Comments on: Economic specialization is a feature, not a bug

By: Bipster

Bipster — Mon, 12 Sep 2011 05:13:37 +0000

I agree with Summers. Similar to a disclosure required from the wall street analyst, there should be disclosure from the economist, Are they associated with right wing or left wing group, Are they registered as republican or democrat. There is nothing wrong about making a wrong assessment, but it is unethical to be deliberately misleading in the opinion.

By: lawrencefranko

lawrencefranko — Fri, 29 Jul 2011 02:57:30 +0000

One would have thought that Larry Summers would have learned a little humilty from the utter failure of his “stimulus” package. Unfortunately, our modern Ivory Tower academic economists fancy themselves to be the 21st century version of The Vanguard of the Proletariat, and treat actual people as subjects for experiments in working out their grand designs. The Model says that scale leads to efficency? So let’s herd the peasants into large collective farms. Understanding of, or empathy for, actual people, as opposed to classes, groups and categories? Fuggetaboutit. The Model “abstracts from” the possible effects of special interests pushing insane regulations? So let’s ignore the downside of the ever more entagling regulatory state. The model abstracts from government failure and intervention in the mortgage market? Ignore institutional perversions. The model assumes a multiplier of 2 with money pulled out of thin air (but which might have to be repaid someday)? Go for it, regardless of the evidence or consequences. Amazing how failure only increases some people’s (and especially some economists’) arrogance.

By: TGGP

TGGP — Thu, 28 Jul 2011 13:22:45 +0000

loudnotes, economists are not merely referring to an industry collectively outperforming itself. Fama has also presented data on serial-correlation of the returns of fund managers (whether those who do well before are more likely to do well in the future, and vice versa for those who do badly). His conclusion is that for the most part they don’t, though there is a very small portion of managers at the top who do seem to be worth their fees.

By: wrylyfox

wrylyfox — Wed, 27 Jul 2011 20:55:28 +0000

I think a novice can out perform the market, if you consider the S&P 500 as the market. A Chart to prove it:

http://preview.tinyurl.com/NoviceOutperf omsMkt

Which would a novice have chosen?

By: loudnotes

loudnotes — Wed, 27 Jul 2011 20:07:25 +0000

Isn’t it a bit strange for Summers, given his experience at D.E. Shaw, to repeat the EMH trope that active mutual fund managers don’t outperform the market? Of course they do not when evaluated as a group – collectively market participants cannot outperform themselves, especially net of fees – but individual money managers have outperformed and will continue to outperform markets. Consistently. It’s one of the more embarrassing failures of financial theory that academics ever since Fama can’t seem to model that.

By: EmanuelDerman

EmanuelDerman — Wed, 27 Jul 2011 15:48:09 +0000

The analogy with physicists and engineers is faulty. Engineers base their work on reliable theories and mostly reliable heuristics. There isn’t a SINGLE economic theory that is provably reliably correct, and pretty much so for heuristics too.

By: EricHake

EricHake — Wed, 27 Jul 2011 03:50:39 +0000

I thought the most telling point in these exchanges was that Thoma, Krugman, and Summers glossed over any sort of mention of Dean Baker. Dean Baker points out, ahem, that he called the bubble. he has also called attention to lots of other less pleasant features of the modern economy and the economics profession.

In an exchange about “The Great Divide” designed to encourage humility, inclusiveness, and paying attention to some dissident voices, they do a remarkably good job of talking about the medicine without actually taking it.