^TagJames Tobin

Set of red glass dice isolated on black background. 3d rendering - illustration.

^{Type
post

Author
Gary Smith
Date
September 5, 2022

Categorized
Business and Finance, Economics, Mathematics

Tagged
Economics and human motivation, Economics and math predictions, Featured, Great Depression economic policies, James Tobin, John Maynard Keynes, Paul Samuelson, Samuelson simulations, Stock market bubbles vs. dice rolls, Zvi Bodie}

Don’t Worship Math: Numbers Don’t Equal Insight

_{The unwarranted assumption that investing in stocks is like rolling dice has led to some erroneous conclusions and extraordinarily conservative advice} _{Gary Smith

September 5, 2022

7

Business and Finance, Economics, Mathematics}

My mentor, James Tobin, considered studying mathematics or law as a Harvard undergraduate but later explained that I studied economics and made it my career for two reasons. The subject was and is intellectually fascinating and challenging, particularly to someone with taste and talent for theoretical reasoning and quantitative analysis. At the same time it offered the hope, as it still does, that improved understanding could better the lot of mankind. I was an undergraduate math major (at Harvey Mudd, not Harvard) and chose economics for the much the same reasons. Mathematical theories and empirical data can be used to help us understand and improve the world. For example, during the Great Depression in the 1930s, governments everywhere had so Read More ›

^{Type
post

Author
Gary Smith
Date
May 25, 2022

Categorized
Business and Finance, Economics, Work

Tagged
Ed Leamer, Ezra Klein, Featured, George Box, Great Depression (and economic theory), James Tobin, Janet Yellen, Jobs (and market forces), John Maynard Keynes (on wages vs. prices), Lawrence Summers (on market equilibrium), Market equilibrium, Market forces, Paul Krugman (on market equilibrium)}

Some Economic Models are Alluring, Others are Useful

_{In some markets, prices are affected by market forces and in others, like the job market, they are not} _{Gary Smith

May 25, 2022

6

Business and Finance, Economics, Work}

Statistician George Box is credited with the aphorism, “All models are wrong, but some are useful.” Unfortunately, as the brilliant economist Ed Leamer, once quipped, “Economists are like artists. They tend to fall in love with their models.” A large part of the art of economics is distinguishing between attractive models and useful models. The traditional bedrock of economics is the demand-and-supply model. Every introductory economics course explains how demand and supply are related to price and how the equilibrium price is where demand is equal to supply. This can be a very useful model for predicting how changes in demand and supply affect prices and trades — if we make the tempting assumption that the market price is equal Read More ›

Worried doctors and medical researchers on conference meeting, discussing possible solutions for resolving a world health crisis. Health and medical care concept. Selective focus.

^{Type
post

Author
Gary Smith
Date
September 14, 2020

Categorized
Medicine and Health, Peer Review, Science

Tagged
Aleh Tsyvinski, bitcoin, Featured, James Tobin, Meaningless correlations, replication crisis, Reproducibility, Reproducibility crisis, Ronald Fisher, Statistical significance, Yukun Liu}

Computers Excel at Finding Temporary Patterns

_{Which contributes to the replication crisis in science} _{Gary Smith

September 14, 2020

7

Medicine and Health, Peer Review, Science}

The scientific method calls for the rigorous testing of plausible theories, ideally through randomized controlled trials. For example, a study of a COVID-19 vaccine might give the vaccine to 10,000 randomly selected people and a placebo to another 10,000, and compare the infection rates for the two groups. If the difference in the infection rates is too improbable to be explained by chance, then the difference is deemed statistically significant. How improbable? In the 1920s, the great British statistician, Sir Ronald Fisher , said that he favored a 5 percent threshold. So 5 percent became the Holy Grail. Unfortunately, the establishment of a 5 percent hurdle for statistical significance has had the perverse effect of encouraging researchers to do whatever Read More ›