Learning about the world of economics I have noticed not one economist or market prognosticator throughout modern history (and before?) hasn't made at least a couple of terribly or even horrible calls discrediting most of their previous work if one were to be truly rigid in his judgement. From Keynes ("We will not have any more crashes in our time." ) to Irving Fisher ("Stock prices have reached what looks like a permanently high plateau." ) days before the crash of '29 to the likes of Mises claiming each and every reflation atempt must end in a currency collapse (Japan?) to the 'guru's and Keynes of our time (who's flaws and missed calls have been well covered on ET and elsewhere over the last few years). So, in your experience or view, does a bad call, be it fundamentally or short term, have the power to totally discredit a persons lifework or should the notion that no one can predict the future nore should this be expected gain the uperhand here? "Don't listen to them, they are all salesmen looking to earn a dollar themselves." Usually the clasical answer on such kind of question but isnt that a bit easy? Say, a central bank is printing money and you want to know how to position yourself you learn about how such a scenario could play out and unavoidably you end up with theories launched by people with a trackrecord like it or not. For instance: Irving Fisher: " Each dollar of debt still unpaid becomes a bigger dollar, and if the over-indebtedness with which we started was great enough, the liquidation of debts cannot keep up with the fall of prices which it causes. In that case, the liquidation defeats itself. While it diminishes the number of dollars owed, it may not do so as fast as it increases the value of each dollar owed. Then, the very efforts of individuals to lessen their burden of debts increases it, because of the mass effect of the stampede to liquidate in swelling each dollar owed. The more the debtors pay, the more they owe." Should this be disregarded as nonsence cause Fisher was the clown who said stocks could never go down? Basically I was wondering how high peoples standards on ET are to consider certain issues as self evident or not and how thin the line is between 'learning' the 'truth' or following your own judgement skills regardless of them being considered generally accepted or not. Cheers.
No, of course it doesn't. Does the fact that Newton believed in and practiced alchemy invalidate the foundations of classical mechanics?
For a laugh I'll be starting a blog with a section poking fun at the history of economics, done with short clips that resemble old public service announcements, stop motion clay animation, etc... To borrow a quote from French mathetician, economics can be described as a "collection of ingenious fallacies."
I am working on my 'Incredibly Inefficient-Market, But Only For So Long' hypothesis. Wish me luck in my bid for the Nobel in Stockholm!
economists are at a tactical disadvantage because the rules of the game keep changing and the amount of arguably accurate information available is pretty small. So not only are you working blind, but you can't even get your bearings. Take the credit crisis. You could have spotted the housing bubble and you probably could have seen that derivatives trading posed some serious risks to the system. You even could have suspected that there was a lamentable decline in underwriting standards for mortgages. But I don't think there was any way, at least at the time, to put a number on at least the 2 latter phenomena. It also would have been difficult to quantify the extent to which rating agencies had sold their souls and were putting investment grade stamps on securities that were about as transparent as a black hole. So even if the rest of their model was precisely on target and even if they had regressed it back to Pharaonic Egypt with 100% accuracy, it wouldn't have mattered.