If there was ever a Popperian refutation of the econometric/quant modelling of human behaviour we are surely living through that now.
No matter how many people know that water is H2O, it will not affect the fact. Once we have people telling us they can plug in probabilities for human actions, we have the start of monumental folly.
Every wise investor understands what Soros calls reflexivity. There is a role for math clearly but I find this post obsession about what to me seem fairly dull objections to the Austrian school miss their larger picture which seems to me overwhelmingly supported by current market experience.
It should not be a surprise to note that some of the most successful money managers/traders I work with have a strong Austrian bias, at least in the understanding of the monetary system and its systemic flaws and the predictable response of government… all using shiny models of course. Ahem.
I believe Mises said that socialism would fail at a time when the left (I do not imply Mises was thus on the right) was wowed over the success of Russia etc. and logically his theory would suggest money would be debased over time and that wealth would increasingly, and unjustly flow in Cantillon fashion to the earlier recipients of new money. Well, that to me means bankers, property developers, lawyers etc and this is so.
Today we are seeing rates near zero and government supporting long bonds and it is no surprise, to an Austrian trader, that we are seeing enormous trading profits in these areas of investment banks. This is an example of the Cantillon effect.
I would recommend we take the powerful parts from the Austrian theory and use them in real life. They surely work but it is also true that many who call themselves Austrians are of a ‘perma-bear’ disposition so be careful who you listen to. Look for form.
If there was ever a Popperian refutation of the econometric/quant modelling of human behaviour we are surely living through that now.
No matter how many people know that water is H2O, it will not affect the fact. Once we have people telling us they can plug in probabilities for human actions, we have the start of monumental folly.
Every wise investor understands what Soros calls reflexivity. There is a role for math clearly but I find this post obsession about what to me seem fairly dull objections to the Austrian school miss their larger picture which seems to me overwhelmingly supported by current market experience.
It should not be a surprise to note that some of the most successful money managers/traders I work with have a strong Austrian bias, at least in the understanding of the monetary system and its systemic flaws and the predictable response of government… all using shiny models of course. Ahem.
I believe Mises said that socialism would fail at a time when the left (I do not imply Mises was thus on the right) was wowed over the success of Russia etc. and logically his theory would suggest money would be debased over time and that wealth would increasingly, and unjustly flow in Cantillon fashion to the earlier recipients of new money. Well, that to me means bankers, property developers, lawyers etc and this is so.
Today we are seeing rates near zero and government supporting long bonds and it is no surprise, to an Austrian trader, that we are seeing enormous trading profits in these areas of investment banks. This is an example of the Cantillon effect.
I would recommend we take the powerful parts from the Austrian theory and use them in real life. They surely work but it is also true that many who call themselves Austrians are of a ‘perma-bear’ disposition so be careful who you listen to. Look for form.