Voting is now open for what has been renamed the Dynamite Prize in Economics.
The renaming was necessary because the owners of the Ig Nobel Prize objected to the similarity–which is understandable. They also suggested the Dynamite Prize as a useful alternative.
We are, after all, intending to award the prize to the three economists who did most to drop the GFC bomb on the global economy, via their naive and utterly unrealistic theories of economics.
The selection process produced the following set of nominees:
- Fischer Black and Myron Scholes
- Eugene Fama
- Milton Friedman
- Alan Greenspan
- Assar Lindbeck
- Robert Lucas
- Richard Portes
- Edward Prescott and Finn E. Kydland
- Paul Samuelson
- Larry Summers
I would have preferred to see Bernanke there as well–he was one of my own nominees–but he didn’t survive the editorial process.
After all, there was stiff competition…
Voting is via the Real World Economics Review Blog, and it’s extremely simple: just go to the blog, tick the three nominees you regard most worthy of receiving the Prize, and click on the Vote button (the list is on the right hand column of the blog). Your computer’s IP address is recorded (so that you can’t vote twice) and the votes are then automatically tallied.
Over a thousand people had voted as of two days ago. Please add to the numbers–the more the merrier on this unpopularity poll. Help send a message to the many neoclassical economists who still don’t get it that their theories helped cause this crisis.
For the record, my own votes were for Greenspan, Friedman, and Samuelson.
Once you’ve done that, turn your mind to another topic: what to call what was to be the Nobel Prize in Economics for the three economists who did the most to anticipate and warn about the GFC. Since we’re including dead economists in the list for getting the Stick of Dynamite, I will definitely be nominating Hyman Minsky as the outstanding candidate for the … What shall we call it? Ideas please!
I chose Friedman, Lucas and Samuelson because these were the influential theoretical economists rather than those who implement the economic policies based upon these theories (Greenspan and Summers).
The latter, of course, should know better but I place more blame with the theoreticians.
As there were a Gang of 12 who predicted the US housing bubble and GFC, there is now a Gang of 12 who richly deserves the blame for it.
“After all, there was stiff competition…”
Are you referring to Fischer Black? Sorry, just a bit of black humour…
I voted Friedman , Greenspan , Fama.
Name suggestion for prize:
” Nobel Prize in Ignored Economics “
I voted for Greenspan.
Here’s why! http://thetaildoesnotwagthedog.blogspot.com/2009/07/in-end-tail-does-not-wag-dog.html
Hello Steve, trouble is I think that the “Dynamite Economics” name could be mistaken for that of a merit award. Perhaps “Ponzi Economics” would be a better name as it describes the end effect of their work, the global Ponzi scheme, and everyone now seems to know about Ponzi’s work.
As for the real merit award I would like to suggest the “Hyman Minsky” Economics award.
I would like to nominate your good self for this merit award.
Many thanks for all your efforts.
Dr Keen and Co, the blog is great!
It has helped me to reflect on economics (not my domain) with confidence and a lot more understanding.
In fact stumbling across Dr Keens 1st podcast was a cheer stroke of luck and later listening to him on ABC radio talking with Paul Clithero was the clincher.
There are many who follow the blog in awe of all the contributions.
Thanks to this blog I can vote Greenspan!
I think I voted for Samuelson, Black/Scholes and Greenspan. I recall listening in 1998 to Greenspan when he was asked about the stock market. I recall a phrase that these things generally didn’t end well. Not a peep out of CNBC about that comment. Truthfully, I think he became afraid of the market and what would happen if he was accused of imploding it with some unwise interest rate hikes, but in his book he said Rubin said you couldn’t tell if stocks were too high. Rubin should have made that list. I get the idea that Samuelson should win. I had his text book along with everyone else that took entry level economics. There wasn’t anything about credit and it is clear from what I know today that to create a real boom in an economy, all you need is a little more credit. It is also the path to depressions. Black/Scholes got my vote, not because their model itself was flawed, but because the modern risk model has so widely been adopted that once it becomes the rule, it doesn’t avoid risk, but concentrates it. Thus the model becomes the savior for all risk, which insures the risk will become systematic. The same holds true of portfolio theory, which gave people the idea that you bid aggessively for the S&P 500 because the S&P 500 will make 9% or 10% without risk. Of course, anyone that knows compound values knows that the corporate earning world can’t produce a return greater than dividends plus nominal growth under any circumstances for long. The models create a holding system for risk that underpriced risk, which made money available for much that wouldn’t have otherwise been available. The models work when the world at large isn’t playing the same game.
Well I would vote for Greenspan, from that list, otherwise I think the major prize would have to go to Nixon
AND The Winner is “Alan Greenspan”.
If anyone can take full credit for having destroyed a country’s economy then it is none other then “the Maestro”.
Revered and God-like to boot!!
Oh he is a deserving winner!!
I love this one.. http://www.cnbc.com/id/35240841
n the last deep and long recession, 1981-1982, the economy started adding jobs two months after the recession officially ended. A year later, payrolls were almost 3-million higher. Even ore strikingly, the jobless rate was even higher at that time.
Back then, “we got into a recession because the Federal Reserve raised interest rates, and then lowered them. You can’t lower interest rates this time. They’re as low as they can go,” says Dean Baker of the Center for Economic and Policy Research. “This is a recession caused by a collapse of a bubble. We don’t have the basic dynamism we had.”
Lost in the swirl about jobs ands this recovery is that in some ways it’s a continuation of a decade-long trend. There are approximately 100,000 more jobs today than there were in January 2000. By comparison, some 20 million jobs were created in the expansion of the 1990s.
Since posthumous awards are evidently acceptable, why not nominate Walter Bagehot, the patron saint of central banking? Never before in history have financiers been able to pile so much bad debt onto an economy’s back as when they had a government backed liquidity provider, ready to catch any hard fall.
“I think I voted for Samuelson, Black/Scholes and Greenspan. I recall listening in 1998 to Greenspan when he was asked about the stock market. I recall a phrase that these things generally didn’t end well. Not a peep out of CNBC about that comment. Truthfully, I think he became afraid of the market and what would happen if he was accused of imploding it with some unwise interest rate hikes, but in his book he said Rubin said you couldn’t tell if stocks were too high.”
This is a really good point. Greenspan was much more of a slave to the desires of the American “investor class” than most people realize. If he hadn’t followed the basic policy script that he did, he would have been fired and replaced with someone who would.
I would vote for E. Fama. I think he is one of the most practical economist ever.
oops! I would like to change it to greenspan as worst economist we ever had (if we can call him an economist — I heard he has never written a single academic paper in his life.)
Re Bagehot, the period for new nominations ended when the shortlist was prepared.
I voted for Greenspan, Summers, and Samuelson. Even though I think Greenspan is the most to blame, I think Summers is the biggest jackass on the planet as he continues to craft policies that are destroying the economy and financial system. As Obama’s head economic advisor he’s had the most influence over recent policy decisions and with the benefit of hindsight with regard to the financial crisis problems he still thinks printing more money and raising the deficits will fix the problem. And I think this will end very badly for the dollar because the Fed is now caught in a position where it can’t withdraw the stimulus or stop the money printing without severely destroying the economy. So one of the few ways for people to protect themselves from this situation, since in my view there is little political support to reign in the money printing, is to continue investing in gold and gold mining companies in the U.S. and Canada. I recently saw a pretty useful piece called “Gold Price Retakes $1,100 – U.S. Dollar and Standard of Living at Risk?” at http://www.goldalert.com/ that dissects a lot of the problems with the federal budget deficit, and that highlights recent comments made that the rising deficit has become a matter of national security.
bloody hell steve are you looking to be the next simon cowell of the heterodox economics world?
I’m going to go out on a limb here and suggest that this is not the right way to attack the establishment!
I’m sure you’re going to be proved right (if a little late) on your oz property bet in 2010. If so, then there is your moment. Should it come to pass, what is your plan to capitalise on that and will you have all your ducks in a row by then?
I vote for Friedman, Greenspan and Summers. Although perhaps media and public greed can bear some blame for deifying them especially when times are good.
Suggest The Lost Fortune Tellers for the GFC forecasters prize.
@5 BrightSpark1
I like your idea and in fact, I propose a full title: what about Ponzi Memorial Prize in “Economics”?
The Dynamite Prize, on the other hand, has a rather ominous ring to it: like in ticking bomb or in landmine. Which, although ultimately very appropriate, too, is kinda less humorous.
Bloody economists (even the contrarians) don’t have much sense of humour or for the words. Oh, well.
Steve,
Off topic, but my comment relates to an earlier observation of yours about the emerging collaboration with the technically gifted members.
You also mentioned that you have to form some kind of trust or foundation type structure to deal with the donations. Why not use this as an opportunity for a rallying call to potential collaborators?
Perhaps you could call it the “Open Source Economics Project”. Could you publish a feature set description or functional spec of the ideal end product of your work? ie. not one based on what you alone can do. I’m thinking of a spec that includes your “in my wildest dreams list” of the model’s capabilities.
Of course, you would still retain control of what gets taken up.
This may sound crazy but looking at the Open Source approach you would be kicking off with several advantages compared to, say, Linux. For starters you aren’t competing with an economic “operating system” that actually works to any useful degree.
Maybe it would also resonate with those “engineeer entrepreneurs” you talk about.
Perhaps Greenspan was a victim of the following phenomena related to large scale organisation:
“There is a doubt whether simplicity is compatible with large organizations of any kind, so that insistence upon simplicity in that field would result in the destruction of large organizations upon which so much of our modern life depends. Correlated with this is a doubt whether the avoidance of exercising power over others, as part of an effort to attain simplicity, is not really a dodging of responsibility. As to these my belief is that our present world has too many occasions and opportunities for the exercise of power over other people. Our great executive organizations,—financial, manufacturing, commercial, and governmental,—are so large that it is impossible for their chief executive officers to know the full truth about what is happening to the people in them. If, for instance, there is trouble in a little Minnesota iron mining town controlled by the U. S. Steel Corporation, the President of the Corporation cannot find the essential truth about it. He has not time to go there and look into it in person, and even if he did go, the people there would be so overawed by his position that they would be afraid to tell them all the details. If, instead, he writes to the local representative of the Steel Corporation in that town, that man, even assuming he is honest and fair-minded, will not tell the whole truth. He will not mention his own mistakes; he will not adversely criticise or “let down” his immediate subordinates because he relies on them to do what he thinks necessary. Nor will he criticise his superiors, because he depends on their favor for his job. All three of those people,—himself, his immediate subordinates and his superiors— are human and have therefore made mistakes. But none of those three sets of mistakes are going to get into that man’s report to the President. Yet the President has to make an executive order based on that man’s report. Hence it is practically impossible to have that order really just, because the facts needed for it cannot be obtained by the President who has to make it. When you add, as you must, an allowance for the average amount of selfishness, prejudice, pride, ignorance, stupidity, lack of imagination, ambition, jealousy, greed, and dishonesty, both in relation to the making of that report, the consideration of it by the President’s assistants and advisers, and the administration of the President’s order after it is made, the probabilities of injustice to the rank and file of workers and people on the periphery of that immense organization are greatly increased. Indeed, there is sure to be great and constant misunderstanding, injustice and consequent resentment and friction. That is true of all large executive organizations, no matter what their field of action. The larger they are the more certainly does this condition exist. Their very size makes them humanly inefficient, whether or not they are mechanically or financially efficient. Such a result is a matter of psychological necessity.
Hence we are unable to wield vast powers without probably doing more harm than good. There is too much concentration of power in the hands of too few people. I agree with Mr. Justice Brandeis that our organizations are too large for human efficiency. To say that only by the concentration of wealth can we attain great technical advances is not a valid argument, for already our technical development is out of proportion with the rest of our growth. If we want our civilization to last we must prevent megalomania and keep the different departments of our common life in harmony.8 We need to decentralize our economic, social and political life. If larger aggregations are desirable for some purposes, it should be possible to integrate the small units more loosely than at present, and for different functions. Such changes would give society greater security, not less. In view of the foregoing ideas and some others I doubt whether complete socialism is an effective answer.”
From: THE VALUE OF
VOLUNTARY SIMPLICITY
RICHARD B. GREGG, 1936.
Fama (EMH – sorry but hahahahaha), Greenspan(Ayn Rand should have started a religion like L.Ron Hubbard – second thought I think she did) and Summers (women aren’t as smart as men lecture and loosing Harvard a lot of money and counting), shame Rubin wasn’t on the list but you can’t have everybody.
I feel slightly better having cast me depreciating 2 cents worth in and would like to thank all for my slow and on going education into the current Ponzi economics.
Cheers
Moz
Re #20 angophera,
That’s a pretty bloody good idea!
As it happens, a lot of work has been done developing a specialised tool by a professional programmer who would prefer not to have his material Open Source, but that’s no reason not to do other work OS style–and we’ll see how he feels later about an Open Source approach later.
How about DOSE as an acronym–”Dynamic Open Source Economics”?
While I’m on that topic, I’ve suggested to Edward Fullbrook that the intended “Noble Prize in Economics” could be named the “Revered Prize in Economics”–with the obvious double meaning there neatly complementing the intended double meaning behind Noble Prize.
Angophera, Steve,
I agree.
It is all about project management and team management. Why should Steve waste time on setting up a new blog?
However open-source project management may be close to herding cats.
The trouble with the proprietary tool approach is that it is GUI-centric and it doesn’t allow for data export – this is the business model of Apple, Microsoft and the few others. The extreme example of the GUI-based approach is visual programming where the interface is almost everything – which is not the same as closed data formats of course.
http://en.wikipedia.org/wiki/Visual_programming_language
(Vissim is listed there)
Why data cannot be exported in an open xml format for example?
From technical point of view it is in my opinion the same kind of social manipulation as the neoclassical stuff in economics and it doesn’t add much (or any) value from the user’s point of view. I am not against closed-source software (I work for a company selling closed source software and I am happy with the model) but against closed environments, protocols and data formats. (I will never buy a product of Apple for that very reason).
Once the data is liberated the rest is pretty much straightforward. You can build your own toolchains and pick / build different components …
We will see how the alternative approach works as I am working on solving this problem right now. For me the most interesting part is being able to tell from the modelling what really makes the system behave in a certain way – that is to display a certain type of instability. So far all the dynamic models produced by Steve are similar to a predator-prey model. This may be good at the extreme-macro end of economics but is most likely not applicable to simulations including markets as data doesn’t look there like a simulation of Lotka-Volterra equations.
The following section also partially addresses issues raised by Frank.
What if Soros is right with his reflexivity? I couldn’t stop thinking about this issue because the shapes of graphs depicting individual shares, indices, exchange rates or commodity prices changing value in time are not like a predator-prey model. These shapes are distinctively different. This doesn’t prove anything but makes me thinking about other possibilities… I don’t agree with MMT scholars in ignoring (or pretending to ignore) asset markets and financial markets in general. They do exist even if we don’t like them or want to get rid of them.
The original model of reflexivity described in http://arxiv.org/PS_cache/arxiv/pdf/0901/0901.4447v1.pdf does not include time at the very beginning.
Initially it is y=f(x) and x = phi(y) (cognitive and manipulative functions). Note I haven’t read the Soros’ book (yet).
In my opinion the system model of reflexivity should be properly built using continuous time rather discrete time. Then it is the same as the generic non-linear closed control feedback loop described by the control theory.
“The evolution of x and y with time” is considered in the article – but in discrete time domain only. x and y are functions of discrete time x_i,y_i where i=1… rather than functions of continuous time x(t), y(t) – even if stability of the fixed points is considered in the context of continuous time.
( This can be inferred from the sentence “Suppose f ( x) and phi(y) are differentiable functions…”)
Please bear in mind that discrete time control systems are currently even more common than continuous time (analogue) systems but the analysis and design work is very often performed in the continuous time domain.
What is crucial for the subject championed by Steve is that quite often we may not be able to write the equations in the form of system of ODEs: dy(t)/dt = g(x(t),y(t) and dx(t)/dt=h(x(t),y(t)) . (ODE – “a relation that contains functions of only one independent variable, and one or more of its derivatives with respect to that variable” see http://en.wikipedia.org/wiki/Ordinary_differential_equation ). We need to consider y(t)=g1(x(t),y(t) and x(t)=h1(x(t),y(t)) what of course in some cases might be collapsed to a system of ODEs.
That’s why I am sceptical whether benefits of having a very slick specialised graphical interface to the simulation program (like Vissim) are really that huge. Of course generic simulation programs can deal with all feedback systems not only these described by ODEs and maybe these things can coexist easily in Vissim or Mathcad – I don’t know, I’m not going to spend a lot of money or fiddle with the “free” version only to play with a program a few times if I have a free alternative (Scilab). But in my opinion the emphasis should be put on what’s “under the bonnet” of the model rather than on decorating it with hundreds of variables when certain very fundamental components (namely asset markets) are missing. One day they will need to be added and then Mr Soros may be convinced fork out a few grand to buy a new version of Vissim…
I am even not touching a very interesting topic of multi agent simulations and linking micro scale models with macro scale.
Disclaimer:
I graduated as a hardware engineer so my brain is tainted with the low-level stuff.
I voted for Greenspan because he’s the main engineer in this mess in the US. Certainly Ben Bernanke should have been on the list as part of Alan Greenspan’s team. You should have been able to vote for both.
I’d put Paul Krugman on the list for his cheerleading of all the inflationary policies but he was in fact a bit player. I don’t think his political writing had that much influence. Because Keynesianism is itself self contradictory it sometimes makes him sound right. Of course a stopped clock is right twice a day, but is not operating on a sound model for predicting the time.
Despite picking Greenspan this was not however mainly a US problem. This was a global problem with central bankers from most countries participating in the foolishness, even China and Japan. Had the US not existed the crisis would have erupted somewhere else and spread to the other countries. Greenspan certainly was not responsible for the situation in Iceland, the UK, Canada, the rest of Europe, Japan and so forth.
I think Keynes should have been on this list. Many of the old “common sense” monetary fallacies were popularized by him and rationalized by his economic theories. He is the main culprit in the justification of many economic fallacies that our current monetary and financial system is based upon. He did so both post facto and pre facto. He even invented a few of his own like liquidity preference as a justification for the old “unemployed resources” fallacy of banking.
Krugman is a good example of an economist who has fallen for this Keynesian fallacy with his “Baby Sitting the Economy” article. His article shows his <a href="http://blog.mises.org/archives/009699.asp"total lack of understanding of even what money is.
The worst fallacy that Keynes came up with and one of the main causes of the current situations is his paradox of thrift hypothesis.
Because of Keynes Nixon went completely off gold allowing a completely free floating fiat currency system to spread around the world. In 1971 after doing this Nixon was quoted as saying, “I am now a Keynesian in economics”. This was a paraphrase of Milton Friedman’s 1965 “We are all Keynesian’s now”. Yes, those blaming Friedman need to look back to Keynes.
I’d say that if Keynes was on the list then he would have been given my strong consideration. It’s because of Keynes and the popularity of his incorrect explanations of the Great Depression that not only haven’t we been able to get to a sound money system, we have moved in the opposite direction.