Wednesday, January 28, 2009

Don't try this s--- at home

I like Paul Kedrosky's blog. It's a fixture in the old RSS reader, and it isn't in any danger of getting expelled. He just digs up too much interesting stuff to exclude on personality grounds alone. But ohmigod is he capable of heroic feats of wankery. To wit:

I'm tired of behavioral finance. It has become a sort of socio-psychological financial freakshow, the past decade's version of chaos theory. It can go away now.

Uh huh.

Sure, we could tell lots of good stories – availability heuristic! hindsight bias! rational inattention ! etc. -- but what was the real and measurable contribution of behavioral finance to ameliorating the credit crisis. Tell me, because I don't know.


What happens? Well, it's not that we abandon the stuff. Some of behavioral finance gets pulled into finance (whatever that is anymore, and that's a bigger subject). And much of the "oooh, look at the silly humans" behavioral stuff finally bores enough people that it doesn't sell books or get articles published. Then that's it. We just have finance again -- and it's as ex post and generally useless as ever, but at least they can tell better stories.

Paul Kedrosky, ladies and gentlemen. If I ever get like that, I want someone to tell me.

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