P
pibbur
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I wouldn't soil my trusty garden fork with the likes of Madoff. I have good clean dirt and manure to dig with that, you know.
Don't have any rusty ones lying around?
I wouldn't soil my trusty garden fork with the likes of Madoff. I have good clean dirt and manure to dig with that, you know.
They think they can model just a few years' worth of data and come up with probabilities for things that may happen only once every 10,000 years. Then people invest on the basis of those probabilities, without stopping to wonder whether the numbers make any sense at all."
We're living in the Age Of Greed.
Since we're sorta kinda discussing economic theory here, this thread might be a good place to put this bit in Financial Times that I came across: it's basically a scathing attack on macroeconomics as it's been (generally but not quite universally) practiced for the past several decades. In particular, it whacks the efficient markets hypothesis that's at the core of Classical, Keynesian, new Classical, and new Keynesian theory (and, FWIW, implicit in Austrian school economics that mudsling likes so much).
[ http://blogs.ft.com/maverecon/2009/...state-of-the-art-academic-monetary-economics/ ]
It's somewhat heavy reading, but if you're at all interested in how come so many so very smart people got it so wrong for so long, it's definitely worth it. (It's also gratifying to notice that some of the people I've personally found most enlightening all along are cited as positive exceptions to the general rule.)
We're living in the Age Of Greed.
I don't think we have it wrong, we just don't have it completely right, and not having it completely right can cause some very nasty times.
Yes BN: "But in the CDO market, people used the Gaussian copula model to convince themselves they didn't have any risk at all, when in fact they just didn't have any risk 99 percent of the time. The other 1 percent of the time they blew up. Those explosions may have been rare, but they could destroy all previous gains, and then some"
@bn, I don't entirely disagree. But the man has a point -- if meteorologists could predict the weather in Florida with uncanny accuracy not counting hurricanes, wouldn't you say that they're missing something rather fundamental?
I treat theories like tools: they can be highly useful for understanding and conceptualizing things, but they're always fundamentally limited. If you're not aware of what those limitations are, you run a risk of outrunning them, applying them in areas where they stop working, and then mistaking the result for reality. This is an especially big danger in disciplines without strong built-in reality checks: sociology, history, psychology, and, yes, economics. Not so much in "hard" sciences where the results are usually empirically verifiable with little ambiguity.
Given that year in and year out scientists are off huge amounts in their predictions of named storms for the coming year, I'd say yes they are missing something fundamental.
One of the new toys on display at the 2009 Toy Fair in New York is "Smash-Me Bernie," a figurine of Bernie Madoff, the U.S. financier charged with running a $50 billion Ponzi scheme. "Smash-Me Bernie" wears a devil's red suit, carries a pitchfork and comes with a golden hammer for smashing the doll on the head. Madoff's former clients might not be in the mood to shell out the cost of the figure -- $99.95, plus shipping.
The government said in court documents it wants Madoff to forfeit all of the money and property that can be traced back to the alleged fraud -- a sum it estimated at more than $170.8 billion....Madoff was charged with securities fraud, mail fraud, wire fraud, three counts of money laundering, making false statements and perjury among other charges, according to the court documents. He faces up to 150 years imprisonment, according to sentencing guidelines.
There is no plea agreement with Madoff, who remains under house arrest.
That's rather the point. Both economics and meteorology (and climatology) are statistical disciplines. The difference is that meteorologists can tell with a remarkable degree of accuracy how many cat 3, 4, and 5 hurricanes will make landfall over the next 10, 30, or 50 years -- but economists can't make any such predictions about cat 3, 4, or 5 recessions. What's more, meteorologists can also predict pretty accurately if, where, and when any given storm will make landfall, with sufficient warning to evacuate the population. Economists don't appear to be able to predict hurricanes even when they're right on top of them, Krugman, Roubini, and a few others notwithstanding.
Well one problem with predicting out that far is simply that there are too many events you can't model. How do you model war? Or a terrorist attack?