Nassim Nicholas Taleb, seasoned trader and risk manager, and author of the provocative and well regarded book Black Swans, today in the Financial Times takes on the high priesthood of modern finance. He argues that modern portfolio theory and many of its offspring, such as the Black-Scholes option pricing model and the capital asset pricing […]
Read more...An excellent post, courtesy Mark Thoma at Economist’s View, from FactCheck.org, on why its efforts to correct the record are too often counterproductive. In essence, if ideas are falsely linked (say “Saddam Hussein” and “Al Queda”), further discussion preserves the false association. The entire post is very much worth reading; it’s a primer on how […]
Read more...Since I assume many readers work in large organizations, I pass this post from Eliezer Yudkowsky at the Overcoming Bias blog as one of those rare bits of practical advice that isn’t overwhelmingly difficult to implement and can make a real difference in the quality of outcomes: From pp. 55-56 of Robyn Dawes’s Rational Choice […]
Read more...Consider the ironies in the discussion of free trade. It’s widely depicted by economists to be a good thing, and anyone who opposed it is considered to be economically illiterate. Yet the system we have deviates considerably from the free trade ideal and is more accurately called managed trade. And in this system of managed […]
Read more...Harvard’s Dani Rodrik in a recent post questioned the role of labor market rigidities (such as restrictions on firings and generous unemployment) in Europe’s higher unemployment. (As an aside, readers will know even that factoid is disputed. Barry Ritholtz has argued that if we calculated unemployment the same way Europeans did, the rates wouldn’t be […]
Read more...It’s always dangerous for mere mortals to take issue with Serious Economists, but let’s start with Brad DeLong’s thesis (hat tip Mark Thoma): The fact that there is even a small liquidity crunch for banks implies larger liquidity crunches for less intensively regulated financial institutions, and even greater liquidity crunches for manufacturing and real-estate companies. […]
Read more...George Magnus, senior economics adviser at UBS and the person responsible for bringing economist Hyman Minsky to the public’s attention, invokes him again in a good piece in the Financial Times. In keeping with his affinity for the world view of the dour economist, Magnus depicts our current credit crunch as a Minsky moment and […]
Read more...Normally, I have the highest regard for Martin Wolf, the Financial Times’ lead economics writer. He is forthright, data-driven, articulate, sober, and insightful. However, I take issue with his current article, “The Federal Reserve must prolong the party,” and see its failings as symptomatic of the state of economics. In brief, Wolf argues that the […]
Read more...Aah, there is so much good stuff out there that I can’t begin to do it justice. Hopefully you will enjoy these items: VoxEU features a very good international study on the gender income gap. The Boston Globe tells us that negotiating courses don’t address the fact that people lie. APEC is set to issue […]
Read more...John Authers of the Financial Times thinks the markets got a lucky break this week, and deferred a so-called Minsky moment, which he discussed in a noteworthy piece earlier. By way of background, economist Hyman Minsky observed that creditors become more lax about lending standards during times of stability. He divided borrowers into three types: […]
Read more...This piece is from Tyler Cowen, and as a contrarian and a cat owner, of course I find it to be terribly clever: Many people have been clamoring for this topic over at the secret blog. My views are simple: we have too few cats in the world, relative to dogs. Dogs, for reasons of […]
Read more...A little weekend levity, courtesy Economic Investigations: That recessions are always and everywhere caused by the government. (That’s because they mostly know only one theoretical account/scenario for such an event.) That the seigniorage caused by a 3% annual rate of inflation plays a big role in politics and that it’s big enough to motivate a […]
Read more...We’ve been skeptical of inflation targeting, no doubt as a result of seeing Paul Volcker use monetary targets very effectively. Witness the proof of the pudding, namely, asset bubbles, deteriorating credit quality, and increasing inflation (at least in overall CPI, although core CPI is better behaved). But serious economists have only started looking into this […]
Read more...The notion that markets need rules, and therefore rulemakers, which generally implies some form of government oversight, is anathema to libertarians. But as we have stressed before, the markets that the public at large thinks of as well-functioning, like the US stock markets, are in fact highly regulated and would not exist without it. So […]
Read more...A neat little analysis by Ross Eisenbrey at the Economic Policy Institute may be difficult for union foes to explain away. It shows the proportion of workers covered by collective bargaining agreements in major European countries and the US and then shows productivity growth country by country in the same group 1979-2005. Despite being the […]
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