Felix Salmon

The ontological status of gold

Felix Salmon
Dec 22, 2009 20:22 UTC

I was pleasantly surprised by the volume of email response I got to a passing reference to Kripkenstein on this blog — clearly quite a lot of you enjoy a bit of analytical philosophy! I went out to lunch today with a couple of philosophically-inclined finance types as a result, and, since I’m still high on Sichuan peppercorns and it seems to be something of a slow news day, I thought I’d put up a poll.

Remember this wonderful graph, from Paul Kedrosky, showing the price of gold in gold? Pay attention, there will be a quiz.

So here’s the question, for those of you who remember the analytic-synthetic distinction:

Or to put it another way: Can an analytic a priori statement be funny?

Update: With 125 votes cast, a clear majority of you (59%) are voting for the first option, analytic a priori. But you’re wrong, as dsquared explained to me in an email this morning — what happens to the graph if the price of gold goes to zero?

The assertion that the price of gold, in gold, is 1, is not analytic because it depends on the truth of at least one other proposition (that gold has a nonzero price) and is not a priori because there are possible worlds in which gold does not have a nonzero price.

Which just goes to prove, if nothing else, that philosophy is probably not best conducted by polling blog readers.

Update 2: Natecha defends the analytic-a-priori crew against dsquared, saying that the statement “x/x=1″ isn’t false when x=0, just undefined. He adds for good measure that “Daniel’s comment flies in the face of philosophical orthodoxy about analyticity and apriority”. Which is a statement I daresay Daniel would agree with.


The price of gold is the price of gold. Positive, negative or otherwise. The analytic is the logic.

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Taleb and Feyerabend

Felix Salmon
Jul 21, 2009 02:17 UTC

Back in March, Scott Locklin’s second-ever blog entry was a takedown of my Wired article which ended with this:

I’ll be fine until someone sends me another piece of nonsense by Nassim Taleb, at which point, as my favorite wrestler, the Iron Sheik likes to say, “I will make him humble; old country way.”

Happily, that day has now come, and Locklin’s screed against Taleb makes for delicious reading. Among his vocabulary: clowns; impostures; mush headed absurdity; Berkeley tapwater; careen; chicken entrails and pixie dust; utile; dyspepsia; serfs; mountebanks; and “heretical alpha monkey of the quants”.

Substantively, Locklin makes a very astute comparison:

Taleb, on the other hand, is sort of the Paul Feyerabend of quantitative finance. Like Feyerabend, he is well read, a good writer and quite charming. Like Feyerabend, Taleb seems to earn his daily bread by showing up and being kind of witty. Finally, both Feyerabend and Taleb are very much Against Method. This means, effectively, they’re both intellectual nihilists. Feyerabend thought we couldn’t know anything for various reasons too silly to get into right now. Taleb thinks all of quantitative finance is nonsense and we should do away with quants.

I’m a fan of Feyerabend, which is maybe why I’m a fan of Taleb as well: both of them force us to carefully examine things we believe mainly because clever and successful experts tell us that they’re true. And I haven’t asked Taleb about this, but I suspect that he wouldn’t be very upset to be called “the Paul Feyerabend of quantitative finance”. Certainly the two share an interest in thinking big.

Locklin ends his blog entry by saying that a successful quant like Jim Simons is “making money more or less proving people like Taleb wrong”. To use Locklin’s own analogy, that’s like saying that a successful physics experiment more or less proves Feyerabend wrong. Which given that Feyerabend was a successful physicist before he became a philosopher, is a bit weird.

It’s perfectly possible to spend a lifetime in science without ever having to grapple with or worry about Feyerabend’s philosophy — just as it’s perfectly possible to spend a lifetime in finance without expending any time on Taleb’s arguments. Many of those scientists and financiers will be very successful. But for those of us who want to take a step back and re-examine the foundations of science, or finance, then grappling with Feyerabend and Taleb is I think a useful and illuminating thing to do.

Update: Taleb emails to say he considers himself closer to Hayek than to Feyerabend.


I wrote the following comment on Scott Locklin’s critique of your post on the Gaussian copula, and it’s currently awaiting moderation.
I found your blog post because Felix Salmon, who certainly lives up to his first name, cheerfully provided a link to it in his own blog post of July 21, 2009. Here, you said, “The problem is, houses cost too much because money was too cheap. That’s the financial crisis in one line. It’s not any more complicated than that….” Did I not already have other information and some critical acumen of my own, I might have read your hand-wavy explanation and gone away flattered that I’m among the enlightened.

Assuming that we know what it means for money to be too cheap, that we know when it is too cheap, and that on the given occasion it really was, we’re still faced with the circumstance that housing suffered a bubble this time, while tulip bulbs and companies trading in South America were more or less spared the insane run-up. We must also try to account for the circumstance that house prices didn’t rise at all uniformally across the United States, as one learns from even a little time spent examining the histories of the twenty cities in the Case-Shiller index. Moreover, in order to accept your opinion that “cheap money” was the cause of the housing bubble, we have to assume that hand-wavy quantitative financial analysts, complacent risk managers, authors of legal restrictions on land use, and supposedly powerful members of Congress such as Barney Frank and Chris Dodd are all actually non-causal. So I do think the matter is more complicated than that. Oddly, for one who is so sensitive to others’ simplifications, it appears you may even have made a habit of simplifying. Consider that in this same blog post, you gave us the formula for popular science-writing, then immediately allowed that Isaac Asimov had a much different way of going about it.