4 ms·

>"Economists have essentially no idea what is going on" Complete and utter nonsense. "You" don't know what's going on, and assume others don't. The public is

>"Economists have essentially no idea what is going on" Complete and utter nonsense. "You" don't know what's going on, and assume others don't. The public is unbelievably ignorant of this subject. These men are brighter than you think. >"EMH is by far the clearest example of this" EMH is a 50 year-old theory. Like practically any other subject, economics that is taught in school at low-levels is based on old science. There is real, modern research happening on real-world things, just go poke around the Fed's site to see what they're doing.

confluence 14y ago
You're probably right. I've only done graduate level courses in economics and finance so there might be PhD level stuff I'm unaware of. I only have one question. If they know what they are doing why do we still have financial crises?
- nateberkopec 14y ago
  If physicists know what they're doing, why don't I have a flying car? edit: physicists ugh too early in the morning
  - confluence 14y ago
    We do - if you're willing to pay for it. And their called physicists.
    - ColinWright 14y ago
      Yes, and it's spelled "they're". See Muphry's (sic) law on wikipedia.
      - dfc 14y ago
        Did you include the "sic" as a joke? If so well played my friend, if not the streak continues. Including "sic" is grammatically incorrect because you are not transcribing an error or misspelling something on purpose.
        ColinWright 14y ago
        I believe you to be mistaken. I did not include it as a joke, and using "sic" in this context is literally correct. The reference is to "Muphry's" law (carefully note the spelling), and almost everyone would assume that I had mis-spelled that, intending instead "Murphy's" law. Using "sic" indicates that it is written as I intended. Quoting Wikipedia: The Latin adverb sic ("thus"; in full: sic erat scriptum, "thus was it written") ... The usual purpose is to inform the reader that any errors or apparent errors in the transcribed material do not arise from transcription errors, ... http://en.wikipedia.org/wiki/Sic http://en.wikipedia.org/wiki/Sic
        dfc 14y ago
        I did read closely, given the context it is readily apparent that you are not referring to Murphy's law.
        ColinWright 14y ago
        But others, who do not read as closely as you apparently do, need the extra information provided by the "(sic)". More than once when quoting Muphry's Law I've been "corrected".
- tatsuke95 14y ago
  >"I've only done graduate level courses in economics and finance. If they know what they are doing why do we still have financial crises?" Then you're ahead of me education-wise; we lend money until the default rate gets above a threshold, which causes a "crisis" of deleveraging. Then we lever up again. All of this happens around a long-term, upward growth trend. It's the business cycle. It's hard to time, but most people understand how it works. How can you prevent crises when their foundations can come from anywhere, including natural disasters? It's impossible. But the powers-that-be do their best to soften the blow. And they have been very successful in this last recession. I know it's hard to convince people that it could have been worse, but it could have been worse. Already they're working on the next problem: how do we not become Japan? Unlike some of the hard-sciences, economists get one kick at the can. If they miss, they have a new problem to solve.
  - confluence 14y ago
    Why not counter cycle the lending activity instead of exacerbating the business cycle? Oh wait we're economists - free markets are sacrosanct and they are efficient - if there is an arbitrage opportunity to short surely the rational investors will price it correctly. Not.
    - tatsuke95 14y ago
      >"Why not counter cycle the lending activity instead of exacerbating the business cycle?" That's easier said than done. Most of it is politics. But they do. The Fed began tightening monetary policy back in 2004, when rates went from just below 2% to 5.5%. They did so to start to "cool" the economy, and it essentially popped the housing bubble.
- dingfeng_quek 14y ago
  Because politicians run the country. Not economists.
dingfeng_quek 14y ago
EMH is actually a hypothesis (not a theory) that arises from non-arbitrage models. It's not meant to describe the real world, although it's thought-provoking to look at how "efficient" real markets are, so people like to characterize and "test" the EMH in its various forms. How markets fail to be "efficient" is often quite instructive for practical purposes. For pedagogical purposes, I think it's a really good simplified and ideal illustrative model, until you learn the more axiomatic derivations of no-arbitrage (the arrow-debreau stuff). From your other posts, I gathered that you're not beyond undergrad studies in economics - you'll likely learn about the more complex models when you reach a more advanced and rigorous stage, if you pursue the theoretical path. If I were you, I wouldn't be too concerned about others arguing about the EMH - without the proper foundations, you won't understand them beyond a superficial level. Not to mention that it's popular for the less educated to bitch about the EMH, probably because it's an English acronym with commonly used words. I've almost never heard laymen talk about how unrealistic the nash equilibrium is (:

confluence 14y ago

You're probably right. I've only done graduate level courses in economics and finance so there might be PhD level stuff I'm unaware of. I only have one question. If they know what they are doing why do we still have financial crises?

nateberkopec 14y ago
If physicists know what they're doing, why don't I have a flying car? edit: physicists ugh too early in the morning
- confluence 14y ago
  We do - if you're willing to pay for it. And their called physicists.
  - ColinWright 14y ago
    Yes, and it's spelled "they're". See Muphry's (sic) law on wikipedia.
    - dfc 14y ago
      Did you include the "sic" as a joke? If so well played my friend, if not the streak continues. Including "sic" is grammatically incorrect because you are not transcribing an error or misspelling something on purpose.
      - ColinWright 14y ago
        I believe you to be mistaken. I did not include it as a joke, and using "sic" in this context is literally correct. The reference is to "Muphry's" law (carefully note the spelling), and almost everyone would assume that I had mis-spelled that, intending instead "Murphy's" law. Using "sic" indicates that it is written as I intended. Quoting Wikipedia: The Latin adverb sic ("thus"; in full: sic erat scriptum, "thus was it written") ... The usual purpose is to inform the reader that any errors or apparent errors in the transcribed material do not arise from transcription errors, ... http://en.wikipedia.org/wiki/Sic http://en.wikipedia.org/wiki/Sic
        dfc 14y ago
        I did read closely, given the context it is readily apparent that you are not referring to Murphy's law.
        ColinWright 14y ago
        But others, who do not read as closely as you apparently do, need the extra information provided by the "(sic)". More than once when quoting Muphry's Law I've been "corrected".
tatsuke95 14y ago
>"I've only done graduate level courses in economics and finance. If they know what they are doing why do we still have financial crises?" Then you're ahead of me education-wise; we lend money until the default rate gets above a threshold, which causes a "crisis" of deleveraging. Then we lever up again. All of this happens around a long-term, upward growth trend. It's the business cycle. It's hard to time, but most people understand how it works. How can you prevent crises when their foundations can come from anywhere, including natural disasters? It's impossible. But the powers-that-be do their best to soften the blow. And they have been very successful in this last recession. I know it's hard to convince people that it could have been worse, but it could have been worse. Already they're working on the next problem: how do we not become Japan? Unlike some of the hard-sciences, economists get one kick at the can. If they miss, they have a new problem to solve.
- confluence 14y ago
  Why not counter cycle the lending activity instead of exacerbating the business cycle? Oh wait we're economists - free markets are sacrosanct and they are efficient - if there is an arbitrage opportunity to short surely the rational investors will price it correctly. Not.
  - tatsuke95 14y ago
    >"Why not counter cycle the lending activity instead of exacerbating the business cycle?" That's easier said than done. Most of it is politics. But they do. The Fed began tightening monetary policy back in 2004, when rates went from just below 2% to 5.5%. They did so to start to "cool" the economy, and it essentially popped the housing bubble.
dingfeng_quek 14y ago
Because politicians run the country. Not economists.

dingfeng_quek 14y ago

EMH is actually a hypothesis (not a theory) that arises from non-arbitrage models. It's not meant to describe the real world, although it's thought-provoking to look at how "efficient" real markets are, so people like to characterize and "test" the EMH in its various forms. How markets fail to be "efficient" is often quite instructive for practical purposes. For pedagogical purposes, I think it's a really good simplified and ideal illustrative model, until you learn the more axiomatic derivations of no-arbitrage (the arrow-debreau stuff). From your other posts, I gathered that you're not beyond undergrad studies in economics - you'll likely learn about the more complex models when you reach a more advanced and rigorous stage, if you pursue the theoretical path. If I were you, I wouldn't be too concerned about others arguing about the EMH - without the proper foundations, you won't understand them beyond a superficial level. Not to mention that it's popular for the less educated to bitch about the EMH, probably because it's an English acronym with commonly used words. I've almost never heard laymen talk about how unrealistic the nash equilibrium is (: