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Paul Krugman wins Nobel Prize

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brian0918

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Krugman was awarded the Nobel Prize in Economics today for his work on the New Trade Theory. From the committee:

By having integrated economies of scale into explicit general equilibrium models, Paul Krugman has deepened our understanding of the determinants of trade and the location of economic activity.
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Krugman is a liberal moron whose contribution to economics is marginal at best. The Nobel Prize is given out by certified wackjobs, as evidenced by the award to Gore. Off the top of my head, I can only think of two "non-liberal" thinkers that the prize was given out to in economics: Milton Friedman and Friedrich Hayek (and the latter shared 1/2 of the prize with another guy). The Merton-Scholes year turned out to be a disaster when it was found that their stupid "rational market" theories led to the destruction of Long-Term Capital Management. The other I can think off the top of my head is Solow, who had some valuable insights on technology and productivity and their effects.

I can't stand Krugman though. The last few years have definitely been a low point for the Nobel prize.

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I think we know who the John Maynard Keynes of the 21st century will be.
Yes, speculation is that he might be the guy to whom Obama will offer the economic-Czar job. I suppose one should ask oneself: what would Krugman do? To what industries would he direct government largess, and which ones will he strangle?
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Krugman is a liberal moron whose contribution to economics is marginal at best. The Nobel Prize is given out by certified wackjobs, as evidenced by the award to Gore.

Don't hold back, Eliot. Tell us how you really feel. :pimp:

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Yes, speculation is that he might be the guy to whom Obama will offer the economic-Czar job. I suppose one should ask oneself: what would Krugman do? To what industries would he direct government largess, and which ones will he strangle?

That would be a tragedy. I wouldn't compare him to Keynes, that's giving this goof too much credit. Krugman is a footnote. He'll be remembered more for his NY Times Bush-bashing editorials than any intellectual accomplishment.

Kendall: Had to get it off my chest. :lol:

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I heard another Princeton prof on NPR "explaining" why the government allowing Lehman to fail caused this whole stock market decline. Of course, he stopped short of saying whether it was a good thing or not. Obviously everyone was thinking the same thing: the government should have done more.

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Al Gore should not have won the Nobel Piece Prize. He should have been ridiculed for making such a ridiculous display of "science" and having the cajones to actually put his name anywhere near it.

Edited by NickS
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The first thing I thought of when I heard that Krugman won was the author in The Fountainhead who wrote Gallant Gallstone.

As cliched and obvious as it is to say it -- Krugman mirrors Toohey. A lot.

What's this about Obama picking Krugman for any position in the White House? Krugman has been very critical of Obama so far. I haven't seen anything that suggests they will team up all the sudden.

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There is a paper written by Austrian economist Ritenour here that explains Krugman's theory of business cycles as presented in his book "The Return of Depression Economics". I learned a lot of new things from it and I recommend the short read.

A few points from the article:

Krugman really is a modern-day Keynesian, who writes in his book that the Latin American and Asian busts during the 90's were the result of too little inflation. Krugman's writes: "the world is lurching from crisis to crisis, all of them involving the problem of generating sufficient demand." Of course, like any economist who sees demand as a primary, the solution is: INFLATE! In his eyes, Japan should have printed enough money in the 1990's to raise inflationary expectations, so that Japanese consumers would stop saving and start spending; in other words: higher levels of inflation would have caused holding cash to be perceived as risky, so demand for money would have decreased while the supply of money in the goods market increased.

Krugman finishes his book off with the obligatory pragmatic attack against capitalism: "the only important structural obstacles to world prosperity are obsolete doctrines that clutter the minds of men."

Edited by adrock3215
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  • 2 weeks later...

There is a good video here about the financial crisis. It is a panel discussion given at Princeton University. Of course, Krugman is one of the members of the panel, and he sneaks in an attack on Bill O'Reilly, Paulson, and some other politically-motivated attacks against Republicans. God knows why these comments are tolerated at an academic event. It's hard to listen to his smug ass, but still an interesting presentation from all members. Alan Blinder also gives a presentation, as he is a professor of Economics at Princeton.

Edit: Krugman begins talking 38 minutes in.

Edited by adrock3215
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Krugman is a liberal moron whose contribution to economics is marginal at best. The Nobel Prize is given out by certified wackjobs, as evidenced by the award to Gore. Off the top of my head, I can only think of two "non-liberal" thinkers that the prize was given out to in economics: Milton Friedman and Friedrich Hayek (and the latter shared 1/2 of the prize with another guy). The Merton-Scholes year turned out to be a disaster when it was found that their stupid "rational market" theories led to the destruction of Long-Term Capital Management. The other I can think off the top of my head is Solow, who had some valuable insights on technology and productivity and their effects.

what

The Nobel peace prize (which Gore won) has nothing to do with any of the academic prizes and using it to discredit the awards as a whole is ridiculous.

The efficient market hypothesis is not 'stupid', is largely correct, and had nothing to do with the collapse of LTCM

Black-Scholes still has a central place in quantitative finance, and modern portfolio theory is still largely based around models like CAPM which assume efficiency.

Edited by eriatarka
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The Nobel peace prize (which Gore won) has nothing to do with any of the academic prizes and using it to discredit the awards as a whole is ridiculous.
"Any" is wrong. The prizes for peace, literature and economics are basically about ideology. They say nothing of the objective merit of the winners. When free-market ideology had a little boom, Friedman and Hayek got prizes. Tells you nothing except what is in fashion among certain people in that field.

The efficient market hypothesis is not 'stupid', is largely correct, and had nothing to do with the collapse of LTCM
Actually, in its "strong" forms it is pretty stupid. The notion that information is the primary driver of market prices on a short and medium-term basis is simply false. LTCM's collapse is totally related to the EMH -- i.e. with it's underlying epistemological approach.

Black-Scholes still has a central place in quantitative finance, and modern portfolio theory is still largely based around models like CAPM which assume efficiency.
Black-Scholes and CAPM are the other things that are related to EMH's epistemological base -- the same rationalistic economist approach.

Obviously that's not to say that these are useless. When certain basic assumptions work, then the math works. The problem with economic and finance is that people to not question and study the things that lead to the assumptions. It is easier to take certain assumptions, and get a Phd doing math.

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"Any" is wrong. The prizes for peace, literature and economics are basically about ideology.
Criticizing a set of awards because they often go to people of a different political persuasion than yourself is about as ideological as it gets. Awards in semi-scientific fields like economics are always going to be more influenced by bias than those in pure sciences like physics where it's easier to evaluate theories in a value-free way, but the 'liberal conspiracy' accusations are rooted in far deeper bias than anything the Nobel committee has ever had.

Actually, in its "strong" forms it is pretty stupid.
It's counter-intuitive but the fact it's went unrefuted for decades is decent evidence that it's correct. Noone has managed to conclusively demonstrate non-trivial inefficiencies in developed markets which dont require access to information which isnt available to the general public (eg insider information, access to expensive data-sets which only large-capital hedgefunds can afford, complex trading algorithms which allow funds to act before information is widely disseminated, etc [and none of these things are inconsistent with the EMH])

The notion that information is the primary driver of market prices on a short and medium-term basis is simply false
If you can establish this claim then you'll be in the running for a Nobel prize yourself.

LTCM's collapse is totally related to the EMH
LTCM's collapse is down to over-confidence and bad luck (Russia defaulting). Why do you think that the EMH was involved? Edited by eriatarka
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Criticizing a set of awards because they often go to people of a different political persuasion than yourself is about as ideological as it gets. Awards in semi-scientific fields like economics are always going to be more influenced by bias than those in pure sciences like physics where it's easier to evaluate theories in a value-free way, but the 'liberal conspiracy' accusations are rooted in far deeper bias than anything the Nobel committee has ever had.
You first confirm your opponent's argument, then you create a straw-man and destroy it.

As for the EMH, there's a thread specifically for that. best to continue the discussion there.

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It's counter-intuitive but the fact it's went unrefuted for decades is decent evidence that it's correct. Noone has managed to conclusively demonstrate non-trivial inefficiencies in developed markets which dont require access to information which isnt available to the general public (eg insider information, access to expensive data-sets which only large-capital hedgefunds can afford, complex trading algorithms which allow funds to act before information is widely disseminated, etc [and none of these things are inconsistent with the EMH])

It is refuted. Here is the refutation: me. If markets were rationally efficient, I would not make a single penny as a trader. Here's another refutation: Warren Buffet. Another: Steve Cohen. A few other refutations: Jesse Livermore, Bernard Baruch, Gerald Loeb ("What everybody else knows is not worth knowing"), Nicolas Darvas ("As for good stocks and bad stocks, there were no such things; there were only stocks increasing in price and stocks declining in price"), and William O'Neil ("with hard work anything is possible...your own determination to succeed is the most important element of trading.")

EMH has been empirically proven to be wrong. No question about it. Anyone claiming otherwise is an ivory tower wackjob with little to no experience in financial markets.

LTCM's collapse is down to over-confidence and bad luck (Russia defaulting). Why do you think that the EMH was involved?

I suggest you read the book When Genius Failed by Lowenstein.

Edited by adrock3215
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