comment | 04- 6-09 9:14 PM
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688 -- You're telling me that there aren't sub-fields of physics which (a) significant sub-communities of other physicists find to be "implausible," and that (b) don't have a whole lot empirical support due to the bounds of modern technology, but that still persist as separate areas of inquiry for some other reason? (Maybe the perceived aesthetic beauty of their mathematics? Or their potential, in the future, for possibly providing empirical predictions consistent with experiments?)

Regardless, physics I'm less familiar with -- try writing 687 again with "physicists" s/b "geneticists" or "molecular biologists," and then we can start discussing truly implausible models that really are unsupported by evidence... (and yet these models are useful! and using them qualifies as science!)

I mean, whatever, my team's lead has dropped to 15 and I'm was just nervously trolling Emerson instead of watching the game.


Posted by: arthegall | Link to this comment | 04- 6-09 9:19 PM
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653

... But climate science is largely based on well-understood physics and chemistry, ...

Climatologists claim this all the time but it isn't true (except in the sense that astrology is based on well understood physics because the planetary orbits are computed correctly). All of the complicated climate modeling codes have lots of free parameters that are empirically fitted.


Posted by: James B. Shearer | Link to this comment | 04- 6-09 9:20 PM
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688: there are big bits of physics (specifically, IME, the bits related to nuclear power stations) where a lot of the pathologies of economics tend to also be found. But I doubt this is the rule - there isn't typically much money in it either way, and there isn't the history that there is in economics - it's an intrinsically political subject and has been from day one. What happened in the 1980-2008 period was that one political faction suddenly massively out-evolved the rest, with consequences familiar to anyone who's studied a rabbits-foxes model.


Posted by: dsquared | Link to this comment | 04- 6-09 9:25 PM
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693

Probably rudely, because they can be validated; indeed, that's sort of a huge part of what modelers do.

No they can't. Consider what you would need to actually validate the codes. You would need data on lots of earthlike planets with varying atmospheres and solar inputs followed for thousands of years. Check the predictions of the codes against this data and you would have some idea of how good they are. As it is you don't.


Posted by: James B. Shearer | Link to this comment | 04- 6-09 9:26 PM
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Climatologists claim this all the time but it isn't true (except in the sense that astrology is based on well understood physics because the planetary orbits are computed correctly). All of the complicated climate modeling codes have lots of free parameters that are empirically fitted.

First: just like every climate denialist on the internet, you immediately leap to the rhetorical shift from "climate science" to "climate models". The latter is only one part of the former.

Second: you think having free parameters that are empirically fitted is a sign of not being well-understood physics? Jesus. All science does that. There is nothing in physics that doesn't have free parameters that are empirically fitted. We muddle along by trying as much as possible to factorize calculable things from things that are only measurable. If you can fit something from one set of data and use it to predict things about several other sets of data, that's a success. That's good science. And this is the sort of thing climate modelers do. Of course they can't get every bit of the microphysics that goes into our climate right, so you integrate out the small-scale stuff and replace it with coarse-grained stuff, which to some extent you always just have to measure. As long as they don't cheat by using one set of data to predict the same set of data, there's nothing wrong with that.

I'm not an expert on precisely what measured things go into climate models -- some are things like the absorption spectrum of various gases, or evaporation rate as a function of temperature. But from the talks I've heard on the subject and the reading I've done, it's clear that these people are doing their best to build the models as much as possible on parametrizations like this and low-level physics, and then to check that they correctly postdict existing data as validation.


Posted by: essear | Link to this comment | 04- 6-09 9:31 PM
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Also, there's a distinction between "economics" and "academic finance", in that in the abstract sense academic finance is a branch of economics, but they live in distinct departments and have distinct training. Academic finance is much more clearly implicated in the crisis, since they have been the big promoters of the efficient market hypothesis, and since they taught all of the MBAs that have just destroyed the world economy.

I don't buy this distinction at all. Academic finance split off from economics quite recently, and it only did so because there was so damn much money to be made in having a separate finance degree. Academic finance=economics, period, end of story.

Not really. Both economics and climatology make predictions of varying reliability. Some are borne out by data and some are not. In both cases there are important decisions that have to be made about systems we don't completely understand.

No moral equivalence, please. Climatology has far more scientific grounding than economics, and is far more predictively reliable.


Posted by: PGD | Link to this comment | 04- 6-09 9:32 PM
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First: just like every climate denialist on the internet, you immediately leap to the rhetorical shift from "climate science" to "climate models". The latter is only one part of the former.

But...the comment he's referring to...doesn't talk about climate science, it talks about climate models.


Posted by: Cryptic ned | Link to this comment | 04- 6-09 9:32 PM
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No they can't. Consider what you would need to actually validate the codes. You would need data on lots of earthlike planets with varying atmospheres and solar inputs followed for thousands of years. Check the predictions of the codes against this data and you would have some idea of how good they are. As it is you don't.

Oh, give me a fucking break. We have a lot of data, of varying degrees of quality, about the Earth at various times. Getting models to reproduce that, along with getting the physics right as much as possible, is the best validation you can ask for. Sure, to some extent there's a sort of "cosmic variance" problem; we only have the one earth to work with. That in itself doesn't preclude doing science.

It seems like you have some sort of weird platonic ideal of what science should look like. Science is messy. Some fields are data-rich, others aren't. People do the best they can, and most of the work is explaining and trying to quantify how badly they're doing.


Posted by: essear | Link to this comment | 04- 6-09 9:37 PM
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700: neither 644 nor 653 specifically said anything about models.


Posted by: essear | Link to this comment | 04- 6-09 9:39 PM
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702

700: neither 644 nor 653 specifically said anything about models

But 691 and 693 did.


Posted by: James B. Shearer | Link to this comment | 04- 6-09 10:03 PM
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701

Oh, give me a fucking break. We have a lot of data, of varying degrees of quality, about the Earth at various times. Getting models to reproduce that, along with getting the physics right as much as possible, is the best validation you can ask for. ...

It obviously isn't the best validation you could ask for as I just gave an example of what you would really need.

It seems like you have some sort of weird platonic ideal of what science should look like. Science is messy. Some fields are data-rich, others aren't. People do the best they can, and most of the work is explaining and trying to quantify how badly they're doing.

And if you are missing a lot of important data you shouldn't pretend it doesn't matter because it does.


Posted by: James B. Shearer | Link to this comment | 04- 6-09 10:09 PM
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It obviously isn't the best validation you could ask for as I just gave an example of what you would really need.

So your attitude is really that, given that we don't have ready access to thousands of years of data from a whole ensemble of Earth-like planets, no one should take climate models seriously?


Posted by: essear | Link to this comment | 04- 6-09 10:32 PM
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705

So your attitude is really that, given that we don't have ready access to thousands of years of data from a whole ensemble of Earth-like planets, no one should take climate models seriously?

Not exactly. My attitude is that the most complicated models aren't adding any predictive value to simpler models.


Posted by: James B. Shearer | Link to this comment | 04- 6-09 10:39 PM
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Not exactly. My attitude is that the most complicated models aren't adding any predictive value to simpler models.

That's not so unreasonable; in my own field, I'm a big fan of simple, analytically tractable models that capture all the right qualitative stuff. But from having listened to some talks by, and talked briefly with, climate scientists who work on analytic models, they seem confident that the computer models are important for some things (like estimating effects on a regional scale) that are completely out of reach of simpler models. And that, while the uncertainties are still large, the models were doing a decent job of those things.


Posted by: essear | Link to this comment | 04- 6-09 11:19 PM
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707 is way to fucking reasonable for this thread. Knock it off, essear!


Posted by: Sifu Tweety | Link to this comment | 04- 6-09 11:22 PM
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708: I vehemently agree with Sifu!


Posted by: JP Stormcrow | Link to this comment | 04- 6-09 11:25 PM
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"too", though. Sheesh.


Posted by: Sifu Tweety | Link to this comment | 04- 6-09 11:29 PM
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707

... But from having listened to some talks by, and talked briefly with, climate scientists who work on analytic models, they seem confident that the computer models are important for some things (like estimating effects on a regional scale) that are completely out of reach of simpler models. And that, while the uncertainties are still large, the models were doing a decent job of those things.

They may feel so but there is no strong reason to believe them. Note there is a selection bias here, the people working on the complicated models are predisposed to believe in them.


Posted by: James B. Shearer | Link to this comment | 04- 6-09 11:33 PM
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Note there is a selection bias here, the people working on the complicated models are predisposed to believe in them.

No, you missed my point: it's the people working on the simple models who made that case for the complicated ones.


Posted by: essear | Link to this comment | 04- 6-09 11:34 PM
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Topical! Sort of!


Posted by: Sifu Tweety | Link to this comment | 04- 6-09 11:36 PM
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Why did the Bayesian cross the road?
He was going that direction anyway.


Posted by: JP Stormcrow | Link to this comment | 04- 6-09 11:41 PM
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Andrew Gelman should sure as shit comment on unfogged.

I bet he already does.


Posted by: Sifu Tweety | Link to this comment | 04- 6-09 11:44 PM
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712

No, you missed my point: it's the people working on the simple models who made that case for the complicated ones.

I accept that there are questions which simple models aren't much use for. I am totally unconvinced that complicated models will do better. For one thing I don't trust that there aren't bugs in the computer codes.


Posted by: James B. Shearer | Link to this comment | 04- 6-09 11:55 PM
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James: I really don't think there's a parity between global warming and economics, not even at the technical level you want to limit the argument to. At that level, I think that the blatant, in-your-face problems with bad modelling are worse in economics than in climatology. I'm not able to prove that, though.

But the conflict of interest problems with official economics are very bad compared to the conflict of interest problems with global warming. The GW deniers are the ones with the problems, not the academics.

And then, GW was not just tested by a 15 year bubble it helped cause and failed to warn against.

There's a methodological level of defeatist perfectionism which can refute any theory whatsoever. A lot of philosophy is stuck there, and the skeptics about tobacco and cancer spent their whole careers there, and I think that that's where you are.

Arthegal,


Posted by: John Emerson | Link to this comment | 04- 7-09 7:10 AM
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687, Arthegall:

OK, I get your point. The same thing that happened to econ could happen to any policy science, and maybe already has to some of them. I guess I'm only saying that at this moment econ is the worst in its combination of flawed scientific claims, ideological narrowness and bias, and powerful influence. And all have gotten worse in the last 30-60 years, it would seem.

Your comment reads as though you were asking me to attack even more people, which isn't a criticism I'm used to getting.


Posted by: John Emerson | Link to this comment | 04- 7-09 7:14 AM
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Psychopharmacology is actually pretty close.


Posted by: John Emerson | Link to this comment | 04- 7-09 7:16 AM
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I am totally unconvinced that complicated models will do better. For one thing I don't trust that there aren't bugs in the computer codes.

Dude on the internet thinks, ummm, uh, there might be "bugs in the computer codes"! Stop the presses! Global warming a hoax!

Give me a fucking break here.


Posted by: PGD | Link to this comment | 04- 7-09 7:22 AM
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I may have made that up.

Has anyone noticed that lately Emerson has a tendency to make a hasty, overbroad statement and, when he's challenged, he backs down. I find this trend alarming and, as dsquared did before me, I feel compelled to step into the breach. Here's the statement that John was repenting:

climatologists have lots of data and use lots of complicated math too, but economists still sneer at them as though they were lyric poets and New Age mystics anyway

Climate change deniers can hire lawyers, politicians and PR people to make their case, but everyone understands that those are professional advocates, and they can't be trusted. Deniers need scientists. Who will do the job?

You can get scientists in unrelated disciplines to be climate change skeptics, but that tactic has limited utility. Why believe a physicist on climate change when there's a discipline devoted to the study of climate?

Geographers would be an obvious choice - especially if you want to make the case that, whatever the truth of climate change, it won't cause important dislocations. Alas, there don't seem to be any geographers who are willing to take on this task, and it's unclear that geographers have much influence outside the academy anyway.

So who does that leave you with? What academic discipline is tangentially related to climate change issues, has sufficient public influence, and is devoid of professional scruples?

You can guess where I'm going with this. Econonists are not only qualified by their influence and their lack of standards, they also have a powerful pseudo-scientific tool perfectly suited for climate change denialism: Econ 101. The central premise of Econ 101 is that complex systems do not need to be regulated - that individuals, acting in their own interests, will behave appropriately and market discipline will ensure that everything comes out okay. Externalities are either irrelevant, or they are so complex that there's no way to factor them into policy considerations.

That's pretty much everything a denialist needs in one easy, intellectually respectable package.

So when Bangladesh drowns, certainly the lawyers and PR people and politicians will be culpable, but let us not forget the special role of economists in dismissing the science of climatology.


Posted by: politicalfootball | Link to this comment | 04- 7-09 7:35 AM
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The central premise of Econ 101 is that complex systems do not need to be regulated - that individuals, acting in their own interests, will behave appropriately and market discipline will ensure that everything comes out okay.

In 515 EB parodied free-market ideologues in terms reminiscent of Christian Science. I think that that's a valuable insight. "There is no disease; disease is merely an illusion of the mind."


Posted by: John Emerson | Link to this comment | 04- 7-09 7:45 AM
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let us not forget the special role of economists in dismissing the science of climatology.

Once again, this just isn't true. Economists do not dismiss climatology. When economists do speak up against efforts to control carbon emissions (and most do not), they do it from the perspective of conceding the scientific case and arguing that the economic costs of the climate shifts that climatologists are predicting are not high enough to justify the economic costs of some proposed means of controlling carbon emissions. In other words, they take the tradeoffs/marginal costs vs. benefits route, not the denialist route.

Economists have been heavily involved in the debate on trying to design systems for pricing carbon. (Unfortunately economists contributed significantly to the clumsy, unwieldy, and manipulable "cap and trade" system coming to the fore, instead of a simpler and more direct tax). They certainly haven't been denying things.

Economists have responsibility for a lot -- most especially the horrible Econ 101-type propaganda that permeates public discourse -- but not this.


Posted by: PGD | Link to this comment | 04- 7-09 8:30 AM
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Economists do not dismiss climatology.

Accurately stated: "Not all economists dismiss climatology."


Posted by: apostropher | Link to this comment | 04- 7-09 8:36 AM
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Accurately stated: "Not all economists dismiss climatology."

More accurately stated: "Very few economists dismiss climatology."



Posted by: Brock Landers | Link to this comment | 04- 7-09 8:41 AM
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When economists do speak up against efforts to control carbon emissions (and most do not), they do it from the perspective of conceding the scientific case and arguing that the economic costs of the climate shifts that climatologists are predicting are not high enough to justify the economic costs of some proposed means of controlling carbon emissions. In other words, they take the tradeoffs/marginal costs vs. benefits route, not the denialist route.

Right, the Lomborg approach (also 'not-an-economist', but also clearly doing 'economics'). These arguments usually depend on some slight of hand by which the costs of interfering with the free market can be calculated with reasonable certainty from first principles because economics is reliable like that, but the benefits of environmental remediation are totally speculative and have to be discounted on that basis.


Posted by: LizardBreath | Link to this comment | 04- 7-09 8:46 AM
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There was a study awhile back saying that economists consistenly overestimate the costs of environmental regulation, for example by not taking substitution into account the way they would when estimating the costs of something they favored. (For example, substituting rubber for a plastic when regulation drives up the cost of the plastic.)


Posted by: John Emerson | Link to this comment | 04- 7-09 8:53 AM
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Lomborg points out ways that environmental costs have been exaggerated, as well as ways that they are unknown. This usually plays into a pro-development political agenda that I disagree with, but he shouldn't be dismissed as a right-wing crank.

One case where environmental fears have been wildly overstated and where the underlying politics is pretty clear is the alarm about health effects of EM fields from power lines. Bob Park's great book Voodoo Science goes into detail.


Posted by: lw | Link to this comment | 04- 7-09 8:57 AM
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Despite our different results, James B. and I attack the climate change issue in a similar way. There is lots of science - say, economics or evolutionary biology - where I feel competent to directly address many of the issues involved. That's not true of climatology.

At my level of sophistication, I can note that temperatures have been trending higher. I can also know with some confidence that atmospheric C02 has increased from the start of the Industrial Age, and that C02 could be expected to have some impact on climate.

But by itself, that's not very useful, and beyond that, I don't feel competent to converse on the subject. In the end, I'm heavily reliant on appeals to authority: Climate scientists are pretty much unanimous on the broad outlines of anthropogenic global warming.

I find this unsatisfying. Why should I trust climate scientists any more than, say, economists?

I think James makes two salient points in his dismissal of climate science: Just because climate science is the best thing available doesn't mean that it's good enough; and scientists in any discipline tend to overestimate the usefulness of their tools.

Now ultimately, I think there are numerous factors that outweigh those considerations, but, like James's arguments, my evidence is indirect and almost ad hominem. I can address the credibility of the proponents of different views, but find the actual content of the climatologists' views opaque. It's frustrating.


Posted by: politicalfootball | Link to this comment | 04- 7-09 8:58 AM
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James: I really don't think there's a parity between global warming and economics, not even at the technical level you want to limit the argument to. At that level, I think that the blatant, in-your-face problems with bad modelling are worse in economics than in climatology. I'm not able to prove that, though.

In both cases you are trying to model the behavior of large complex imperfectly understood systems with very limited data. Surprises are not unexpected.


Posted by: James B. Shearer | Link to this comment | 04- 7-09 8:58 AM
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Dude on the internet thinks, ummm, uh, there might be "bugs in the computer codes"! Stop the presses! Global warming a hoax!

Why do you think the liklihood of significant bugs in the most complicated computer climate models is unimportant?


Posted by: James B. Shearer | Link to this comment | 04- 7-09 9:03 AM
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If anyone could name even a single major academic economist who "dismisses climatology", that would be helpful.

The claim that economists dismiss climatology shows a lack of understanding of the sociology of the field -- economists are deferential to the hard sciences, contemptuous of other social sciences. Climatology is more towards the hard science end of the spectrum.


Posted by: PGD | Link to this comment | 04- 7-09 9:03 AM
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721

You can get scientists in unrelated disciplines to be climate change skeptics, but that tactic has limited utility. Why believe a physicist on climate change when there's a discipline devoted to the study of climate?

Why believe a physicist on cold fusion when there is a disipline devoted to the study of cold fusion?

Of course physicists don't uniformly denounce climatology as they do cold fusion.


Posted by: James B. Shearer | Link to this comment | 04- 7-09 9:07 AM
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Why do you think the liklihood of significant bugs in the most complicated computer climate models is unimportant?

I have very little doubt that there are bugs in the codes. There are bugs in any sufficiently complicated computer code, as anyone who has ever used complicated computer codes knows. That's why you validate them against data where possible, and also build multiple independent codes that do similar things and check that they agree with each other. Once you do that, you can be pretty confident that whatever bugs are there are not affecting your conclusions.

"It's a complex system" isn't much of a criticism either. This is why people tend to take seriously the most robust, macroscopic results (the climate sensitivity is 1.5 - 4.5 degrees for doubled CO2 [note the big error range -- they're not claiming extraordinary precision]; polar warming is greater than equatorial warming). But no one takes seriously the tiny details (the temperature change over Shearer's hometown in ten years). In between there are all sorts of results that are trusted to varying degrees. If you want to know how much to trust them and how much not to, you could, you know, read the literature, where the experts explain these things.

729 says "scientists in any discipline tend to overestimate the usefulness of their tools", but in my experience scientists in any discipline are the strongest critics of their tools, and always bemoan the fact that their tools are so shitty.


Posted by: essear | Link to this comment | 04- 7-09 9:10 AM
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730: James, your point is correct in itself, but I don't think that climatologists have deliberately, opportunistically, and tendentiously used bad models to the way economists do. Friedman's "Introduction" to "Positive Economics" wasn't right in the first place, and it's been used far beyond what even Friedman would have accepted. And often the distortions are ideologically motivated.

Climatologists have also been accused of exactly this too, but to me it looks like the usual winger immunizations strategy -- "You're just as bad as I am, neener-neener!" A fair proportion of these accusations come either from ideologues or from industry hacks.

I find this unsatisfying. Why should I trust climate scientists any more than, say, economists?

Maybe the relative absence of reasons for suspicion in the one case compared to the wealth of reasons for suspicion in the other?

In the winger argument, a climatologist who worries about the degradation of the environment is a corrupt partisan in the same way that an oil company lobbyist being paid in the seven figures to block environmental legislation is.


Posted by: John Emerson | Link to this comment | 04- 7-09 9:12 AM
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723

Once again, this just isn't true. Economists do not dismiss climatology. ...

Lots of people concerned about climate change despise economists and it is human nature for economists to react to this.


Posted by: James B. Shearer | Link to this comment | 04- 7-09 9:12 AM
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In the end, I'm heavily reliant on appeals to authority: Climate scientists are pretty much unanimous on the broad outlines of anthropogenic global warming.

I find this unsatisfying. Why should I trust climate scientists any more than, say, economists?

Part of the difference is the unanimity. It's not perfect, of course, nothing is. But as you say, the broad outlines of AGW are close to unanimously accepted among climate scientists; dissenters tend either to be non-scientists, or scientists trained in other fields. What that means to me is that the odds are strong that either they're broadly right, or climatology is all fraudulent crap -- a field of study that's as intrinsically screwed up as astrology or homeopathy -- and it doesn't look like fraud from the outside. If what were going on were that questions about (the broad outlines of) AGW were just very, very hard to answer with the current tools, you'd get more dissent within the profession. (The argument that gets brought up against this is one of self-interest, in that alarmism is good for the careers of climate scientists, but that really doesn't work -- there's enough reward in science for successfully disputing a widely accepted theory that people would be going that way if it looked intellectually viable.)

With economics, on the other hand, on interesting policy questions you get all sorts of dissent within the academic profession, but a much more monolithic public face of the sorts of policy arguments that get sold as economically well-supported.


Posted by: LizardBreath | Link to this comment | 04- 7-09 9:13 AM
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major academic economist

This hardly encompasses the full set of economists though, does it?


Posted by: apostropher | Link to this comment | 04- 7-09 9:13 AM
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James, rape and murder are human nature too.


Posted by: John Emerson | Link to this comment | 04- 7-09 9:14 AM
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723: PGD, I find the distinction you are making here to be unhelpful. You contradict me thus:

Once again, this just isn't true. Economists do not dismiss climatology.

And then you go on to describe the method by which economists dismiss climatology:

the tradeoffs/marginal costs vs. benefits route, not the denialist route.

This is right. The Econ 101 view is not that climate science is wrong, it's that climate science is irrelevant. That is to say, the Econ 101 view dismisses climate science.

I'm not claiming that economists have been prominent among denialists. I am claiming that they have been prominent servants of denialism - or maybe the way to say it is that they are second- and third-order denialists in a hierarchy that looks like this:

1 - First-order denialists deny that climate change is happening.
2 - Second-order denialists deny that climate change is bad - and suggest that it may even be beneficial. Economic arguments start to be deployed here.
3 - Third-order denialists acknowledge that climate change exists and it's bad, but deny that there is a cost-effective way of addressing the issue.


Posted by: politicalfootball | Link to this comment | 04- 7-09 9:21 AM
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Because climate scientists highlight their confidence intervals and are explicit about uncertainty, and by and large, have made policy recommendations at the lower end of the range, not the high range. They behave like cautious people, not like risk-takers.


Posted by: Megan | Link to this comment | 04- 7-09 9:28 AM
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This hardly encompasses the full set of economists though, does it?

we're talking about economists qua economists, not any old random dude who claims to be an economist. So if no one or hardly anyone who is prominent in the profession dismisses climate science, then that matters. I'm sure there's a doctor somewhere who is a climate denialist, that doesn't mean medicine does.

I'm not claiming that economists have been prominent among denialists. I am claiming that they have been prominent servants of denialism

You're saying that at least some economists don't draw the same policy conclusions you do from the agreed upon set of discoveries emerging from climate science. That is very different than questioning the facts of the science, which is what we were talking about above. If you want to change the subject from the scientific accuracy of the findings of climate science to what conclusions we should draw from those findings, that's fine, but it's a different topic. One that economists do have a lot to say about.

I do agree with the economic perspective that the costs of carbon emissions control have to be weighed off against the benefits of carbon emissions control. (Actually, I think almost everyone agrees with this, as the mainstream debate is not about shutting down carbon emission completely). For measuring the benefits of carbon emissions control, I think we should rely heavily on climate science.


Posted by: PGD | Link to this comment | 04- 7-09 9:40 AM
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742: Sigh. Okay, does George Reisman count?


Posted by: apostropher | Link to this comment | 04- 7-09 9:48 AM
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No. Totally outside the econ mainstream.


Posted by: PGD | Link to this comment | 04- 7-09 9:53 AM
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That is very different than questioning the facts of the science, which is what we were talking about above.

Eh. I think if you look at the "I" part of "we," you'll see that I was talking about the role of economists in dismissing climatology - and you were responding specifically to me - quoting me, even.

Heck, in the post you quoted, not only was I clear about my own view, but I even referred to an expression of the more extreme view - the view you are rebutting - as "hasty" and "overbroad."

I think I was pretty clear.


Posted by: politicalfootball | Link to this comment | 04- 7-09 9:56 AM
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You keep drawing the definition smaller and smaller.


Posted by: apostropher | Link to this comment | 04- 7-09 9:57 AM
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I'm agreeing with PGD unless someone comes up with some evidence. I wouldn't have been surprised to have been right, but I was guessing.

I still think of the profession as anti-environmentalists on the whole, but maybe not that way.


Posted by: John Emerson | Link to this comment | 04- 7-09 10:00 AM
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Crooked Timber just linked to a very nice Julian Sanchez post on when arguments from authority (in the context of global warming) are fairly reliable.


Posted by: LizardBreath | Link to this comment | 04- 7-09 10:16 AM
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Economists do not dismiss climatology.
Accurately stated: "Not all economists dismiss climatology."
More accurately stated: "Very few economists dismiss climatology."

Most accurately stated: "Nobody has surveyed economists to find out!"

Or have they, said I to myself, post-joke? ... Why, yes! Yes, they have!

But that simply isn't true, and it's time for the press and public to recognize it. There is an emerging economic consensus about the cost of climate action, but most journalists have failed to notice it, so the public doesn't know it exists. That's a problem, since the opponents of climate action use the cost issue--and doomsday analyses based on skewed assumptions--to block cap-and-trade legislation. Gullible press reports treat these junk forecasts as if they are credible and give them equal weight alongside respected academic and governmental studies. I spent the fall at Harvard's Kennedy School of Government studying how this "he said, she said" reporting style muddies the waters of the climate debate, and I recently published a discussion paper about it. Since the paper came out, I've been hearing from economists--some of whom argue that they, too, deserve a share of the blame for this sorry state of affairs. Before we look at what reporters and economists are doing wrong, let's summarize the economic consensus.

So. There's that.

max
['Huh.']


Posted by: max | Link to this comment | 04- 7-09 12:39 PM
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Fuck. Forgot </a> tag. Sorry.

max
['Dreary fucking day.']


Posted by: max | Link to this comment | 04- 7-09 1:00 PM
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Max's link says that PGD is right. It also says that most people believe that that I was right. Perhaps economists should make an effort to get the word out, and to stop letting their most reprehensible spokesmen represent them.

A poll o Econ 101 teachers might be interesting too. Are they worse than the average?


Posted by: John Emerson | Link to this comment | 04- 7-09 1:01 PM
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"It's a complex system" isn't much of a criticism either. This is why people tend to take seriously the most robust, macroscopic results (the climate sensitivity is 1.5 - 4.5 degrees for doubled CO2 [note the big error range -- they're not claiming extraordinary precision]; polar warming is greater than equatorial warming). But no one takes seriously the tiny details (the temperature change over Shearer's hometown in ten years). In between there are all sorts of results that are trusted to varying degrees. If you want to know how much to trust them and how much not to, you could, you know, read the literature, where the experts explain these things.

The robust results come from simple models also. The tiny details come from the complex models. So the complex models aren't adding value.


Posted by: James B. Shearer | Link to this comment | 04- 7-09 1:29 PM
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I have very little doubt that there are bugs in the codes. There are bugs in any sufficiently complicated computer code, as anyone who has ever used complicated computer codes knows. That's why you validate them against data where possible, and also build multiple independent codes that do similar things and check that they agree with each other. Once you do that, you can be pretty confident that whatever bugs are there are not affecting your conclusions.

But the complex climate codes haven't been adequately validated in this way when compared to say weather forecasting codes.


Posted by: James B. Shearer | Link to this comment | 04- 7-09 1:33 PM
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737

... (The argument that gets brought up against this is one of self-interest, in that alarmism is good for the careers of climate scientists, but that really doesn't work -- there's enough reward in science for successfully disputing a widely accepted theory that people would be going that way if it looked intellectually viable.)

The key issue here is that it is hard to prove climate theories wrong for the same reasons that it is hard to prove them correct. So it is safer to go along with the consensus (which is also human nature).

How could you prove Greenspan's policies were leading to disaster before disaster ensued?


Posted by: James B. Shearer | Link to this comment | 04- 7-09 1:41 PM
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You couldn't prove it, but if you said they would ahead of time, you'd look smart when you turned out to be right. There are rewards for successful iconoclasts, and 'human nature' isn't uniform -- I'm sure some climate scientists are influenced by a desire to safely go along with the crowd, but others would be seizing an opportunity to look brilliant when an unorthodox position turned out to be right. The fact that there don't seem to be a lot of climate scientists (as opposed to people not working in the field) doing that suggests that there aren't unorthodox positions disagreeing with the broad outlines of AGW that look plausible enough to be worth making a high stakes bet of one's career on.


Posted by: LizardBreath | Link to this comment | 04- 7-09 1:53 PM
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748 -- Sanchez's post contains a fun analogy, but can we just nip the whole "one way hash" phrasing phenomenon in the bud? It's either different or redundant, depending on how you look at it -- "one way functions" are a different concept from "hash functions," and the public-key cryptography he's talking about uses one-way functions. And (I would guess) most encrypted messages that are flying around on the interwebs are encrypted by symmetric private-key systems that don't rely on them anyway.

Anyway, the analogy is fine, even if the wording is completely mixed up...


Posted by: arthegall | Link to this comment | 04- 7-09 2:27 PM
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You couldn't prove it, but if you said they would ahead of time, you'd look smart when you turned out to be right. There are rewards for successful iconoclasts, and 'human nature' isn't uniform -- I'm sure some climate scientists are influenced by a desire to safely go along with the crowd, but others would be seizing an opportunity to look brilliant when an unorthodox position turned out to be right. The fact that there don't seem to be a lot of climate scientists (as opposed to people not working in the field) doing that suggests that there aren't unorthodox positions disagreeing with the broad outlines of AGW that look plausible enough to be worth making a high stakes bet of one's career on.

It doesn't do your career any good to be proved right in one hundred years.

To give a concrete example, some time ago I knew someone trying to publish a paper purportedly showing that the numerical methods used by some popular oceanography codes to solve equations relating to ocean current flow were incorrect (in other words the equations were not being solved correctly). The paper was refereed by people using these methods so naturally they recommended it be rejected. He was unable to get it published anywhere and has left the field. I don't know whether he was right but if he was being right did him and his career no good at all. He would have been better off making the same mistake as everybody else.


Posted by: James B. Shearer | Link to this comment | 04- 7-09 2:31 PM
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That wording is stupid. I'm not totally sold on the analogy. But the idea is good. We should find a better name. Asymmetrical unfair?

Also, you know how people are like "hey, X, e-mail me" and it's like, dude, why are you using the blog comments section to do that? Arthegall, e-mail me.


Posted by: Sifu Tweety | Link to this comment | 04- 7-09 2:32 PM
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Shearer, either oceanography is a giant fraud, your friend's particular referees were all corrupt (unlikely if the field is not a giant fraud), or your friend was probably not right. Most scientists care about their the progrssion of knowledge in their fields, and welcome error corrections.


Posted by: Brock Landers | Link to this comment | 04- 7-09 2:38 PM
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These are climatologists, not economists after all.


Posted by: politicalfootball | Link to this comment | 04- 7-09 2:51 PM
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And why did he leave the field? Because one paper was rejected for publication??


Posted by: Brock Landers | Link to this comment | 04- 7-09 2:55 PM
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In general, the economists' (in the pejorative sense) view of climate change can be seen in the works kof Worstall, McArdle etc in their purest form - to agree that there is a problem of course in the abstract, how could you possibly lump me in with those awful deniers, but then to cavil and quail and pick all sorts of nits, exclusively with mainstream anti-denialist work like the Stern Report and act like Bjorn Lomborg is some sort of persecuted Galileo figure.


Posted by: dsquared | Link to this comment | 04- 7-09 3:07 PM
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257, 259: Chandler Burr's The Emperor of Scent details Luca Turin's struggle to publish an article challenging the prevailing theory of smell. Apparently Turin had evidence that human olfactory sensors detect molecular vibrations, rather than differentiating between different molecular shapes, which is the established understanding of how smell works.

Anyway, the story goes that the science journals all sent his article to be peer reviewed by the bigshots in the field of smell science, all of whom were proponents of the molecular shape theory and had some interest in not seeing it debunked. As a result, Turin's paper was repeatedly rejected.

I think Turin is no longer a working scientist -- he's a rich and famous perfume writer.


Posted by: jms | Link to this comment | 04- 7-09 3:08 PM
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I don't really trust the law and econ people. I knew someone who had a BA in econ, went to law school and then decided to go get a PhD in economics. She used too fume about how her property professor didn't actually understand what Coase's theorem said.


Posted by: Bostoniangirl | Link to this comment | 04- 7-09 3:16 PM
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Shearer, either oceanography is a giant fraud, your friend's particular referees were all corrupt (unlikely if the field is not a giant fraud), or your friend was probably not right. Most scientists care about their the progrssion of knowledge in their fields, and welcome error corrections.

Why corrupt instead of incompetent? And scientists are as reluctant as anybody else to acknowledge error.


Posted by: James B. Shearer | Link to this comment | 04- 7-09 3:32 PM
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And why did he leave the field? Because one paper was rejected for publication??

He was more an acquaintance than a friend so I can only speculate. He was more successful in a different field and perhaps was disillusioned with oceanography. And having a single paper rejected can push someone out of a field.


Posted by: James B. Shearer | Link to this comment | 04- 7-09 3:38 PM
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I have actually figured out who the anti-me would be. He would go to an Opus Dei Catholic HS, study econ and analytical philosophy in college, and go to law school. Scalia Plus.


Posted by: John Emerson | Link to this comment | 04- 7-09 3:40 PM
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The refereeing process sucks. If you get a moronic referee, you tell the editor your referee is a moron and you get another one. I'm a little suspicious of this "he got rejected by all the referees and left the field" story.


Posted by: essear | Link to this comment | 04- 7-09 3:40 PM
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Then, I work in one of those enlightened fields where no one gives a damn about journals except to have something to put on their CV, and a paper doesn't have to be published to have a big impact, so maybe my viewpoint is skewed.


Posted by: essear | Link to this comment | 04- 7-09 3:42 PM
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I had a paper rejected once during my paper-writing days by a referee who decided I was anti-Semitic because I used the phrase "pound of flesh".


Posted by: John Emerson | Link to this comment | 04- 7-09 3:46 PM
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In general, the economists' (in the pejorative sense) view of climate change can be seen in the works kof Worstall, McArdle etc in their purest form

Tim Worstall and especially McArdle are NOT ECONOMISTS. I mean, please. Is there some special rule where anyone stupid and snide who talks about economics is automatically credited with a Phd and a peer-reviewed publication or two?


Posted by: PGD | Link to this comment | 04- 7-09 3:47 PM
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771: McArdle has been hired by a magazine that's been intellectually well respected for well over a century to write about economics. If what she says doesn't have any import for economics as a field, then something's very screwy somewhere.


Posted by: LizardBreath | Link to this comment | 04- 7-09 3:51 PM
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but then to cavil and quail and pick all sorts of nits, exclusively with mainstream anti-denialist work like the Stern Report and act like Bjorn Lomborg is some sort of persecuted Galileo figure.

By contrast, the Stern report WAS written by actual real economists -- Nicolas Stern is at the top of the profession and pretty much his whole staff were qualified economists. So if some ignorant glibertarian dickhead with a blog nitpicks his report, that means that the discipline of economics is anti-environmentalist and gives aid and comfort to denialists? My head is spinning here.


Posted by: PGD | Link to this comment | 04- 7-09 3:51 PM
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772: Whatever flaws econ has, this tells you a lot about US media, and nothing about econ.

"then something's very screwy somewhere.2

Well, yes.


Posted by: David Weman | Link to this comment | 04- 7-09 3:53 PM
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772: I'd say something's very screwy somewhere.


Posted by: Sifu Tweety | Link to this comment | 04- 7-09 3:53 PM
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772: McArdle is not an economist. Nothing she says has any import for economics as a field. She doesn't even know much about the topic. There has been a failure of journalistic quality control, which is not a "screwy" event but unfortunately a commonplace one.


Posted by: PGD | Link to this comment | 04- 7-09 3:54 PM
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772: Before McArdle worked for the Atlantic, she used to work for some other publication. I can't think of the name of it, though.


Posted by: politicalfootball | Link to this comment | 04- 7-09 3:55 PM
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Back on topic, this was just plain mean.


Posted by: David Weman | Link to this comment | 04- 7-09 4:01 PM
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Look, as I noted (perhaps too parenthetically) above, the term "economist" has been appropriated, just as the term "Marxist" refers more closely to Nicolae Ceaucescu than it does to (say) Jon Elster. So I'm not really an "economist" (although I have two economics degrees and worked as a professional economist for five years), but Tim Worstall is, in the modern lexicon - it's a party affiliation, not an academic discipline any more.


Posted by: dsquared | Link to this comment | 04- 7-09 4:04 PM
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769

Then, I work in one of those enlightened fields where no one gives a damn about journals except to have something to put on their CV, and a paper doesn't have to be published to have a big impact, so maybe my viewpoint is skewed.

This occurred some time ago so I don't think he could just put it on his webpage. And computer time was much more expensive.


Posted by: James B. Shearer | Link to this comment | 04- 7-09 4:06 PM
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772

McArdle has been hired by a magazine that's been intellectually well respected for well over a century to write about economics. If what she says doesn't have any import for economics as a field, then something's very screwy somewhere.

Are we talking about her blog or news articles with her byline? Bloggers and journalists often write about things for they don't have professional credentials.


Posted by: James B. Shearer | Link to this comment | 04- 7-09 4:12 PM
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Are we talking about her blog or news articles with her byline?

Pretty sure we're talking about her gig at The Economist.


Posted by: apostropher | Link to this comment | 04- 7-09 4:18 PM
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Lord what fools these mortals be!


Posted by: OPINIONATED PUCK | Link to this comment | 04- 7-09 4:26 PM
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Lord what fools these worsmortals be!


Posted by: OPINIONATED PUCK FIX'D | Link to this comment | 04- 7-09 4:29 PM
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So serendippy I have to write:

DeLong attacks shape of earth differ NYT reporter, commenters have 2nd opionion.

Patricia's reply was spot on, if the economics profession is so broken that it give Nobel prizes to loons, then its our fault, not the reporters, that loony stuff gets reported by the NYtimes. Biology doesn't give Nobel prizes to creationists-so creationists don't get this kind of press.

Posted by: CalDem | April 05, 2009 at 08:52 PM

CalDem is right. Greg Mankiw cannot both be a highly respected Harvard economist and a Republican hack. Gary Becker cannot be both a Nobel laureate and certifiably insane. The fact that there are no standards or, if there are standards, no enforcement is a big problem in trying to convey any sense that economics is a science.

Posted by: elliottg | April 05, 2009 at 10:10 PM

A poli sci professor who blogs once pointed out that a person who wanted a physics professor to lie for him would be best served by avoiding the best physics departments, but if that person wanted an economist to lie for him, then he could find a nice selection at the highest ranking econ departments. No need to go to junk science/propaganda mills.

This also continues two trends which became not honestly deniable during the Bush administration:
1) There is a vast selection of right-wingers who are happy to publicly lie through their teeth; they either feel that their reputation is not at stake, or that it doesn't matter (or, in econ, that being a right-wing liar will enhance their status). Note that the two prominent places where this happens are B-schools and economics.

2) When somebody repeatedly does dishonest things in public, they are dishonest. They might later repent, but they *are* being dishonest. The current case in pointis, of course, Larry Summers, professor of right-wing serve-the-elites econohackery at a junk science mill known as the Harvard Econ Dept.

Posted by: Barry | April 06, 2009 at 06:48 AM


Posted by: David Weman | Link to this comment | 04- 7-09 4:42 PM
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http://delong.typepad.com/sdj/2009/04/an-open-letter-to-patricia-cohen-of-the-new-york-times.html#comments


Posted by: David Weman | Link to this comment | 04- 7-09 4:42 PM
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It strikes me I don't think I quite agree w commenters. More grist for the mill, anyway.


Posted by: David Weman | Link to this comment | 04- 7-09 4:43 PM
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I'm in agreement with Dsquared about econ as a political tendency and way of life, and that the profession itself is implicated in that way of life and actively promotes it when not obliviously taking it for granted.

But what I said was specifically about the credentialed econ professionals and their response to global warming, and I have to grant PGD that point.

McMegan is a perfect Econ 110 thinker and is exactly what I'm talking about. There are several million of them out there.

Between bland complacency and quiet meanness (James Buchanan), a lot of the pros are not terribly far from the Econ 110 fundamentalists. Just smarter and more careful. (Buchanan actually seems to have a pretty reasonable theory of meta-economics, he's more openly political and less scientistic than a lot of them. Alas, his politics sucks.) Besides Buchanan Cowen and the Freakonomics guy strike me as casually nasty without knowing it.


Posted by: John Emerson | Link to this comment | 04- 7-09 4:44 PM
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The DeLong comments went very well without my presence. I have an army of minions, I guess.


Posted by: John Emerson | Link to this comment | 04- 7-09 4:49 PM
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I just posted this there:

One thing relevant to the specific topic of journalistic standards: Journalists now go to their own professional school and are taught professional standards. Many of those believe that their neutral, "shape of the earth differs" reporting on the news pages is state-of-the-art professionalism and an austere moral obligation. For them DeLong is a guy who just doesn't understand, and expert horning into another expert's field, as though he were kibitzing brain surgery. Patricia Cohen is not the only journalist to have expressed this opinion in the last couple of years; this kind of thing just seems so stupid to normal people that many don't realize that that was what's being said, and they don't remember it. ABC's Mark Halperin said something like that a year or so ago. Professionalization can do more harm than good.


Posted by: John Emerson | Link to this comment | 04- 7-09 5:03 PM
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Overall, one wishes the The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel had never been instituted.


Posted by: David Weman | Link to this comment | 04- 7-09 5:09 PM
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791: Didn't Grampa Hilzoy say something like that?

It's all I can do to restrain myself from posting on Obsidian Wings as Uncle Jan. Hilzoy knows all about crazed ultra-leftist relics.


Posted by: John Emerson | Link to this comment | 04- 7-09 5:46 PM
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If you want to troll Hilzoy (in a rather cruel manner) you could bring up her beloved grandpa's enthusiasm for the forced sterilization program.

Maciej Zaremba claims no one in the SAP believed in the official eugenical rationale except the Myrdals. The real reason was to save money and stop social problems by preventing families that could turn dysfunctional.


Posted by: David Weman | Link to this comment | 04- 7-09 6:00 PM
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I think of Hilzoy as on the side of the angels. Why anyone would want to troll her, especially in such a personal way?


Posted by: Megan | Link to this comment | 04- 7-09 6:04 PM
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And yes, he did. Interestingly: Friedrich Hayek stated that if he had been asked about the establishment of the Prize before receiving it he would "have decidedly advised against it.


Posted by: David Weman | Link to this comment | 04- 7-09 6:05 PM
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One doesn't generally endorse actions by calling them cruel.


Posted by: David Weman | Link to this comment | 04- 7-09 6:06 PM
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arthegall, I'd be really interested to know more about this physicists encroaching on biology in pernicious ways business.

The only person I know who started out in physics and now does bio stuff, does what he used to call the physics of biology. He was uncomfortable with the term biophysicist, because he wasn't working on action-potential type stuff.

He started out doing particle physics or soemthing, but midway through graduate school, hsi draft number came up. He successfully petitioned for conscientious objector status and worked in a hospital for a couple of years where his interests shifted.

He's maybe the least arrogant guy I know, though, and doesn't give a shit abotu getting into whatever that National Academy of Sciecnes is. (So, he's probably not typical.)


Posted by: Bostoniangirl | Link to this comment | 04- 7-09 6:07 PM
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as I noted (perhaps too parenthetically) above, the term "economist" has been appropriated, just as the term "Marxist" refers more closely to Nicolae Ceaucescu than it does to (say) Jon Elster. So I'm not really an "economist" (although I have two economics degrees and worked as a professional economist for five years), but Tim Worstall is, in the modern lexicon - it's a party affiliation, not an academic discipline any more.

This claim is just silly. Pick your complaint here. If economists are the twits yammering on about "socialism!" on right-wing blogs and talk shows, then they have little real establishment influence, except as just another journalistic hack like the Jonah Goldbergs of the world. If economists run the world through the Federal Reserve and so forth, then they are a respected academic discipline with lots of entrance requirements and standards. Ben Bernanke isn't a pretend "economist" whining about high tax rates and calling global warming a hoax on his right wing blog. Neither is Larry Summers or any of the members of the CEA like Mankiw. Neither is Nick Stern, former chief economist of the World Bank and more recently author of the Stern Report.

Econ is a recognizable social science discipline that became way too arrogant about its pretensions to "science" and has done social harm thereby. The kind of pop econ that D-squared points too is just the latest version of the half-baked, self-serving prejudices of the bourgeoise, that Dickens was already spoofing 150 years ago. It's true that over the years economics the discipline has had a kind of devil's bargain and has frequently been an enabler of these prejudices, but the two are still quite distinguishable.


Posted by: PGD | Link to this comment | 04- 7-09 6:10 PM
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Moi? Why would I troll Hilzoy?

I've never done it. That's just how I'd go about it. Jan Myrdal is a real crazy and has been since the 60s.

Living in NYC he got involved in a streetfighting gang and his counselor said something like "Boys of your class don't do that sort of thing." He answered "In Sweden we do."

What he wrote. True? Who knows?


Posted by: John Emerson | Link to this comment | 04- 7-09 6:14 PM
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Pop economics conforms considerably to much older American self-made man / competition prejudices.


Posted by: John Emerson | Link to this comment | 04- 7-09 6:17 PM
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Well, fuck uncle Jan. I hate any kind of leninist w a burning passion. Myrdal's a unrepentant maoist. Deng's apostasy didn't stop him from defending the Tiananmen massacre.

He's supposed to be a good novelist, though.


Posted by: David Weman | Link to this comment | 04- 7-09 6:24 PM
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One of the Myrdal grandchildren, Hilzoys's cousin Stefan Fölster is the chief economist (and public advocate) for the Confederation of Swedish Enterprise.


Posted by: David Weman | Link to this comment | 04- 7-09 6:35 PM
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800: Right. One of the problems with identifying economics the discipline with the whole stew of prejudices in "pop economics" is that it prevents you from getting the full weirdness of the neoclassical market model, which has some interesting insights but is really pretty bizarre in a lot of ways. A big complaint of the Austrians and Hayek about neoclassical microeconomics was that it was fully compatible with socialism.


Posted by: PGD | Link to this comment | 04- 7-09 6:37 PM
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Of course, plenty of legit econ conforms to those same prejudices.


Posted by: John Emerson | Link to this comment | 04- 7-09 6:42 PM
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IMO, by far the worst effect of "pop" economics on the academy has been in the American law schools, where half-baked economic reasoning is now the dominant mode of explaining most of private law.

And, given that the products of law schools often set policy, that's a pretty direct nexus between bad economics and bad public policy. (As BG and others have pointed out). It's hard to overstate how much egregious misuse of e.g., the Coase theorem goes on in law schools.


Posted by: Robert Halford | Link to this comment | 04- 7-09 6:51 PM
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804: Legit econ can conform to almost anything you want it to conform to, because the core of the model is so tautological and empty. It's something of an exercise in manipulating your assumptions. It's nice to try to empirically test your models -- you do learn stuff that way -- but the space of possible theories is so massively underdetermined by the evidence that empirical evidence doesn't constrain you very much. In the end people's conclusions are pretty determined by their ideological prejudices, or failing that by the prejudices they get attached to for careerist / personal reasons (that's *my* theory!).


Posted by: PGD | Link to this comment | 04- 7-09 6:52 PM
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I would say, though, that fully understanding what a wide range of theories and conclusions about social organization are compatible with a rational actor model can be a useful exercise. It really makes you get why culture is so important and so potentially arbitrary.


Posted by: PGD | Link to this comment | 04- 7-09 6:55 PM
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The Economists.


Posted by: JP Stormcrow | Link to this comment | 04- 7-09 6:59 PM
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I'm ready to destroy the law-and-economics movement. Where do I start?

I'm with PGD on the question of the moment. He deserves better than to be lumped in with Worstall and McMegan.

I'm intrigued by this statement by dsquared: What happened in the 1980-2008 period was that one political faction suddenly massively out-evolved the rest, with consequences familiar to anyone who's studied a rabbits-foxes model. Who counts as a member of the evolving faction? Do game theorists? Or is it just rational expectations macroeconomics/finance?


Posted by: Walt Someguy | Link to this comment | 04- 7-09 8:34 PM
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Too soon, Stormcrow.


Posted by: Bave Dee | Link to this comment | 04- 7-09 8:40 PM
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810-> 407, 408


Posted by: JP Stormcrow | Link to this comment | 04- 7-09 9:20 PM
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I RULE THIS THREAD WITH AN IRON FIST!


Posted by: THE AMAZING CRISWELL | Link to this comment | 04- 7-09 9:23 PM
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811: If ogged (pbuh) were here, he'd thank you for making that explicit.


Posted by: Bave Dee | Link to this comment | 04- 7-09 9:44 PM
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It just seemed like such a long time ago. And I also have a dim, fading memory of a similar discussion in a nearly identical world. Strange.


Posted by: JP Stormcrow | Link to this comment | 04- 7-09 9:51 PM
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If the missing comments were included, this thread would 1200-1300 comments long.


Posted by: David Weman | Link to this comment | 04- 8-09 4:23 AM
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I just want to note that 406 and 410 are about my favorite comments here ever. In particular, I've been running 410 through the back of my head for a couple days now.


Posted by: JRoth | Link to this comment | 04- 8-09 7:26 AM
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physicists encroaching on biology

Huh, maybe arthegall and I know each other. The heads of several large genomics centers are ex-exact science people, one an ex-physicist, one a mathematician who went to an economics department. They and other heads of large centers are tremendously influential, with all the screwy intellectual politics that attaches to huge, expensive, slow-moving scientific projects, since decision validation is usually years separated from the actual decision.

I don't think it's any worse than particle or fusion physics or space science, and myself believe that the salient problems are project size and murkiness of proximal outcome. I don't think there's a solution-- people are imperfect, and big science opens doors forever closed to small science. I do not think that center directors or other scientific administrator-politicians have much long-term effect on humanity-- much of the social change comes from the concatenation of basic technology improvements to make results orders of magnitude cheaper than previously when produced in bulk. Directors can totally derail a line of inquiry for 5 years, or insist on a pointless one. So what, unless it's your project, in which case arrrrgh.

Once a technology is cheap enough, someone will develop it, not necessarily in the US, UK, or Ch, where most pharmaceuticals are now developed, regardless of who is in charge there. Oh, for whatever it's worth, I'm an ex-physicist now in biology, not at all a bigshot, obvs.


Posted by: lw | Link to this comment | 04- 8-09 8:02 AM
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She used too fume about how her property professor didn't actually understand what Coase's theorem said.

I don't know--this was definitely true of my property professor.


Posted by: Brock Landers | Link to this comment | 04- 8-09 8:16 AM
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"The Martians of Science" by Estvan Hargittai (CT's lovely Eszter's father) has a lot of interesting stuff about Big Science management. Nobel and near-Nobel scientists were managed, in some cases, by generic high military officer. It worked better than you'd expect, partly because that's the way things were done under the Austro-Hungarian Empire too. Of the five, only Szilard got antsy at times.

Lots of interesting stuff about lots of things. Everyone should read it.


Posted by: John Emerson | Link to this comment | 04- 8-09 8:41 AM
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I do ask that when we feed all of the economists to the hog farm that we leave behind the books and papers. There are a lot of interesting ideas there that are worthy of study. Strong minds like myself, PGD, and maybe dsquared can handle them without turning into libertarians. (The rest of you, on the other hand, should stay away. Ten minutes with intermediate microeconomics, and you'll probably be ready to go work for the Cato Institute.)


Posted by: Walt Someguy | Link to this comment | 04- 8-09 7:54 PM
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I do ask that when we feed all of the economists to the hog farm that we leave behind the books and papers...

Pound game theory, can Granger causality, six bagels--bring home for Walt Someguy...


Posted by: arthegall | Link to this comment | 04-14-09 3:10 PM
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