Nobel 2013: Fama, Shiller, and Hansen

Yah, Nobel prize.  All guys that deserved it … I just wouldn’t have expected them to get it together.  To be honest, the reasoning makes sense though – they have all added significantly to the empirical analysis of asset prices, albeit in quite different ways :)

Still, don’t read me.  Read Cochrane (here, here, herehere, here).  And Marginal Revolution (here, here, here, here, here, here).

Also I enjoyed this.  And this post on why the Chicago school gets so many Nobel laureates is a good counter-measure to all the arbitrary bile that can be thrown around on the interwebs :) .  I also enjoyed this post from Noah Smith.

I have a bias towards Shiller in all of this because of my interests.  He is a big proponent of trying to view economic phenomenon through a lens of history dependence (with the regulatory difficulties that entails) and has talked about how exciting neuroeconomics is – completely agree.  However, this has nothing to do with empirical finance in of itself, as this is not my field.  While I think some of the stuff is pretty cool (and remember really like GMM a few years back) I have nothing to say.  Hence why you should be going back and clicking those links to Cochrane and Marginal Revolution ;)

  • VMC

    Some of us, maybe only those if us with an appreciation of history, who knows – wish that the rest of you would stop referring to this prize as a Nobel prize. Its not – its actually called the The Sveriges Riksbank Prize. And its called that because the Sveriges Riksbank created it, unlike the Nobel prizes which were created by Alfred Nobel. If it had happened in NZ, we would call it the Reserve Bank prize!

    • Seamus Hogan

      Actually, it is “The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel”. But as that is a mouthful, it is easier to shorten that to “The Nobel Prize in Economics”, which seems sensible, given that it is there along with the ones specified in Nobel’s will on the Nobel Foundation’s website, is presented at the same ceremony, similarly administered by the Royal Swedish Academy of Sciences, etc.

      • VMC

        It is a mouthful – but to pretend its a Nobel prize is pretentious.

        • http://tvhe.co.nz/ Matt Nolan

          Aha, so you are inherently ranking the value of the contribution associated with the physical sciences and humanities above the social sciences in calling this pretentious. I would be careful with this argument – and I would note that when I’m using the term “Nobel prize” I am not applying this type of ranking ;)

          Remember, calling it a Nobel prize is common language for what the prize is – defining these linguistic patterns as pretensions requires additional assumption, some of which may be unfair to apply to the groups you are discussing ;)

          • VMC

            I agree, it has become common including (often) from those who actually think Nobel did create such a prize. But I don’t think there is any attempt to rank contributions of various disciplines by noting this. Plenty of other activities have their own accolades and dont feel the need to crowd out (diminish) poor old Nobel.

            • http://tvhe.co.nz/ Matt Nolan

              Fair enough – however, it does all stem back to a quite hard related issue, the idea of the weight we place on the “appeal to authority” of a given discipline.

              From what I have read, when the economics prize was established in relation to the Nobel prizes, there was a growing recognition that social sciences deserved a similar recognition to physical sciences and humanities as a discipline. Merely 40 years before the prize was set up, many people saw social science study a fairly negative light – and intuitionism was extremely popular.

              In this context, I definitely appreciate that it is a touch rough that the award is solely in economics, rather that broader social science. And I can actually feel a lot of sympathy for psychologists and sociologists that get annoyed at the economics prize being treated in this way :P

              The idea of having the prize as completely separate also has weight – but if the term itself has become a focal point for the idea of rewarding “academic explanation”, then its usage may also have merit!

              Also, I am not sure how having economics floating around hurts the other prizes? I don’t write about the other prizes as I do not know anything about them – I don’t even know terrible much about this prize :D .

              • VMC

                Re: Your last thoughts – this link (http://www.minneapolisfed.org/publications_papers/pub_display.cfm?id=3547) suggests – a far way through, that it may actually diminish economics. While this link (http://www.alternet.org/economy/there-no-nobel-prize-economics?page=0%2C1&paging=off&current_page=1#bookmark) is much more critical – indeed, don’t read this one if you are feeling sensitive as it says things such as the Swedish Central Bank Prize was just set up as a marketing ploy.

                • Miguel Sanchez

                  I was actually just about to post that second link, for a laugh. The idea that the prize was set up to promote free-market ideology doesn’t stack up when you read what many of the early winners had to say – there’s a fairly consistent theme that the big ‘advances’ in economics were towards making central planning more feasible.

                • VMC

                  Yep, i thought it good for a chuckle – although I doubt the author intended it to be anything other than serious

                • Luc Hansen

                  Ah, the peace prize. Honoured in breach?
                  :-)

                • http://www.seo-mumbai.co.in/brochure-design.html sanjay sharma

                  Its good…. Its speciality of it.

    • http://tvhe.co.nz/ Matt Nolan

      While this is very true, and I hear it repeatedly, I’m going to continue calling it the Nobel prize :)

      I do have sympathy for the position that it is misleading, and that instead we should perhaps have a name for a social science prize – rather than ‘riding on the coat-tails’ of the physical sciences. (Although I also hear think this view can in turn be exaggerated) .

      However, the readership of this blog is pretty limited, and is primarily people involved in economics/economics reporting in NZ in some fashion, and who know this blog is only about economics – the majority of which know this already know this fact. In that environment calling it “The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel” is all cost with practically no benefit.

      • VMC

        Cheers. To some of us pedants – accuracy is its own ‘benefit’

        • Seamus Hogan

          VMC. I would never decry a pedant, but let me ask you: Do you refer to the sport played by the All Blacks as “rugby football union” and that played by the Phoenix as “association football”, or do you just sometimes find it easier to shorten the former to “rugby” and the latter to either “football” or the slang term for “association” (soccer)?

        • http://tvhe.co.nz/ Matt Nolan

          Interesting – given I stated that, for the audience I’m talking to, the terms mean exactly the same thing there is no difference in “accuracy”.

          Unless accuracy is defined by having every premise of an argument fully defined – in which case these articles will get very long and be subject to constant infinite regress!

          Or is the point of the term ‘accuracy’ here solely as a pejorative about my argument ;)

          • VMC

            Absolutely no intention to be pejorative to your argument, which (to summarise) is that you think the people who got the prize deserved it, though there were some surprises for you. These announcements are all the better for a little surprise (What a nice surprise to see that Eleanor Catton has just won the Mann Booker prize against many of the pundits. ) I think – would become boring if they became too predictable.

            • http://tvhe.co.nz/ Matt Nolan

              This is true – very exciting about Eleanor as well!

            • Miguel Sanchez

              It’s the *Man* Booker Prize. I question your commitment to pedantry…

              • VMC

                Well observed – maybe I am falling under the spell caste in this discussion that seems to suggest that its OK to be erroneous, as long as every one knows thats what you are doing!

  • VMC
    • http://tvhe.co.nz/ Matt Nolan

      I am still a little nervous of the premise they put it on – their ideas of “science” as a well defined block methodology are a bit antiquated! The purpose is more about giving research into social science a heads up as a discipline deserving of systematic analysis – rather than being subject to naive intuitionism.

      An even bigger concern with the post is the purpose given for the prize. Pinning the Nobel’s purpose solely to science ignores the fact that the humanities also make a showing (I am unsure of the scientific qualities of literature, or peace) – calling it a prize regarding in subjects that aim to increase the wellbeing of man has always made more sense, and social science would been put if it had truly existed when he made the prize!

      That is why the concern I find more valid is the fact other social sciences get pissed – why is it an economics prize, and not a general contribution to social science prize?

      Regarding the post I’d also note Quiggin is attacking one area of the discipline. I wouldn’t call it a fully fair attack but even if it was there are far more ‘scientifically rigourous’ elements of economics than macro – namely the entire rest of the discipline (this is debatable depending on how we start to define science – but this is stretching the bow in comments :P). Since Becker has started stretching the bounds of the base economic method, it has been applied in across the social sciences.

      The ‘rational man’ has provided an ideal type we can just to help understand deviations from, and interpret data transparently. This is a necessary condition for doing analysis, and as a result the economics prize made less sense until these applications came into being. Now some will criticise the rational man as ‘untrue’ but this misses the point of why it is used for, and what ideal forms are used for in scientific (and literary) analysis in the first place. It is a tractable and testable form which we can easily extend upon. Calling economics “prescientific” in the way Quiggin does is a pejorative term for economic thinkers he disagrees with – not a descriptive term ;)

      I might copy this comment and put it on his post!

      • VMC

        If he responds to your post – any chance you might repost his thoughts?

        • http://www.tvhe.co.nz/ jamesz

          We had a short argument on Twitter instead. This is the last tweet of the conversation:

          https://twitter.com/JohnQuiggin/status/390771851095728129

        • http://tvhe.co.nz/ Matt Nolan

          Of course, I need to actually post it first – I’ll get onto that once I get into the office :)