Some Nerd Humor….

I liked this joke from the comments section at the MR site:

Have you heard the joke about the chemist, the physicist and the economist who get wrecked on a desert isle, with a huge supply of canned baked beans as their only food? The chemist says that he can start a fire using the neighboring palm trees, and calculate the temperature at which a can will explode. The physicist says that she can work out the trajectory of each of the baked beans, so that they can be collected and eaten. The economist says, ‘Hang on, guys, you’re doing it the hard way. Let’s assume we have a can opener.’

That’s what a lot of modern macro is today – ivory tower theorists explaining to everyone else that their ideas are right because they made the math work in the model that they made up.   And so long as they have a PhD the rest of us feel obligated to give their ideas the time of day no matter how little the model resembles the actual real world.  Fun times.

Cullen Roche

Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.

More Posts - Website

Follow Me:
TwitterLinkedIn

Comments

  1. Hi Cullen,

    In addition to a PhD, we give way too much credibility to anyone who has a Nobel Prize in Economics. As if that really means something!

    • The Economics Prize is not even a real Nobel prize, since it is funded and awarded by the Swedish Central Bank, but the ceremony is combined with the Nobel ones. Sort of a fake, but almost real “Nobel Prize”.

      But does the Nobel Peace Prize have any real substance either? Look at some of the characters who got that one over the years – Arafat, AlGore, and Obama. And Obama got it merely for winning his first election. The only Nobel Prizes I pay attention to are in Chemistry and Physics.

  2. to balance the views here is a joke on physicists: horses in a farm are suffering from a mysterious disease and are dying one after another. the farmer asks his friend the physicist if he could find a cure. the physicist does some tests and then goes away for a week. when he returns he says: “I’ve found a solution to the disease but it works only for spherically symmetrical horses in vacuum”.

  3. The reason why some economists may be less reliable than others perhaps is not just ivory tower thinking; perhaps they may be trying to keep the very large flow of consultancy money (probably including massive complementary purchases of the books they write) coming in from their sponsors:

    http://www.huffingtonpost.com/charles-ferguson/glenn-hubbard-romney-campaign_b_2029609.html
    «And what you see is that at least two thirds of his literally dozens of consulting, advisory, speaking, and directorship arrangements over the last decade are with the financial sector — MetLife, KKR, Goldman Sachs, Freddie Mac, JPMorgan Chase, Citigroup, Bank of America, the list goes on and on. Until Columbia adopted its disclosure policy, Hubbard had never disclosed most of those relationships, either in his publications or when making public statements about policy issues affecting Wall Street. Even Columbia’s new policy, moreover, does not require Hubbard to disclose how much they pay him; all we know currently comes from required SEC disclosures of his director’s fees from the boards of three financial sector companies, which pay him over $700,000 per year. His total financial sector income, including consulting and speaking, is undoubtedly much higher.»

    Ivory tower economists can make a pretty good salary as professors, but those sponsored by their consultancy employers become multimillionaries and retire quite rich.

  4. As far as making the math work in the model they built – they then run history matches to test if their model works on historical data (output replicates historical results).

    But NONE of them realize that if their model was widely used during the time frame of that historical data – the data would have been far different.

    And it takes about an hour for the world to figure out which model is working successfully and disseminate it.

    Then of course the model fails. The degree to which an investment model beats the market is inversely related to its applicable lifespan.

  5. As someone with a Ph.D and 60 years old I can tell you without doubt that a Ph.D is not a license to be correct. Far from it. Like any other examination, it is only a test that people hope to pass. However, unlike being part a test with many people it is just you. What matters is how much arm twisting your sponsor can do on your behalf.

  6. An engineer and a physicist are in a room with their backs against one wall. Leaning on the opposite wall and facing them is a naked girl. They are told they can approach the girl but each step towards her must be half the previous step.

    The physicist immediately says whats the point, I will never reach her. The engineer on the other hand says that’s near enough…………..

  7. What do you call an extrovert scientist or engineer. Someone who looks at your shoes and not his own when he is talking to you…………..

  8. “That’s what a lot of modern macro is today – ivory tower theorists explaining to everyone else that their ideas are right because they made the math work in the model that they made up. And so long as they have a PhD the rest of us feel obligated to give their ideas the time of day no matter how little the model resembles the actual real world.”

    Perhaps the wises words ever spoken on PC…Hats of to, Mr Roche!