Skip to main content

[Article Comment] Economists Have a Lot to Learn From the Weather

A comment on Bloomberg View article:
http://www.bloomberg.com/news/2012-04-08/economists-have-a-lot-to-learn-from-the-weather.html

When I first started studying economics back in college, I was stunned: all consumers perfectly rational? Free markets always lead to maximization of utility? It was in a stark contrast to what I have experienced as someone who saw Soviet Union collapse and embrace the free market theology to the extreme. So I asked my professors: how could something this unrealistic explain all the complexity that actually exists? They told me you had to start with some assumptions to see the gist of it, but you can then relax them to arrive to the more realistic ones. To the best of my knowledge, a model that would really explain the real world of economics is still to be developed. But that doesn't seem to bother most of the economists. Neoliberalism (criticized by some bright minds, Joseph Stiglizt one of them) feels more like a religion than a science. Believed to be right until proved otherwise.


■
Labels:

Comments

Post a Comment

Popular posts from this blog

Investment Banking Series: Equity Story

Investment Banking Series Post 6 Equity Story 1. What is it anyway? Equity Story is, in its essence, the reasoning why the particular stock should be bought by investors. It emphasizes the strong side of the company and places the stock in either the value or the growth category. In a nutshell, the value stock is expected to have little price appreciation, but pay out relatively high dividend, whereas the growth stock is expected to have a high appreciation potential, but not necessarily pay much dividend. How a stock is classified depends on several factors, such as where in the industry life cycle it is, what the macro conditions are, what industry it belongs to, or sometimes even if it has a hot buzzword in its description. For instance, a power generation company would usually be classified as a value stock: there is very little growth potential, but the cash flows are steady and not as much correlated with the economic conditions. An Internet portal or a biotech company ar
3 comments
Read more

Investment Banking Series: Pitch Books

Investment Banking Series Post 3 Pitch Books 1. What is it anyway? A pitch book is the paramount of days and nights of a banker's hard work. It is a marketing tool that tries to set apart basically very similar banks and to support the claim that THIS bank, and NO ANY OTHER should be selected to arrange the deal. They say pitch books used to be actual books, but in the present world they are Power Point presentations printed out and bound in a plastic cover. The main purpose of the pitch book is to deliver two messages to the prospective client: (1) "we understand your business very well", and (2) "when it comes to arranging your deal, we are the best fit". Both claims are usually weak at best, but they are made elaborately and extensively, and the resulting multi page document often looks impressive. 2. Typical structure A pitch book will have varying structure depending on what product is being proposed, but there is a lot of similarities. Below is o
1 comment
Read more