I never learned much macro-econ; they didn't respect it at Caltech where I got my Ph.D. So while my econ colleagues blog 24/7 about the macro crisis, I've mostly kept quiet. But I can speak on this issue: who are the real "experts"?
Where do I see these macro predictions from macroeconomists?
"It is a complex process with multiple variables all of which interact with each other making predictions as much art as science."
I've seen this line throughout my schooling and professional life. Is it anything more than bullshit? Would we be more accurate to use the latest language of cognitive science and say "as much system 1 intelligence as system 2 intelligence"? Or alternatively, is what a line like this really means "as much bullshit as science"? Where, and what, is the non-science art that helps increase predictive accuracy?
"While Bryan reports "almost none of the economic `experts' pontificating [in the media] on Obama's economic plan are actually [degreed] economists"
the updated but still interesting list of PhD economists who have appeared on recent chat shows is here.
"Who is supposed to be the parents here?"
Dick Fuld. John Thain. And those other guys with the legal fiduciary responsibility - I believe they are sometimes known as "Directors?" They are supposed to be, you know, the grown-ups here?
"we can and should still blame him for not warning often enough, and loud enough"
What would have been the amount of warning that would, without hindsight, have been "enough?"
When Li had returned to China, Wilmott and several other well-known quants and even quant critics such as Taleb picked up this role, shouting from the rooftops (or in the case of Wilmott, from the pages of his glossy quant magazine), on the need to use the model responsibly, to be aware of its dangers? This wasn't enough?
With all due respect, Wei Dai, what did you want? A personal letter to your house? All the quants knew the issues, they weren't a secret.
When children play with handguns it's the parents' fault, not Eli Whitney's.
Who is supposed to be the parents here? The government? In that case it's more like handing a gun to a kid playing in the street plainly without adult supervision.
Although Li did warn against misuse of his research, we can and should still blame him for not warning often enough, and loud enough. Even if that isn't fair, it's good if it decreases the probability of the next crisis by even a small amount (by teaching other researchers to give more and louder warnings in similar situations).
To Philip Goetz, who commented on one of my comments: I was referring to applicants for faculty positions at Harvard. I presume that the existing faculty at Harvard does the best job they believe they can to select the best future faculty -- and I don't see any reason to believe they fail to do so. Of course I use "Harvard" just to pick a random prestigious school, not to suggest it's distinctly better than the rest.
To Robin Hanson: selection of "Harvard" faculty is chance insofar as experts are unable to rate the level of expertise of their colleagues, while forecasting economics is chance insofar as experts are unable to understand the world to make forecasts. It seems straightforward to me that experts can, in principle, rate the expertise of their colleagues, while at the same time not be able to make forecasts. I guess this draws the question what is valued as "expertise," when it doesn't involve forecasts. But I think we have a good sense of a person's creativity, aptitude, and knowledge -- in deep theoretical physics there are few predictions too, but still it is very clear who are the best physicists.
Wei, reading an article or two would not make me an expert.
Zac, persistence of stupidity is a problem for most any consensus institution; I can't see why it would be more a problem with decision markets than with other such institutions.
"interesting micro issues"
Indeed, there are some issues of incentives, policy design and signaling that Robin could discuss. But I'm impressed by Robin's willingness to admit he doesn't know very much about banking practice and so is slow to discuss them. I am unimpressed by over-frequent authors whose repeated writings display a terrible ignorance of banking practice. And so while their "economic discussions" may have meaning in some abstract realm, they are fundamentally laughable from an actual banking perspective.
As for the article against David X. Li, wow, what a hater. Li is a genius. The article is wrong to attempt to contrast him with Paul Wilmott. Altho' there is one quote saying it's not Li's fault, the overall article is certainly biased against Li. Wilmott, the father of all quant basically, said long ago these models weren't perfect and shouldn't be the end-all. Li's model was meant to be one tool to help make rating issues more tractable - it was never meant to be used alone, without other metrics, it was never meant to rate a billion-dollar deal in 20 minutes, and Li always said so.
From Wei Dai's blog: "It seems that some people did notice the flaws, and tried to short the market, but there is so much "dumb money" out there which can easily overwhelm "smart money" on a timescale of years. Is this a problem for decision markets? Why or why not?" -- this is the sort of microeconomic issue related to the crisis that I personally want to see more discussion about. But maybe its not an issue of insufficient demand - people really seem not to know what to write. And microeconomists, unlike macroeconomists, don't like to just make up answers.
Robin, there are lots of interesting micro issues in this crisis that you can talk about. What about this? I listed a few more issues here.
Publicise the high status individuals participating in prediction markets? Personalise them?
It seems that many notable academics in Australia seemingly get the influence they have they are more because they have a compelling style of public speaking and slot directly into some stereotype for a wise academic.
You're missing the point. The financial system is one big scam. Consider the Compound Interest Paradox (http://fskrealityguide.blog.... Most people have either one of two strong reactions to that post. They either say "Very insightful, FSK!" or "FSK is full of ****! FSK should go take an introductory economics course!"
Economics is one of those issues where the vast majority of people can't think rationally, especially those who have received a lot of "education"/brainwashing.
To clarify, was going through the Caltech Social Science Ph.D program substantially different than going through a GMU Econ PH.D program or a poli sci Ph.D program, in Robin's estimation? Other than the fact that some schools will have profs who want to stress the importance of macroecon, where Caltech seemed not to respect it, of course.
I'd be curious to hear the story about Caltech's lack of respect for macroecon. I certainly lack respect for macro. I'd be interested in hearing what Robin thinks Caltech is trying to signal by being different and not having more formalized academic departments and having "divisions". Does that just breakdown into profs acting like they are in departments anyway? Was going through the Ph.D program that was called a Ph.D in Social Science different in any substantive way from what Robin sees in GMU's Ph.D program or others?
I second Yvain's question.
One, without any reason to think otherwise, I am moretrustful of a Harvard academic than one chosen at random because I presume that Harvard University has applied rigorous vetting to its applicants.They have. They make sure to admit only people with rich parents.
Consider for instance, selecting an investment manager by past performance. I would think, if you applied this strategy to mutual funds, you would lose money (at least relative market average).You would. I've looked into it. If you know how to make money by shorting them, please tell me. :)