GMO's Jim Montier Destroys Kartik Athreya
Remember the Fed economist who said all bloggers are idiots, and only Ph.D's are smart enough to understand why the market can go up 4% on double dip depression news? Neither do we. But the following obliteration of the Richmond Fed's errand boy by GMO's James Montier, who is once again back to posting on his blog http://behaviouralinvesting.blogspot.com, is completely worth the read.
Barbie does economics!
The sheer hubris of many
in the economics profession never ceases to amaze me. Take for instance a
recent paper by Kartik Athreya of the Federal Reserve Bank of Richmond entitled “Economics is Hard. Don’t let Bloggers
Tell You Otherwise”. In a move that is eerily reminiscent of the
controversial talking Barbie of the early 1990s who fatefully uttered
“Math class is tough”, Athreya’s short paper essentially lays out a
quite staggering claim :- that economics should be left to those with a
PhD in the subject!
Athreya describes himself as “a worker bee
chipping away with known tools”. He goes on to say “writers who have not
taken a year of PhD coursework in a decent economics department…cannot
meaningfully advance the discussion on economic policy”. You’ve got to love the ‘decent’ in that
sentence – it wreaks of intellectual snobbishness of the highest order.
fact, Athreya’s ire isn’t limited to what she sees as uninformed
debate, he seems to object to anyone who attempts to make the policy
issues of the day clear even if they have a PhD. He pejoratively
describes both Paul Krugman and Brad DeLong as “Patron saints of the
Macroeconomic Policy is Easy” movement.
He argues that we won’t
expect particularly informed discussion on the causes, consequences and
treatments for cancer from non-Oncology specialists, so why we would we
expect non-specialists to offer any useful debate on economics.
the analogy is false. Modern medicine is based on scientific
principles and follows an evidence based approach. Even then some
estimate that the majority of published findings in medical journals are
Economics starts from a far worse
place. It isn’t a science, and often seems more interested in twisting
the facts to fit a theory rather than the other way around. In fact, as
Nassim Taleb has pointed out, economics is more akin to medieval
medicine than its current practice, “Medicine used to kill more patients
than it saved – just as financial economics endangers the system by
creating, not reducing, risk.”
The idea that what we need is more
‘worker bees’ gaining their PhD’s from conducting ‘angels on a pin head’
like work based on minor alterations to previous research makes me want
to cry. Where were the warnings from the orthodox economics
establishment ahead of the global financial crisis? Oh, that’s right
there weren’t any.