9 November 2008

PHONIES in ACADEMIA Dealing With TBS & The Problems of Rare Events

(In progress)

I just came back from Paris where I listened to people defend mathematical risk management, frustrated at my attempts to conceal my anger. Then I was emailed a million versions of Greenspan's testimony --the sight of whom makes me fly into rage. I am now convinced that an (advanced) economics degree lowers one's ability to understand the difference between absence of evidence and evidence of absence. Some people need to be locked up, and locked up quickly.
Tyler Cowen, or How Bankers & Traders Go Bust, but Academic Fraudsters Stay

In a Slate review of The Black Swan (mid 2007), the economist Tyler Cowen attacked the argument that markets cannot price rare events –using bogus empirical claims. These claims were unsound (absence of evidence/evidence of absence) but were also factually incorrect, even at the time he wrote them (we did not need the current crisis to assess the invalidity of the claims).

He wrote:

Only on Wall Street do people seem to give proper credence—not too much, not too little—to very unlikely events

(more here about my reaction).

You would think that someone who made such a dangerous and misleading statement would do a mea culpa and apologize to society and try to counter it by correcting his past thought –after all it is claims like these that blew up the banking system, impoverishing hundreds of millions. But, nothing; he keeps playing guru. He can be deemed still very dangerous to society, as he does not belong to a profession where this kind of fraud can be penalized (bankers go bust, academic charlatans stay).

How can an intellectual system evolve under these conditions? From funeral to funeral?

Shouldn't he have his tenure taken away?
Academic Economists and Evidence

Spyros Makridakis has shown that supplying econometricians with data contradicting their methods does not lead to any revision of beliefs on their part (as discussed in TBS). Evidence is what they select. This does not stop me from being enraged by the following. I put a paper on Edge.Org with close to 20 Million pieces of data showing that prediction errors swell out of proportion –and questioning the use of prediction markets in Extremistan. Here is the reaction

If 20 million pieces of data on almost all macroeconomic variables, and the Rome burning aspect of the banking crisis is not empirical support, what can be deemed empirical support?

There is more: Statements made by Robert Merton, Alan Greenspan, etc. (later) Aren’t you horrified and shocked at the economics establishment? If you are not, you have a problem.

Indeed Robert C. Merton is perhaps the best case for the termination of tenures --malpractice.
Predictors of the Crisis

By the hindsight bias everyone now "predicted" the crisis --Ken Rogoff [suit & tie] claimed to have seen it coming but gave no evidence to having done anything about it, warned his friends and family to protect their portfolios, gone short SP500, bought puts on AIG, etc. The acid test: check the person's 401K. Did it contain bank stocks? did his portfolio include financials? Was the person long the market? (anyone long stocks cannot have predicted a crisis except, of course, if his portfolio had short ETFs). It is so simple to audit people and clear-up bullshitters.
J. Barkley Rosser, Web Harassment, Cognitive Dissonance & Ego Defense Mechanism at Work

I once received the following fan mail from J. Barkley Rosser the editor of a seemingly vapid academic journal, in which he invited me to contribute:

“Congratulations on your tour de force. (...) I would also like to invite you to submit papers to the journal I edit, JEBO. “ J. Barkley Rosser, Jr. Editor, Journal of Economic Behavior and Organization, Professor of Economics and Kirby L. Kramer, Jr. Professor of Business Administration James Madison University [August 2007]

Needless to say that my no-nonsense orientation clashes with these career-furthering venues (I despise academic resumé-builders, and the fellow has all the attributes of my academic parasite). Feeling rebuffed, the poor fellow went on an entertaining web-smearing mission which includes producing factually incorrect information about my income (it is not hard to get reports on liars playing with your reputation on the web and identify sources of calumnies; everything one puts on the web is permanent). But, interestingly, my refusal of his “invitation to submit” in his technical journal suddenly made me a ...journalist. Recently, he posted:

“BTW, no way Taleb will get it [The “Nobel”]. Krugman will get it before him, and he will not get it this year, although he might some day down the road. Taleb is a popularizer, a journalist [sic]. He has proposed no new idea of his own, except for ones that do not work, like the "barbell strategy," which would not be a Nobel-worthy idea even if it actually made money, which it does not.” [October 2008]

[note that the idiot wrote this “does not work” lie when the SP500 was down about 40% for the year, almost all my hedge-fund detractors were bust, and my own track record, which I do not discuss, is clearly present in the FACT CHECKED press. Also note that my barbell strategy has nothing to do with making money –although it does OK– but with being robust to model error]. They don’t have lie-detectors in that business.

Two-facedness: it is common for economists to call themselves “rigorous” and claim peer-reviewing as a stamp of authenticity, produce more bullshit than astrologers, yet feel superior to journalists who fact-check their statements. [plenty of evidence]

Contradictions & Loss of Consistency: Note that it is very common to find the same person calling me “unreadable” upon first encountering my work then, after the pick up in book sales, change the insult into “popularizer” (or “this is utter nonsense” first, then, after my ideas become accepted, “he is saying nothing new; I knew this” or "X wrote about it before" --as if it now made rare events now tractable). I can elicit so much hatred in economists and other academic parasites they lose consistency in their attempt to discredit me. Interestingly when they try to find the X who wrote about it before, few critics get the same X: Mill, Schumpeter, Popper, Mandelbrot, Pareto, Kahneman,Socrates, Hayek, etc. I counted around 23 alleged predecessors]
How My Warnings were Received By Parasites/Economists

If you want an interesting definition of puny and missed the point, here is Paul Seabright's review in the Times Literary Supplement (aside from Cowen, the only other economist who tried to write a review). You can't miss the point any more than the fellow. Why is it that an economics degree make people stupid, dangerously stupid.

see the links

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