A Quote by Kenneth Arrow
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.
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When you look at any experimental work not directly related to economics, but trying to test rational behavior in other ways, experiments have conspicuously failed to show rational behavior. Macro evidence certainly suggests deviations from rationality, but I don't want to say the rationality hypothesis is completely wrong. If you have any introspective idea or experimental idea about people's behavior, it seems to be incompatible with the really full scale rational expectations.
I think what they've been doing is largely almost in firefighting mode without a good conceptual framework - either at the micro or the macro level. Micro, you would ask: "What kind of financial or banking system do we want?" Macro, you would say: "What are the underlying problems in the structure of our economy?"
The impact on the broader economy and financial markets of the problems in the subprime markets seems likely to be contained.
Think about what it feels like when you interact with someone who makes you notice what's good about yourself (raising your status), who is clear with his expectations of you (increasing certainty), who lets you make decisions (increasing autonomy), who connects with you on a human level (increasing relatedness), and who treats you fairly.
So far as discipline is concerned, freedom means not its absence but the use of higher and more rational forms as contrasted with those that are lower or less rational.
From the 1990s onward, the financial sector created a vast array of instruments designed to separate investors from their money, financial derivatives of an ever-increasing level of complexity. At some point, this complexity reached a point where even the creators of the derivatives themselves didn't understand them.
The first and most optimistic response was complete rational expectations econometrics. A rational expectations equilibrium is a likelihood function. Maximize it.
What is faith? If you believe something because you have evidence for it, or rational argument, that is not faith. So faith seems to be believing something despite the absence of evidence or rational argument for it.
The current system is organized around financial values over life values. We need to shift that locus of power down to the community level because the financial markets recognize only money and thereby only financial values.
Extrapolated, technology wants what life wants:
Increasing efficiency
Increasing opportunity
Increasing emergence
Increasing complexity
Increasing diversity
Increasing specialization
Increasing ubiquity
Increasing freedom
Increasing mutualism
Increasing beauty
Increasing sentience
Increasing structure
Increasing evolvability
Ultimately savings have to go somewhere and I think they will find their home in financial markets and within financial markets, a large part in equity.
Man is a rational animal – so at least I have been told. Throughout a long life, I have looked diligently for evidence in favour of this statement, but so far I have not had the good fortune to come across it, though I have searched in many countries spread over three continents.
Respect for the dignity of others includes treating them as rational creatures capable of being persuadad by rational argument, even in the face of frequent evidence to the contrary.
Kevin Freeman has been warning America’s leadership of the dangers of financial terrorism for the last three years. It is happening now and Kevin provides the evidence in his book Secret Weapon. Every American needs to understand how our financial markets have been manipulated by people who want to destroy the nation and how they can do even greater damage in the future. This book is a critical read for everyone.
Actually, he gave false evidence [of chemical weapons]. In this case,[John] Kerry didn't even present any evidence. He talked "we have evidence" and he didn't present anything. Not yet, nothing so far ; not a single shred of evidence.
Forecasts vary in horizon, from a few seconds up to a few days in financial markets, compared to from one to several months for macro variables. We have to provide uncertainty intervals around the central forecasts to indicate the extent to which we are unclear about the future.
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