The application of psychology to finance and the home of an investing skeptic
welcome back. and an excellent article to start with. thanks for pointing out the benefits of a wide variety of opinions rather than the single-mindedness of the "select few" at the Federal Reserve
The difference between a construction worker and an interior designer lies in the fact that whereas the former is engaged in the minutiae of 'how to frame', the latter sees the whole and serves as the interface with the rest of the world. The construction worker always considers the designer to be somewhat incompetent. The world pays the designer a lot more.Athreya is like the construction worker. His research is very focused on minutiae and presumably he is in a manner of speaking a competent 'framer' (get it - 'frame' it so you can test it). He cannot see that unless it is intelligible to the rest of the world he is himself of limited utility. Finally, we should be suspicious of the admonition to leave things to experts - where do we draw the line?
Thank you for this article. As a non PHD non-economist working as a macro strategist I may put this on a plaque.Also welcome back you have been missed.
You are precisely the kind of uneducated moron he is complaining about. Go back to wherever you were hiding and leave thinking to people better at it.
Good observations...implicit in what you said, but worthy of articulating I think, is the reality that this is a self-perpetuating phenomenon: bad theory is institutionalized and then bad institutions create a self-reinforcing "community" of economists out there using the same broken tools. Biggest challenge we face at this point that I have seen no good solution to yet is though: now that we have debunked much of economic theory if not all of modern finance theory, how should we figure out what to do next as investors?Curious to read more of your stuff.
Thanks for the article...the moron is Athreya, of course, and the "who watches the watchers then..." of the Latins comes to mind. But what makes him a total moron, is that there is, out there, a full school of economists who predicted what would have happened, with good scientific and math basis....and wasn't listened because they didn't belong to the orthodoxy. Steve Keen, at Western Sidney University is an example:http://www.debtdeflation.com/blogs/His work is testament that there are some good scientists out there...if you can filter them out morons like Athreya or idiots like the previous anonimous poster.Cheers
It was interesting to see how quickly Arthreya's paper disappeared after it was first posted.I was gobsmacked to see him talk about Fallacy of composition and economic feedback, when the favourite model for analysing monetary policy is a DSGE (Barbie, this is really hard maths)that is not guaranteed to be stock-flow consistent in M0! Scary stuff.
Great post. In grad school economics (not PhD, so I guess I'm not really entitled to an opinion), we started off the semester with a class called "why didn't anyone see the credit crisis coming." I politely pointed out that Peter Schiff, Nouriel Roubini and Marc Faber ("who on earth is that?" )had indeed seen it, but this was dismissed as doubtful and instead we had to read and discuss in detail what Paul Krugman had to say about the problem of dogma in economics, which wasn't very interesting. Six months later I decided I had wasted enough time by listening to lectures by arrogant and mostly irrelevant academics on mostly useless and unrealistic (but mathematically advanced) models, and dropped out and instead started working as an analyst for an investment company. I never got to the DSGE models in much detail unfortunately, so I guess I'm doomed to failure. Oh well.Thankfully, there are voices like Mr Montier out there. Looking forward to the enxt post.T
Ahhh, the anonymous coward troll post.James, do yourself a big favor and ban these idiots before they become a drain on your time and psyche . . .
(reek != wreak)
Glad to see you back! "Trust us, we're experts" is one of my very favorite arguments. It's pretty much only trotted out when people are lying to me, or at the very least, don't understand what they are saying well enough to explain it rationally.But then again, I got disenchanted with economics and quit short of a PhD, so I suppose I can't have an opinion.
Has anyone read "Progress and Poverty" or "The Science of Political Economy" by Henry George?If you have then you know that good reasoning and not PHD status is what makes a good economist.
Sense is short in supply and is currently under threat of being swamped by limitless supply of gibberish. Good to have you back.
More people should use technical analysis in my opinion as it's a leading indicator and tells us where the economy is headed.In early 2007 I warned of an impending stockmarket crash. The equity global uptrend since March 2009 was a bear market rally contained within a much larger downtrend that started in 2000.The proprietary indicators I use in my technical analysis can identify trend changes before they occur.Please see my blog for more info.
So great to read your thoughts. This topic was also of interest to the not as infamous Falkenstein:http://falkenblog.blogspot.com/2010/07/in-defense-of-elitism.htmlHere's to hoping more people index and avoid equities so I can buy cheap and create alpha!
Any chance we can get a "subscribe" button for this blog? I haven't found one here, and would like to earmark it. Thanks for your work!
To RandomFundamentalist:Here's the linkhttp://behaviouralinvesting.blogspot.com/feeds/posts/default
I have always considered economists to be like narrators. Some are good like Jeremy Grantham (the equivalent of Morgan Freeman in The Shawshank Redemption), while others are not so good (too many to list). Narrators, like economists are never any good at telling you what will happen, only good at explaining what already passed. However, I believe having a solid understanding of economics to be extremely beneficial, but mostly to understand behavioral finance (plug). Warren Buffett, Seth Klarman and others simply ignore economic predictions altogether. I'm certain we would all be better off if we did the same.By the way, glad to have you back......
"Ahhh, the anonymous coward troll post."You are so very clever and smart and good-looking. It is a pity you know so little.
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