It’s that time of year again: when Austrians spontaneously organize to collectively commit to disparaging the work and reputations of highly esteemed professional economists. For a sampling of what others have had to say, see here and here. This is my humble contribution to this storied tradition.
The Committee of the Swedish Riksbank Prize in Economic Sciences in Memory of Alfred Nobel decided this year to honour the works of three American economists: Robert Shiller of Yale, Eugene Fama of Chicago and Lars Peter Hansen of Chicago. All three are very well respected in the mainstream of the profession. And while there are many places that have summarized their contributions and beliefs, I present them here in their own words. (With my own quirky interpretation in parantheses.)
Here is Robert Shiller on the source of unemployment:
“Unemployment is a product of capitalism: people who are no longer needed are simply made redundant. On the traditional family farm, there was no unemployment.”
(In other words, he’s saying back when people lived hand-to-mouth and were in constant fear of droughts and locusts wiping out their entire crops and starving to death, at least they never had to worry about not having anything to do!)
Here is Eugene Fama in 2010 describing the origin of the 2007-2008 credit crisis:
“What happened is we went through a big recession, people couldn’t make their mortgage payments, and, of course, the ones with the riskiest mortgages were the most likely not to be able to do it.…”
(Meaning that the reason that banks stopped lending, was that people mysteriously stopped paying their mortgages. In reality, the exact opposite happened!)
And here is Lars Peter Hansen describing his own contributions to economics:
“The quadratic-form criterion that I used to formulate consistency certainly has its origins in the minimum chi-squared estimators used to produce estimators that are statistically efficient and computationally tractable. [...] My aim was in part to use Gordin (1969)’s martingale approximation device to adopt a more general starting point.”
(in other words, he figured out a really, really, really clever way to guess about how real human beings–who, apparently despite their tendency to be inherently unpredictable–will behave in the future.)
So there you have it. To win the Nobel, you have to yearn for the days of impoverished subsistence farming, mix up cause and effect of the single most important economic crisis years after the fact, and invent new ways to make astrologers look like legitimate scientists.
Oh well. Here’s to next year!