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Brian_Macker comments on Worse Than Random - Less Wrong

25 Post author: Eliezer_Yudkowsky 11 November 2008 07:01PM

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Comment author: Brian_Macker 13 November 2008 01:09:33AM 1 point [-]

Stuart Armstrong ,

"By 'comprehend the emergent behavior' do you mean that you have a vague intuitive feel for this, or that you have the equations relating interest rates to other factors, along with enough mathematical theory to make specific quantitative predictions?"

If I believe that a individual or committee cannot determine a market price other than by actually observing one then why on earth do you think I am claiming to be able to "make specific quantitative predictions?"

Those economists that make the mistake of thinking they can make a killing in the market are notoriously bad at it. Greenspan being an example.

Austrian theory holds that you cannot make the kind of quantitative predictions you expect to. So when you can predictibly and consistently make quantitative predictions on your economic theory then you can prove Austrian theory wrong.

"If you (or people like you who "comprehend the emergent behavior") did not make a lot of money out of the current crisis, then your statement is wrong."

Not at all. One can predict that the actions of say, Mugabe in Zimbabwe, would be an economic disaster without being able to capitalize on it.

"Explanations after the fact are simply stories."

But the explainations were given before the fact. Austrian theory exists as a model and it predicts certain outcomes given certain actions.

In the theory, below market interest rates result in low savings, overborrowing, trade deficits, asset inflation, and market bubbles. Everything that has been occuring makes sense in light of the theory.

BTW, that theory predicted the Great Depression before the fact, and this crash before the fact. It also predicted the existence of stagflation before the fact.

Likewise it predicts that the current actions of the Fed if continued are going to lead to inflation, all other things being equal.

The current crisis was caused by fractional reserve banking and monetary inflation and the current solutions being proposed and acted on by the likes of Krugman are to inject more money. These are precisely the wrong things to do.

Interest rates are prices like any other. It's well understood that when you put a price ceiling on a good that you get shortages as consumers try to consume more at the lower price and producers produce less. That is exactly what we are experiencing now, a shortage of capital due to a price ceiling on interest rates. This is a simple case of trying to violate economic law and being stung by it.

Austrian theory has more to say on the matter in that this kind of monetary inflation causes misallocation of resources but I'll refrain from writing a long article. It isn't at all about "vague intuitive" feelings either. It consists of clear, understandable mechanisms by which each result can be deduced from the model.

Comment author: Larks 14 May 2011 07:50:23PM 1 point [-]

One can predict that the actions of say, Mugabe in Zimbabwe, would be an economic disaster without being able to capitalize on it.

How about shorting the Zimbabwean Dollar? Any piece of knowledge you have, and others lack, can be acted on by taking bets.