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The Nobel in Economics: Another Bubble?

Am I the only person in the world to be wondering about the recent prize in economics? How they awarded it to 3 different people (to wit Lars Peter Hansen, Eugene F. Fama and Robert J. Shiller) with totally different theories and approaches?

I mean, which one was right? Aren’t the Nobels supposed to be telling us that, coz it’s kind of unreasonable to expect Joe Six-pack to figure out how to work out the mathematics of irrational or efficient behavior for himself between beers isn’t it? Was this a wager on both sides of the argument on the part of the Nobels?

And what does the (Hansen’s) Generalized Method of Moments have to do with efficient markets and/or bubbles anyway? Kind of like putting a Barbie Doll between two Egyptian mummies. To surprise us maybe? OK I know that makes me a dumb you-know-what, but can I even ask?

I mean, does all of this get us nearer to a GUTE (sorry, Grand Unified Theory of Economics) or doesn’t it? And if the answer is no (which would seem to be the case on a reasonable reading), why even give the prize in the first place? Aren’t the prizes supposed to get us nearer to Something?

Or is the Nobel Prize in Economics morphing imperceptibly into the arcane areas of philosophy and politics, such as the Nobel Prize for Peace (past winners including Yasir Arafat and Barack Obama, QED).

Are there so many incomprehensible studies in economics with no apparent overall significance that even the Nobels don’t know what to make of any of them? So they leave it to John Q. Public to decide? “American Idol” for economics, perhaps? Eurovision Song Contest for nerds?  Is this the Bubble moment for economics?

Maybe modern economics just doesn’t work, as I argued in a recent blog post (http://www.perthleadership.org/~perthlea/index.php/easyblog/entry/modern-economics-doesn-t-work). Is that what an economics studies bubble would presage, that economists are publishing so furiously to cover up the fact that there’s no sensible theory so far? Is the current prize for economics telling us that even the Nobels don’t have a clue about modern economics? Whether it works or not? And so they give us the prizes as pacifiers to keep us from calling them out?

It’s quite probable that I just don’t understand any of this. I might (just) meet the standard of the apocryphal Reasonable Man. But I am not the only one of this genre out there, and maybe they need some explanations too.

In this day and age don’t we want the Great Unwashed to understand Science in all its glory? So they can possibly understand climate change, why we are sending so many missions to Mars and why we are spending such enormous amounts of money on the Large Hadron Collider instead of fixing all those US bridges which obstinately persist in continuing to fall down?

Of course the Nobels are in Sweden where they are probably a lot smarter than us, and in any case, certainly more cultured. So they probably were all born with this knowledge in their genes whereas the rest of us just have to actually learn it.

But don’t even uncultured Americans count too? After all, we did invent Google, and those guys certainly understand a thing or two about economics. I think they would like to get some benefit from the Nobel Prize in economics too.

Could this Nobel Prize be revealing a significant gap between economists and the rest of us which is developing into a yawning, unbridgeable chasm? Are economists evolving into a separate race of humans, the True Homo Economicus, which will soon interbreed only with other economists, and generate their own superior gene pool?

Does the Nobel committee have a secret master plan to separate the world into econo-mathematical haves and have-nots? Where the haves will retire to Sweden or to a new colony for the supremely gifted on Mars or at the L2 Lagrange Point between the Earth and the Moon? So they can become, in their own special way, celestial objects in their own right, to be looked up to by we lesser mortals down below?

Economics has had a lot of major failures recently e.g. the failure to predict the Great Recession and the failure of managed investing to beat stock indexes. So economists already have a huge problem with credibility. The Nobel Prize in economics looks set to perpetuate this problem by effectively portraying economists as a cabal complete with secret handshakes and codes that the rest of us will never understand.

Right how the shortage in economics isn’t of clever studies, of which there is a surfeit. The problem is a lack of credibility and a perceived lack of accessibility and comprehensibility. Unless economists can address these issues they are going to fade into total irrelevance.

Maybe economics needs fewer prizes for geniuses and more economic sitcoms for commoners.

 

 

 

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Thursday, 21 September 2017

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