Sunday, May 15, 2005

Ya ain't alone

Supposedly when Pierre Salanger came into President Kennedy's office, Kennedy asked "Is it good news or bad news?" Salanger replied " there is no good news, but there is bad news that isn't our fault; the Aswan dam is leaking."

If you are fighting yourself at the poker tables, here is some bad news for others that isn't your fault. From the Econo Log at LLO:

Four Bad Role Models, May 12, 2005

by Bryan Caplan

Some Nobel prize-winning economists keep investing foolishly even though they know better, according to a recent L.A. Times article. Here are their statements, ordered from bad to worse:

  • Harry Markowitz, father of modern portfolio theory, put half of his assets in stocks and half in low-risk assets. Now he says "In retrospect, it would have been better to have been more in stocks when I was younger." OK, maybe the equity premium puzzle had yet to be discovered.
  • Clive Granger: "I would rather spend my time enjoying my income than bothering about investments." Isn't there some connection between the two?
  • Daniel Kahneman is more culpable: "I think very little about my retirement savings, because I know that thinking could make me poorer or more miserable or both."
  • But George Akerlof aggressively seizes the booby prize. He apparently keeps his wealth in money market funds and the like. His justification? Less than zero: "I know it's utterly stupid."

    The whole article reminds me of a quote I wrongly attributed to Einstein instead of Thomas Szasz: "Clear thinking requires courage rather than intelligence." It's sad that such eminent economists know the smart thing to do but fail to follow through.

  • See, ya ain't alone. Overall, these guys have not done so well advising others either, but they are willing to take your money to tell you what to do; or to teach a class full of math on how things economic work. The key would seem to be the courage to use knowledge, and maybe realize we don't know as much as we think we do.

    Now, what we need at the poker table seems to be the courage to .....


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