Sunday, 4 January 2015

The Unusual Cult of Deriding Economists

16:36 Posted by The Thalesians (@thalesians) No comments
The Internet has its way of amplifying opinion. Praise spreads like a whisper, whilst criticism is amplified like a rabbit overdosing on crack. As a group, economists come in for seemingly relentless derision on the Internet, most notably on Twitter. I am all for free speech, that is after all the power of the Internet, an amalgam of different opinions, which coalesce to give you a snapshot of the world. Constructive criticism can be a powerful device, to filter out the signal from the noise.

Indeed, in George Cooper's Money, Blood & Revolution, he discusses the various schools of economic thought, offering constructive criticism. He creates an extremely simple diagram to illustrate the differences, which Cooper dubs "The Economic Plane". What quickly becomes apparent, is that it can't be the case that all these schools cannot be right simultaneously. Rather than simply reveling in this lack of cohesion, Cooper offers a solution. He comes up with his own theory circulatory growth model designed to unify the various economic schools of thought, which I found quite intuitive. The key point is not so much Cooper's idea, but that he offers an alternative viewpoint to understanding economics.

Simply criticising economists without ever offering some alternative, can end up being little more than an exercise in name calling. Sometimes, it feels economists can do no right, observing Twitter. Some might mock economists for using mathematics to bring some rigour to their field. Yet, perhaps if they avoided mathematics they would be equally maligned for simply relying on words to make their point.

The difficulty is that economists are trying to model human behaviour, which is tough to model! People have emotion, they react to their environment, they are all different. Hence, trying to model people as a single cohesive unit is always going to be challenging. I am not an economist, my specialty is systematic trading models. Whilst it is possible to make profitable trading models, it is not the case that they will work forever (I would be somewhere on desert island if this was the case). Markets change and whatever trading model I am creating is merely an approximation for market behaviour. It simply emphasises the fact that models will never be precise, whether we are trying to model an entire economy or some facet of the market. Other accusations banded about against economists (and strategists), is that they don't take risk. From my own experience, risk taking is a different skill and can be very different to analysing the market or the economy. Some people like taking risk, some do not.

Economists aren't perfect, but neither is anyone else mixed up in this wonderful miscellany called life. Perfection is something we all crave, but will never achieve.

Like my writing? Have a look at my book Trading Thalesians - What the ancient world can teach us about trading today is on Palgrave Macmillan. You can order the book on Amazon. Drop me a message if you're interesting in me writing something for you!


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