Steve Waldman at Interfluidity today has an important post on what he calls “rational astrologies” or when it makes sense to hew to widely accepted belief systems, even when you know following them won’t necessarily produce the best outcomes. You really must read his post in full; I think the first part is terrific but have some quibbles when he tries extending his observation.
Read more...John Harvey is Professor of Economics at Texas Christian University. He blogs at Forbes and is the author of the book ‘Currencies, Capital Flows and Crises: A Post-Keynesian Analysis of Exchange Rate Determination’
Interview conducted by Philip Pilkington
Philip Pilkington: Your book seeks to outline an alternative theory of what determines exchange rates in our world today.
Read more...By Philip Pilkington, a writer and journalist based in Dublin, Ireland. You can follow him on Twitter at @pilkingtonphil
The influence that mathematics has had on neoclassical economics is obviously quite profound. However, when looked at in detail it appears that a certain type of modern mathematics was in fact highly suited to the direction many in the economics profession took after the work of Leon Walras – the Frenchman who founded modern neoclassical economics – appeared on the scene. So, it should not be thought that it was simply the formal tools of mathematics that transformed neoclassical economics into the obscurantist doctrine it is today. Instead it should be understood that its obscurantist skeleton was ready and waiting for its mathematical flesh.
Read more...By Sell on News, a global macro analyst. Cross posted from MacroBusiness
A question that has been asked, but not nearly often enough, is why did the complex risk defrayal methods fail so completely during the global financial crisis?
Read more...By Cathy O’Neil, a data scientist who lives in New York City and writes at mathbabe.org
Without naming names, I’d like to characterize problematic pseudo-mathematical behavior that I witness often enough that I’m consistently riled up.
Read more...Nothing like putting your foot in mouth in public and chewing.
Read more...By Richard Alford, a former New York Fed economist. Since then, he has worked in the financial industry as a trading floor economist and strategist on both the sell side and the buy side.
In theory, there is no difference between theory and practice. In practice, there is. – Yogi Berra
Economic policymakers, pundits and academics continue to forecast the future course of the economy and predict the effects of possible policy initiatives with an air of scientific certainty. The high degree of confidence expressed in their forecasts, predictions and commentary continues unabated despite:
1. Only a small minority of economists and none of the central banks and treasury/finance ministries anticipated the financial crisis and the recession, and
2. At most only one of the currently competing macroeconomic models (which embody significantly different structures and implications for economic policy) can serve as a sound basis for policy.
The confidence and false precision in these forecasts and policy prescriptions reflect a continuing unwarranted faith in the models.
Read more...Francois T pointed to a post at the blog Health Care Renewal that summarizes an important insider report at the British Medical Journal on how much so-called medical research is of dubious validity, and performed to give talking points for marketing rather than to improve the lives of patients.
The reports on the corruption is big Pharma “research” are so rife that this account hardly qualifies as news. For fun, I dug up the notes from a 2004 study in which I interviewed some experts on drug company marketing. The reason? Even then, it was seen as the most effective, and a big financial services client was keen to see what techniques they could adopt from it. Even then, it was clear “research” was seen as key to effective selling. Per one interviewee, on sales reps:
Read more...By Philip Pilkington, a writer and journalist based in Dublin, Ireland. You can follow him on Twitter at @pilkingtonphil
Convictions are more dangerous foes of truth than lies
– Friedrich Nietzsche
Heterodox economists – that is, those that do not subscribe to the neoclassical research program – often claim that they are marginalised within the profession. Anyone who has had dealings with academia would instinctively take such complaints with a pinch of salt. Indeed, academic quarrels often have as much to do with who said what at a dinner party as they have to do with questions of high theory. Academics, for better or for worse, are often characterised by their independent-mindedness… and with it: their stubbornness. This often leads them to partake in intellectual factionalism.
However, when I started studying economics and talking to heterodox economists, it quickly struck me that something wholly different was going on.
Read more...This is a bit of a sleeper of a presentation from the recent INET conference. It was from a session titled “What Can Economists Know?” which might cause willies among non-economists as being too much about epistemology and not enough about issues that might give insight, say, into why the overwhelming majority of economists in early 2007 thought a global financial crisis was impossible.
This talk by Gerd Gigerenzer is about heuristics, and why they are often superior to the more formal methods of analysis and decision-making fetishized by economists.
Read more...GM Food Increases Body Weight in Rats
Read more...Yanis Varoufakis is a Greek economist who currently heads the Department of Economic Policy at the University of Athens. From 2004 to 2007 he served as an economic advisor to former Greek Prime Minister George Papandreou. Yanis writes a popular blog which can be found here. His treatise on economic theory ‘Modern Political Economics: Making Sense of the Post-2008 World’, co written with Nicholas Theocrakis and Joseph Haveli is available from Amazon.
Interview conducted by Philip Pilkington.
Philip Pilkington: Without getting into too much technical detail what is it that you refer to in your book Modern Political Economics: Making Sense of the Post-2008 World the ‘inherent error’ in all economic theories and models?
Read more...By Cathy O’Neil, a data scientist who lives in New York City and writes at mathbabe.org
A bit more than a week ago I went to a panel discussion at the Met about the global financial crisis. The panel consisted of Paul Krugman, Edmund Phelps, Jeffrey Sachs, and George Soros. They were each given 15 minutes to talk about what they thought about the Eurocrisis, especially Greece, the U.S., and whatever else they felt like.
It was well worth the $25 admission fee, but maybe not for the reason I would have thought when I went. I ended up deciding something I’ve suspected before. Namely, economists don’t understand the financial system, and moreover they don’t get that they don’t get it. Let me explain my reasoning.
Read more...By Philip Pilkington, a writer and journalist based in Dublin, Ireland
Read more...A concentration camp is the complete obliteration of privacy.
– Milan Kundera
By Cathy O’Neil, a data scientist who lives in New York City and writes at mathbabe.org
Yesterday I caught a lecture at Columbia given by statistics professor David Madigan, who explained to us the story of Vioxx and Merck. It’s fascinating and I was lucky to get permission to retell it here.
Read more...