4 ms·

Scientific papers about politically controversial topics that involve billions of dollars of money flowing around in firms that can potentially hire the author

by Eliezer 16y ago

Scientific papers about politically controversial topics that involve billions of dollars of money flowing around in firms that can potentially hire the author later, need to be taken with a grain of salt. A large grain of salt. Sad but true. You can't trust science papers about politically controversial, money-impregnated topics the way you can almost sorta sometimes trust science papers about completely noncontroversial topics. I have no particular reason to distrust the author or the paper. Only general reasons to distrust the topic.

arethuza 16y ago
Indeed, I wonder if anyone has done a literature survey to detect whether economics academics ever manage to state contrary conclusions to general market sentiments? For example, whether anyone was warning of the dangers of the pricing models used for CDOs etc. a few years back.
- maigret 16y ago
  No time to make some search right now, but I remember a few people pretend having known and spoken about the CDO dangers a few years before the crisis. Roubini is one them, but there is still a discussion going on whether he really foresaw it. If you look at economic research in Europe, you'll see many other opinions, like about the importance of the state, or alternative economic models. You'll probably find studies against HFT also.
  - rdm70 16y ago
    There are a number of people who foresaw the problems brewing in the CDO market. The book "The Big Short" by Michael Lewis provides a detailed portrait of a number of them. As usual, even when someone knows that the generally accepted wisdom is bunk, no one listens. Another comment that comes to mind is from Warren Buffett, who famously called derivatives "weapons of financial mass destruction" years before the recent blow up.
    - yummyfajitas 16y ago
      While I completely agree that Burry foresaw the collapse of the housing bubble, Buffet didn't. Buffet never described derivatives as creating a housing bubble. Buffet's problem with derivatives is that they make accounting tricky and fraud easier. But have no fear! Moodys (which Buffet owns about 20% of) will distill the complex accounting down to a simple letter rating. If Moodys calls a derivative "AAA", you know it's safe. Snark aside, this was not a prediction of a housing bubble. CDO's did exactly what everyone thought they would do. They behaved like AAA securities for as long as the beliefs underlying them held true ("housing never goes down").
    - arethuza 16y ago
      I was more thinking of a review of academic publications to see how coupled they are to the finance industry.
lzw 16y ago
These conclusions, however, are also consistent with about 70 or more years of economics investigation by members of the austrian school. In fact, is whole economic cycle, that ended in 2008 was predicted by austrians in specific in 2001 and in general as far back as the 1920s. So, this isn't just some single paper with an unexpected conclusion. It is important also because it supports an understanding of economics that is under constant political attack in our society.
- yummyfajitas 16y ago
  ...is whole economic cycle, that ended in 2008 was predicted by austrians in specific in 2001... [Citation needed.]
  - sigil 16y ago
    I'm not sure what 2001 prediction lzw could be referring to, but the Austrian school definitely sounded an early warning on the housing bubble. See this article from 2004 for instance: http://mises.org/daily/1533 http://mises.org/daily/1533 Or, Ron Paul addressing the House in July 2002: http://www.ronpaul.com/2008-09-26/ron-paul-on-the-housing-bubble-july-2002/ http://www.ronpaul.com/2008-09-26/ron-paul-on-the-housing-bu...
- Ennis 16y ago
  I agree that the austrian school has more merit than it's been given but that brand of economists has been spelling doom for many years. It's not out of this world for them to be right at some point. But they are often not right (like on deflation being a good thing.)
  - lzw 16y ago
    So, you think tibias a bad thing for peoples purchasing power to go up, and for there to consequently be fewer people at or below the poverty line? And for those above the poverty line to have more disposable income to invest in long term or short term needs is also a bad thing? Yet, somehow, the opposite, where everyone is poorer and a lot of preventative maintenance is avoided because it simply can't be afforded, is somehow better?

by Eliezer 16y ago

arethuza 16y ago

Indeed, I wonder if anyone has done a literature survey to detect whether economics academics ever manage to state contrary conclusions to general market sentiments? For example, whether anyone was warning of the dangers of the pricing models used for CDOs etc. a few years back.

maigret 16y ago
No time to make some search right now, but I remember a few people pretend having known and spoken about the CDO dangers a few years before the crisis. Roubini is one them, but there is still a discussion going on whether he really foresaw it. If you look at economic research in Europe, you'll see many other opinions, like about the importance of the state, or alternative economic models. You'll probably find studies against HFT also.
- rdm70 16y ago
  There are a number of people who foresaw the problems brewing in the CDO market. The book "The Big Short" by Michael Lewis provides a detailed portrait of a number of them. As usual, even when someone knows that the generally accepted wisdom is bunk, no one listens. Another comment that comes to mind is from Warren Buffett, who famously called derivatives "weapons of financial mass destruction" years before the recent blow up.
  - yummyfajitas 16y ago
    While I completely agree that Burry foresaw the collapse of the housing bubble, Buffet didn't. Buffet never described derivatives as creating a housing bubble. Buffet's problem with derivatives is that they make accounting tricky and fraud easier. But have no fear! Moodys (which Buffet owns about 20% of) will distill the complex accounting down to a simple letter rating. If Moodys calls a derivative "AAA", you know it's safe. Snark aside, this was not a prediction of a housing bubble. CDO's did exactly what everyone thought they would do. They behaved like AAA securities for as long as the beliefs underlying them held true ("housing never goes down").
  - arethuza 16y ago
    I was more thinking of a review of academic publications to see how coupled they are to the finance industry.

lzw 16y ago

These conclusions, however, are also consistent with about 70 or more years of economics investigation by members of the austrian school. In fact, is whole economic cycle, that ended in 2008 was predicted by austrians in specific in 2001 and in general as far back as the 1920s. So, this isn't just some single paper with an unexpected conclusion. It is important also because it supports an understanding of economics that is under constant political attack in our society.

yummyfajitas 16y ago
...is whole economic cycle, that ended in 2008 was predicted by austrians in specific in 2001... [Citation needed.]
- sigil 16y ago
  I'm not sure what 2001 prediction lzw could be referring to, but the Austrian school definitely sounded an early warning on the housing bubble. See this article from 2004 for instance: http://mises.org/daily/1533 http://mises.org/daily/1533 Or, Ron Paul addressing the House in July 2002: http://www.ronpaul.com/2008-09-26/ron-paul-on-the-housing-bubble-july-2002/ http://www.ronpaul.com/2008-09-26/ron-paul-on-the-housing-bu...
Ennis 16y ago
I agree that the austrian school has more merit than it's been given but that brand of economists has been spelling doom for many years. It's not out of this world for them to be right at some point. But they are often not right (like on deflation being a good thing.)
- lzw 16y ago
  So, you think tibias a bad thing for peoples purchasing power to go up, and for there to consequently be fewer people at or below the poverty line? And for those above the poverty line to have more disposable income to invest in long term or short term needs is also a bad thing? Yet, somehow, the opposite, where everyone is poorer and a lot of preventative maintenance is avoided because it simply can't be afforded, is somehow better?