Thaler says he likes to parse this statement in two parts: The first is whether you can individual investors outperform the market (doesn’t look promising); the second is whether prices are “correct” at any given point in time (I suppose it depends on what you mean).
The discussion is absolutely great, and you will learn a lot about economic modeling and thinking about testing economic models from two leading scholars who have thought a lot about it. At one point, Fama somewhat hilariously (to economists, at least) declares himself to be “the most important behavioral-finance person, because without me and the efficient-markets model, there is no behavioral finance.”
No, that’s not me introducing Professor Galambos at a recent Economics Colloquium; it’s George Lucas hashing out his initial vision of the Indiana Jones character with Steven Spielberg and Lawrence Kasden.
In the wake of Michael Lewis’s recent piece, Professor Galambos reminds me of the excellent “In Search of the Pope’s Children” from 2006. If you have read the piece on Germany, you might take a look at the first 15 minutes of part 3, which is amazingly prescient given this was done five years ago (like Lewis, McWilliams also invokes a prostitution metaphor to dissect the situation). The piece also melds well with Lewis’s piece on Ireland.
Last week I had a discussion with Professor Azzi about the classic piece, “Market contestability in the presence of sunk (entry) costs,” where Vernon Smith and his colleagues examine the dynamics of market structure. They find that even with the same initial conditions, an industry sometimes winds up competitive and sometimes winds up characterized by market power, a finding that we may well flesh out in IO this fall.
With that in mind, I was pleased to see a link to a ReasonTV.com video interview with Smith making the rounds on the econ blogosphere. In the interview Smith — the pioneer of “experimental” economics — talks about how asset bubbles show up in the lab whether you want them to or not, and his assessment of the government’s bailout of many homeowners:
Forgiving debt is not a good idea, but you have to realize that we don’t face any good options. If it hadn’t been done, the banking system would likely have collapsed.
Aside from that note, Smith also touches upon the marginal revolution, The Theory of Moral Sentiments, and growing up through the Great Depression. An interesting half hour all around.
I recall seeing him speak about the troubled state of electricity regulation a few years back, where he said something to the effect of: “the regulators’ solution is to set average revenues equal to average costs, and it’s this sort of average thinking that got us into this mess.”
Speaking of Hayek, late last week the libertarian Cato Institute hosted a blockbuster panel on The Constitution of Liberty, which was just re-released. The curiosity of the day was the appearance of Hungarian financier, George Soros, certainly no libertarian, but someone who was around when Hayek and Popper were mixing it up. The panel also contained rock star law professor Richard Epstein, and preeminent historian of economic thought, Bruce Caldwell.
Is there a bigger champion of the educational movie on campus than Professor Brozek? I think the answer is decidedly not. In the spirit (sort of) of last year’s international film series, this term he brings us Forbidden Planetto entertain and enlighten us in ways that only sci-fi movies from the 1950s can.
The movie screens Tuesday, September 21 at 9:30 p.m. in Warch Cinema. Everyone in Freshman Studies (and beyond?) is invited.
For those of you who had a reasonably normal childhood, here’s the basic storyline:
Forbidden Planet is an adaptation of The Tempest set on the planet Altair IV in the year 2257 – Shakespeare in space suits, essentially. The parallels between the movie and the play are numerous – Dr. Morbius and his daughter, Altaira, are the only human inhabitants of the planet, although they have a faithful servant in Robby the Robot. When a mission from Earth comes to rescue Dr. Morbius, they discover threats (a machine that creates monsters in the crew’s subconscious) as well as romance (Altaira and a young Leslie Nielson as Commander Adams).
Part of the fun of Forbidden Planet – especially in the context of Freshman Studies – is picking out the parallels between the film and the play. It’s also interesting, though, to look at the spots where they diverge – SPOILER ALERT SPOILER ALERT I CAN’T BELIEVE HE SENT ME ALL THESE SPOILERS
For those of you who think passion is reserved for the humanities, check out this NOVA documentary on mathematician Andrew Wiles’ quest to solve Fermat’s last theorem. Wiles literally breaks down crying when thinking back to the moment when he thought he had it.
Fermat himself had said of the proposition, “I have a truly wonderful proof of this fact…. This margin is too small to contain it.” Though he probably didn’t, what his claim unleashed is extraordinary, with the Wiles’ proof being the last chapter.
Professor Sanerlib regularly shows this to his Math 300 class, but why should they have all the fun?
UPDATE: Alex Tabarrok at Marginal Revolution also spotted this and offers this:
The plainspoken Goro Shimura talking of his friend Yutaka Taniyama, “he was not a very careful person as a mathematician, he made a lot of mistakes but he made mistakes in a good direction.” “I tried to imitate him,” he says sadly, “but I found out that it is very difficult to make good mistakes.” Shimura continues to be troubled by his friend’s suicide in 1958.