From the New York Times:
“I cannot find a single convincing argument that tells me that astrologers won’t do better than economists,” Mr. [Nassim Nicholas] Taleb said last week by telephone from Lebanon, where he was mountain hiking.
“The problem is the arrogance of these economists,” he said. “They’re making people rely on theories that have not worked, do not work, and are really dangerous.”
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I really, really, really want to like Taleb. He’s a good writer, has a humanist sensibility, loves Cavafy. The description of traders and their “knowledge” of the markets is spot on. But the arrogance is hard to take. As E. Falkenstein wrote:
There is something compelling about sureness, and Taleb’s criticisms are funny because they are most appropriate in describing himself.
Taleb’s style is to criticize experts of all sorts severely, while implying that both he and his reader or listener are exempt from their many biases. He does this with a thinly disguised false modesty, and tolerance for faulty grammar and even spelling as if this highlights that he only cares about truth, not style. Lambasting ‘experts’ in this way is a popular tactic. Reading someone deflating puffed-up egos, criticizing the insular world of academics, and suggesting the experts have a huge blind spot on something important, can be fun reading. But it has to be making points that are true if new, or important if true, and here he fails to deliver.
http://www.efalken.com/papers/Taleb2.html
He’s arrogant, that’s for sure. But I agree with him about economists vs: astrologers. The problem with economists is that they aren’t just randomly wrong, they’re systematically wrong. What I mean is that they can appear to be right for a long time and then they hang on with their rosy predictions long after the market has tanked. And my, do they jibber. You’d think with all their fancy talk that they actually know something. But astrologers are know for jibbering too. Look at the fancy vocabulary they’ve built up over the years.
But the argument from the first comment is pertinent. Taleb bloviates about the obvious and serves more as a Don Rickles than a Delphic Oracle. Still, it’s good that someone can get paid good money to say the emperor is buck naked. Then again, so is Taleb.
I suspect there are a few Wall Street types who could comment in some detail about the accuracy of astrologers v. economists. A friend who would regularly do profiles of (and therefore interview) top people in the money business) said that Wall Street runs on sex and psychics. Quite a few apparently use seers of various sorts.
I think Taleb’s sense of humor comes through on audio/video a bit more.
No question though, he likes to upset the apple cart. This quote might even make more noise than light (is that the saying?) with economists.
Still … there is something interesting here. All kinds of things unsaid. We know, for instance, that the FED can’t know the economy so well that they can name next year’s rate: 4.232% to fine grained detail. We accept that they will tweak and change, with successive approximation, until they get something that seems to work.
Will they at the same time claim Taleb is wrong and they have a Science?
Read all Talebs books and then read them again. He isnt that arrogant. The Black Swan was unedited on purpose.
To paraphrase Churchill:
This man is immodest, and he has few reasons not to be so.
Beware Falkenstein he has been webstalking nassim for almost 15 years. He is a 10th rank economist and currently unemployed trader and very bitter for some reason because nassim attacked valueatrisk. he writes nonsense about him on the web all the time.
I say, ‘Why not astrologers?’
It was good enough for Nancy Reagan, we ran the whole freaking country on astrology! And look what great and wondrous things RR accomplished!
From the NYT article:
“This year, Wall Street’s crystal balls have performed even worse than in the past. As earnings season for the second quarter winds down, 67 percent of companies reported earnings higher than what analysts had predicted, and 22 percent reported earnings that were worse. Only 10 percent of companies matched analysts’ expectations.”
I think that would actually be Wall Street at its most accurate. The regulatory standards are a lot laxer for quarterly reports than the big annual reports. Companies take full advantage of this, building up suspiciously good track records of beating forecasts. It’s a given we’ll be presented with more accurate (and less upbeat) numbers when we get the annual earnings.
Controversy sells: it is clear that the _tenor_ of Taleb’s commentary is schtik. I don’t respect him for it, but in essence he has been well-advised because this is exactly what the publishing industry wants its ‘soft shell nonfiction’ to read like. Dweebs eat it up, pro or con, and buy. That said, Taleb does have some content spackled in with the Turkish delight.
—But not in this remark. There are many and complex things I could say about astrology, but it’s complete lack of consistent accuracy has been demonstrated countless times. Economists are often wrong, and their system is faulty even if some of their tools are genuinely useful. But they will come out ahead of astrologers in any performance face off: The comment is ditzy ‘look at me’ stuff. Taleb has his day in the sun, and it has made his hat size swell markedly. When he gets himself back under control, he may well have further useful things to say.
Talebs not far off.
Speaking of Ed Yardeni (quoted in the article)– he lobbed forth a miserable forecast last November – i.e. after the credit crunch was well under way – as he had the s&p earning $111 during 2008 ("high single digit" growth).
Fast-forward to today, the WSJ points out that S&P profits fell 17.9% yoy for a run-rate of about $80-85.
Keep adjusting those predictions, Ed.
Does this bonehead ever have anything substantive to say? All he ever does is talk about how stupid everyone else is. He is oh-so-much-smarter, and yet seems to have so little to offer beyond scathing critique.
What an inane comment.
There are smart economists who regularly get it right (think Krugan, Shiller, CR, Roubini (as much as I abhor this last man because of his colossal ego) and dumb or partisan ones who get it wrong.
But to say all economists are the equivalent of dice-rollers because sometimes some get things wrong or sometimes theories fail to capture the whole picture…
Hello???
This post is not worthy of this otherwise superb blog.
Speak for yourself, Audrey.
Your commenting is evidence enough of the though-provocation caused by this post. That’s orders of magnitude more than you will get reading your Econ textbook.
Btw, shiller is often right b/c shiller recognizes the behavioral element of economics. Classical economists dismiss that outright as it doesn’t fit into the models that taleb so disdainfully refers to.
Read all Talebs books and then read them again. He isnt that arrogant.
I agree. Even black swan wasn’t that bad after the first 3 chapters or so. For whatever reason I started it on ch 4 or 5 then went back to the earlier chapters. He was such a pompous ass in those chapters that I can see how people would be turned off by the rest of the book – which I found facinating.