One problem with this post, which is also seen in various other posts in the sequences and many LW posts in general, is the tendency to jump to conclusion that people's behavior is irrational. Neither of these examples (Casey Serin and the LTCM people) strikes me as being obviously irrational, in the sense that these people would be acting against their own interest clearly and to an unusual degree.
This is especially true of the LTCM example. While it might be possible that this venture was really a mistake for Merton, Scholes, and the others involved (from the perspective of their own self-interest), the way this conclusion is reached in the post and the idea that they would have something to learn from being lectured about this topic are just childishly naive.
Agreed.
The whole Bayesian being an ultra-rational agent and any deviation on the part of humans is a sign of irrationality has been moved away from by some economists. Now some think that humans are rational and the trick is to figure out how what appears irrational at first glance can be considered rational. This because the model for rationality didn't give very many useful results outside of gambling and playing stocks, even then people have gotten burned by it.
Much of it comes down to limited information and variable time preferences.
Today's post, Just Lose Hope Already, was originally published on 25 February 2007. A summary (taken from the LW wiki):
Discuss the post here (rather than in the comments to the original post).
This post is part of the Rerunning the Sequences series, where we'll be going through Eliezer Yudkowsky's old posts in order so that people who are interested can (re-)read and discuss them. The previous post was Politics is the Mind-Killer, and you can use the sequence_reruns tag or rss feed to follow the rest of the series.
Sequence reruns are a community-driven effort. You can participate by re-reading the sequence post, discussing it here, posting the next day's sequence reruns post, or summarizing forthcoming articles on the wiki. Go here for more details, or to have meta discussions about the Rerunning the Sequences series.