THE FIRST DEGREE VIEW



The Nobel Prize for nothing

Stephen Fisher - Monday, October 09, 2017
Q: Why did the monkey sit in the tree?
A: That's what he does. Its behavioural.

Today is a sad day for the field of Economics in particular and for Science in general.  Richard Thaler, the populist champion of the embarassing branch of economics labeled 'behavioural', was named 2017 Nobel Laureate for Economics. It seems that the current passion for populist political personalities has spilled over into academia.  The Noble awards committee should be ashamed of itself.

Behavioural economics is an 'explain-all' theory.  Why do people leave their jobs? Its behavioural.  Why do firms issue bonds rather than equity? It's behavioural.  Why do Europeans work shorter hours than Asians? Its behavioural.  Why does the monkey sit in the tree...

The problem with explain-all theories is that by explaining everything, they actually explain nothing.  Our monkey in the tree may well be there to escape predators on the ground or since the fruit he eats happens to be high up.  A theory which delivers a testable hypothesis is able to discriminate between two or more possible explanations and successfully eliminating one possibility is a contribution.  Behavioural economics has no such luck.

Behaviouralists often criticise mainstream economics for assuming that people are rational.  Behaviouralists point out in their experiments that people are prone to make mistakes.  Rational agents have expectations that are unbiased but there is no requirement that they do not make mistakes.  In fact error is part of economic reality.  Systematic error is where the rationalists and behaviouralists part ways.

Thaler is genuinely entertaining and his seminars are reminiscent of a stand-up comedy club in the West Village. He has had a ball with Finance. He started out on the correct foot graduating from Rochester, then it all went wrong.  Making fun of scientists is age old but, dudes, it's not Nobel prize-worthy. 
Comments
Post has no comments.
Post a Comment




Captcha Image

Trackback Link
http://www.firstdegree.asia/BlogRetrieve.aspx?BlogID=17690&PostID=993947&A=Trackback
Trackbacks
Post has no trackbacks.

We all use our spare time differently - some of us sail, some of us read and some of us spend just a little too much time working out whether that South Australian Shiraz really did deserve a gold medal

 

And then there are those of us who spend their spare time thinking about the better application of monetary policy, about Central Bank intervention risk and, of course, about Greece

 

Meet Fish, our CIO, who is almost solely responsible for keeping First Degree's lawyers constantly on standby, with his alternative (and just the right side of libelous, according to those lawyers) view of what those in power are mucking up

 

If you like what he writes, we are happy to take you on as a Client, because those lawyers are pretty expensive!

 © FIRST DEGREE GLOBAL ASSET MANAGEMENT PTE. LTD.

+65 6681 6632