Monthly Archives: October 2010

Opacity

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HatTip to Dave Lull for letting me know of the update.

136- The Irish Potato Famine, Mother of All Errors from Optimization Models, Those unethical economists

I find it both unethical (& blind) on the part of economists to teach Ricardo’s comparative advantage (something that is “optimal” under some set of fixed, nonstochastic assumptions, i.e. price of goods remain fixed) without telling us about the Irish potato famine, the exact result of a model error coming from monoculture. In the mid-19th Century, one and a half million persons died, another million emigrated (mostly to the U.S.). I found so many cases of collapses coming from such optimization (Egypt from cotton, American Indians in the SouthWest, silk in Lebanon).In my rewriting of all of economics under model errors (and epistemic opacity) I find that every quantitative “Nobel” since Samuelson so harmful … it is revolting.

Nassim Taleb: Don’t Listen to Geithner or Krugman – Nicole Allan – Business – The Atlantic

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Taleb took issue with Krugman’s support of deficit spending. “This transformation of private debt, with all the moral hazard it entails, into public debt is, number one, from a risk standpoint, bad,” he said. “And from an ethical standpoint, I find it immoral. The grandchildren should not bear the debts of the grandparents.”

Taleb called Friedman’s book The World is Flat “very bad for society,” arguing that it did not adequately assess risk. 

One person who did see the crash coming? Nassim Taleb. “In 2008, when the crisis happened, a lot of heads of state were interested in my message,” Taleb said. “Including David Cameron.”

Asked where the economy would be in 25 years, Taleb gave the vague response that “everything fragile will break.” Oh, and that the Fed won’t exist anymore. It will be replaced by something “I think more organic and that makes more sense.”