Lunch at the Labs

Economic Matters

Some web links related to economics and finance.

• Chameleons: The Misuse of Theoretical Models in Finance and Economics
  • Cherry Picking in Empirical Research = Carefully Selecting Data to Support a Desired Result
    • If one has sufficient freedom to select the data, one can support almost any result.
  • Potential Cherry Picking in Theoretical Research = Searching for a Set of Assumptions that Produces a Desired Conclusion
    • If one has sufficient freedom to select assumptions, one can create a model to support almost any result.
    • Are the assumptions reasonable?
    • Are there other more reasonable assumptions that explain what we see?

• Risk Doesn't Stand Still

  Review of Greg IP's book, Foolproof: Why Safety Can Be Dangerous and How Danger Makes Us Safe

  In this provocative new book, the Wall Street Journal's chief economics commentator Greg Ip contemplates how actions to reduce and control risk are often discovered to have increased it in some other way, and thus, "how safety can be dangerous."
  
  This is an eclectic exploration of the theme, ranging over financial markets, forest fires, airline and automobile safety, bacterial adaptation to antibiotics, flood control, monetary policy, and financial regulation. In every area, Ip shows the limits of human minds trying to anticipate the long-term consequences of decisions whose effects are entangled in complex systems.

• The State of the Art in the Economics of Education

  the most promising areas for policy are:

  • Teacher effectiveness is by far the most important thing that matters in school. The difference in outcomes for pupils taught by effective or ineffective teachers is huge.   . . .
  • Investment in the early years of child development is very important.   . . .
  • A coherent market structure for schools to operate in is very important.   . . .
• Jeremy Grantham's Take on Oil, Metals and Agriculture

  Quarterly market outlook from the hedge fund manager.

  The commodities guru argues that oil stocks can recover while farmland is his "first choice" for the long run.