Wednesday, October 22, 2014

The Paranoid Style in Economics

NEW DELHI – Why do high-profile economic tussles turn so quickly to ad hominem attacks? Perhaps the most well-known recent example has been the Nobel laureate Paul Krugman’s campaign against the economists Carmen Reinhart and Kenneth Rogoff, in which he moved quickly from criticism of an error in one of their papers to charges about their commitment to academic transparency.

For those who know these two superb international macroeconomists, as I do, it is evident that these allegations should promptly be dismissed. But there is the larger question of why the paranoid style has become so prominent.

Part of the answer is that economics is an inexact science, with exceptions to almost every pattern of behavior that economists take for granted. For example, economists predict that higher prices for a good will reduce demand for it. But students of economics will no doubt remember an early encounter with “Giffen goods,” which violate the usual pattern. When tortillas become more expensive, a poor Mexican worker may eat more of them, because she now has to cut back on more expensive food like meat.

Such “violations” occur elsewhere as well. Customers often value a good more when its price goes up. One reason may be its signaling value. An expensive handcrafted mechanical watch may tell time no more accurately than a cheap quartz model; but, because few people can afford one, buying it signals that the owner is rich. Similarly, investors flock to stocks that have appreciated, because they have “momentum.”

The point is that economic behavior is complex and can vary among individuals, over time, between goods, and across cultures. Physicists do not need to know the behavior of every molecule to predict how a gas will behave under pressure. Economists cannot be so sanguine. Under some conditions, individual behavioral aberrations cancel one another out, making crowds more predictable than individuals. But, under other conditions, individuals influence one another in such a way that the crowd becomes a herd, led by a few.

The difficulties for economic policymakers do not stop there. Economic institutions can have different effects, depending on their quality. In the run-up to the 2008 financial crisis, macroeconomists tended to assume away the financial sector in their models of advanced economies. With no significant financial crisis since the Great Depression, it was convenient to take for granted that the financial plumbing worked in the background.

Models, thus simplified, suggested policies that seemed to work – that is, until the plumbing backed up. And the plumbing malfunctioned because herd behavior – shaped by policies in ways that we are only now coming to understand – overwhelmed it.

So, why not let evidence, rather than theory, guide policy? Unfortunately, it is hard to get clear-cut evidence of causality. If high national debt is associated with slow economic growth, is it because excessive debt impedes growth, or because slow growth causes countries to accumulate more debt?

Many an econometrician’s career has been built on finding a clever way to establish the direction of causality. Unfortunately, many of these methods cannot be applied to the most important questions facing economic policymakers. So the evidence does not really tell us whether a heavily indebted country should pay down its debt or borrow and invest more.

Moreover, what seem like obvious, commonsense policy solutions all too often have unintended consequences, because a policy’s targets are not passive objects, as in physics, but active agents who react in unpredictable ways. For example, price controls, rather than lowering prices, often cause scarcity and the emergence of a black market in which controlled commodities cost significantly more.

All of this implies that economic policymakers require an enormous dose of humility, openness to various alternatives (including the possibility that they might be wrong), and a willingness to experiment. This does not mean that our economic knowledge cannot guide us, only that what works in theory – or worked in the past or elsewhere – should be prescribed with an appropriate degree of self-doubt.

But, for economists who actively engage the public, it is hard to influence hearts and minds by qualifying one’s analysis and hedging one’s prescriptions. Better to assert one’s knowledge unequivocally, especially if past academic honors certify one’s claims of expertise. This is not an entirely bad approach if it results in sharper public debate.

The dark side of such certitude, however, is the way it influences how these economists engage contrary opinions. How do you convince your passionate followers if other, equally credentialed, economists take the opposite view? All too often, the path to easy influence is to impugn the other side’s motives and methods, rather than recognizing and challenging an opposing argument’s points. Instead of fostering public dialogue and educating the public, the public is often left in the dark. And it discourages younger, less credentialed economists from entering the public discourse.

In their monumental research on centuries of public and sovereign debt, the normally very careful Reinhart and Rogoff made an error in one of their working papers. The error is in neither their prize-winning 2009 book nor in a subsequent widely read paper responding to the academic debate about their work.

Reinhart and Rogoff’s research broadly shows that GDP growth is slower at high levels of public debt. While there is a legitimate debate about whether this implies that high debt causes slow growth, Krugman turned to questioning their motives. He accused Reinhart and Rogoff of deliberately keeping their data out of the public domain. Reinhart and Rogoff, shocked by this charge – tantamount to an accusation of academic dishonesty – released a careful rebuttal, including online evidence that they had not been reticent about sharing their data.

In fairness, given Krugman’s strong and public positions, he has been subject to immense personal criticism by many on the right. Perhaps the paranoid style in public debate, focusing on motives rather than substance, is a useful defensive tactic against rabid critics. Unfortunately, it spills over into countering more reasoned differences of opinion as well. Perhaps respectful debate in economics is possible only in academia. The public discourse is poorer for this.

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  1. CommentedBernard King

    Ultimately, beneath every economist's patina of empiricism are normative judgments and foundational assumptions about human action based on each individual's personal philosophy and unique worldview. Thus, when an economists work is enmeshed with his own values, criticism of his work is easily internalized as a personal attack on his values. Thus prompting what the economist believes are retaliatory ad hominem attacks in response.

  2. CommentedJonathan Lam

    Gamesmith94134: The Paranoid Style in Economics

    “transactions in the modern world of finance tend to be “arms length”, the only way to measure performance is the money that one can “earn”. Consequently, firms and individuals are pressured to “push the limit” or “extend the edge” in all they do so that they can achieve a few more basis points return than their competitors.”

    I have learned the basis of Fault Lines: How Hidden Fractures…;and I did not read the book; but I will soon. I am not an economist, but I think the application of Physics that give no casualty like equity (fair exchange and not equitable capital or goods). It applies to economics, which development balances itself on the marginal equilibrium on what is earned and displacement from its competitors.
    Projection to growth equals assumption plus consumption which arm length is earned that firms and individuals is pushed the limit or extends the edge. What happen equitable is not being earned? We are talking of hard to get clear-cut evidence of causality; if it was not the “Giffen food” then, we are talking of displaced by competition, either more taco less meat, or to starve with deficits if the firm or individual have not vanished. It is what happened to India’s economy which inflated the equitable both capitals and goods that created the inequality in the social-stratum, that displacement of the not earned turned these equitable into inflation occurs to those low tech salary earners or farmers. Through the consumption on the non-vanished firm and individuals and the rupees are pegged to dollar, and the overload of credits through the quantitative easing escalated the price on the equitable capital and goods; but the salary earner and farmer did not benefitted from the intrusion, they became the deficit as the cost of living rises as being non-vanishing. This is the displacement on the not-earned.

    In explaining the arms length which is like investors flock to stocks that have appreciated, because they have “momentum.” Perhaps, we can use examples on commodity of gold and Apple in deciding how casualty is created if earning is down. In assumption, it applies to the infrastructure of pricing that its arms length is not the reality or equitable, but it is just how the market appreciates or what is called momentum only. Perhaps, if we are exchanging gold or stocks in Apple for something like cash, we will find the risks factors exist as it becomes less equitable that we will sell lower to deviate the momentum or arms length, and the price structure is collapsible under the assumption of the arms length or momentum. Perhaps, we can call it another risk factor on pricing like Jose araujo said in REAL VS NOMINAL.

    Some may get paranoid if they are classified as in academics to economics. However, science does give its equitable but not in capital or goods if we search deeper in its equilibrium and its polarized objects. Anyway, it is debatable on any objective and both can learn if pride is not being subjective. As to economical future, there is always plots rather than theory----Giffen food or evolution on displacement. It’s where the world begins.

    May the Buddha bless you?

  3. CommentedKen Presting

    It's typical of Rajan that he ignores the many other distinguished economists who criticize Reinhart and Rogoff, including the original studen who diagnosed their error.

    In an academic journal, no paper could be published without a summary of previous research. Rajan is simply exploiting the editors and audience of this blog.

      CommentedBernard King

      I take it you don't mind the ad hominem attacks that pervade economic arguments?

  4. CommentedKarthik M

    Sorry Jatin, I replied to your comment by misake.

    I much prefer the paranoid style, over the more serious, strictly academic style of debating. Perhaps you too should give it a try, sometime.
    I do not say Krugman is correct, but neither am I your follower. And, I too belong to the public if anything else.
    It is easy to dish out philosophical answers, like "economics is an inexact science", "listen to both perspectives", "be humble", etc. And it is easy for public to consume such answers and avoid the question, so i do not agree wth you here.
    And in case of Krugman, I find it good that he takes his positions seriously and his debates personally. (Perhaps too personally..., but still personally!)

  5. Commentedjatin meswani

    Part of issue is statistics. This is where understanding of ground realty will differentiate the academician and the good economist.

      CommentedKarthik M

      I much prefer the paranoid style, over the more serious, strictly academic style of debating. Perhaps you too should give it a try, sometime.
      I do not say Krugman is correct, but neither am I your follower. And, I too belong to the public if anything else.
      It is easy to dish out philosophycal answers, like "economics is an inexact science", "listen to both perspectives", ""etc

  6. CommentedJohn Doe

    why don't we have an editor, keeping stuff like this from wasting time

    when garbage comes from the pen of someone whose chair is funded by a hedge fund ...

  7. Commentedadmir ramadani

    Oh common. so lame an article. you seem to be heavily biased from your punches received by krugman from the past, and you fall into ad hominem as well. krugman critic might be harsh in some personal aspect but his "substance"'s critic was so light as wrongoff/hart didn't stop the austerity debate from reining on,but actually endorsing it through their paper. by doing this their paper might have caused thousands of lost jobs.

  8. CommentedDaniel Baker

    Other than in the popular press, the Reinhart-Rogoff controversy has nothing to do with a single "error in one of their working papers." The spreadsheet error was completely irrelevant. Reinhart and Rogoff published and pushed a paper that was based on a simple average of 7 data points.

    This was negligent and unworthy research regardless of any spreadsheet mistake. The authors completely misrepresented the underlying data. The fact that it would be defended in this forum is not encouraging. I have laid out a full analysis here:

  9. CommentedMark Pitts

    The commentors prove the author right!

      CommentedAdam Harper

      Thank you for also noticing this. Pretty astounding how many people here have unintentionally strengthened the author's point.

  10. CommentedJose araujo

    On the Wrongoff Wronghart piece, its not paranoia, its was a crucial basic mistake, and the conclusions were all wrong.

    Mistakes like those ones should cost you your reputation, but coming from a guy who is a professor of finance but doesn't know what a giffen good is, this should probably be ok.

  11. CommentedJose araujo

    Yikes, why doesn't project syndicate hire editors, c'mon the errors on this article are basic. Makes you question on how this characters achived academic recognition.

    Tortillas a giffen good???? gourmet tortillas could be a giffen good, but that's not the example, in the stated example tortillas are a normal good, so when the real price of tortillas goes down demand increases, the key here is REAL VS NOMINAL prices.Nominal price increase can lead to higher demand of a normal good, it doesn't have to be a giffen good, for christ sakes, even an introductory course on economics teaches you that.

  12. Commentedvivek iyer

    Not to be Paranoid, but what is really happening here is Dr.Rajan is sending a signal that
    1) as RBI Chief he's going to be vigilant against the fiscal deficit- a good thing
    2) his theory of Int. Trade is conservative, or at least not flakey.
    3) the mention of Giffen goods shows he's not going to get hung up on either Human Development Indices or go overboard on per capita Income growth or fads like exponential Micro-finance outreach- i.e. the guy is a safe pair of hands.

    The truth is a Paranoid style in Politics- obsession with wedge issues etc- is a cheap solution for the underlying signal extraction Co-ordination problem at the level of 'cheap talk' for Financial markets. However, for those with Obligatory Passage Point status, a paranoid or idionomic style of functioning vitiates the underlying interessement mechanism because the necessary 'costly signals' are structural suicide.

  13. CommentedPaul A. Myers

    Another question might be why more economists didn't question and look closely at the idea, and underlying support, of 90 percent Debt/GDP being some sort of inflection point? The simple opposite to be tested is that the stresses of debt were gradual and continuous in this range. It too has a common sense ring of being correct.

    Krugman's critique should probably have been more fairly aimed at those partisans who used one small piece of the Reinhart-Rogoff book to say that the case for austerity was made.

    There are economists who do give every appearance of being academic shills for the rich and powerful. Glen Hubbard's name comes easily to mind. But then I think he "sells into" a political market, not the serious policy market.

    And lastly, is this really a "paranoid style." Possibly we are just moving into a more confrontational style in the public square of public debate as economic arguments are seen by a much larger public and also powerful special interests as being pivotal in the public debate on setting policy. I would say that is a pretty good thing!

    And we should always thank Paul Krugman for broadening the debate and rockin' and sockin' the specious argument.

      CommentedJose araujo

      Krugman critique was light, Wrongoff and Wronghart fisrt mistook cause with consequence and on topp of that drew wrong conclusions and on top of the top selected data to support the absurd conclusions.

      Rajan thinks the allegations should promptly be dismissed because he isn't an economist, he is someone who apparently iis named governor of the reserve bank of india without the knowledge of basic economics.

      Mediocres protecting other mediocres, Academia has been like that since Galileo ...

  14. CommentedSteve J

    "Despite their paper’s influence, Reinhart and Rogoff had not made their data widely available—and researchers working with seemingly comparable data hadn’t been able to reproduce their results."

    Is this the ad hominem attack? You are right Krugman sure is a meany. The lengths people will go to attack Krugman surprise me sometimes. Let's write an article that is supposedly about economics in general but in reality is just a takedown of an individual. Hey at least you have comments enabled here which is better than I can say for the blog of the high profile economist that led me here.

  15. Commentedprasad p

    Hearty Congratulations for your new responsibility.

    You are probably luckiest person so far as 'India' has been facing slow growth, unbearable inflation & excessive debt. Soverein rating of India is 'Baa3'(Moody's) nearly junk status.
    You have got an opportunity (Once in a life time) to turn this giant Indian-ship to right direction.

    I have few points in my mind and i wish you will surely address them in your term as a RBI Governer.

    * In July 2008, Crude oil was $147 (Re.6174 :: 1USD=42Re in 2008), Now Crude oil is $107 (Re.6500 :: 1USD=60.75Re in 2013).When rich nations are paying less than $110 per barrel;Why we are paying 40% more price for same commodity.Life of common people should not be in the hands of forex speculators.
    * World power has been appriciating talent of young Indians in IT/Technology industry.Why are we decided to make them Lazy?
    For Example: Suppose One struggling IT/ Technology company is making 1 Billion USD revenue in 2008 (Rupee 4200 Crore :: 1USD=42Re) and suppose its revenue in 2012-13 is still 1 Billion USD then company is making illusionary 6075 Crore Rupee (1USD=60.75Re) whopping 44% jump in revenue.I am sorry but this is classic jobless growth picture of India.
    Whereas low skill labours,farmers and other large middleclass has been facing tremandous problem because of higher prices of gasoline,domestic LPG, electricity & foods-groceries .
    This is classic case in India where talented people are becoming Lazy and hard working people struggle to win bread.

    *The only fair solution to this unusual problem is to 'Peg Currency' in a certain range for certain period of time which will be benefical for all. If India manage to Peg Rupee in the broad range like (Re.30 to Re.60) against USD for next 10-15 years then it will help to overcome many medium term problems.
    Speculators can still speculate within that broad range and depending upon fundamental conditions Rupee will Appriciate/Depriciate.
    Hoping for unusual measures in unusual time from 'Young & Talented RBI Governer'.

  16. CommentedMichael Hennigan - Finfacts

    Congratulations on your new a central bank chief, you will surely be the target of many ad hominem attacks!

    The bigger danger within professions and apparently the more common, is excessive deference and politeness, which promotes self-censorship.

    Paul Krugman's main arena today is an adjunct to the political one and Richard Hofstadter's famous essay, 'The Paranoid Style in American Politics,' written 49 years ago, shows that it was never a place for the faint-hearted.

    Yes, humility and acknowledgement of uncertainty would be a good things in economics.

    'The Age of Uncertainty' was the title of JK Galbraith's BBC documentary series about economics, history and politics in 1977.

    Last April, the BBC reported on a conference hosted by the IMF and the Nobel Prize winner George Akerlof of the University of California - had a vivid analogy for the state of uncertainty the economics profession now faces. "It's as if a cat has climbed this huge tree - the cat of course is this huge crisis. My view is 'oh my God the cat's going to fall and I don't know what to do'."

    Olivier Blanchard, the Fund's chief economist did not beat around the bush: "We don't have a sense of our final destination… Where we end I really don't have much of a clue."

  17. CommentedDan Gay

    The inevitably rhetorical and inexact nature of economics, not to mention its dependence on values, means that it is always likely to be personal. It’s a human belief-system whose outcomes are destined to be all-too-human. It’s almost impossible for economists or any other social scientists to progress without developing a set of beliefs about how the world works, and these beliefs are likely to be based on personal experience and political persuasion. That’s why Krugman and Reinhart and Rogoff shout at each other so loudly. Rajan is so keen to tell readers that he is mates with a Nobelist and two academic superstars because he wants to persuade us that he’s a bigshot who’s worth listening to.

    I actually find it slightly creepy that economists would try to portray themselves as white-coated scientists tinkering behind the scenes, especially when such monumental political decisions are at stake. It’s no bad thing that some debates are conducted in public, even if a bit of snarkiness creeps in. And in the end who doesn’t like watching a bit of a brawl?

  18. CommentedMukesh Adenwala

    Rising above a particular incident involving Professors Krugman, Rogoff and Reinhart, such attitudes exist at all levels of expertise and intelligence. Freudian concept of Narcissism gives an insight into the workings of human mind where such conclusions (as reached by Professor Krugman) gets explained just as gravitation explains motion of planets.
    Forms of such eruptions of bitterness that does not contribute anything to betterment of knowledge vary as per culture. As Jared Diamond in his `Guns Germs, and Steel observed in regard to Moriori and Maori tribes.
    I am too ignorant to judge professional competence of Dr. Rajan but all said and done, I am glad that person who thinks this way has been selected to head Central bank in my country.

  19. CommentedFrank O'Callaghan

    I have difficulty with this article. In the final paragraph Professor Rajan concedes that "In fairness, given Krugman’s strong and public positions, he has been subject to immense personal criticism by many on the right." Krugman's problem with the R&R work is with the fact that they made a mistake. He was right, they did. Those who attack Krugman have yet to cite an error of his. Only one of these is an ad hominem attack. Krugman is innocent!

    There are some important points raised. He says the accepted "economics is an inexact science, with exceptions to almost every pattern of behavior". It is perhaps too easy to point out that it is inexact and that it is not a Science. The political issue is correctly made and all the detter that such is often denied. There are at least two sides in Economics, left and right. The right pays better and distorts the debate. Economic narrative often favours the wealthy for this reason. There is also the division between reality and theory. Biased theory driven by economists' self interests is the implicit target of Krugman's attack. Who can blame him?

    Krugman is generally on the side of the facts rather than the fantasy. He is on the side of the many rather than the few. Those on the other side are guilty of ad hominem attacks, billions of them!

  20. CommentedRaghu S A

    Truly an inexact science-a million moving parts, laws based on working hypotheses, in turn based on human behavior-the search for causality from observed phenomena in Economics can be frustrating, which probably is what spawns these acrimonious debates. Also exemplified by the fact that the USA has the largest collection of Economics Nobel laureates and yet struggles to manage its economy. The answers may well lie outside Economics, as Rajan seems to hint.

  21. Portrait of Pingfan Hong

    CommentedPingfan Hong

    The paranoid style in the discourse of economic issues is not caused as much by the inexact nature of economics as by the inextricable connection between economics and politics, as well as the connection between economics and ideology. This is particularly true when the economic issue under debate has a strong policy implication, as in the case mentioned in this article.

    We should not be surprised to realize that many, if not all, eminent economists, namely, the Nobel laureates in economics, are also at the same time prominent stardardbearers of certain ideology, either on the extreme right or on the extreme left. At issue is whether they become ideological bearers before they become eminent economists or after.

  22. CommentedRajarshi Samuel Betha

    One final comment - you do sound a little fatalistic in this conclusion. While causality cannot be implied in certain cases, momentum or a general perception of interdependence or co-existence cannot be totally denied.

    To this extent, the recognition of one factor as "bad" can indicate that the removal of both factors may be reasonably considered as good (tail risks of incorrect interpretation of course remain).

    However, more often that not, what doesn't get discussed is the underlying hidden cause of one or more of these visible indicators (or symptoms)...

    And it gets difficult to subscribe to the need for structural reforms when cosmetic impacts of fiscal stimulus can create short run impacts (who has the time to wait and evaluate long run impact anyways)...

    Hence, I think at the cost of being considered paranoid or defenseless or anything else by the public, economists still have a duty to educate policymakers (and the common man, so policymakers also seem politically correct, and have momentum and consistency in their actions) about a refined and balanced perspective to understand the key hidden drivers behind the symptoms.

    Consider the Indian Rupee - we import more than we export. Monetary flows are volatile, and high interest rates have visibly slowed growth (while of course reining in some inflation)... Going forward, are we focused on structural reforms? Will we see a shift towards policy stability, less bureaucratic hurdles, and a collective action towards greater economic growth? Seems a tall order, but not impossible and I remain hopeful.

  23. CommentedRajarshi Samuel Betha

    In this example the utility of the good has changed, and hence it is really a different good, and still following the rational expectations of economists...

    Nevertheless, it still justifies the argument that an economist needs to constantly question the implicit assumptions embedded within his/her frame of reference... Well written article and very refreshing from this perspective - thank you.

      CommentedJose araujo

      Sorry, basic economics, prices increase lower demand, ceteris paribus.

      But in this case not all things remain equal, namelly he's inferring inflation, so he's talking about nominal increases of prices, which can or cannot lead to increases in demand depends if real prices of the good increases or decreases.

      CommentedJose araujo

      Sorry, basic economics, prices increase lower demand, ceteris paribus.

      But in this case not all things remain equal, namelly he's inferring inflation, so he's talking about nominal increases of prices, which can or cannot lead to increases in demand depends if real prices of the good increases or decreases.

  24. CommentedRajarshi Samuel Betha

    Agree that it's difficult to assert one's opinion when the other side is using marauding tactics, and lacking academic refinement in examining arguments on a public stage... It's also easy for a victim to use aggression as a defense mechanism...

    Notwithstanding the difficulties of human psychology/survival strategies influencing public debate, surely academic debate will allow for a deeper and balanced analysis of arguments, and hence remain a more valid platform for judgement... So economists, why are you publicly paranoid? You know it doesn't matter :)


    Perhaps, the author could be a little more certain and assertive on this aspect of economics- that it is a grossly inexact science and will remain so for ever. This is particularly applicable for Macroeconomics, which, even many top-notch economists, backed by econometric models (whose back-up data never approaches any size that could be deemed statistically significant, or, truly random), think that is as good as Quantum Mechanics, or, the Theory of Relativity! As Soros and other have started clamoring, let us rethink economics, and in a way, that gives 'micro' a greater role, and the concepts are built up afresh from the grassroots behavior of the economic players, rather than take policy decisions based on a 'macro' approach, which hides all that can be hidden!

  26. Commentedsrinivasan gopalan

    It is refreshing to read Rajan's views on economists and the need to tailor policy in consonance with the behaviourial pattern of people whose tastes and temperaments change so fast as to rely on any one size fits all paradigm. How else could one explain the British authorities' new-fangled zeal in 'velocity escape' to slightly rejig their protracted austerity-obsession policy regime to capitalize on the early greenshoots of growth.
    Now that Rajan is all set to don the mantle of the Governor of the country's central bank, all eyes are on him as to how he would bring to bear his immense theoretical knowledge on finance to practical ways of solving India's myriad problems. If he sticks to the single point agenda of taming inflation which is currently unrelentingly high in terms of consumer price index, other objectives to bring the economy from the entrenched slowdown to normal growth path and averting the free fall of the indian currency rupee would have to be ill-served. But in an election year as 2014 is, the authorities would not be pleased if they do not have the wherewithal to fund their many fancy policies that are mostly rights-based such as food security to the poor. How Rajan would help in the revival of growth process without losing the larger inflation battle would be keenly watched by his admirers across the world and we wish him godspeed at a critical juncture in which he is assuming office of the apex bank's chief. G.Srinivasan,Journalist,New Delhi, India

  27. Commentedcaptainjohann Samuhanand

    Great article and your view "All too often, the path to easy influence is to impugn the other side’s motives and methods, rather than recognizing and challenging an opposing argument’s points.
    Read more at " is to the point.The Indian Media herd is singing choruses about your appointment as RBI Governor.As an concerned Indian I will judge uour record on the basis of brining the Rupee value to a level closer to 45/- per dollar. All world bank and IMF prescriptions have been to devalue the national currency and that is why Iexpect this from you sir.

  28. CommentedPaul Gement

    We haven't forgotten that you and Paul Keugman have had your own disagreements. Given that, one could make the argument that this article itself is a thinly veiled insult.

  29. CommentedProcyon Mukherjee

    First of all my heartiest Congratulations for being nominated as the Central Banker of India; when we last met at Davos in 2011, it was so nice to see you talking about India's challenges.

    You are spot on as Economists, of all people, who must deal with human responses to stimuli, which cannot in any definitive way operate without a band of results or have tail events that could be judged by different people in the same method as prescribed by a model; we must have the humility to a public debate and accept that what we infer from experience, data and mathematical instruments is just a way of looking at a problem, unless we take the approach of falsifiability, there is nothing cast in stone as far as an inference is concerned. Probability weighting of events, or pricing of skewness, for example are completely human dependent responses and modeling them by any means in a definitive manner is impossible.

    This openness is seen lacking in many Economists of our times. Vulnerability is a virtue, not a weakness in current times.