About two weeks ago, Kartik Athreya, a researcher for the Federal Reserve Bank of Richmond, posted a diatribe about the difficulties in performing macroeconomic research and policy. Titled “Economics is Hard. Don’t Let Bloggers Tell You Otherwise,” it was an odd sort of academic rant.

Stung by myriad criticisms of the Fed, Athreya attempted to defend the priesthood of economics. “Writers who have not taken a year of PhD coursework in a decent economics department (and passed their PhD qualifying exams), cannot meaningfully advance the discussion on economic policy,” he wrote.

Predictably, it provoked a firestorm of criticism from the blogosphere.

But Athreya’s circle the wagon’s defense raises a valid point — economics is too important to leave to just anyone.

Especially economists.

Towards that end, and to further illuminate the discussion our Federal Reserve researcher began, I suggest the following questions be used for all economic PhD candidates as part of their qualifying exams:

True or False: Humans act to obtain the highest possible well-being for themselves given available information about opportunities and other constraints, both natural and institutional, on their ability to achieve predetermined goals.
-Explain your answer in real world practice, rather than theoretical, terms.

• Starting in 2001, the FOMC started a monetary accommodation that took rates to the lowest levels in over 40 years, and then kept them there for 3 years. Discuss the economic and market impact of these rates. Include commodities, residential real estate, and financial derivatives in your answer.

• Almost the entirety of the economics profession missed the 2008 recession, the worst in many decades, in advance. Why?

• Nobel Laureate Joseph Stiglitz wrote: “The Chicago School [of economics] bears the blame for providing a seeming intellectual foundation for the idea that markets are self- adjusting and the best role for government is to do nothing.” Discuss the intellectual errors of The Chicago School, from Milton Friedman forwards.
- For Booth School of Business PhD candidates ONLY: Why is the rest of the world wrong, and your belief system correct?

• Federal Reserve economists prefer to focus on “core inflation,” excluding food and energy. What is the basis of this exclusion? What impact does it have on Fed polciy? What might it mean for policymakers?

Joan Robinson of Cambridge University: “The purpose of studying economics is not to acquire a set of ready-made answers to economic questions, but to learn how to avoid being deceived by economists.” What did she mean by this?

• Please identify the 3 non-science fields in the following list:

-Nonlinear Wave Dynamics
-Wimmins studies
-Quantum Physics
-Bioinformatics and Proteomics
-Economics
-General Relativity
-Design and Fabrication of Microelectromechanical Devices
-18th Century English Poetry
-String Theory

• In 2007, the Fed Chairman stated that subprime mortgages were contained. What was the analytical basis of this statement? Why was it wrong? What impact did it have?

• John Kenneth Galbraith: “We have 2 classes of forecasters: Those who don’t know… and those who don’t know they don’t know.” Please explain what Galbraith’s statement means in the context of Wall Street economists.

• In 1997, the Boskin Commission claimed that inflation was overstated by 1.1%. Changes to how CPI was calculated (Substitution, Hedonics) were made. How did these changes affect subsequent Federal Reserve Policy? What was their impact on actual — not BLS measured — inflation?

• A Federal Reserve researcher recently wrote: “I still feel ill at ease with my grasp of many issues, and I am fairly confident that this is not just a question of limited intellect.” How would you explain the Dunning–Kruger effect to this person? What does Dunning-Kruger mean in practical terms to the work of economists?

• Statistician George Box said, “Remember that all models are wrong; the practical question is how wrong do they have to be to not be useful.” Discuss.

Final question:

• Why do you want a PhD in economics? What do you plan on doing for a living?

Please put your written answers here, including all relevant citations and sources.

Category: Federal Reserve, Really, really bad calls

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

77 Responses to “Economics is Easy; Comedy is Hard”

  1. Incidentally, the title is a play on the infamous last words of Sir Donald Wolfit: “Dying is easy, comedy is hard.”

  2. dead hobo says:

    BR, your questions are interesting. But since you’re not a qualified economist then you are not qualified to make meaningful criticism of the profession. You should leave the analysis of economic events to experts, since only experts can even understand the actual concepts. This is hard shit, after all. You’re not qualified. Piss off.

  3. dead hobo says:

    Just who the hell do you think you are? Alan Greenspan?

  4. Sircornflakes says:

    Barry, you made my day!

    Thanks.

  5. zzzzmd says:

    dead hobo
    by your logic, only doctors are”qualified to make meaningful criticism of the profession”
    only bankers arequalified to make meaningful criticism of their profession
    The sad thing is that many profesionals only think they are qualified to comment on their own profession

    -SNIP-

    ~~~

    BR: Yes, he was being sarcastic . . .

  6. Expat says:

    Their are several purposes or goals in achieving a Phd.

    1. It is a pre-requisite to teaching. On one hand, it insures that the candidate is familiar with school politics, grading, and teaching since that is how most of his doctorate study time was spend. On the other hand, it insures a restricted pool of employables, allowing existing Doc’s to demand higher wages and better conditions.

    2. It is a genuine vehicle for the advancement of knowledge. Funding of doctorate studies allows otherwise impecunious geniuses to develop new ideas which may benefit mankind.

    3. It keeps smart people who are incapable of dealing with the real world out of our hair for an additional three to six years. Ultimately, they will stay in academia, allowing the rest of us to get on with real job of oursourcing jobs, ripping off investors, and blowing up brown and tan people in foreign lands.

    I am a victim of reason #1. After 20 years of commodity trading, I am being told I cannot teach full-time because I don’t have a PhD, while courses in commodity investing are taught by people who have never sweated a squeeze on Brent or carried brown bags of cash to the Third World. Well, ceteris paribus and on a frictionless plane, my real-life experience is meaningless.

  7. dead hobo says:

    Here’s a conundrum. According to Fed researchers, only those who graduate from a decent doctoral program should be allowed to contemplate economics in a professional manner. Dr Greenspan led the Fed for several terms and is the acknowledged architect of out current good fortune. Yet his NYU dissertation appeared to be a kludge.

    Per Barrons:

    Dr. Greenspan’s Amazing Invisible Thesis

    By JIM MCTAGUE

    http://online.barrons.com/article/SB120675340444773623.html

    Exactly how Greenspan wrapped up his NYU studies in such a short period is unclear, but it appears that his thesis wasn’t especially time-consuming. Auerbach cites an earlier biography that says that Greenspan submitted — instead of a normal Ph.D. dissertation — some papers totaling 176 pages that he entitled Papers on Economic Theory and Policy. Among them was at least one he’d written earlier.
    ————————————————————————————-

    Thus, is Dr Greenspan an example of educational excellence or, by the researcher’s own analysis, was Dr Greenspan an unqualified poser who lucked into his dream job?

  8. bobby says:

    Barry
    You outdid yourself!! Great stuff…
    b

  9. Marcus Aurelius says:

    BR: keep it up, and the Psychologists will use their pseudo-science to have a net thrown over you and declare your eccentric but rational observations of reality a threat to society. Of course, they will send you a bill.

  10. Robespierre says:

    “Why do you want a PhD in economics? What do you plan on doing for a living?”

    I’m not surprise by this statement. Have you ever considered that it may just be for personal satisfaction and not just money or to “earn a living”? I like history and I know I won’t make a living out of it. Should that stop me from going to school to learn more of it? Having said that I agree that Fed Reserve people are idiots and the fact that they write this is that they know they are losing their propaganda war….

  11. VennData says:

    Greenspan… Boskin… Chicago School… I see a pattern here.

    …and not a sewing pattern, which unless I could re-contextualize Betsy Ross simulacra, disqualifies me from saying anything of value about Wimmin.

  12. Kort says:

    gosh, I would have failed big time, took me too long to figure out what Wimmins Studies was…

  13. Shnaps says:

    Having worked with some genuine numbnuts who outrank me in Economics education ‘on paper’, I know what people mean when they refer to “Piled Higher and Deeper”.

    That said, Athreya’s basic argument does have some validity to it. There are suddenly a lot of people with almost no Economics background who want to pop off about how to run shit. The vast majority of them are more interested in finding some economic arguement that jives with their political view than by a genuine belief/interest in some Macroeconomic theory.

  14. monmick says:

    The answers are: True, True, False, True, True, False, False, False, True, False, True, False and False.

  15. schodack says:

    The entire piece was wonderful, thanks. To pick one at random….”Federal Reserve economists prefer to focus on “core inflation,” excluding food and energy. ” Exactly! Okay, they can be volatile, we understand. But to ignore them? Are they kidding? Those two items may be the only ones in the index that essentially every one in the US uses every day, and that new purchases are likely made each day (therefore subjecting the buyer to the volatility). Plus, they constitute roughly a quarter of the CPI! Meanwhile housing has a roughly 40% weight, has obviously had huge swings over the last decade+, but is not something that a given individual is likely to experience in their “personal” CPI as most of us lock in a substantial portion of our housing costs for multiple year periods. Yet it is not ignored! Amazing.

  16. dead hobo says:

    Wimmins Studies:

    For your further edification

    http://en.wikipedia.org/wiki/Wimmen%27s_Comix

  17. Mike in Nola says:

    Barry: You are making comedy look easy with this post :)

  18. Robespierre says:

    @Shnaps Says:

    “The vast majority of them are more interested in finding some economic arguement that jives with their political view than by a genuine belief/interest in some Macroeconomic theory.”

    And please tell me what is it that government does with its economist? Do you actually believe that they are not interested in finding an economist opinion that does not jive with its “political interests”? When it comes to economist positions driving policy it is ALWAYS about the political believe system of the ruling party.

  19. call me ahab says:

    That is a valid point — economics is to important to leave to just anyone. Even economists.

    lol

  20. MorticiaA says:

    BR:

    You have outdone yourself today. This is a great way to start my morning — love the comments as well.

    The post reminds me of my Econ I class in college. I challenged the prof that he couldn’t get through the entire lecture without drawing a graph, and without saying “assume there are no taxes or unemployment…” To his credit he tried and almost got through the whole class — but in the last 15 minutes he looked at me, shrugged his shoulders and proceeded to draw the graph and say “assume…”

  21. postman says:

    Although macroeconomists (along with Wall Street forecasters who never studied in a Ph.D. econ program) are denoted as economists in the general press, most practicing economists are microeconomists who focus on smaller markets. These include industry experts who analyze antitrust issues, econometricians who investigate alleged race discrimination by an employer, and public finance specialists who consider a city’s financial structure and urban planning. In dumping on macroeconomists, one should at least realize that the general criticism is inapt for the majority of the profession: highly-trained microeconomists whose models and methods generally perform quite well.

  22. postman says:

    The economists highlighted in the general press are macroeconomists as well as Wall Streeters who never took a single Ph.D. econ course (but that does not prevent their confident predictions).

    Criticisms of these folks should not be generalized to all economists, most of whom are microeconomists studying antitrust implications of a merger, investigating an allegation that an employer discriminated against certain race/ethnic groups, analyzing the effect of a city’s budget cuts, etc.

  23. zero cool says:

    @monmick

    And here I thought the answers were UP UP DOWN DOWN LEFT RIGHT LEFT RIGHT B A

  24. Gatsby says:

    It’s funny because it’s so true. Well done BR! I love the question for the Booth Business School.

  25. ChrisH says:

    Some questions that I’ve been grappling with:

    If Economics is a science and science is necessarily empirical, then wouldn’t someone’s work speak for itself? Wouldn’t the work stand the tribunal of verifiability on its own grounds?

    If freshwater economics is misguided or unfounded, then why is still widely accepted and taught? What adaptive characteristics does it possess in the face of what seems to be clear contrary data?

    Isn’t the blogosphere just a marketplace for ideas and if it is, what characteristics does it and does it not share with traditional markets? What regulation, if any, ought there be?

  26. rootless cosmopolitan says:

    And what would constitute a fail regarding all these questions? Giving an answer to any of those that doesn’t agree with Barry’s opinion on those matters? And I mean opinion, in contrast to an explanation that is based on scientific approach and evidence.

    ____

    BR: Not much of a sense of humor, eh?

  27. ashpelham2 says:

    I used to begin my financial seminars with a discussion of why fuel and food is excluded from core inflation numbers, which are used to sway economic policy. For the groups that knew what the hell I was talking about, it was like a light switch turning on. They would predictably realize that this was a basic example of just how dysfunctional government is in the US.

    And I gave many of these speeches before Mr. Obama was sworn in as President. But I would still insist that I am not anti-government. In fact, I would follow those comments by saying that we had brought ourselves into the economic situation we were in at the time by allowing the car to drive itself, with little regulation or oversight as to what was lying in the road (financial derivatives and other ticking time bombs).

    Anyway, I’m not so smart. I’m from Alabama. What the hell do I know? I know Fridays are payday, crap doesn’t roll uphill, and the Crimson Tide is God’s Team.

  28. MorticiaA says:

    A mathematician, an accountant and an economist apply for the same job.

    The interviewer calls in the mathematician and asks “What do two plus two equal?” The mathematician replies “Four.” The interviewer asks “Four, exactly?” The mathematician looks at the interviewer incredulously and says “Yes, four, exactly.”

    Then the interviewer calls in the accountant and asks the same question “What do two plus two equal?” The accountant says “On average, four – give or take ten percent, but on average, four.”

    Then the interviewer calls in the economist and poses the same question “What do two plus two equal?” The economist gets up, locks the door, closes the shade, sits down next to the interviewer and says, “What do you want it to equal”?

  29. Mannwich says:

    The oldies but goody arguments (“this stuff is too complicated for YOU to understand little boy”) by “the elite” die hard. Keep at it Barry. It won’t be easy to smash the Tyranny of the Incompetent (and Arrogant).

  30. Mannwich says:

    Yes, keep at it, Barry. Smashing the Tyranny of the Incompetent (and the old, tired, false arguments) clearly won’t be easy.

  31. Lesly says:

    Not by any means scientific but really,

    wimmins?

  32. flashcurious says:

    You believe based on what you perceive.
    That leaves a lot of room for error.
    Today’s high science is tomorrow’s folly.
    Find me someone who does not filter everything through the lens of self-interest.
    Finding an “objective” economist is just as unlikely as finding a Supreme Court Justice who could not be called “activist” by the party out of power.

  33. Transor Z says:

    When I go fishing into arcane areas of law it’s almost always to try to get someone out of trouble. 99% of the time, when it comes to business litigation, my clients know way more about the laws and regulations impacting their businesses than their lawyers do. They already know the rules, tricks and loopholes the same way a good NFL lineman knows how to hold somebody without drawing a holding penalty.

    This is why Barry’s questions are great. Truly smart people know that you can learn far more about the real-life nature of money, pricing, lending (and economics generally) from a pawnbroker than from this clown. Show me somebody with a strong professional bias and I’ll show you somebody who is unable to really see what is right in front of their face.

  34. me says:

    “(Reuters) – Federal Reserve Chairman Ben Bernanke on Thursday said losses associated with subprime mortgages could reach $100 billion.

    “The credit rating agencies have begun to make sure they account for those losses and they have downgraded some of these products,” he said.

    “WASHINGTON (MarketWatch) — Federal Reserve Chairman Ben Bernanke said Thursday that there will be “significant losses” associated with subprime mortgages but that these losses should be regarded as “bumps” along the road of market innovation.”

    Dr. Ben Bernanke Ph.D. July 19, 2007 Senate Testimony

    Is economics hard, you bet. But mathematical models and missing the big one is incompetent. You can’t time the economy but you you can tell if it is going up or down.

    Like these two clowns can not: “(RTTNews) – President Barack Obama met with Federal Reserve Chairman Ben Bernanke in the Oval Office Tuesday, discussing that the Fed Chairman’s assessment of the economy as well as the White House’s policy initiatives.

    “I think in our discussions, we share the view that the economy is strengthening, that we are into recovery, that it’s actually led by some interesting sectors like manufacturing that we haven’t seen in quite some time,” Obama said.”

  35. This thread has too many big words for me

  36. constantnormal says:

    Constantnormal’s Hypothesis: The Dunning-Kruger effect extends to skilled persons as well as unskilled.

  37. AHodge says:

    nice
    as i ran the golobalinsight big model US econometric forecast for 6 years with a masters only, i take personal offense at his cant have an opinion without a PHD.
    as to your last sentence and what “you” plan to do for a living with PHD. Mr Ahreya plans to pick up a 6 figure salary, write about with nearly incomprehensible modeling and weasle words how welfare makes folks more likely to default on debt.
    the fed payment system fees– a form of user tax– pays his regional fed bank salary.

  38. Fred C Dobbs says:

    Barry, I understand you went to law school, where you must have studied Evidence and learned that only experts can testify against other experts. If a doctor (MD) gives me the wrong medicine, for example, only another doctor (MD) can testify that this violated standards of the medical profession, and was therefore negligent. So, by extension, only Doctors of Economics (Ph.Ds) should be allowed to give evidence against other Doctors of Economics. Dead Hobo is right, and you are not right.

    Separately, this expert vs. expert testimony in medical lawsuits creates terrible problems. Healthcare professionals are collegial and are, as a rule, unwilling to speak out against fellow professionals. Lawyers, of necessity, must use the few that have consciences and are willing to speak out against medical errors, and the defense gets to point out to the jury that these few are ‘hired guns’ and therefore ‘bought and paid for’ witnesses. This deprecation of their testimony is a form of ad hominem argument, a dirty fallacy. The public should be informed that the healthcare profession is not policed by the regulators anymore than the regulators policed Big Banks, and the only regulation of the profession comes from the fear that they might be nailed by the Malpractice Bar for some wrong they have committed. I didn’t see the Germans admitting England scored its second goal Saturday, even though they new they had been scored against. How many healthcare professionals step forward and admit they killed someone and their insurance company should pay? Legislative limits on medical malpractice suits produce lower quality medicine, including terrible actions live the VA hospital infecting more than 100,000 with HIV through wrongful transmissions. Tell your legislator to protect us, not the healthcare professionals.

    Tell economists that, if they can’t explain what they are talking about so the ordinary middle of the IQ Bell Curve person can understand it, they should not speak out, and deserve to be ignored, if they do. It gets down to successful communication. You are pretty good at it, but they are not. What did Greenspan mean? What does Bernanke me? They should speak plainly, so they can be held to account for their statements rather than hiding behind ambiguity. The Fed should hold a press conference and answer questions posed by economists and journalists. No more of hiding behind the Green Curtain in Oz.

    ____

    BR: You apparently think Economists and medical doctors have an equivalent skillset. Good luck with that next surgery!

  39. Joey says:

    Barry

    by far, one of the more stellar blog posts (excellent title too)

    nice work ~

  40. Mannwich says:

    @Fred: But the problem is their theories bear very little resemblance to what actually goes on in the real world. That is NOT a problem of “communication”. That is a problem of being WRONG, dead, disastrously wrong, on serious issues that end up harming a lot of people (but maybe not “THEIR people”). Evan-Pritchard gets it right.

    http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100006729/time-to-shut-down-the-us-federal-reserve/

  41. catman says:

    Six month drug dealing pre-req might be a good idea.

  42. dave says:

    Didn’t Disney make a movie on this entire subject?

  43. Mannwich says:

    The elites always seem to think that their PR or “communication” just isn’t effective for the “little people” to understand. It’s always PR. Yeah, that’s it. Just need more PR and “communication” and we’ll understand. Give me a break.

  44. Low Budget Dave says:

    disney explained, for example, that rats make great chefs. I saw a documentary on it. In the same way, economics should only be discussed by local beauty queens with hard won degrees in journalism.

  45. bergsten says:

    I especially enjoyed the trick question — there are FOUR non-science fields in the list.

  46. Transor Z says:

    So, by extension, only Doctors of Economics (Ph.Ds) should be allowed to give evidence against other Doctors of Economics. Dead Hobo is right, and you are not right.

    “All men are mortal. Socrates is mortal. Therefore, all men are Socrates.” – Woody Allen, “Love and Death”

    1) Economics is not a learned profession requiring professional licensing. It is not a discipline that provides services which are susceptible to generally accepted professional standards. Unfortunately, economists cannot be guilty of professional malpractice.

    2) Dead Hobo was being sarcastic.

  47. Robespierre says:

    @Fred C Dobbs Says:

    “If a doctor (MD) gives me the wrong medicine, for example, only another doctor (MD) can testify that this violated standards of the medical profession, and was therefore negligent.”

    The reason for that is that Medicine is a discipline that has a sound scientific foundation.

    ” So, by extension, only Doctors of Economics (Ph.Ds) should be allowed to give evidence against other Doctors of Economics.”

    Wrong. Economics is not based on sound scientific principles at all. So as a matter of fact what the so called experts call “laws of economics” is an oxymoron created to make economics look like a real science and therefore gain the support of the “joe sixpacks” of the world.

  48. If a doctor (MD) gives me the wrong medicine, for example, only another doctor (MD) can testify that this violated standards of the medical profession, and was therefore negligent.

    So Michael Jackson (after consuming copious amounts of drugs) and the parrot are thus not dead? Or are they only dead because another doctor has told us they are dead. Otherwise we would not have know they were dead or why (the jury is still out on the parrot)

  49. MaciekKolodziejczyk says:

    Barry,

    This was insanely funny :) :)

    So, in case “they” shut down the markets or if you for whatever reason decide to leave Wall Street, you can be certain you can make a living as a comedian…

    Maciek.

    @ Fred C Dobbs

    Do you think that only an expert astrologer can judge whether a horoscope is right or wrong?

    M.

  50. dead hobo says:

    Transor Z Says: (to Fred C Dobbs)
    June 30th, 2010 at 11:46 am

    2) Dead Hobo was being sarcastic.
    ******************************************
    BR (to zzzzmd) : Yes, he was being sarcastic . . .

    *******************************************
    reply:
    ———–
    How to confuse America: No smiley faces, no laugh tracks, no funny punctuation. Greenspan was a god.

  51. CIGA Monitor says:

    Delightful post. Please allow me to correct one line (in caps).

    That is a valid point — economics is TOO important to leave to just anyone. ESPECIALLY economists.

    M

  52. Jeremy Wa says:

    Is it possible, just maybe, maybe… that this whole discussion, from inception, suffers from Dunning–Kruger effect?

    I mean, we have a current administration that used the advice of “the best minds there” – Paul Krugman, Joe Stiglitz, et al. to pass legislation and made promises based on that advice that if the legislation was passed, based upon these “best minds” then unemployment would not rise above 8%.

    Now, we are told that adolescent profligacy (I can’t be out of money, I still have checks left…!) demands that we double down and spend more…

    Maybe these best minds do not know what the ordinary housewife knows: You cannot spend yourself out of a spending hole by spending more. Maybe these “best minds” suffer from Dunning-Kruger….?

    Just asking…

  53. Jonathan says:

    Barry,

    You appear to know your stuff a lot more than most of the other guys out there. I am curious as to what your educational background is.

    As for Ph.D types, unless you also have one I consider them well-educated theorists with the flaw that they have no idea how the real world actually would react to their theories.

  54. Andy T says:

    Good Stuff Barry. Can’t believe the Richmond Fed let that guy publish that….

  55. zzzzmd says:

    Fred
    Riddle me this
    I have been on the stand over 15 times in malpractice cases as an expert. Have won every one
    10 for defense, 5 for plaintiffs
    why do I make the plaintiffs attorneys pay me in total up front before I render an opinion, but charge the defense an hourly rate

  56. dead hobo says:

    zzzzmd Says:
    June 30th, 2010 at 1:34 pm

    why do I make the plaintiffs attorneys pay me in total up front before I render an opinion, but charge the defense an hourly rate

    reply:
    ———-
    Duh? You’re chiding the defense to penny pinch. If they don’t manage your time effectively, and your cooperation, you will gouge them while being helpful. Others might call it passive aggression. A smart defense would research what they need, get it from you in short sentences, and save a dime.

    Plus, the defense has an almost infinitely inelastic demand for your services while the plaintiff can tell you to piss off and ignore your invoice if you don’t tell them what they want to hear.

  57. Transor Z says:

    @zzzzmd:

    Question. How often do you provide expert testimony in personal injury cases not involving malpractice? If you have, how often has it been for the defense/plaintiff?

    Question. How many different professional liability carriers have you worked for in your 10 defense cases?

  58. crankitto11 says:

    Ditto the above.

    Barry you have outdone yourself.

    Insanely funny intellectual comedy.

  59. AHodge says:

    some readers here, even educated ones, are confusing academic economics with a science like medicine or physics. there are 30 different pieces to it. some including most of the policy related like finance and forecasting, is nowhere near a science or agreed. here my take –from book preface– on what they offered in the recent crisis. the only reason to pay any attention to ahraya is to get his worthless ass fired

    “For the profession as a whole I apologize if you thought “we” could see the future, or even offer warnings. Maybe 97% knew little about banking and credit at the start. Roughly nobody, including me, saw clearly at the start how our mostly brand new derivativised, phony insured, and securitized system might handle stress.

    Or what they knew was wrong, thinking like “it will take care of itseIf, the market will meet our needs.” Many of the people with better skills, who accept there are business cycles, who saw it at least hazily, have come to the fore and are now listened to. That’s’ progress.

    But honestly even most of my famous A team is fighting on key points even now. Niall Ferguson is publically fighting with both Martin Wolf and Paul Krugman over the dangers of debt. I see promotion for their slugfest. His colleague Ken Rogoff knows all the debt crises everywhere. Jan Hatzius and Dick Berner are two of the best Wall St economists. They have a different bond view now, similar to the first threesome. David Kotok is the well known member of the network in the book. We fight all the time. I love him. You might want a couple permabears. The incomparable Roubini and David Rosenberg? They will usually disagree with all positive points of the others.

    For financial markets and cycles George Soros notes shortcomings in behavioral economics (Robert Shiller) that his feedback “reflexivity’ theories improve on. Shiller in turn says he much broader than the Minskyites. Speaking of which, Bob Barbera takes on entire groups and schools, including five Nobel economics laureates. Those are definitely not on my A list either. At least the above all grasp there are cycles and that government did not totally cause them.

    Both laureate and A list is Larry Klein. But I presume too much. Larry, Paul Volcker and George Soros are for me our nations’ splendid elder statesmen. Martin Feldstein is always worth listening to. Warren would probably be insulted to be called economist. They are each in the book helping me along, sometimes personally.

  60. AHodge says:

    answer to riddle me
    because you have to lie more for the paintiffs?

  61. bergsten says:

    @Robo — …Medicine is a discipline that has a sound scientific foundation….
    Really? Where do you get YOUR health care?

  62. d4winds says:

    Was the Dunning–Kruger reference an unintentionally ironic slip or was it a ploy to bait the untutored unwary?

  63. Julia Chestnut says:

    That’s spelled “Wymmin’s Studies,” you ignorant jerk. I can haz graduate degree now?

    I read that bit about needing to be educated at a “good” school in a PhD program to get why they are so much more brilliant than any of us reality-based organisms could possibly appreciate. It made me giggle. Until I realized that I wasn’t sure that the person in question was joking. I think that same feeling might be behind the title of your blog entry.

    As I’m sure you know, PhD programs are a form of brainwashing cult. It’s difficult not to take yourself too seriously for your own good once you have suffered through such a program. I still meet genuinely brilliant people who have survived intact, but people of lesser abilities seem to succumb early on. Oddly, I have the most luck with mathematicians and physicists – one of the most self-effacing, fun people I ever knew was a particle physicist, working with some string theorists. Those are weird, funny guys. Most of them are entirely comfortable with the idea that they could be completely wrong. In sharp contrast to every economist I know – even the good ones.

    The fanatical, religious belief in the Chicago School exhibited by lawyers in the law and economics movement confirms for me that there is a personality type who is attracted to these fields. And it ain’t the type to whom the Dunning-Kruger effect would be kind.

    ____

    BR: I beg to differ

  64. Mannwich says:

    Not only that, Julia, but consider the amount of coin spent on said programs. Once you’ve done that, you MUST believe that you’re more brilliant than those who haven’t been through the same or similar fleecing. Otherwise, how could you accept the fact that you just got punked?

  65. crankitt:

    Your comment is destined to become the movie poster pull quote:

    “Insanely funny intellectual comedy.”

  66. S Brennan says:

    Let me offer up, only major oil producer the size of BP is qualified to criticize the Gulf Oil Spill.

    Much of economics today isn’t about truth or near truth, it’s about justifying the rape of less fortunate. Until Milton Friedman’s highly political economic views are irrevocably deconstructed by the economic profession [as a whole] we will return down the idiotic path that has lead to worldwide disaster once before.
    I can not think of any unregulated [or unfairly regulated] competitive human activity that has managed long term survivability. In the US we have taken from our antecedents and our decedents for the last thirty years, this has been possible largely through the fig leafs of justifications proffered by elements the economics profession and the silent acquiescence of peers looking to advance their careers.

    To be clear, my criticism is not directed at every INDIVIDUAL economist, rather it is directed at those who either support or remain silent while others provide highly complex technical reasons for barbarous behavior. Much of economics today isn’t about truth or near truth, it’s about justifying the rape of less fortunate and the planet itself. Religion once filled this role, but tiring of the indefensible, they’ve turned the dirty work over to “Economics”.

    Along these lines I have been banned from commenting on Mark Thoma’s site because I ridiculed a quoted economist, one David Warsh who supported Alvin Roth’s supposition that economists predictions and designs were as reliable as an engineers* In the banned remark, I said, “The economics profession would need to go through the equivalent of a Copernican revolution before this would be true”. Apparently, not only are the high priests of this religion often wrong, they are also pretty thin skinned.

    In the US, we need a 12 part, 1 hour long series on PBS [Freedom to Lose?] outlining the idiocy of Milton Friedman politically motivated economic prescriptions

    * ["...there was still something novel about the proposition that economic engineering was becoming close kin to chemical engineering or medicine" - Alvin Roth Which was followed by David Warsh's comment, "Not any more!"]

  67. zzzzmd says:

    dead hobo Says:
    Transor Z Says

    See, you both don’t get it
    It’s really about the truth. The defense want to know if it is defensible, or should they settle. If the case is truly defensible, we go to trial where we win over 85% of the time, since the truth actually triumphs. I get an hourly because the insurance company will pay no matter what. They are reliable with that. If there is malpractice, it pays for them to settle, as they can usually settle for a reasonable and fair amount. Whether you choose to believe that is up to you.

    I make plaintiffs pay up front, since I have found that if I charge an a hourly, and then tell them they don’t have a case, They give me a hard time about a bill.
    Thus, after a while, only plaintiffs with bonafide cases contact me. They are glad to pay before my opinion, if I tell them the case is no good, I actually save the attorney money, since my fee is much less than the cost to them of loosing at trial. It serves to weed out the ambulance chasers.

    For the record, mine, and any good experts testimony should be the same for either side. This is science; there are facts, articles, and studies to back up opinions.

    The hacks just say it’s because theyI know better. The true experts have good scientific data to back up their opinions.
    Of the 10 cases at trial for defense, I have probably been paid by at least 7 different carriers.
    This is also about 20% of the cases, since the rest are dismissed on scientific grounds, or settled before trial.

    Most people sue out of anger and bad results
    Not all bad results are malpractice
    And a lot of malpractice goes un-sued.
    goes unsued.
    That is the reality

  68. Tarkus says:

    Economics may be hard, but I still remember the story of the mal-investment made in the “island economy” from too much money liquidity taught in Econ 101. Maybe Kartik Athreya (and Alan Greenspan) need to go back to basics.

    Still, the Fed has never divulged anything to have us doubt them, so they must be doing something right…

  69. dsantiago says:

    I prefer to look at this as an artifact that perhaps the schoolchildren at the Fed are beginning to get the message that in the real world a job’s salary brings with it an expectation one’s work has some relationship to tangible usefulness. I sometimes think some of those guys think the checks are some sort of student loan you don’t have to pay back.

  70. dsantiago says:

    So I read and re-read this guy’s paper trying to get a feel for what’s underneath it all. It’s a self-portrait of a man truly ill at ease with taking any substantive stand on how to effect the process. The only thing he’s really certain of is that he hasn’t done anything substantive yet and in the end he resigns himself to accepting his will be an administrative career at best. There’s a tinge of envy really that others who chose other less academic paths have learned to see transparently through the very models he’s so determined to keep opaque. But here’s the thing, the reason why is right there in the paper itself. No guts, no glory. You cannot understand a mold you are not willing to shatter. This is why he fails. It takes the crucible of non-belief to truly understand what’s there. Funny really. One would think someone who’s professed academic interests includes “asymmetric analysis” would know that.

  71. [...] some other criticisms of Athreya, see this, this, this, this, this, this, this and [...]

  72. crankitto11 says:

    Barry:

    Are you sure you want “Insanely funny intellectual comedy” as the pull quote for the movie? That would guarantee to put the gross in Woody Allen territory– RECENT Woody Allen territory. But then you might get to work with Penelope Cruz or Scarlett Johansson, so maybe not all is bad.

  73. rothmanp says:

    Question for BR’s exam: “Go back to 2004, consider the market for sub-prime mortgage-backed securities, and suppose that the purchases in that market made by the GSEs Frannie and Freddie changed, from the actual value of 44% to 0%. All else equal, what would be the expected changes in the price of such MBSs and mortgage interest rates? In answering, discuss whether you think such a shift from 44% to 0% would be inconsequential?”

  74. rothmanp says:

    Another question for BR’s exam: “Some commentators have criticized (sometimes quite stridently) former Fed Chairman Greenspan for presiding over a regime of ‘ultra-low’ interest rates for much of the first half of the past decade. Currently, in the US economy we observe a very high unemployment rate and meager employment growth, while by several measures it’s likely that the recession ‘ended’ close to a year ago. In this environment, we also observe very low (most would likely even say ‘ultra-low’) interest rates. In light of the criticism referred to above of Greenspan, do you think, all else equal, it would be useful for the Fed to immediately engineer significant increases in interest rates? Perhaps a fed funds target of 2.5%? 5%? 7.5%? 10%? Higher?”

  75. [...] with corporate balance sheets or history prevent him from opining on the subject. Perhaps Kartik Athreya should have been more focused on the mainstream media, instead of bloggers . . [...]

  76. [...] am not going to get all Kartik Athreya on everyone, or claim that only lawyers should discuss this. But too many people seem to be [...]