tag:blogger.com,1999:blog-17232051.post8029918627267479600..comments2024-03-28T03:16:14.104-04:00Comments on Noahpinion: Today's econ ain't your pappy's econNoah Smithhttp://www.blogger.com/profile/09093917601641588575noreply@blogger.comBlogger57125tag:blogger.com,1999:blog-17232051.post-87703590548253517472014-05-17T02:45:47.101-04:002014-05-17T02:45:47.101-04:00Levitt shows a poor understanding about how social...Levitt shows a poor understanding about how social health systems work. But what I dislike more is when I see a lot of ignorance about how a system, or economy, or society actually works, and then an argument is presented in algebra or geometry, obeys optimisation conditions and somehow it is considered informed and authoritative.<br /><br />In this way perhaps Levitt is not as bad as some others?<br /><br />A lot of people get tired of economists going on about "their model".<br /><br />What we want is informed analysis.<br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-1776244108793824652014-05-16T09:19:21.658-04:002014-05-16T09:19:21.658-04:00Part of your narrative appears to be that Friedman...Part of your narrative appears to be that Friedman is representative of mainstream views at the time. He may have been prominent, but the seat of power in those days was not in Chicago. Your pappy's representative economist was not Milton Friedman - more like Samuelson/Tobin/Solow.Stephen Williamsonhttps://www.blogger.com/profile/01434465858419028592noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-85786471452907019172014-05-15T18:14:03.440-04:002014-05-15T18:14:03.440-04:00" I wouldn't say structural estimation is..." I wouldn't say structural estimation is the "hot new technique." My impression is that the majority of empirical researchers don't like it."<br /><br />Even people doing CS do like it! See for example the influential work of Judea Pearl (Turing Award 2011). Epanechnikovhttps://www.blogger.com/profile/11483326134660576978noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-28754805651719996182014-05-15T18:03:42.375-04:002014-05-15T18:03:42.375-04:00I think Dimitar, it was always there, especially f...I think Dimitar, it was always there, especially foreign country data, but before it was just much more difficult to find. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-33839140272122067992014-05-15T17:57:00.258-04:002014-05-15T17:57:00.258-04:00This is because most of the free market economics ...This is because most of the free market economics types followed the money into the business schools...mainstream finance is built solidly on a foundation of market solutions and lack of trust for regulation, even in situations rife with asymmetric information. That left only the hippies in economics departments... John At Riskhttps://www.blogger.com/profile/07346395746333775016noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-89982898040306800762014-05-15T15:14:54.557-04:002014-05-15T15:14:54.557-04:00Next time I am in NY I may come and visit you ;)
...<i>Next time I am in NY I may come and visit you ;)</i><br /><br />Please do! You should meet the people from our QF program in the AMS department, or come to a seminar or something.Noah Smithhttps://www.blogger.com/profile/09093917601641588575noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-75961592688230675132014-05-15T14:27:25.886-04:002014-05-15T14:27:25.886-04:00Your "impression?" Doesn't sound ver...<i>Your "impression?" Doesn't sound very scientific.</i><br /><br />That's true, but president of AEA seems fairly indicative of non-renegade status.Noah Smithhttps://www.blogger.com/profile/09093917601641588575noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-51424869000774183202014-05-15T14:16:04.053-04:002014-05-15T14:16:04.053-04:00"What does it mean to "fully cover a par..."What does it mean to "fully cover a part" of something?"<br /><br />As you already know according to the MPT the total portfolio risk can split into two categories - the unsystematic and the systematic risk. Hence the my expression "fully cover a part" is identical to "fully cover the unsystematic risk". The latter is nothing more that an fictitious entity which we assume we can fully control! Sorry it seems I should have been a bit more explicit.<br /><br /><br />"That's not ideal but it's a heck of an improvement over what was being done before!"<br /><br />I am not so sure the improvement is that big. MPT is a naive quantification of the very old proverb "don't put all your eggs in one basket". And by attempting to do so it doesn’t only make the wrong assumptions but it also gives the wrong answers to some very crucial questions (how/when to invest and how to assess and manage the associated risk!).<br /><br />What I mean is that we can’t assess the total acidity of an unknown liquid substance by measuring its volume. And that despite the fact that there is a positive correlation between the acidity of an *unknown* substance and its volume! Using the wrong measure could be worse than using no measure at all (but just some robust heuristics)!<br /><br /><br /><br />"There have been improvements on all those fronts.”<br /><br />Yes I know there have been many improvements (e.g. EVT) but those are to a big extend unrelated to the MPT. The MPT implies the only risk you can eliminate (and that completely!) is the so called unsystematic and that can be done just by mimicking the market portfolio. This is completely wrong. The MPT’s sole risk measure (linear correlations) in many cases is spurious, meaningless and/or can not even be defined (that depending on underlying stochastic process of the asset returns)! Furthermore timing plays a huge role as the returns have got long memory. Big gains and big losses cluster in time!<br /><br /><br />"Come out to Stony Brook and we'll show you! ;-)”<br /><br />Sure why not. Next time I am in NY I may come and visit you ;)Epanechnikovhttps://www.blogger.com/profile/11483326134660576978noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-79400297666225274012014-05-15T13:59:10.369-04:002014-05-15T13:59:10.369-04:00How can you scientifically prove that Friedman was...How can you scientifically prove that Friedman was a rebel-maverick in 1968?<br /><br />He got published, awarded, honored and listened to in central banks (like in Germany). What more would he need in respect? Getting a a yearly triumph in the streets of Rome?Dimitarhttps://www.blogger.com/profile/14817426354343784512noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-49054734144079293342014-05-15T13:54:14.693-04:002014-05-15T13:54:14.693-04:00Has the availability of data improved since then? ...Has the availability of data improved since then? You can sure process the heck out of it now, but is there much more data than before?Dimitarhttps://www.blogger.com/profile/14817426354343784512noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-38639684245679334372014-05-15T13:30:26.121-04:002014-05-15T13:30:26.121-04:00This comment has been removed by the author.Epanechnikovhttps://www.blogger.com/profile/11483326134660576978noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-9843377423833725822014-05-15T11:48:18.909-04:002014-05-15T11:48:18.909-04:00Your "impression?" Doesn't sound ver...Your "impression?" Doesn't sound very scientific.Stephen Williamsonhttps://www.blogger.com/profile/01434465858419028592noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-76478542865762103272014-05-15T08:50:50.201-04:002014-05-15T08:50:50.201-04:00That was pointless. Economics isn't science.
...That was pointless. Economics isn't science.<br /><br />It seems unintuitive that snake oil cures warts. <br /><br />Zachhttps://www.blogger.com/profile/01115366572915518720noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-66061923530868191682014-05-15T08:21:31.436-04:002014-05-15T08:21:31.436-04:00Three thoughts:
Think of the title as a piece of ...Three thoughts:<br /><br />Think of the title as a piece of subtle irony.<br /><br />Or would you have felt better if the copy editor had gone in the opposite direction?<br />“Economists are Idiots!..." And as recently as the mid-1980s, he was right.<br /><br />Did the two disciplines pass each other in the night? (And here I have string theory in mind.)Globaltalk21http://son-of-gadfly-on-the-wall.blogspot.jp/noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-83458679141727326602014-05-15T04:05:09.010-04:002014-05-15T04:05:09.010-04:00Sorry that was removing the case for income redist...Sorry that was removing the case for income redistribution through active government interventionAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-82001678892267256152014-05-15T04:03:49.833-04:002014-05-15T04:03:49.833-04:00To sum it up the Lucas/Sargent project was about r...To sum it up the Lucas/Sargent project was about removing the case for macro-economic stabilisation through active policy and for income distribution.<br /><br />The latter point is why they are big on micro-theory relating to the efficiency-equity tradeoff.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-86393013957720923032014-05-15T03:49:09.748-04:002014-05-15T03:49:09.748-04:00True. I think the Chicago School, perhaps wrongly,...True. I think the Chicago School, perhaps wrongly, refers to Monetarism I and II (you may not have been around when those terms were used). Essentially I guess it was a way of distinguishing a group of economists from the Neo-Classical synthesis. They dominated the orthodoxy from the 1980s, taking over from Friedman in the 1970s. They liked free markets - but with tough rules to protect those markets (so they actually were often in favor of government regulation even if they did not like big government), rules for money supply growth etc. Monetarism II is more dogmatic - rational expectations, even more doctrinaire on government commitment and credibility, insistence on optimization constraints and the linking of macro-economics with the theory of the the firm and households. By doing this they are delinking macro-economics from a different view - it is fundamentally not about markets, but society and the role of the state.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-54285597332688260552014-05-15T03:31:46.593-04:002014-05-15T03:31:46.593-04:00Big Data is only useful when you understand what t...Big Data is only useful when you understand what the data means. Ie the history and context behind it.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-72422471444802673632014-05-14T22:18:51.787-04:002014-05-14T22:18:51.787-04:00Dimitar: That fits more with my impression that Fr...Dimitar: That fits more with my impression that Friedman was always a really well-respected guy.Noah Smithhttps://www.blogger.com/profile/09093917601641588575noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-932448250836106492014-05-14T21:07:21.534-04:002014-05-14T21:07:21.534-04:00Well, neither Sargent or Prescott are Chicago econ...Well, neither Sargent or Prescott are Chicago economists. Sargent has spent no time there, while Prescott has held a visiting position for less than 2.5 years of his career. They weren't part of the Chicago school.Charlie Clarkehttps://www.blogger.com/profile/02079017903923824877noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-75135846286872661772014-05-14T19:57:54.919-04:002014-05-14T19:57:54.919-04:00Noah and Stephen, have either of you seen this?:
...Noah and Stephen, have either of you seen this?:<br /><br />http://informationtransfereconomics.blogspot.com/2014/05/blowing-anti-neo-fisherite-model-out-of.htmlTom Brownhttps://www.blogger.com/profile/17654184190478330946noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-76726125107235993302014-05-14T19:43:12.834-04:002014-05-14T19:43:12.834-04:00The whole point of science is not to do away with ...The whole point of science is not to do away with intuition anymore than the point of meat is to do away with vegetables or the point of Ford is to do away with Toyota or the point of no return is to do away with the the point of it all.<br /><br />The point of science is to explain natural phenomena.Shoobynoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-41436714373738805442014-05-14T18:42:14.796-04:002014-05-14T18:42:14.796-04:00In 1967 he delivered his address as the president ...In 1967 he delivered his address as the president of AEA <br />http://www.aeaweb.org/honors_awards/officerspast.php<br /><br />Speech: http://www.aeaweb.org/aer/top20/58.1.1-17.pdf <br /><br />I was under the impression that it is a pretty big honor and Tobin and Solow became presidents after him. He was also awarded the John Bates Clark medal in 1951.Dimitarhttps://www.blogger.com/profile/14817426354343784512noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-11925540997394490882014-05-14T17:19:43.872-04:002014-05-14T17:19:43.872-04:00Portfolio Theory however has also fooled thousands...<i>Portfolio Theory however has also fooled thousands of investment managers to believe they can fully cover a part of their risk by investing in 30 or so stocks. </i><br /><br />What does it mean to "fully cover a part" of something?<br /><br /><i>It has also made them believe their whole risk can be quantified in those Greek letters (betas and sigmas, β,σ) and their performance can be measured in terms of a Greek letter too (alpha - α)</i><br /><br />That's not ideal but it's a heck of an improvement over what was being done before!<br /><br /><i>And no PT is not a data based model - it is a theory in the strictest sense. Data just don't agree with this theory - no normality, no independent returns, no constant volatility, no linearity etc</i><br /><br />There have been improvements on all those fronts. Come out to Stony Brook and we'll show you! ;-)<br /><br />But I agree that MPT is not the ultimate solution to investing.Noah Smithhttps://www.blogger.com/profile/09093917601641588575noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-5924493941498473602014-05-14T17:11:29.560-04:002014-05-14T17:11:29.560-04:00In 1968, Milton Friedman was hardly in the mainstr...<i>In 1968, Milton Friedman was hardly in the mainstream of the profession.</i><br /><br />Really? When did he become such a respected guy? As long as I've been aware of the outside world (i.e. since the late 80s or early 90s), it seems like he's been considered THE economist of economists.<br /><br /><i>Macro in 1968 was all about IS/LM</i><br /><br />Well, yeah. I was trying to talk less about macro specifically and more about all of econ in general. Macro might be "out of phase" with the rest. But in any case, don't you think the stuff that was dominant in the 00s (NK models) and the stuff that's hot right now (institutional finance-macro stuff) is much less "perfect-free-market" than the stuff that was big in the 80s?<br /><br /><i> wouldn't say structural estimation is the "hot new technique." My impression is that the majority of empirical researchers don't like it.</i><br /><br />Seriously?? At Michigan it was all the rage, and those are pretty much all empirical people. And people like Card who I've seen give talks on "the state of empirical econ" or whatever were all very big on structural estimation. I think you might be wrong about this.<br /><br /><i>Otherwise, you're off track on the trends I think.</i><br /><br />So of the other two trends - more empirics and less libertarianism - which do you think is wrong? Are you not persuaded by Hammermesh's study of publishing trends and Klein's study of political/policy leanings?Noah Smithhttps://www.blogger.com/profile/09093917601641588575noreply@blogger.com