Monday, November 17, 2008

The usefulness of academic economics

When Kepler figured out the orbit of the planets, nothing changed in the solar system (though it did pave the way for cool things like spacecraft). But academic research in economics can change the laws of motion of the economy.

There are many other war stories of this nature, particularly from financial economics. One that comes to my mind is the story of the 1986 Eytan/Harpaz paper on pricing a geometric mean of prices index, that is told in this paper by Sam Thomas.

4 comments:

  1. Its really disappointing : "Managers investing in their own funds"-
    http://online.wsj.com/article/SB115387818488617378.html?mod=djemPJ
    Regards,
    Anonymous1

    ReplyDelete
  2. The link above is this. Anonymous1, why is this disappointing? I found it to be pretty much what I had expected.

    ReplyDelete
  3. Really it was a bit foolish of me to expect that after a level, a few more bucks of personal wealth is less valuable to a professional fund manager as compared to his peer ranking. If its still their ‘own money’ which drives motivation for such people and not so much their professional standing (which actually is the way to far greater wealth and professional satisfaction), well I remain disappointed. Why would otherwise some people who could have made a lot more money had they stayed in the US after getting their PhDs in Economics at USC, ….come back.. as they really wanted to contribute to the creation of a world class financial system in India.
    Regards,
    Anonymous1

    ReplyDelete
  4. Just thought over my comment. It was naive of me to expect that of the Fund Managers but I admire your decision to come back to India to create a world class financial system in India and I feel so indebted whenever I go through your blog..just to clarify so that nobody misunderstands.
    Best regards,
    Anonymous1

    ReplyDelete

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