October 7, 2008

Nobel Prize in Economics

My first suggestion is that rather than hand out a new Nobel Prize in Economics this year, they instead take away one they gave to some economist in the past who now looks like a prime nitwit.

If that's too radical, how about giving the Nobel to an economist who was actually, like, right? How about Robert Shiller who has been banging the gong about the coming housing crash for years?

My published articles are archived at iSteve.com -- Steve Sailer

31 comments:

dearieme said...

It's only a pseudo-Nobel, Steve - it wasn't in the old boy's will; the economists just invented it as self-congratulation a few decades ago. A suitable gesture now would be to scrap it.

Chief Seattle said...

Bravo, Steve. There's a reason that Alfred Nobel didn't put a social science award in his will. Beyond the basic concepts of micro and macro, economics is largely a rationalization of politics. Unlike science, it has little predictive power and is rarely falsifiable. Want proof: Look at our current Fed Chair. A reputable academic who made his name studying the Great Depression. If anyone can keep it from repeating it's him, right? Well, we'll see.

James D. Miller said...

Which economists were wrong?

I'm an academic economist and can tell you that what happened to Fannie and Freddie were of no surprise to economists. The real problem with economists is that we don't have enough influence over politics.

Eric Falkenstein said...

Shiller has been talking about housing for years, but prior to 2007, his outlook for housing was merely cautious. Read his 2005 version of Irrational Exuberance, which has a chapter on housing, and basically you get of 'on the one hand...on the other hand'. His latest book, was written in response to the housing crisis. The only one's who called the subprime crisis, are probably many risk managers in the bowels of large organizations that were never promoted (like the head of risk management at Freddie Mac, who left to teach in 2004), or Stan Liebowitz, who at UT Dallas--but note he gave up carping about this in the early naughts because it was pointless, no one wanted to hear him.

Anonymous said...

The Austrian school has gotten it right from the beginning, but you don't get Nobels for telling people what they don't want to hear.

--Senor Doug

headache said...

Good point. Here in Germany we have Prof. Hankel who as one of the four Professors who put in a lawsuit against the Germany state for exchanging the DM for the Euro (of course they lost). I'm reading his book and apart from predicting the current Wall Street crash back in 2000, he also explains that the EU-construct is structurally not able to work unless the EU becomes a dictatorial super-state (which unfortunately seems to be happening). The reason is that monetary and fiscal policy should reside with the same authority. In Europe monetary policy is with the ECB and fiscal policy with the nation states (because the government of the day decides on fiscal policy).

That was the reason why each individual state decided on bail-out mechanisms on its own, and not on an EU-basis, as some nitwit anchor on CNN was frantically demanding they should do. There is this structural reason for this which the super-elite CNN journos obviously do not understand, or maybe they just demand the EU-Super state NOW (just as Krugman demands that the Obama-team should form a government of national unity with the Bush admin NOW, i.e. without regard to that stupid election).

But then the Fed acts as a kind of separate state and competing entity to the US government so you seem to have the same problem. Hankel is a Keynesian so I wonder whether that wasn't a smarter theory than the open-markets rubbish which Hankel convincingly debunks.

King Obama said...

You god damn chicken littles are pathetic. I swear, Steve attracts rejects and neo-nazi types (maybe because Steve is a reject and a neo-nazi).

Keep bitching about the economy. It won't matter. When the economy turns around, you little bitches will be nowhere to be found.

Anonymous said...

"I'm an academic economist and can tell you that what happened to Fannie and Freddie were of no surprise to economists. The real problem with economists is that we don't have enough influence over politics."

Why aren't you rich?

Anonymous said...

1. The Price in economics is given for contributions to research, not policy or investment advice.


2. The price is not supposed to reflect contemporary events.
In fact if they give the price for the criteria you suggest, relating to the housing crisis etc, it WOULD be pseudo-science.

They should just give to to some technical macro guy or whatever they were going to before.

I am also curious why anyone would read Sailor if they don’t think social SCIENCE, thinking methodically and fact and logic based about social issues, can exist?

Anonymous said...

It hasn't been mentioned anywhere that I've seen, but remember when we were talking about Hannah Rosin's article and discussing "mixed-income" housing, vouchers, section 8, etc.?

It seems to me that our government (and not just ours, but most first world governments) was, via economic means, trying to transform poor minorities into middle-class whites. Our government apparently believes in the premise that man responds primarily to economic incentives and second, that he is a blank slate. We are paying the price for this large, decades long experiment that seems to have gotten more radical until it came to a crashing halt.

In 1978, a year after the C.R.A., the Section 8 housing program began. This subsidized housing.

In 1993, HOPE IV began. According to wikipedia:

Public housing in the US has been overhauled in recent years after criticism that neglect and concentrated poverty have contributed to increased crime. HUD's 1993 HOPE VI program addresses these issues by funding renewal of public housing to decrease its density and allow for tenants with mixed income levels.

*In summary, it wasn't enough for the poor to be put into homes via tax grabs (section 8 and HOPE IV) and relaxed lending guidelines, they were put into homes amongst the working and middle class in the hopes that middle-classness would rub off onto the underclass. Have a middle-class home, have middle-class neighbors, ergo, become middle-class.

**One other thing, the rising cost of health care hasn't even been addressed. What all caused it to rise drastically in the past few years and what role does it play in the economic malaise? I suspect that the answer is tangled up with two factors: the tort system and illegal immigration. If health care costs are important, which of these factors is more germane? According to the American Journal of Obstetrics and Gynecology, only a handful of states have good tort laws. We do know that illegal immigration density correlates highly with foreclosures, but how and why? One theory: tipping points of non-payers is more fundamental and led to rising health care costs whereupon hospitals and doctors became strapped. This lead to economic malaise and, consequently, foreclosures among the most vulnerable. Michigan would be an exception, but they're an exceptional state. One would have to see if health care costs correlate with foreclosures. I know according to AJOG, Florida shot way up in 2005 to become the third most expensive state to have a baby. Florida has both poor tort laws and a high illegal immigration population.

Other first-world countries shared even this trait with us, too.

Roger Chaillet said...

Read Dr. Gary Shilling's articles from Forbes magazine. He had things pegged a few years ago. http://www.agaryshilling.com/front.html

He's an economist.

I'm pretty sure he's wealthy.

Seems to me it does have predictive power.

DK said...

Seems to me it does have predictive power.

With 100 people predicting 10 things over ten years, someone's got to be right. Does not say ANYTHING about predictive power!

Captain Jack Aubrey said...

I know we're supposed to ignore the trolls, but really...

King Obama<

Keep posting. Keep in mind Steve actually moderates the comments. If he's letting your commets through it's only for our amusement.

Chief Seattle said...

"I'm an academic economist and can tell you that what happened to Fannie and Freddie were of no surprise to economists. The real problem with economists is that we don't have enough influence over politics."

No, the real problem is that it's not a science and has no predictive power. If it did, people would listen to economists by now. You don't hear physicists whining about car crashes saying "If only they'd listened to a physicist this never would have happened." Look at institutions like the IMF and World Bank - they're run by economists, and they leave ruin in their wake with every country they "help".

Fred said...

You must be reading Nassim Nicholas Taleb again.

Anonymous said...

Actually, Steve there is one economist who I do respect greatly, namely the Briton Wynne Godley.
Godley looks and speaks just like what you would expect an old-school English Oxbridge Don to do so.
Being a dsiciple of JM Keynes, but modified somewhat, Godley's point of view is unfashionable to say the least amongst the current jerks who have dictated policy, mamely the neocons, the WSJ and 'The Economist' magazine.
His chief claim to fame was advising the British Labour Party in the late 70s (during the period of 'Bennite'* ascendancy) in the so-called AES or Alternative Economic Strategy.This hinged mainly on the proposition that Britain needed to abandon 'free trade' and impose swingeing tarrif barriers asits only possible 'bolt-hole' out of permanent crisis.

*Named for Tony Benn.
British socialist politician, intellectual and orator, in the style of the 'Bloomsbury' socialists.

Anonymous said...

The 1997 prize is a good candidate for that, Steve.

Planetary Archon Mouse

Micahel T said...

I agree that economics is a rationalization of politics. The Austrians are the most 'economically correct' lot, but few people would want to live in their world. Thus we have the endless bickering about how much government intervention and its timing. That wouldn't be so bad if it were our only problem. Sadly, the demographic disaster looms much larger.

Roger Chaillet said...

Dr. Gary Shilling manages tens of millions of dollars.

He does have predictive abilities.

No one would trust him otherwise.

As for science, his undergraduate degree is in physics.

Looks like I was right.

MQ said...

I'm an academic economist and can tell you that what happened to Fannie and Freddie were of no surprise to economists.

if you're truly an academic economist you should know that Fannie and Freddie were not at the heart of this crisis (although I realize . You should also know that fancy derivatives designed by using mathematical financial engineering techniques that came straight out of economic theory were pretty crucial to the Wall Street mess. Very few economists questioned the massive private sector asset bubble as it blew up. Fannie and Freddie were right-wing targets (properly, for their bad accounting), but they didn't start to seriously buy into subprime or Alt-A until about 2005 to 2006, as things started to wobble. The private sector created a huge amount of fake wealth, and economists if anything made excuses for it rather than questioning it (remember the global savings glut bit from Bernanke? Greenspan's celebration of "financial innovation"?)

Anonymous said...

Side note:

Did anyone notice there are 5 Asians
on the Nobel roster this year. Is this an anomaly or a likely coming trend of the next 25- 50 years?. Now, Japan had developed its institutions a while back so one might expect them to snag a few. The looming question is whether China will develop the scientific temperament.

Jun said...

Chief Seattle: "Look at institutions like the IMF and World Bank - they're run by economists, and they leave ruin in their wake with every country they 'help."

Maybe that's the idea.

Look at what happened to Argentina. Country a debtor nation (like the U.S.) -- when Argentinian house-of-cards came crashing down, foreign investors swooped in and bought most of the nations' big companies (YPF, telecommunications, railroads) in the subsequent fire sales.

Good deal (for the buyers).

Similar principle should work with IMF and World Bank "funding" -- get a country in debt and then cash in later.

Guv'nor said...

If there is a credit crunch why have interest rates not gone up? Why doesn't Microsoft, sitting on $25 billion, lend out at 10%? Why doesn't the Gates Foundation and Soros and anyone else with a billion plus take advantage of this credit crunch that I don't believe is happening and make some money?

Looks to me like a lot of deliberate shock and awe scaremongering (threats of worst depression since the 30s) in order to implement an agenda (bailout), a nice bookend to the deliberate shock and awe scaremongering in order to implement an agenda that began this administration. I've seen many stock crashes, every time it recovers.

Anonymous said...

Basically there is only one economic 'law' that is atually worth a tuppenny damn:
"The price of any good or service is that which a purchaser is prepared to pay for it".
Simple, plain commonsense one would think, (but no doubt many economists with strings of letters after their names and cushy tenureships would quibble with this statement).
Well anyway, apart from that one maxim all the rest of 'academic' economics all the tmes stuffed full ofd pseudo theories, all the equations all the graphs, everything, is just a lot of stinking bullsh*t, whose only value is perhaps to burn on the hearth on a col;d winter's day to keep warm.
Science it ain't - that's the key message to get across - it's a pseudoscience whose practitioners (mostly third rate men who couldn't hack real science), try desperately, with the absurd results we can all see, to ape the real men of science.

Anonymous said...

it's a pseudoscience whose practitioners (mostly third rate men who couldn't hack real science), try desperately, with the absurd results we can all see, to ape the real men of science.

To be fair, their math is often highly advanced and quite good. However, the economy is not an equation or a formula; it is a computer that is constantly being fed new information. That's why real economists proceed from a priori axioms in order to explain what's happening. The Austrian school is the only one with a coherent theory that has been right from the start. All the others, it's like watching children try to deconstruct a magic trick.

--Senor Doug

Anonymous said...

I like reading this blog, but sometime I get the feeling that Steve Sailer is to Economists as L. Ron Hubbard is to Psychiatrists.

Anonymous said...

"Dr. Gary Shilling manages tens of millions of dollars.

He does have predictive abilities.

No one would trust him otherwise."

The guys at LTCM had nobel prizes and billions. And they went tits up. So much for the vaunted utility of this so called science.

Anonymous said...

The central tenet of 'science' or natural philosophy to give it is older and more accurate name, since the subject first became 'serious' at the time of the enlightenment is the acceptance of theory.
To put it bluntly either a theory is correct and therefore accepted or it is incorrect and rejected as worthless.The acceptance of theory, which can be contentious and a long-wrought process, is done by convincing the most hard-boiled sceptics by sheer weight of evidence and predictive and explanative power to the point where oppostion is no longer credible.
Here of course, natural sciences differ from mathematics where formal proof is apparent and incontestable.
Such things as we take for granted these days, suchsas atomic theory were not generally accepted until the late 19th century, strangely enough.The very eminent German physicist Von Helmholtz was a noted sceptic of the atom.It was Einstein with his explanation for Brownian motion who really set the seal on the existence of atoms.
Similarly, there was a controversy between the 'spermists' and 'ovists' in the 18th century over the fructifyuing element of hereditary.
Darwins theory of evolution - accepted by virtually every academic bilogist - but challenged by the mass of unimformed opinion is another case in point.
Really, my point is that the well-known aphorism that is impossible to get two economists to agree on anything exemplifies the 'discipline' as being essentially worthless.The ubiquitous divergence of opinion demonstrates that the 'theories' are not accepted - and therefore worthless.

nsam said...

An article about the austrian school would be instructive..and why they are marginalized in academia.. they seem to have been on the ball for a while

http://mises.org/story/3128

Anonymous said...

There is an old English saying 'The proof of the pudding is in the eating', which aptly sums up the failure of the whole gaggla of high-paid, 'high powered' economists in the Fed, the Treasury, academia and elsewhere to even whisper a warning of the finicial crisis.
Since the time Adam Smith wrote his seminal 'Wealth of Nations' - one of the very few economics texts actually worth reading, eriou attention was focused on the perpetual problem of why poverty exists and what can be done to allieviate it.
This is, in fact, the only justification for 'economics'.
The fact is today more humans live in hand-to-mouth poverty than in any other historical period.
This is despite the fact that government policy in virtually every nation on earth (perhaps save the Andaman Isles whose inhabitants are distinctly brighter than your average Harvard economist)has been dictated by economists -and has been continuosly for very long period of time (the 'magic wand' argument perpetually used by economists to let them off the hook won't wash).
On the other hand a humbl little book by two non-economists, namely Richard Lynn and Tatu Vanhanen, that has no pretensions to theory whatsoever - but is merely descriptive and evidence based - does appear to have tremendous predictive power.
MORAL: Junk the economists and rely on the real cientists.

Anonymous said...

"
Did anyone notice there are 5 Asians
on the Nobel roster this year. Is this an anomaly or a likely coming trend of the next 25- 50 years?. Now, Japan had developed its institutions a while back so one might expect them to snag a few. The looming question is whether China will develop the scientific temperament."

It's an anomaly if you look at the last 25 years, but if you look at this decade, the Japanese have done well. Not that much data but I will speculate it shows that maybe until after 1980 was Japan rich and built up enough to do a lot of highly advanced research. So now in the 2000s their decent pull of prizes is showing up.

The Koreans and Taiwanese are at the $20k/per capita level and are probably limited in the advanced stuff. Koreans haven't produced a winner and Taiwanese can only claim one person who did his work in the US.

Singapore has reached $40k/per capita. Anyone know how good is their research? What about Hong Kong?