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Back in my Econ classes we were taught that Libor was this atomic-clock-like gauge that objectively and impartially measures interest rates with absolute precis

Back in my Econ classes we were taught that Libor was this atomic-clock-like gauge that objectively and impartially measures interest rates with absolute precision. Turns out that isn't exactly the case. We know that some commercial banks that participated in rigging it - the article mentions about employees of Barclays who and got caught, convicted and jailed for rigging Libor. But if the Bank of England has exerted pressure one way or another on Libor the claim that it is a a 'precise' interest rate gauge determined by the 'free market' are starting to look increasingly more questionable.

scatters 9y ago
Yes, and in high school chemistry you were taught that electrons go round the atomic nucleus in orbitals. The real scandal here is the poor state of undergraduate education in economics.
- thaumasiotes 9y ago
  In high school chemistry I was taught that electrons existed as a fuzzy smear near the nucleus and were particularly likely to be found within various oddly-shaped orbitals. Motion of the electron was not discussed nor implied. That may not be a perfect model, but it's a pretty far cry from "electrons go round the nucleus". My bog-standard high school chemistry textbook showed pictures of s and p orbitals and they are clearly three-dimensional. I think you'd have to go a pretty long way back to find a high school chemistry textbook saying that electrons follow a path.
  - jacquesm 9y ago
    Not all teachers are equal. There are plenty of places where the current state of chemistry education is still teaching kids the electrons go around the nuclei in perfect little circular orbits and that electrons that are 'shared' do so by making figure 8's.
    - Symbiote 9y ago
      In England and Wales, the circular orbits simplification is used at GCSE [1] (age 15-16), but the orbitals/probability thing at A-level [2] (age 16-18). My teacher (the same for all four years) explained that the first model was an oversimplification, but I don't think it's inappropriate to use it. [1] http://www.bbc.co.uk/schools/gcsebitesize/science/add_ocr_pre_2011/periodic_table/atomicstructurerev1.shtml http://www.bbc.co.uk/schools/gcsebitesize/science/add_ocr_pr... [2] http://www.s-cool.co.uk/a-level/chemistry/atomic-structure/revise-it/the-structure-of-the-atom http://www.s-cool.co.uk/a-level/chemistry/atomic-structure/r...
- kitsune_ 9y ago
  Back in high school, our chemistry teacher explicitly told us that this is nothing but a model and that all models are approximations. At the same time our economics teacher argued that rational self-interest is the undiluted essence of human behaviour.
  - CamelCaseName 9y ago
    Your kindergarten teacher probably told you that the number after 1 is 2. How stupid of them not to know that you can also have 1.1! You can't hop in the deep end when you start learning a new subject. If you continue in Economics you will deal with models that consider irrational actors.
    - kitsune_ 9y ago
      Deep end? I tried to illustrate that one teacher made the effort to highlight a model's shortcomings while the other one couldn't see beyond his own ideological biases.
- TheOtherHobbes 9y ago
  The real scandal is that economics - and especially banking - is in no small part lies, fraud, corruption, criminality, and bullshit. I've lost count of the number of economic scandals over the last few decades in which the banking system has played a central part. Whether it's price fixing PMs http://www.reuters.com/article/deutsche-bank-lawsuit-metals-idUSL2N17H1IA http://www.reuters.com/article/deutsche-bank-lawsuit-metals-... the Libor scandal https://en.wikipedia.org/wiki/Libor_scandal https://en.wikipedia.org/wiki/Libor_scandal the obvious high-level links to money laundering http://www.bbc.co.uk/news/business-36768140 http://www.bbc.co.uk/news/business-36768140 (and many, many more) it's obvious that banking isn't exactly the sober and reputable business it tries so hard to pretend to be. Any other industry with this level of systemic corruption would be closed down and cleaned out.
- ska 9y ago
  electrons go round the atomic nucleus in orbitals Which is still a better model[1] than most of economics has, so trying to teach it like physics or chemistry in the undergraduate curriculum is doomed to failure. [1]: i.e. more predictive power, more falsifiable
clappski 9y ago
Then whoever taught that class didn't teach properly. LIBOR is (s/is/was/g) the risk free rate of lending. After recent financial crisis, OIS treated as a more reliable index rate to use.
- artmageddon 9y ago
  The spread between the two that is worth paying attention to, as well. Pre-crisis, the two were pretty much in lock-step with one another and no one cared about it. As the crisis emerged, and beyond, the two diverged significantly.
branchless 9y ago
You were also taught banks were intermediaries of funds. Odd that Econ doesn't reflect reality, no?

scatters 9y ago

Yes, and in high school chemistry you were taught that electrons go round the atomic nucleus in orbitals. The real scandal here is the poor state of undergraduate education in economics.

thaumasiotes 9y ago
In high school chemistry I was taught that electrons existed as a fuzzy smear near the nucleus and were particularly likely to be found within various oddly-shaped orbitals. Motion of the electron was not discussed nor implied. That may not be a perfect model, but it's a pretty far cry from "electrons go round the nucleus". My bog-standard high school chemistry textbook showed pictures of s and p orbitals and they are clearly three-dimensional. I think you'd have to go a pretty long way back to find a high school chemistry textbook saying that electrons follow a path.
- jacquesm 9y ago
  Not all teachers are equal. There are plenty of places where the current state of chemistry education is still teaching kids the electrons go around the nuclei in perfect little circular orbits and that electrons that are 'shared' do so by making figure 8's.
  - Symbiote 9y ago
    In England and Wales, the circular orbits simplification is used at GCSE [1] (age 15-16), but the orbitals/probability thing at A-level [2] (age 16-18). My teacher (the same for all four years) explained that the first model was an oversimplification, but I don't think it's inappropriate to use it. [1] http://www.bbc.co.uk/schools/gcsebitesize/science/add_ocr_pre_2011/periodic_table/atomicstructurerev1.shtml http://www.bbc.co.uk/schools/gcsebitesize/science/add_ocr_pr... [2] http://www.s-cool.co.uk/a-level/chemistry/atomic-structure/revise-it/the-structure-of-the-atom http://www.s-cool.co.uk/a-level/chemistry/atomic-structure/r...
kitsune_ 9y ago
Back in high school, our chemistry teacher explicitly told us that this is nothing but a model and that all models are approximations. At the same time our economics teacher argued that rational self-interest is the undiluted essence of human behaviour.
- CamelCaseName 9y ago
  Your kindergarten teacher probably told you that the number after 1 is 2. How stupid of them not to know that you can also have 1.1! You can't hop in the deep end when you start learning a new subject. If you continue in Economics you will deal with models that consider irrational actors.
  - kitsune_ 9y ago
    Deep end? I tried to illustrate that one teacher made the effort to highlight a model's shortcomings while the other one couldn't see beyond his own ideological biases.
TheOtherHobbes 9y ago
The real scandal is that economics - and especially banking - is in no small part lies, fraud, corruption, criminality, and bullshit. I've lost count of the number of economic scandals over the last few decades in which the banking system has played a central part. Whether it's price fixing PMs http://www.reuters.com/article/deutsche-bank-lawsuit-metals-idUSL2N17H1IA http://www.reuters.com/article/deutsche-bank-lawsuit-metals-... the Libor scandal https://en.wikipedia.org/wiki/Libor_scandal https://en.wikipedia.org/wiki/Libor_scandal the obvious high-level links to money laundering http://www.bbc.co.uk/news/business-36768140 http://www.bbc.co.uk/news/business-36768140 (and many, many more) it's obvious that banking isn't exactly the sober and reputable business it tries so hard to pretend to be. Any other industry with this level of systemic corruption would be closed down and cleaned out.
ska 9y ago
electrons go round the atomic nucleus in orbitals Which is still a better model[1] than most of economics has, so trying to teach it like physics or chemistry in the undergraduate curriculum is doomed to failure. [1]: i.e. more predictive power, more falsifiable

clappski 9y ago

Then whoever taught that class didn't teach properly. LIBOR is (s/is/was/g) the risk free rate of lending. After recent financial crisis, OIS treated as a more reliable index rate to use.

artmageddon 9y ago
The spread between the two that is worth paying attention to, as well. Pre-crisis, the two were pretty much in lock-step with one another and no one cared about it. As the crisis emerged, and beyond, the two diverged significantly.

branchless 9y ago

You were also taught banks were intermediaries of funds. Odd that Econ doesn't reflect reality, no?