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Nobel Should Be Refunded

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June 16, 2009 – Comments (12)

Krugman is dangerous.

12 Comments – Post Your Own

#1) On June 16, 2009 at 8:40 AM, whereaminow (21.65) wrote:

The Nobel Prize in Economics is the "Sveriges Riksbank Nobel Memorial Prize."

Sveriges Riksbank "is Sweden’s central bank and a public authority under the Riksdag, the Swedish parliament.  The Riksbank is responsible for conducting monetary policy, the objective of which is to maintain a low and stable level of inflation. The Bank also has the task of ensuring that payments in the economy can be made safely and efficiently."

That about says it all. I'm shocked that Hayek ever got his.

David in Qatar

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#2) On June 16, 2009 at 9:02 AM, whereaminow (21.65) wrote:

In case people don't read the attached article that dwot posted:

To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble.- Paul Krugman, 2002

David in Qatar

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#3) On June 16, 2009 at 9:20 AM, alstry (35.14) wrote:

Can anyone explain how this nonsense gains general acceptance unless the goal is eventual self destruction????

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#4) On June 16, 2009 at 9:23 AM, portefeuille10 (98.78) wrote:

his prize lecture

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#5) On June 16, 2009 at 9:24 AM, whereaminow (21.65) wrote:

The establishment protects its own, alstry. It makes perfect sense when reflected against Rothbard's Anatomy of the State.

David in Qatar

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#6) On June 16, 2009 at 9:34 AM, Quellist (< 20) wrote:

#1

"Like the Nobel Laureates in Chemistry and Physics, Laureates in Economics are selected by the Royal Swedish Academy of Sciences."

So the "Riksbank" has no say in who gets the price.

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#7) On June 16, 2009 at 9:41 AM, whereaminow (21.65) wrote:

Quellist,

Not all Nobel Prizes are created equal:

Family members were shocked when they learned that Nobel had dictated that his fortune be used to establish the Nobel Prizes. They contested his will, but his final wishes were executed and the first awards were distributed in 1901, on the fifth anniversary of his death. The prize in economics, however, was established in 1968 by Riksbank, the Swedish bank, in honor of its 300th anniversary.

I think it's safe to say that they have tremendous influence.

David in Qatar

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#8) On June 16, 2009 at 11:36 AM, Quellist (< 20) wrote:

whereaminow,

yes, I know how the prize got instated. But considering the political climate, the controversy surrounding the prize in the first place, the fact that the Riksbank is a branch of government and the supposedly independent Royal Academy and the committee with at least some tenured professors.

So if they were applying pressure/influence the probability that someone would blow the whistle would be large and the fallout would be career-ending-bad for everyone involved.

Obvisouly you could be right but I'm doubtful.

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#9) On June 16, 2009 at 1:18 PM, ajm101 (31.80) wrote:

Way to go, Dave in Qatar - suggesting that the Nobel prize is rigged.  Bravo.

I would humbly suggest the conspiracy is even wider.  MIT granted his PhD, so clearly they're in on it.   All the schools at which he has been a professor should be suspect, too: Yale, MIT, UC Berkley, LSE, Stanford, and currently Princeton.  A real rogue's gallery there.  The glaring omission of any work with Mises clearly shows that he's in league with the Trilateral commision and shadow government.

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#10) On June 18, 2009 at 7:56 PM, AdirondackFund (< 20) wrote:

I'm wondering the same thing.  The scale is simply too large and the idea too simplistic.  Jack the economy on devaluation steroids to accomplish what?  This is the down and dirty.  Nobody will loan to us again, without charging a higher premium, if this is how our country does business. 

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#11) On June 18, 2009 at 8:22 PM, rrr2004r (< 20) wrote:

I agree it should be refunded, great post.

And ones of all others since it is clear their economic "discoversies" are worthless garbage, sorry for strong word. Things are this guy and all other alive before him did not predict the largest sh&t of their life  - our damn recession.  What the hell this guy will be talking now for the rest of their lifes? How good their economic models are ?

REFUND IT, KRUGMAN ! Be honest. 

Sweedish Academy is full of idiots. Do they have in rising order - Ph.D.,  Doctors degrees, Academy corresponding member and Academician degrees or just a Ph.D. like in US - the lowest degree any retard can get?  

 

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#12) On June 23, 2009 at 11:14 AM, SkepticalOx (99.42) wrote:

I think Taleb (of "Black Swan" fame, says it best): Nobel Prize of Economics is a SHAM:

From FT:

Last August, The Wall Street Journal published a statement by one Matthew Rothman, financial economist, expressing his surprise that financial markets experienced a string of events that “would happen once in 10,000 years”. A portrait of Mr Rothman accompanying the article reveals that he is consider ably younger than 10,000 years; it is therefore fair to assume he is not drawing his inference from his own empirical experience but from some theoretical model that produces the risk of rare events, or what he perceives to be rare events. 

The theories Mr Rothman was using to produce his odds of these events were “Nobel-crowned” methods of the so-called modern portfolio theory designed to compute the risks of financial portfolios. MPT is the foundation of works in economics and finance that several times received the Sveriges Riksbank Prize in Econ omic Sciences in Memory of Alfred Nobel. The prize was created (and funded) by the Swedish central bank and has been progressively confused with the regular Nobel set up by Alfred Nobel; it is now mislabelled the “Nobel Prize for economics”.

MPT produces measures such as “sigmas”, “betas”, “Sharpe ratios”, “correlation”, “value at risk”, “optimal portfolios” and “capital asset pricing model” that are incompatible with the possibility of those consequential rare events I call “black swans” (owing to their rarity, as most swans are white). So my problem is that the prize is not just an insult to science; it has been putting the financial system at risk of blow-ups.

I was a trader and risk manager for almost 20 years (before experiencing battle fatigue). There is no way my and my colleagues’ accumulated knowledge of market risks can be passed on to the next generation. Business schools block the transmission of our practical know-how and empirical tricks and the knowledge dies with us. We learn from crisis to crisis that MPT has the empirical and scientific validity of astrology (without the aesthetics), yet the lessons are ignored in what is taught to 150,000 business school students worldwide.

Academic economists are no more self-serving than other professions. You should blame those in the real world who give them the means to be taken seriously: those awarding that “Nobel” prize.

In 1990 William Sharpe and Harry Markowitz won the prize three years after the stock market crash of 1987, an event that, if anything, completely demolished the laureates’ ideas on portfolio construction. Further, the crash of 1987 was no exception: the great mathematical scientist Benoît Mandelbrot showed in the 1960s that these wild variations play a cumulative role in markets – they are “unexpected” only by the fools of econ omic theories.

Then, in 1997, the Royal Swedish Academy of Sciences awarded the prize to Robert Merton and Myron Scholes for their option pricing formula. I (and many traders) find the prize offensive: many, such as the mathematician and trader Ed Thorp, used a more realistic approach to the formula years before. What Mr Merton and Mr Scholes did was to make it compatible with financial economic theory, by “re-deriving” it assuming “dynamic hedging”, a method of continuous adjustment of portfolios by buying and selling securities in response to price variations.

Dynamic hedging assumes no jumps – it fails miserably in all markets and did so catastrophically in 1987 (failures textbooks do not like to mention).

Later, Robert Engle received the prize for “Arch”, a complicated method of prediction of volatility that does not predict better than simple rules – it was “successful” academically, even though it underperformed simple volat ility forecasts that my colleagues and I used to make a living.

The environment in financial econ omics is reminiscent of medieval medicine, which refused to incorporate the ob servations and experiences of the ple beian barbers and surgeons. Medicine used to kill more patients than it saved – just as financial economics endangers the system by creating, not reducing, risk. But how did financial econ omics take on the appearance of a science? Not by experiments (perhaps the only true scientist who got the prize was Daniel Kahneman, who happens to be a psychologist, not an econ omist). It did so by drowning us in mathematics with abstract “theorems”. Prof Merton’s book Continuous Time Finance contains 339 mentions of the word “theorem” (or equivalent). An average physics book of the same length has 25 such mentions. Yet while economic models, it has been shown, work hardly better than random guesses or the intuition of cab drivers, physics can predict a wide range of phe nomena with a tenth decimal precision. 

Every time I have questioned these methods I have been abruptly countered with: “they have the Nobel”, which I have found impossible to argue with. There are even practitioner associations such as the International Association of Financial Engineers partaking of the cover-up and promoting this pseudo-science among financial in stitutions. The knowledge and risk awareness we are accumulating from the current subprime crisis and its aftermath will most certainly not make it to business schools. The previous dozen crises and experiences did not do so. It will be dying with us, unless we discredit that absurd Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel commonly called the “Nobel Prize”. Report this comment

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