Comments on: Mistaking Beauty for Truth

By: Dismal science | Cosmic Variance | Discover Magazine

Dismal science | Cosmic Variance | Discover Magazine — Wed, 07 Oct 2009 18:06:33 +0000

[...] Sean highlighted, Paul Krugman recently wrote a piece on the state of the economic profession. Krugman was brutal; [...]

By: perspicacious

perspicacious — Sun, 27 Sep 2009 15:55:48 +0000

Haelfix
just wanted to point out -there is considerable evidence to prove that efficient market theory especially the strong version of it is a load of bull.
For starters
-Read the lecture by Warren Buffett titled ‘ The Superinvestors of Graham and Doddsville’. Its about the group of investors who are his friends also who consistently beat the market not over years but decades
-Secondly read Drermans paper on how low PE stocks constantly beat the market
and finally a personal word of advice – if you want to get rich, dump EMT real quick
the 2 ways to get rich are read Krugman for Macro and follow Klarman for Value Investing
Cheers

By: Sean and Paul and the Beauty of Theories — BCBlog

Sean and Paul and the Beauty of Theories — BCBlog — Tue, 22 Sep 2009 21:40:38 +0000

[...] then some commentary from Sean Carrol, writing on my favorite physics blog, Cosmic Variance: Without knowing much of [...]

By: What’s Wrong with Macroeconomics? « JCC.COM

What’s Wrong with Macroeconomics? « JCC.COM — Wed, 16 Sep 2009 09:57:41 +0000

[...] Cosmic Variance: Mistaking Beauty for Truth [...]

By: Ramanan

Ramanan — Sun, 13 Sep 2009 17:23:29 +0000

Austrian Economics is religion not Economics.

By: Brian

Brian — Fri, 11 Sep 2009 16:38:04 +0000

Some random thoughts:

Economics has to get rid of, once and for all, the notion that risk as a concept can be fully accounted for by variability. They’re trying to take the easy way out on that one.

I suspect that Econonomics fell in love with the idea of the Invisible Hand, which posits that people behave rationally, besides the more obvious and traditionally emphasized angle. While often true it is not always so.

One thing I think economists rely upon is that the individual players in the markets are themselves fungible. There are no elephants. This is demonstrably not true–regulators and central banks have great powers, as do some corporations and investment groups.

By: chris

chris — Fri, 11 Sep 2009 07:34:44 +0000

I think Krugman is spot on. Physicists tend to forget that it is quite impossible to consistently reduce human behavior to a few parameters.

By: yop

yop — Wed, 09 Sep 2009 16:39:15 +0000

“We should have a recession. People who spend their lives pounding nails in Nevada need something else to do.”

….context would be nice. its hard to imagine a context that this is a remotely gracious comment.

…not surprising ive heard talk in pubs where the words “finance” and “lynching” have been in same sentence.

dunken chat i know, but many a true word spoken in jest and all that…..

By: Jim

Jim — Wed, 09 Sep 2009 07:04:55 +0000

Full disclosure: I’m not an economist either. But I’d like to submit a variation to your counter-hypothesis. It wasn’t complacency, exactly, so much as indifference, or to be less charitable, arrogance. One of the political winds Krugman alluded to began with the Reagan administration. When they took office they were facing some very tough decisions about how to deal with an economy stuck in stagflation. Instead of taking a step back and retrenching, they bifurcated the economy with supply side economics. So instead of dealing with the economy as a whole, they focused on policies that would help the investment class, assuming the rest of the economy would come into line eventually if rich people were investing. What this meant was that all retrenching would be done by people whose income was primarily through their paychecks. Investors would move forward. Clinton had an opportunity to make some changes, but he went with Rubin over Reich and tended to favor supply side policies. The result was a top-heavy economy with more and more money flowing into increasingly unstable and mysterious instruments. But at least we didn’t discourage financial creativity. By the time the economy crashed we’d had 30 years of commitment to a mirage, upon which entire careers had been built. As well, an entire generation had grown up and incorporated this outlook into their political identification. Consequently, you can’t call prevailing economic ideas into question without threatening the security of those who hold them. All the people who count were of a mind. In order to be a person who counts, you had to subscribe to the mirage, too, otherwise you were ignored. In other words, if you commented on the emperor’s bare backside, you were making yourself irrelevant. Despite the fiasco of the last two years, it still appears that those making policy are committed to sustaining the status quo, with bandaides.

By: Jingjok

Jingjok — Wed, 09 Sep 2009 06:53:17 +0000

David Park #49 says:

In 1920-21 there was a severe crash. Industrial production fell by over 20%, Unemployment was quite high. Farm prices crashed. What to do about it? Warren Harding, as a deliberate matter of informed policy and not as an oversight or through “meanness” did nothing. It was all over in a year. You never hear of the Great Depression of 1920-21. Everybody has forgotten about it.

Not quite everyone has forgotten about it. My grandfather was a farmer during that time, and my father was growing up, later to become an accountant because farming was such hard work for such small returns. The truth is farm prices remained depressed until about 1927, and even then remained low. They returned to pre-1920 levels in 1929, just in time to be devastated by the next collapse. In fact, this was brought up in my Economics 101 class in 1960, when the professor started to introduce Keynes. Government intervention after World War II did a lot to make medium-sized farms (300 acres or so) prosperous until they were absorbed by huge agribusinesses in the 1980’s and 90’s. The Department of Agriculture’s County Agents did tremendous work in increasing productivity and improved marketing practices.

When I began reading about the Efficient Markets Hypothesis I was astonished that people couldn’t see it was insane.