Ülo Ennuste majandusartiklid

Letter to the FT, November 09

 

First of all Black/Sholes’ lunatic formula should be blamed

Sir, Thank you indeed for publishing this very brilliant letter by Dr Peter Smith (“Blame the economists’ lunatic theories instead of bankers”, November 8). I would like only to specify which may be probably the most lunatic theories in the case of current credit crises “with which the orthodox economics establishment continues to corrupt the minds of the young and vulnerable – the next generation of policymakers and commentators.”

Most of these have been in detail and with care colleted by Peter L. Bernstein in the book “Capital Ideas. The Improbable Origins of Modern Wall Street” (FP 2002). But among them the most demonic seems to be in our circumstances Black/Scholes’ theory of capital option pricing. Of course, there are many others, e.g. also Nobel Laureate in Economics, D. North has 2002 heretically hypothesised: “institutions are not usually created to be socially efficient, are created to serve the interests of those with bargaining power to create new rules.”

Herewith we also should not to forget how many wise things, in contrast, have been written by many famous non-economists about capital, e.g. “for us the most valuable capital has been and will ever be the human being” (Comrade Joe).

november 9, 2008 - Posted by | Uncategorized

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