A Quote by Robert J. Shiller
Economists who adhere to rational-expectations models of the world will never admit it, but a lot of what happens in markets is driven by pure stupidity - or, rather, inattention, misinformation about fundamentals, and an exaggerated focus on currently circulating stories.
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In certain circumstances, financial markets can affect the so-called fundamentals which they are supposed to reflect. When that happens, markets enter into a state of dynamic disequilibrium and behave quite differently from what would be considered normal by the theory of efficient markets. Such boom/bust sequences do not arise very often, but when they do, they can be very disruptive, exactly because they affect the fundamentals of the economy.
At the core of an analytical edge is an ability to systematically distinguish between fundamentals and expectations. Fundamentals are a well thought out distribution of outcomes, and expectations are what's priced into an asset. A power metaphor is the [pari-mutuel] racetrack. The fundamentals are how fast a given horse will run and the expectations are the odds on the tote board. As any serious handicapper knows, you make money only by finding a mispricing between the performance of the horse and the odds. There are no 'good' or 'bad' horses, just correctly or incorrectly priced ones.
In the 1940s, economics started getting highly mathematical. It was basically because economists weren't smart enough to write down models of real behavior that they started writing down models of highly rational behavior - and they kind of forgot about humans.
One of the reasons why we can make a lot of money in equity markets is because they're auction-driven, and auction-driven markets are very different from almost any other kind of market.
Probably the only people left who think that economics deserves a Nobel Prize are economists. It confirms their conceit that they're doing 'science' rather than the less tidy task of observing the world and trying to make sense of it. This, after all, is done by mere historians, political scientists, anthropologists, sociologists, and (heaven forbid) even journalists. Economists are loath to admit that they belong in such raffish company.
Until the Great Depression, most economists clung to a vision of capitalism as a perfect or nearly perfect system. That vision wasn’t sustainable in the face of mass unemployment, but as memories of the Depression faded, economists fell back in love with the old, idealized vision of an economy in which rational individuals interact in perfect markets.
The first and most optimistic response was complete rational expectations econometrics. A rational expectations equilibrium is a likelihood function. Maximize it.
It seems to me that at least as far as the financial markets are concerned, there is increasing evidence against rational expectations, even at the macro level.
If the Humanists wish to be champions of reason, they should consider the following: just as they would not admit mystics into their camp, since no rational discussion is possible with men who substitute supernatural revelations for rational evidence-so they cannot admit advocates of force into their camp, because no rational discussion or agreement is possible with men who substitute guns for rational persuasion.
I thought a lot about how so many memoirs about fatness focus on weight loss; they don't focus on living with weight in a world that is rather inhospitable to it. So I knew that was the idea that was going to be most interesting and most challenging, and I like to be challenged as a writer.
I try not to think about anyone's expectations but rather focus on always doing my personal best. Modeling was never a thought in my mind growing up, but my mom felt it was important for me to be open to business opportunities and expand my horizons.
The Human tendency, largely driven by ego, is to believe we can do it all....It maybe humbling to admit there are only a few things you do really well...you will free yourself to focus on those things which will lead to greater personal success and significance.
Look into the eyes of a chicken and you will see real stupidity. It is a kind of bottomless stupidity, a fiendish stupidity. They are the most horrifying, cannibalistic and nightmarish creatures in the world.
For the last several decades, there was a prevailing belief among traditional economists that the markets were rational and self-correcting. Alan Greenspan advocated this view. But the 2008 financial crisis showed that this view is incorrect, and Greenspan eventually admitted as much.
A lot of the stories about urban America tend to be written on the margins. We focus a lot on these big global cities - New York, San Francisco - or we focus on cities that are having the toughest time - Detroit, Newark, Camden.
Scientists will eventually stop flailing around with solar power and focus their efforts on harnessing the only truly unlimited source of energy on the planet: stupidity. I predict that in the future, scientists will learn how to convert stupidity into clean fuel.
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