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Interesting comment. If I am to understand it correctly, and follow it to its logical conclusion: 1. Economists have no tools for studying the topics that they

Interesting comment. If I am to understand it correctly, and follow it to its logical conclusion: 1. Economists have no tools for studying the topics that they're supposed to study, such as asset prices. 2. They are unable to make predictions because doing so would be "speculative." 3. Because we can't know what is going to happen until it happens, we might as well do away with professional economists because they can provide no input of practical (read: forward-looking) use. They can only try to explain why what happened happened. As for the requirement that one have "special, insider information" to have predicted the housing bubble, this is simply not true. There were a number of people from a variety of professions who recognized the housing bubble. One, Robert Shiller, to answer my own question, is an economist who also predicted the .com collapse[1]. There were also politicians[2] and market participants who predicted a collapse. Some of the latter, like John Paulson, who made billions betting against subprime, didn't publicly promote their beliefs, but others, like Peter Schiff[3], did. [1] http://www.nytimes.com/2005/08/21/business/yourmoney/21real.html?pagewanted=all http://www.nytimes.com/2005/08/21/business/yourmoney/21real.... [2] http://www.youtube.com/watch?v=mnuoHx9BINc http://www.youtube.com/watch?v=mnuoHx9BINc [3] http://www.youtube.com/watch?v=jj8rMwdQf6k http://www.youtube.com/watch?v=jj8rMwdQf6k

natrius 13y ago
The vast majority of economics is about how to avoid past mistakes, not necessarily how to avoid making new ones. This doesn't mean the science isn't valuable. There are plenty of terrible mistakes I hope we never make again.
noloqy 13y ago
According to the first article, Shiller said in 1996 that stock prices were at irrationally high levels. In 2005, he predicted a real estate bubble. Noticing that a bubble is developing, I would say, is the relatively easy part; predicting when it will collapse is the difficult part. As Keynes said, "Markets can remain irrational longer than you can remain solvent", so there is limited value in betting against bubbles. Paulson may have made billions, but undoubtedly there have been people that followed similar shortly before he did, but lost it all. The reason we know Paulson is because of the survivorship bias.

natrius 13y ago

The vast majority of economics is about how to avoid past mistakes, not necessarily how to avoid making new ones. This doesn't mean the science isn't valuable. There are plenty of terrible mistakes I hope we never make again.

noloqy 13y ago

According to the first article, Shiller said in 1996 that stock prices were at irrationally high levels. In 2005, he predicted a real estate bubble. Noticing that a bubble is developing, I would say, is the relatively easy part; predicting when it will collapse is the difficult part. As Keynes said, "Markets can remain irrational longer than you can remain solvent", so there is limited value in betting against bubbles. Paulson may have made billions, but undoubtedly there have been people that followed similar shortly before he did, but lost it all. The reason we know Paulson is because of the survivorship bias.