you have a thousand dollar suit, but drive a fifteen thousand dollar car? Interesting priorities...
A thousand dollar suit *might* help you get you a job and sadly a $1K suit really isn't exceptionally expensive these days for a decent suit. A $15K car will not get you a job though it will get you to said job.
Personally I got my suits (much) cheaper by getting them directly tailored in Hong Kong or Bangkok but only because I was already traveling there for other reasons. It is relatively difficult to find a good quality suit for under $500 but fortunately most men don't need more than 1 or 2 of them. A good fitting suit can be a good investment and some employers require you to wear a suit - frequently if the job has a six figure income attached to it.
but then again, I have a four thousand dollar car but a ten thousand dollar entertainment set up...
Glass houses stocked with black pots... Don't spend it on things you don't care about or aren't useful to you. A $4K car is fine depending on your needs. If you work in a factory you probably aren't going to wear a suit beyond the interview if then. If you are a consultant you'll probably need/have a number of fairly expensive suits if your clientele dictates that sort of dress. Sometimes people need or want something that costs more. Some geeks like mechanical things that do more than beep at them. For what it is worth you can get a pretty nice basic car for $15K. Really nice if you buy used and look carefully.
It's interesting how a logical but critical response to someone with a belief that is by definition irrational gets immediately labeled unreasonable. Basically it tells me that despite your claims to the contrary you don't really welcome analysis of your faith. Pretty much what I expected.
You presume too much about what you think you know about me, my congregation, my faith, my willingness to receive thought out criticisms of the foundation of my faith,
Perhaps but I can only critique what you wrote. What you wrote is that you have an ulterior motive to proselytize. You apparently do this in conjunction with charitable acts which is something I cannot condone. Furthermore you made some statements about what a church is and what it is for that are at best half-truths. You sought to assert distinctions between christianity and various cults without clearly explaining what those differences might be or even acknowledging that christianity was once regarded as a cult itself.
Get out, get to know some of those who profess a faith in Christianity, and see that we are not "harangu[ing] some poor fellow who is down on his luck" but rather we are providing some meaning and hope to those who often have nothing in which to believe.
I live in the US so it's pretty hard not to "know some of those who profess a faith in Christianity" since that is about 76% of the population. I'm quite sure I have a reasonable grasp of the history, foundation and readings of your faith. I've read both the new and old testaments, I have family members who are deeply religious, and I've actually studied the history and philosophy of christianity far more than most actual christians. Genuine curiosity about what all the hub-bub was about on my part. Good enough for you?
You may tell yourself you are providing meaning. I suspect you even believe it. I don't even have a problem with people believing so long as they realize that they are mostly myths and fables. But the simple fact is that you can help people find meaning without religion. You can feed the poor without religion. You can provide hope without religion. Your argument is a straw man which for some reason you are using to try to draw a distinction between your beliefs and those of a scientologist. There are differences and I'm pretty aware of them but you certainly didn't illustrate for anyone what they are.
Furthermore you say that others have "sullied the name of those who truly practice what Jesus taught". That belies an astounding arrogance that you have a clearer understanding of Jesus's teachings than others. Christianity has hundreds of different sects and their respective members cannot agree on all kinds of issues. Who to believe? You? Not likely. I've read the new testament and it is a mess - full of contradictions, errors and fanciful stories. Christians pick and choose the bits of their bible they think are important to follow and ignore the rest. You're going to have a hard time convincing me that you are a better follower of Jesus's teachings than any number of other christians.
nothing I say to you is going to change your bigoted and biased view of me, my congregation, and my faith.
Interesting. You say I presume too much and then you do the same in return. You are more than welcome to try to convince me of whatever you like. Just bear in mind that I might very well decide you are talking nonsense if your argument is weak. So far the premises of your arguments have been nonsensical. If you want to distance yourself from scientology I respect that but you'll need to be more convincing and more researched.
I abhor the "church" of Scientology, but gladly attend my local congregation. We actually help people. I abhor the "church" of Scientology, but gladly attend my local congregation. We actually help people.
Attending church is not required to help people. You are making a false distinction by bringing in irrelevant facts. Scientologists probably contribute to charitable works as well but it still is irrelevant.
Yes, we have an agenda behind it, to tell others of our beliefs, but one is not required to join our faith in order to receive the benefits of our generosity and our desire to help those in need.
So basically your price to receive aid is to harangue some poor fellow who is down on his luck that he should believe in your mythology. Nice.
Our beliefs are out in the open, for all to peruse and attempt to debunk.
I don't believe for a moment that you are the slightest bit interested in a skeptical analysis of your religion or that you or your congregation would react with anything except hostility to such an analysis.
Please do not insult the believers, those in this world who believe it is right to help and provide hope to our fellow human beings who suffer around us and those who wish to better the world in which we all live, by comparing us to the greedy, abusive, and controlling pseudo-religion that calls itself the "church" of Scientology.
There's two problems there. The first is that you are trying to make your beliefs credible by confusing them with charitable works that have nothing to do with your religion. You don't need a church to do charity and frankly I have little respect for anyone who does charity under false pretenses or with ulterior motives. You are trying to recruit people who are down on their luck to your church. I find that distasteful if not outright despicable.
The other problem is that you presume that I as an outsider think your christian/muslim/jewish/whatever beliefs are any less bizzare than those of scientologists. Nor do I think the behavior of your church is necessarily any more honorable. Your religious beliefs are, and should be, just as susceptible to criticism as any others even if you don't like what is said. It is fair to point out that there are more similarities than differences between scientology and christianity. It is fair to point out that neither scientologists nor christians welcome actual logical analysis of their beliefs, texts or doctrines. The stories are different but they both are made up mythologies based not in fact but in irrational belief.
A church is a group of people who welcome you in, and welcome the world to inspect their beliefs, and in fact encourages them to do so.
I have NEVER seen a church that welcomed people to skeptically "inspect inspect their beliefs". Interesting choice of words you used. Frankly if I were to "inspect" your beliefs I suspect you and your congregation would react with hostility when I point out the logical inconsistencies, fallacies, and self-contradictions. Some even react with violence when you point out that their emperor has no clothes. No, I don't accept your premise that churches welcome people in or welcome people to critically inspect their beliefs.
A cult is a group of people with something to hide who refuse to allow just anyone in, and try to keep their power to themselves.
Are you seriously arguing that religions do not constantly war with each other like tribes precisely for power? That the church does not recruit members precisely to grow its power and influence? A cult is nothing more than a religion that hasn't become "successful" yet. A cult is a threat to a religion because it might just take followers away from the religion. All religions were once cults and to my mind they still are cults. It is a distinction without a difference.
There is a source available. Just decommission a few nuclear warheads each year. Since the US has enough nuclear weapons to basically end civilization, I suspect some could be spared without meaningfully degrading national security.
As someone who is interested in some of the Analyst jobs at the CIA what are the civilian equivalents?
Competitive Intelligence. Go to some meetings of SCIP if you get the chance. It's not uncommon for ex-CIA/FBI/etc analysts to end up doing competitive intelligence because the skill sets overlap significantly. Having financial/accounting as well as research skills (think library research) and phone skills are basically pre-requisites.
Most large companies have some sort of competitive intelligence group though they call it various things. IBM, Ernst & Young, Price-Waterhouse, Microsoft, Deloitte, Anheuser-Busch, Boeing, and many more. It's essentially a job writing strategy memos and presentations for company big-wigs. Not a bad gig if you have the interest.
In financial analysis, you do not need to use statistics.
You aren't a financial analyst are you? Statistics is required precisely because financial decisions are almost always made with limited information. You can't model most financial activities including risk without statistics coming into play at some point.
A borrower ability to pay monthly payments is not some unknown quantum state, but well known (at least to himself or his employer)
Actually ability to pay in the future IS unknown even to the borrower. Furthermore ability to pay is not and never will be perfectly known to the lender. There is an inherent information asymmetry because the lender can never be sure the borrower isn't hiding something. Furthermore you are leaving out willingness to pay, as well as the fact that life sometimes isn't so kind and circumstances change. People lose their jobs, they invest with Bernard Madoff, their employer turns out to be Enron, etc. These things cannot always be predicted.
The only reason not to do this, is lack of information or lack of computing power.
So you are comfortable providing no insurance to people with a high likelihood of disease? How about losing most/all access to credit when you lose your job. Because that's what happens with perfect information. Be careful about the unintended consequences of perfect information. Even if a perfect model were possible (and it is not) there are many social reasons why we limit how much information is available and how it can be used.
With fast computers and good data all population statistical analysis should be thrown out, and replaced with calculation for each individual and then integrated.
Except that there NEVER is enough data and it is IMPOSSIBLE to perfectly model future events and actions. Even if I concede that you are right and ignore the unintended consequences, what you are proposing is quite literally impossible. The best you can do in many cases is to make a statistical model of likely behavior based on population models and then seek a portfolio to minimize risk for the desired return. Companies use population statistics because they are the best option available.
I don't have a PhD in this subject but I do have a masters and also am a certified accountant. I work with "quants" rather often so I'm pretty familiar with the options and lifestyle.
In the current scenario, how advisable it is to pursue a PhD in this topic?
If you've got the talent, very advisable - provided you are interested in working as an analyst. You want you also have to decide how much work life balance you want because it tends to tilt heavily out of balance the closer you get to Wall Street.
Regarding jobs, financial firms tend to over-hire and over-fire. Don't count on working for one firm for 20 years. Competition for jobs can be fierce during down times (like now) but they'll throw money at you (if you've got the ability) during bull markets.
What would my options be five years down the line?
Working as an analyst in a financial or large firm, (accounting, investment banking, market analyst, hedge funds, etc) or possibly management if you have the inclination or perhaps working in academia. You could become a controller, banker, consultant or work down a CFO path. The options are pretty decent. The lifestyle? Well, that varies considerably but odds are you'll be working a lot of hours.
Will the so-called 'quants' still be wanted by the banks and other financial institutions, or will they turn to more 'non-math' approaches?
Yes. No question whatsoever. Math is not going away from financial analysis EVER. Anyone who tells you otherwise has no clue. Yes there are flaws in how math is applied but that doesn't mean the models are useless or going away. That said, demand rises and falls with the market just like in any other industry. Financial analytics is no different.
Would I be better off specializing in less volatile areas of Applied Mathematics?
Math is math. Don't know why you think finance is some sort of special case. Frankly you may have an easier time getting a job with a financially oriented PhD than many alternatives outside of academia. Plus the financial math career options tend to be rather lucrative. The real question to my mind is one of lifestyle. The hours are likely to suck and there is a good chance you'll miss a lot of extracurricular life.
In short, what is the future of Financial Mathematics in light of the current financial crisis?"
Very bright. There is always a future for a good analytical mind. No financial crisis will ever change that. Math in the financial world is NOT a fad and never will be. There are specific analytical techniques that become fads but that's not the same thing. If you really are interested and enjoy the subject and don't mind working a lot of hours go for it.
I can respond decently to this however. I do think that many of the people able to pull six figures have paid a cost. They made correct decisions early in life, and many of them give up time with their families for too much work.
A cost is not the same as a "punishment". The choice to earn a 6 figure income at a cost of seeing much of your family, while unfortunate, is a voluntary prioritization. There is nothing morally wrong with choosing to be a high earner but once the food is on the table and the roof is overhead anything additional is a conscious decision. Maybe a decision to be regretted later but hardly mandatory or to be pitied and certainly not a "punishment".
Anyway I was merely responding to the notion that wealthy folks are somehow "punished" in the US for their success. That is by almost any reasoning a ludicrous proposition.
When someone is forced to pay proportionally more, do they also get proportionally more representation?
Are you seriously arguing that rich folks aren't better able to influence government than the poor? If money didn't provide access to power we would not care about campaign finance reform. I thought it was basically axiomatic at this point that money is easily translated into influence...
A rich person will already pay quite a bit more in if we were just using a sales tax.
They pay more in absolute terms but not as a percent of income. Sales taxes are regressive taxes and they hit the poor disproportionately harder than the wealthy.
I never understand why there should be an extra punishment.
What "punishment"? I hope you are so unfortunate as to earn a six or seven figure income. Given all the benefits of wealth if the only cost is somewhat higher taxes then it is disingenuous to complain about such good fortune.
...why not computer controlled sailing cargo vessels?"
They are computer controlled to a degree but the reason they aren't unmanned has to do with the fact that navigating a boat is a remarkably difficult endeavor and our technology available to the task is both extremely expensive and insufficiently flexible to the wide variety of sea conditions and probably unreliable in such a hostile operating environment. That of course presumes it is possible at all to do it safely which is highly unlikely. Add in the fact that unmanned vessels would be remarkably attractive target for piracy and that should pretty much seal the deal.
Poor food, poor seats, poor video quality, and most of all poor company.
True in many cinemas but definitely not all. I've been to some pretty cool ones that serve you decent food in your seat, have comfy chairs, and very cool crowds. Plus the blu-ray can't be any better quality than the film the movie is recorded on so it's not clear to me what your logic is for that complaint.
The only advantage cinemas still retain over my living room is their sound systems,
Somehow I doubt you have a movie theater sized screen in your living room. Methinks you might be missing one rather significant difference between your living room and the cinema...
If you don't think the cinema is providing a good value that's cool but just say so without all the angst. The cinema DOES provide a few things that are hard to get at home. Whether you think those things are worth it is another matter. The cinema is expensive and I totally respect folks thinking it is overpriced.
Not for an engineering or programming degree which often requires a new laptop...
I HAVE an engineering degree (two in fact) and I assure you that my laptop from 2002 would get the job done just fine on the sorts of toy problems they give you in college. On the VERY rare occasion when professors give you something that requires actual computer horsepower, I have yet to see a college of any real repute which didn't have fast computers available for student use. You sir are talking out your ass to someone who has been there and knows better.
IMHO people who carry debt are poor financial advisers. They are likely just 1-2 months away from bankruptcy, if they lose a job, and therefore poor examples to follow.
I guess the fact that I'm a certified accountant, and have masters degrees in both engineering and finance must mean I know nothing about handling money. Oh wait... I actually DO know something about handling money and well known companies PAY me for that expertise.
There is nothing wrong with electing to not carry debt but it doesn't follow that other people are idiots because they elect to take advantage of what borrowed money can do for them. Sticking your money under the figurative mattress has an opportunity cost which you either aren't considering or naively dismiss. Either way I suggest you be careful in what you assume others before you make an ass of yourself in public again.
Are you going to buy me a Wifi modem for my laptop, Mr. Silver Spoon?
No. You can do it yourself for the back breaking price of $10. Never mind that even the cheapest laptops have wifi built in these days so the wifi adaptor would likely be redundant.
For that matter, are you going to buy me a laptop?
Nope. You'll have to do what I did and take out school loans to buy one. Then you pay for it once you are out of college and gainfully employed. If the extra $300 to buy a low end laptop is going to break you, perhaps you need to reconsider your college financing options.
All I could afford was a minimal desktop PC for $300.
Bullshit. Either you're lying or you didn't look hard enough. If you are that strapped for cash you could even have gotten something used or second hand. Even a brand new laptop can be had for under $300 these days.
You see not everyone is rich, or drives themselves deep-into-credit debt to buy these types of toys.
A laptop isn't a "toy" anymore and you don't have to be rich to own one. $300 isn't going to bankrupt you or if it does you were already near bankruptcy for other reasons.
Personal printers are horribly unreliable and very expensive to maintain.
You can get a laser printer reliable enough to run a small business for under $200 these days. Cost of consumables per page is around $0.03-$0.10 depending on the specific make/model. Color laser printers are even available just just a few hundred more. I got a $3000 office laser printer for $250 off eBay which can print 20,000 pages on a single toner cartridge. I've had to buy toner once in the last 5 years.
Anyone who buys an inkjet anymore for any purpose besides printing photos deserves to be hit with a cluebat. I'm astonished anyone is still stupid enough to buy one.
Someone who lives off campus isn't going to want to cart their notebook around everyplace they go
Why not? I did. You're going to be taking a bag anyway so what's the big deal about throwing a laptop in? The whole thing weighs maybe 4-6 pounds. Plus I don't get what living off campus has to do with it.
I know from experience that it's a lot easier to get work done in a distraction-free computer lab,
There is this place called a library. Perhaps you've heard of it? There also is this nifty feature of most college campuses called empty classrooms. Try one sometime.
compared to a noisy dorm room.
I thought you were complaining about living off campus. Make up your mind.
For one, solar flares large enough to do such damage are rare.
Really? Just playing devil's advocate here but we've really only had the ability to monitor such solar activity for a relatively short amount of time - a few hundred years at most and that's generous. And it's only in the last 125 years that our infrastructure developed this new risk factor.
In the ~4 billion years the Earth has been around large solar flares could have been remarkably common at times. For all we know we are in a period of quiet. You probably are right but I'm just suggesting that we be careful about our assumptions.
What part of 12 months to build them is so hard to understand?
It's not hard to understand but it is probably wrong. You are making the assumption that the government and profit seeking enterprises would not be able to rapidly devote resources to producing transformers and other critical infrastructure. They take a long time now because there is no economic or legal incentive to produce them faster. It is not logical to assume production rates would remain constant. Governments and companies are capable of bending a tremendous amount of resources to a problem if there is sufficient need. Worst case, the government takes control (at gunpoint if needed) of the companies that know how to produce these items and vastly expands their production capacity.
Another mistaken assumption you are making is that it all has to come back online all at once. Even worst case it would not be a case of no power anywhere for 12 months. The grid would recover piecemeal. We are overly dependent on our grid but it's hardly a doomsday scenario. Might be a repeat of the great depression but I suspect most people would get by.
So yes, you are correct that it would be a terrible mess. People would die, economies would suffer massively, wars and disease would be virtual certainties. But be careful how you extrapolate and don't underestimate people's ability to respond to adversity. A horrible mess is not the same thing as the end of civilization.
the US Government has decided to meddle in something that EVERYONE ELSE ON THE PLANET views as a primarily religious matter.
Really? I'm not religious and yet I'm married. At least 10% of the US population is either atheistic, agnostic or effectively non-religious and yet a huge proportion of them are married. Marriages occur in every culture on the planet, the majority of which are not based in the christian tradition. You might consider that these days marriage has relatively little to do with actual religious doctrine even when conducted under religious ritual.
The Puritans in Boston shouldn't get to bully around people in entirely different states.
Hence we have the first amendment to our Constitution. Doesn't mean you won't have to fight the good fight against others trying to impose their values on you though.
Let the Pope decide what a sacrament should be and keep any hint of sacrament out of what the government does.
Agreed but that has nothing to do with the modern concept of marriage.
Government really should not be involved with religious sacraments and marriage is a religious sacrament.
Hogwash. I'm married and I've never gone to church a day in my life. It might be a religious concern to some but marriage is de-facto about more than religious tradition.
I agree that the government should not be involved. There should be no financial incentives or tax breaks for marriages. The government should not define marriage or families for that matter, whatever their form. People should be free to designate any individual they trust to make legal decisions on their behalf (including but not limited to financial, estate, healthcare, and guardianship) with a minimum of difficulty.
I don't have much use for either of our two major parties. I do find it somewhat ironic that the political party which supposedly espouses small government is so keen to get the government involved in defining marriage for blatantly discriminatory purposes. Ethical convenience I suppose.
Not in the world of economic models that do forecasting.
So you advocate going back to a barter based system? Seriously, any investment requires some sort of a model. It might be a very simple model but you need a model. You have to accept that your model will not be perfect and that you are taking a risk. Every investment has a risk/return ratio and the risk is NEVER zero.
Physics models have their limits too. We have no model that integrates gravity with quantum mechanics. The models we have are good but they are limited and there is still much we don't understand.
large price movements (like what killed them)
They were killed by large price movements in equities and currency exchange with WAY too much leverage and far too little liquidity. When you are leveraged by 30X your investment even little mistakes can be punished severely. This is common sense and something one would expect Nobel laureates to understand. There is no such thing as a perfectly safe investment but theirs were HIGHLY risky in part because they either didn't understand and/or ignored the risks. Greed does that even to smart people.
Models that claim they can predict the future or quantify risk are dangerous.
Say it with me: "past results are no guarantee of future performance". It's the first thing they teach you in finance 101. I'm a certified accountant and have masters degrees in both finance and engineering. I do modeling for a living. Of COURSE they are dangerous, especially if you ignore or don't understand the model's limitations - like LTCM did. Forward looking financial models are models of probability based on particular (and usually over-simplified) assumptions, not models of fact.
Good financial models don't make predictions, they calculate probabilities of specific outcomes. Real financial analysis usually involves sensitivity analysis - the probability and rewards of various possible outcomes. Any net present value calculation is a guess and probably wrong. Clearly you understand the math but LTCMs failure wasn't really a math failure. It was greed overcoming good sense.
They *did* consider the risks they were taking.
Badly - which is proved by their results. Either they ignored the risks they were taking out of greed or they didn't understand them fully. My personal take is that it was a combination of greed and hubris. Hardly unique on wall street as we can see by the current economic crisis.
That's the point - the founders of LTCM had Nobel Laureates on this very subject!
Yes, Robert Merton and Myron Scholes. They won their Nobel for work in valuing options. Their work has incredibly important applications but a Nobel prize doesn't mean they are experts in every area of finance. Do you have any concept of how limited the parameters of the Black-Scholes equation are? Among the assumptions in the equation are (from wikipedia):
It is possible to borrow and lend cash at a known constant risk-free interest rate.
The price follows a geometric Brownian motion with constant drift and volatility.
There are no transaction costs.
The stock does not pay a dividend (see below for extensions to handle dividend payments).
All securities are perfectly divisible (i.e. it is possible to buy any fraction of a share).
There are no restrictions on short selling.
None of these assumptions normally holds in the real world and that's all assuming you can even accurately quantify volatility which I can tell you from personal experience can be very difficult or even outright impossible. It is especially difficult for many equities and illiquid assets and LTCM was burned by this fact. They took positions so large that liquidating their positions was essentially impossible.
Every financial model out there has a similar list of assumptions. Any real world use of these models is necessarily going to result in incorrect results. The only question is how wrong will it be? Yes they are smart guys but their models didn't predict everything and they damn well should have known that.
Here your basically saying that savings is more important then treatment or quality of life.
Screening tests are about maximizing quality of life for as many people as possible, not you in particular. While you may only care about you, your doctor has a responsibility to many people and if he orders an unnecessary test for you, your doctor is necessarily taking resources away somewhere else. I'm talking about maximizing the treatment and quality of life for as many people as possible.
We can't fund everything for everybody. There is a finite amount of money and manpower available for heath care. It is economically impossible to provide unlimited health care for everyone. This is an indisputable fact. The question is how to spend the resources we do have most effectively. I realize this makes people uncomfortable (you included apparently) but it is reality.
A certain amount of money and manpower is allocated in each society for health care and within that allocation it is a zero sum game. Spend more money and manpower on your MRI and there is less money and manpower available to spend elsewhere. A given test might be an appropriate use of resources but there are very good reasons why we use screening tests.
Many conditions that can be detected on an X-ray or MRI can also include other injuries that the other won't pick up.
That is true and physicians are actually pretty good about knowing when to use one or the other. Sometimes they make mistakes but it is a better use of our finite resources to let them use their judgment in determine which test to use than to simply mandate an MRI and xray for every patient that comes in the door.
And yes, I do agree that pathology is perhaps more challenging then other areas. But that's in the diagnostic section of the treatment. Once they lay claim to a condition or disease, the accepted ways or guidelines to treating it will be printed in the codes.
Pathology was just an example. The same issues apply to ALL areas of medicine. Internal medicine, radiology, surgery, physical therapy, and on and on. Radiologists are masters of the differential diagnosis because imagining technologies can only tell you a finite amount about any given condition. Internal medicine doctors are frequently working with incomplete information. I'm married to a pathologist and they will tell you that it is very common for people to die and we have no idea why. There is SO much that we just don't know. If you can get some doctors to speak frankly with you (not always easy I know) they will admit that they are shooting in the dark a LOT of the time. Some are arrogant and won't admit it (surgeons are notorious for this) but they will be the first to tell you that for many, many, many conditions there is no consensus.
Let me give an example. I know a lot of dermatologists. The number one litigated condition in dermatology/dermatopathology is melanoma. Melanoma can mimic many other conditions and there are no tests that are even close to 100% accurate in determining the condition. It is usually diagnosed via morphology and sometimes with the help of some special stains or genetic markers. Eventually there probably will be some definitive genetic tests but they don't exist yet. Worse there is no consistent definition of exactly when a melanocytic lesion becomes a melanoma. You could ask 10 different doctors and have just as many different opinions. It is quite impossible to have a definitive best practice because there isn't one - the diagnosis has too many variables and unknowns.
The point is that there are SOME things that are agreed upon but many more that aren't and the ones that aren't matter greatly. Specialists in these fields are well aware of the issues but it is quite impossible to produce a book with a definitive best practice for many many conditions. I respect your desire for such a compilation of best practices but it's not as easy a problem as you make it out to be.
Classical economics cannot explain what is happening right now. It's without precedent. There is a little graph I would like to show [msn.com] you...
Try looking at that chart in log base 10 format which will provide an apples to apples comparison. The dip in 1929 was MUCH bigger percentage wise than the one we are experiencing presently. Furthermore despite tremendous volatility we basically find ourselves in a decade of more or less flat growth. The DJIA is at roughly the same levels it was 10 years ago. This HAS happened before from the late 1960s to the early 1980s where the stock market remained flat for nearly 20 years.
The book Black Swan, which should be read by anyone interested in this topic, says that the hideous lie is that people claim that "they're better than nothing", when, in fact, they're worse than not having any model at all.
Say it with me: "All models are wrong. Some models are useful". A bad model CAN be worse than no model but it doesn't follow that all models are worse than no model. In fact it would be impossible to do anything without creating models of the world around you. You do it all the time without even being conscious of what your are doing. Newtonian physics is technically a less accurate model than Einstein's general relativity but it remains very useful for a wide variety of applications IF you understand its limitations. In the economic realm Modigliani-Miller and Black-Scholes are very useful models so long as you understand their limitations - and they do have limitations like every model.
The LTC crash was caused by the founders (Nobel Laureates in Economics) having a model to quantify risk.
They didn't blow up because they had a model. They blew up because they had an inappropriately applied model. LTCM applied their models which apparently worked well for the narrow field of fixed income arbitrage to other areas like equity and currency arbitrage where the models assumptions combined with their excessive appetite for risk caused a catastrophe.
You correctly note that they failed to account adequately for extremely rare events but had they stayed within their original model parameters (fixed income arbitrage) and more reasonable levels of leverage it likely would not have been a big issue. Instead they applied their models to inappropriate financial instruments and levered up heavily which greatly compounded the problem. Worse, the financial institutions which lent them the cash failed because, like in the current financial crisis, they did not adequately consider the risks they were taking.
Almost. The perception is that doctors should be like doctors were before a medical license became a ticket to becoming a millionaire. There was really a time when a successful doctor might have the nicest house on the block, but not also a nice house in St. Lucia and a nice house in Aspen and a nice apartment on the Gulf Coast.
You think so? A general practitioner might be earning as little as $80,000 per year after expenses because we don't pay doctors much for preventative care. And that is while working 70-90 hour weeks doing it. Add in the 8-10 years of medical school and residency and the fact that you don't really get to start practicing until you are in your thirties, long after most people have had a career and it starts to look not so attractive. Try working 60-100 hour weeks for a decade straight for little pay, a mountain of debt and see how idealistic you are afterward.
Yes some physicians earn a lot more but I'm around them and they earn every penny of it. Hardly anyone becomes a doctor strictly for the money. Most of the doctors I know will tell you that if you can imagine yourself doing anything else, you probably should do the something else. It's just too hard otherwise.
So now doctors fear that if we have universal health care in the US, they might have to go back to being part of the community in which they serve.
We already have something close to it and it's called Medicare. It's a huge part of the compensation for the majority of doctors. And frankly doctor compensation is not the big driver of health care expenses. The real drivers are problems of adverse selection and/or moral hazard to use economics terms. Look at ANY analysis of drivers of health care costs and physician compensation will be at the bottom of the list if it is even on the list at all. Don't take my word for it.
The people who are going into medicine these days are doing so because there were no more spots left at Northwestern's B-school.
Ha! You don't know a lot of doctors personally do you? I'm married to one and as a result I know lots of them. Most of them are among the smartest people I know and most of them got into medicine for reasons other than money. It's only after they get to med school that they have the honorable notions figuratively "beaten" out of them. Most of them could get into even the top B-schools easily and yet they choose not to. If your goal is to make a lot of money there are a lot easier ways to do it than being a doctor.
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you have a thousand dollar suit, but drive a fifteen thousand dollar car? Interesting priorities...
A thousand dollar suit *might* help you get you a job and sadly a $1K suit really isn't exceptionally expensive these days for a decent suit. A $15K car will not get you a job though it will get you to said job.
Personally I got my suits (much) cheaper by getting them directly tailored in Hong Kong or Bangkok but only because I was already traveling there for other reasons. It is relatively difficult to find a good quality suit for under $500 but fortunately most men don't need more than 1 or 2 of them. A good fitting suit can be a good investment and some employers require you to wear a suit - frequently if the job has a six figure income attached to it.
but then again, I have a four thousand dollar car but a ten thousand dollar entertainment set up...
Glass houses stocked with black pots... Don't spend it on things you don't care about or aren't useful to you. A $4K car is fine depending on your needs. If you work in a factory you probably aren't going to wear a suit beyond the interview if then. If you are a consultant you'll probably need/have a number of fairly expensive suits if your clientele dictates that sort of dress. Sometimes people need or want something that costs more. Some geeks like mechanical things that do more than beep at them. For what it is worth you can get a pretty nice basic car for $15K. Really nice if you buy used and look carefully.
Your response is so far from reasonable...
It's interesting how a logical but critical response to someone with a belief that is by definition irrational gets immediately labeled unreasonable. Basically it tells me that despite your claims to the contrary you don't really welcome analysis of your faith. Pretty much what I expected.
You presume too much about what you think you know about me, my congregation, my faith, my willingness to receive thought out criticisms of the foundation of my faith,
Perhaps but I can only critique what you wrote. What you wrote is that you have an ulterior motive to proselytize. You apparently do this in conjunction with charitable acts which is something I cannot condone. Furthermore you made some statements about what a church is and what it is for that are at best half-truths. You sought to assert distinctions between christianity and various cults without clearly explaining what those differences might be or even acknowledging that christianity was once regarded as a cult itself.
Get out, get to know some of those who profess a faith in Christianity, and see that we are not "harangu[ing] some poor fellow who is down on his luck" but rather we are providing some meaning and hope to those who often have nothing in which to believe.
I live in the US so it's pretty hard not to "know some of those who profess a faith in Christianity" since that is about 76% of the population. I'm quite sure I have a reasonable grasp of the history, foundation and readings of your faith. I've read both the new and old testaments, I have family members who are deeply religious, and I've actually studied the history and philosophy of christianity far more than most actual christians. Genuine curiosity about what all the hub-bub was about on my part. Good enough for you?
You may tell yourself you are providing meaning. I suspect you even believe it. I don't even have a problem with people believing so long as they realize that they are mostly myths and fables. But the simple fact is that you can help people find meaning without religion. You can feed the poor without religion. You can provide hope without religion. Your argument is a straw man which for some reason you are using to try to draw a distinction between your beliefs and those of a scientologist. There are differences and I'm pretty aware of them but you certainly didn't illustrate for anyone what they are.
Furthermore you say that others have "sullied the name of those who truly practice what Jesus taught". That belies an astounding arrogance that you have a clearer understanding of Jesus's teachings than others. Christianity has hundreds of different sects and their respective members cannot agree on all kinds of issues. Who to believe? You? Not likely. I've read the new testament and it is a mess - full of contradictions, errors and fanciful stories. Christians pick and choose the bits of their bible they think are important to follow and ignore the rest. You're going to have a hard time convincing me that you are a better follower of Jesus's teachings than any number of other christians.
nothing I say to you is going to change your bigoted and biased view of me, my congregation, and my faith.
Interesting. You say I presume too much and then you do the same in return. You are more than welcome to try to convince me of whatever you like. Just bear in mind that I might very well decide you are talking nonsense if your argument is weak. So far the premises of your arguments have been nonsensical. If you want to distance yourself from scientology I respect that but you'll need to be more convincing and more researched.
I abhor the "church" of Scientology, but gladly attend my local congregation. We actually help people. I abhor the "church" of Scientology, but gladly attend my local congregation. We actually help people.
Attending church is not required to help people. You are making a false distinction by bringing in irrelevant facts. Scientologists probably contribute to charitable works as well but it still is irrelevant.
Yes, we have an agenda behind it, to tell others of our beliefs, but one is not required to join our faith in order to receive the benefits of our generosity and our desire to help those in need.
So basically your price to receive aid is to harangue some poor fellow who is down on his luck that he should believe in your mythology. Nice.
Our beliefs are out in the open, for all to peruse and attempt to debunk.
I don't believe for a moment that you are the slightest bit interested in a skeptical analysis of your religion or that you or your congregation would react with anything except hostility to such an analysis.
Please do not insult the believers, those in this world who believe it is right to help and provide hope to our fellow human beings who suffer around us and those who wish to better the world in which we all live, by comparing us to the greedy, abusive, and controlling pseudo-religion that calls itself the "church" of Scientology.
There's two problems there. The first is that you are trying to make your beliefs credible by confusing them with charitable works that have nothing to do with your religion. You don't need a church to do charity and frankly I have little respect for anyone who does charity under false pretenses or with ulterior motives. You are trying to recruit people who are down on their luck to your church. I find that distasteful if not outright despicable.
The other problem is that you presume that I as an outsider think your christian/muslim/jewish/whatever beliefs are any less bizzare than those of scientologists. Nor do I think the behavior of your church is necessarily any more honorable. Your religious beliefs are, and should be, just as susceptible to criticism as any others even if you don't like what is said. It is fair to point out that there are more similarities than differences between scientology and christianity. It is fair to point out that neither scientologists nor christians welcome actual logical analysis of their beliefs, texts or doctrines. The stories are different but they both are made up mythologies based not in fact but in irrational belief.
A church is a group of people who welcome you in, and welcome the world to inspect their beliefs, and in fact encourages them to do so.
I have NEVER seen a church that welcomed people to skeptically "inspect inspect their beliefs". Interesting choice of words you used. Frankly if I were to "inspect" your beliefs I suspect you and your congregation would react with hostility when I point out the logical inconsistencies, fallacies, and self-contradictions. Some even react with violence when you point out that their emperor has no clothes. No, I don't accept your premise that churches welcome people in or welcome people to critically inspect their beliefs.
A cult is a group of people with something to hide who refuse to allow just anyone in, and try to keep their power to themselves.
Are you seriously arguing that religions do not constantly war with each other like tribes precisely for power? That the church does not recruit members precisely to grow its power and influence? A cult is nothing more than a religion that hasn't become "successful" yet. A cult is a threat to a religion because it might just take followers away from the religion. All religions were once cults and to my mind they still are cults. It is a distinction without a difference.
There is a source available. Just decommission a few nuclear warheads each year. Since the US has enough nuclear weapons to basically end civilization, I suspect some could be spared without meaningfully degrading national security.
but it has had times where it seemed out of place on either Windows or OSX
And that's exactly why iTunes has been such a success on Windows. It looks just like a native app...
As someone who is interested in some of the Analyst jobs at the CIA what are the civilian equivalents?
Competitive Intelligence. Go to some meetings of SCIP if you get the chance. It's not uncommon for ex-CIA/FBI/etc analysts to end up doing competitive intelligence because the skill sets overlap significantly. Having financial/accounting as well as research skills (think library research) and phone skills are basically pre-requisites.
Most large companies have some sort of competitive intelligence group though they call it various things. IBM, Ernst & Young, Price-Waterhouse, Microsoft, Deloitte, Anheuser-Busch, Boeing, and many more. It's essentially a job writing strategy memos and presentations for company big-wigs. Not a bad gig if you have the interest.
In financial analysis, you do not need to use statistics.
You aren't a financial analyst are you? Statistics is required precisely because financial decisions are almost always made with limited information. You can't model most financial activities including risk without statistics coming into play at some point.
A borrower ability to pay monthly payments is not some unknown quantum state, but well known (at least to himself or his employer)
Actually ability to pay in the future IS unknown even to the borrower. Furthermore ability to pay is not and never will be perfectly known to the lender. There is an inherent information asymmetry because the lender can never be sure the borrower isn't hiding something. Furthermore you are leaving out willingness to pay, as well as the fact that life sometimes isn't so kind and circumstances change. People lose their jobs, they invest with Bernard Madoff, their employer turns out to be Enron, etc. These things cannot always be predicted.
The only reason not to do this, is lack of information or lack of computing power.
So you are comfortable providing no insurance to people with a high likelihood of disease? How about losing most/all access to credit when you lose your job. Because that's what happens with perfect information. Be careful about the unintended consequences of perfect information. Even if a perfect model were possible (and it is not) there are many social reasons why we limit how much information is available and how it can be used.
With fast computers and good data all population statistical analysis should be thrown out, and replaced with calculation for each individual and then integrated.
Except that there NEVER is enough data and it is IMPOSSIBLE to perfectly model future events and actions. Even if I concede that you are right and ignore the unintended consequences, what you are proposing is quite literally impossible. The best you can do in many cases is to make a statistical model of likely behavior based on population models and then seek a portfolio to minimize risk for the desired return. Companies use population statistics because they are the best option available.
I don't have a PhD in this subject but I do have a masters and also am a certified accountant. I work with "quants" rather often so I'm pretty familiar with the options and lifestyle.
In the current scenario, how advisable it is to pursue a PhD in this topic?
If you've got the talent, very advisable - provided you are interested in working as an analyst. You want you also have to decide how much work life balance you want because it tends to tilt heavily out of balance the closer you get to Wall Street.
Regarding jobs, financial firms tend to over-hire and over-fire. Don't count on working for one firm for 20 years. Competition for jobs can be fierce during down times (like now) but they'll throw money at you (if you've got the ability) during bull markets.
What would my options be five years down the line?
Working as an analyst in a financial or large firm, (accounting, investment banking, market analyst, hedge funds, etc) or possibly management if you have the inclination or perhaps working in academia. You could become a controller, banker, consultant or work down a CFO path. The options are pretty decent. The lifestyle? Well, that varies considerably but odds are you'll be working a lot of hours.
Will the so-called 'quants' still be wanted by the banks and other financial institutions, or will they turn to more 'non-math' approaches?
Yes. No question whatsoever. Math is not going away from financial analysis EVER. Anyone who tells you otherwise has no clue. Yes there are flaws in how math is applied but that doesn't mean the models are useless or going away. That said, demand rises and falls with the market just like in any other industry. Financial analytics is no different.
Would I be better off specializing in less volatile areas of Applied Mathematics?
Math is math. Don't know why you think finance is some sort of special case. Frankly you may have an easier time getting a job with a financially oriented PhD than many alternatives outside of academia. Plus the financial math career options tend to be rather lucrative. The real question to my mind is one of lifestyle. The hours are likely to suck and there is a good chance you'll miss a lot of extracurricular life.
In short, what is the future of Financial Mathematics in light of the current financial crisis?"
Very bright. There is always a future for a good analytical mind. No financial crisis will ever change that. Math in the financial world is NOT a fad and never will be. There are specific analytical techniques that become fads but that's not the same thing. If you really are interested and enjoy the subject and don't mind working a lot of hours go for it.
I can respond decently to this however. I do think that many of the people able to pull six figures have paid a cost. They made correct decisions early in life, and many of them give up time with their families for too much work.
A cost is not the same as a "punishment". The choice to earn a 6 figure income at a cost of seeing much of your family, while unfortunate, is a voluntary prioritization. There is nothing morally wrong with choosing to be a high earner but once the food is on the table and the roof is overhead anything additional is a conscious decision. Maybe a decision to be regretted later but hardly mandatory or to be pitied and certainly not a "punishment".
Anyway I was merely responding to the notion that wealthy folks are somehow "punished" in the US for their success. That is by almost any reasoning a ludicrous proposition.
When someone is forced to pay proportionally more, do they also get proportionally more representation?
Are you seriously arguing that rich folks aren't better able to influence government than the poor? If money didn't provide access to power we would not care about campaign finance reform. I thought it was basically axiomatic at this point that money is easily translated into influence...
A rich person will already pay quite a bit more in if we were just using a sales tax.
They pay more in absolute terms but not as a percent of income. Sales taxes are regressive taxes and they hit the poor disproportionately harder than the wealthy.
I never understand why there should be an extra punishment.
What "punishment"? I hope you are so unfortunate as to earn a six or seven figure income. Given all the benefits of wealth if the only cost is somewhat higher taxes then it is disingenuous to complain about such good fortune.
Well, that breaks down when the FAA tries to take over control of one of the Navy's designated area of operations.
Right, because the Navy has weapons and the FAA doesn't. I'll put my money on the Navy in that fight.
...why not computer controlled sailing cargo vessels?"
They are computer controlled to a degree but the reason they aren't unmanned has to do with the fact that navigating a boat is a remarkably difficult endeavor and our technology available to the task is both extremely expensive and insufficiently flexible to the wide variety of sea conditions and probably unreliable in such a hostile operating environment. That of course presumes it is possible at all to do it safely which is highly unlikely. Add in the fact that unmanned vessels would be remarkably attractive target for piracy and that should pretty much seal the deal.
Poor food, poor seats, poor video quality, and most of all poor company.
True in many cinemas but definitely not all. I've been to some pretty cool ones that serve you decent food in your seat, have comfy chairs, and very cool crowds. Plus the blu-ray can't be any better quality than the film the movie is recorded on so it's not clear to me what your logic is for that complaint.
The only advantage cinemas still retain over my living room is their sound systems,
Somehow I doubt you have a movie theater sized screen in your living room. Methinks you might be missing one rather significant difference between your living room and the cinema...
If you don't think the cinema is providing a good value that's cool but just say so without all the angst. The cinema DOES provide a few things that are hard to get at home. Whether you think those things are worth it is another matter. The cinema is expensive and I totally respect folks thinking it is overpriced.
Not for an engineering or programming degree which often requires a new laptop...
I HAVE an engineering degree (two in fact) and I assure you that my laptop from 2002 would get the job done just fine on the sorts of toy problems they give you in college. On the VERY rare occasion when professors give you something that requires actual computer horsepower, I have yet to see a college of any real repute which didn't have fast computers available for student use. You sir are talking out your ass to someone who has been there and knows better.
IMHO people who carry debt are poor financial advisers. They are likely just 1-2 months away from bankruptcy, if they lose a job, and therefore poor examples to follow.
I guess the fact that I'm a certified accountant, and have masters degrees in both engineering and finance must mean I know nothing about handling money. Oh wait... I actually DO know something about handling money and well known companies PAY me for that expertise.
There is nothing wrong with electing to not carry debt but it doesn't follow that other people are idiots because they elect to take advantage of what borrowed money can do for them. Sticking your money under the figurative mattress has an opportunity cost which you either aren't considering or naively dismiss. Either way I suggest you be careful in what you assume others before you make an ass of yourself in public again.
Are you going to buy me a Wifi modem for my laptop, Mr. Silver Spoon?
No. You can do it yourself for the back breaking price of $10. Never mind that even the cheapest laptops have wifi built in these days so the wifi adaptor would likely be redundant.
For that matter, are you going to buy me a laptop?
Nope. You'll have to do what I did and take out school loans to buy one. Then you pay for it once you are out of college and gainfully employed. If the extra $300 to buy a low end laptop is going to break you, perhaps you need to reconsider your college financing options.
All I could afford was a minimal desktop PC for $300.
Bullshit. Either you're lying or you didn't look hard enough. If you are that strapped for cash you could even have gotten something used or second hand. Even a brand new laptop can be had for under $300 these days.
You see not everyone is rich, or drives themselves deep-into-credit debt to buy these types of toys.
A laptop isn't a "toy" anymore and you don't have to be rich to own one. $300 isn't going to bankrupt you or if it does you were already near bankruptcy for other reasons.
Personal printers are horribly unreliable and very expensive to maintain.
You can get a laser printer reliable enough to run a small business for under $200 these days. Cost of consumables per page is around $0.03-$0.10 depending on the specific make/model. Color laser printers are even available just just a few hundred more. I got a $3000 office laser printer for $250 off eBay which can print 20,000 pages on a single toner cartridge. I've had to buy toner once in the last 5 years.
Anyone who buys an inkjet anymore for any purpose besides printing photos deserves to be hit with a cluebat. I'm astonished anyone is still stupid enough to buy one.
Someone who lives off campus isn't going to want to cart their notebook around everyplace they go
Why not? I did. You're going to be taking a bag anyway so what's the big deal about throwing a laptop in? The whole thing weighs maybe 4-6 pounds. Plus I don't get what living off campus has to do with it.
I know from experience that it's a lot easier to get work done in a distraction-free computer lab,
There is this place called a library. Perhaps you've heard of it? There also is this nifty feature of most college campuses called empty classrooms. Try one sometime.
compared to a noisy dorm room.
I thought you were complaining about living off campus. Make up your mind.
For one, solar flares large enough to do such damage are rare.
Really? Just playing devil's advocate here but we've really only had the ability to monitor such solar activity for a relatively short amount of time - a few hundred years at most and that's generous. And it's only in the last 125 years that our infrastructure developed this new risk factor.
In the ~4 billion years the Earth has been around large solar flares could have been remarkably common at times. For all we know we are in a period of quiet. You probably are right but I'm just suggesting that we be careful about our assumptions.
What part of 12 months to build them is so hard to understand?
It's not hard to understand but it is probably wrong. You are making the assumption that the government and profit seeking enterprises would not be able to rapidly devote resources to producing transformers and other critical infrastructure. They take a long time now because there is no economic or legal incentive to produce them faster. It is not logical to assume production rates would remain constant. Governments and companies are capable of bending a tremendous amount of resources to a problem if there is sufficient need. Worst case, the government takes control (at gunpoint if needed) of the companies that know how to produce these items and vastly expands their production capacity.
Another mistaken assumption you are making is that it all has to come back online all at once. Even worst case it would not be a case of no power anywhere for 12 months. The grid would recover piecemeal. We are overly dependent on our grid but it's hardly a doomsday scenario. Might be a repeat of the great depression but I suspect most people would get by.
So yes, you are correct that it would be a terrible mess. People would die, economies would suffer massively, wars and disease would be virtual certainties. But be careful how you extrapolate and don't underestimate people's ability to respond to adversity. A horrible mess is not the same thing as the end of civilization.
the US Government has
decided to meddle in something that EVERYONE ELSE ON THE PLANET views as a primarily
religious matter.
Really? I'm not religious and yet I'm married. At least 10% of the US population is either atheistic, agnostic or effectively non-religious and yet a huge proportion of them are married. Marriages occur in every culture on the planet, the majority of which are not based in the christian tradition. You might consider that these days marriage has relatively little to do with actual religious doctrine even when conducted under religious ritual.
The Puritans in Boston shouldn't get to bully around people in entirely different states.
Hence we have the first amendment to our Constitution. Doesn't mean you won't have to fight the good fight against others trying to impose their values on you though.
Let the Pope decide what a sacrament should be and keep any hint of
sacrament out of what the government does.
Agreed but that has nothing to do with the modern concept of marriage.
Government really should not be involved with religious sacraments and marriage is a religious sacrament.
Hogwash. I'm married and I've never gone to church a day in my life. It might be a religious concern to some but marriage is de-facto about more than religious tradition.
I agree that the government should not be involved. There should be no financial incentives or tax breaks for marriages. The government should not define marriage or families for that matter, whatever their form. People should be free to designate any individual they trust to make legal decisions on their behalf (including but not limited to financial, estate, healthcare, and guardianship) with a minimum of difficulty.
I don't have much use for either of our two major parties. I do find it somewhat ironic that the political party which supposedly espouses small government is so keen to get the government involved in defining marriage for blatantly discriminatory purposes. Ethical convenience I suppose.
Not in the world of economic models that do forecasting.
So you advocate going back to a barter based system? Seriously, any investment requires some sort of a model. It might be a very simple model but you need a model. You have to accept that your model will not be perfect and that you are taking a risk. Every investment has a risk/return ratio and the risk is NEVER zero.
Physics models have their limits too. We have no model that integrates gravity with quantum mechanics. The models we have are good but they are limited and there is still much we don't understand.
large price movements (like what killed them)
They were killed by large price movements in equities and currency exchange with WAY too much leverage and far too little liquidity. When you are leveraged by 30X your investment even little mistakes can be punished severely. This is common sense and something one would expect Nobel laureates to understand. There is no such thing as a perfectly safe investment but theirs were HIGHLY risky in part because they either didn't understand and/or ignored the risks. Greed does that even to smart people.
Models that claim they can predict the future or quantify risk are dangerous.
Say it with me: "past results are no guarantee of future performance". It's the first thing they teach you in finance 101. I'm a certified accountant and have masters degrees in both finance and engineering. I do modeling for a living. Of COURSE they are dangerous, especially if you ignore or don't understand the model's limitations - like LTCM did. Forward looking financial models are models of probability based on particular (and usually over-simplified) assumptions, not models of fact.
Good financial models don't make predictions, they calculate probabilities of specific outcomes. Real financial analysis usually involves sensitivity analysis - the probability and rewards of various possible outcomes. Any net present value calculation is a guess and probably wrong. Clearly you understand the math but LTCMs failure wasn't really a math failure. It was greed overcoming good sense.
They *did* consider the risks they were taking.
Badly - which is proved by their results. Either they ignored the risks they were taking out of greed or they didn't understand them fully. My personal take is that it was a combination of greed and hubris. Hardly unique on wall street as we can see by the current economic crisis.
That's the point - the founders of LTCM had Nobel Laureates on this very subject!
Yes, Robert Merton and Myron Scholes. They won their Nobel for work in valuing options. Their work has incredibly important applications but a Nobel prize doesn't mean they are experts in every area of finance. Do you have any concept of how limited the parameters of the Black-Scholes equation are? Among the assumptions in the equation are (from wikipedia):
None of these assumptions normally holds in the real world and that's all assuming you can even accurately quantify volatility which I can tell you from personal experience can be very difficult or even outright impossible. It is especially difficult for many equities and illiquid assets and LTCM was burned by this fact. They took positions so large that liquidating their positions was essentially impossible.
Every financial model out there has a similar list of assumptions. Any real world use of these models is necessarily going to result in incorrect results. The only question is how wrong will it be? Yes they are smart guys but their models didn't predict everything and they damn well should have known that.
Here your basically saying that savings is more important then treatment or quality of life.
Screening tests are about maximizing quality of life for as many people as possible, not you in particular. While you may only care about you, your doctor has a responsibility to many people and if he orders an unnecessary test for you, your doctor is necessarily taking resources away somewhere else. I'm talking about maximizing the treatment and quality of life for as many people as possible.
We can't fund everything for everybody. There is a finite amount of money and manpower available for heath care. It is economically impossible to provide unlimited health care for everyone. This is an indisputable fact. The question is how to spend the resources we do have most effectively. I realize this makes people uncomfortable (you included apparently) but it is reality.
A certain amount of money and manpower is allocated in each society for health care and within that allocation it is a zero sum game. Spend more money and manpower on your MRI and there is less money and manpower available to spend elsewhere. A given test might be an appropriate use of resources but there are very good reasons why we use screening tests.
Many conditions that can be detected on an X-ray or MRI can also include other injuries that the other won't pick up.
That is true and physicians are actually pretty good about knowing when to use one or the other. Sometimes they make mistakes but it is a better use of our finite resources to let them use their judgment in determine which test to use than to simply mandate an MRI and xray for every patient that comes in the door.
And yes, I do agree that pathology is perhaps more challenging then other areas. But that's in the diagnostic section of the treatment. Once they lay claim to a condition or disease, the accepted ways or guidelines to treating it will be printed in the codes.
Pathology was just an example. The same issues apply to ALL areas of medicine. Internal medicine, radiology, surgery, physical therapy, and on and on. Radiologists are masters of the differential diagnosis because imagining technologies can only tell you a finite amount about any given condition. Internal medicine doctors are frequently working with incomplete information. I'm married to a pathologist and they will tell you that it is very common for people to die and we have no idea why. There is SO much that we just don't know. If you can get some doctors to speak frankly with you (not always easy I know) they will admit that they are shooting in the dark a LOT of the time. Some are arrogant and won't admit it (surgeons are notorious for this) but they will be the first to tell you that for many, many, many conditions there is no consensus.
Let me give an example. I know a lot of dermatologists. The number one litigated condition in dermatology/dermatopathology is melanoma. Melanoma can mimic many other conditions and there are no tests that are even close to 100% accurate in determining the condition. It is usually diagnosed via morphology and sometimes with the help of some special stains or genetic markers. Eventually there probably will be some definitive genetic tests but they don't exist yet. Worse there is no consistent definition of exactly when a melanocytic lesion becomes a melanoma. You could ask 10 different doctors and have just as many different opinions. It is quite impossible to have a definitive best practice because there isn't one - the diagnosis has too many variables and unknowns.
The point is that there are SOME things that are agreed upon but many more that aren't and the ones that aren't matter greatly. Specialists in these fields are well aware of the issues but it is quite impossible to produce a book with a definitive best practice for many many conditions. I respect your desire for such a compilation of best practices but it's not as easy a problem as you make it out to be.
Classical economics cannot explain what is happening right now. It's without precedent. There is a little graph I would like to show [msn.com] you...
Try looking at that chart in log base 10 format which will provide an apples to apples comparison. The dip in 1929 was MUCH bigger percentage wise than the one we are experiencing presently. Furthermore despite tremendous volatility we basically find ourselves in a decade of more or less flat growth. The DJIA is at roughly the same levels it was 10 years ago. This HAS happened before from the late 1960s to the early 1980s where the stock market remained flat for nearly 20 years.
The book Black Swan, which should be read by anyone interested in this topic, says that the hideous lie is that people claim that "they're better than nothing", when, in fact, they're worse than not having any model at all.
Say it with me: "All models are wrong. Some models are useful". A bad model CAN be worse than no model but it doesn't follow that all models are worse than no model. In fact it would be impossible to do anything without creating models of the world around you. You do it all the time without even being conscious of what your are doing. Newtonian physics is technically a less accurate model than Einstein's general relativity but it remains very useful for a wide variety of applications IF you understand its limitations. In the economic realm Modigliani-Miller and Black-Scholes are very useful models so long as you understand their limitations - and they do have limitations like every model.
The LTC crash was caused by the founders (Nobel Laureates in Economics) having a model to quantify risk.
They didn't blow up because they had a model. They blew up because they had an inappropriately applied model. LTCM applied their models which apparently worked well for the narrow field of fixed income arbitrage to other areas like equity and currency arbitrage where the models assumptions combined with their excessive appetite for risk caused a catastrophe.
You correctly note that they failed to account adequately for extremely rare events but had they stayed within their original model parameters (fixed income arbitrage) and more reasonable levels of leverage it likely would not have been a big issue. Instead they applied their models to inappropriate financial instruments and levered up heavily which greatly compounded the problem. Worse, the financial institutions which lent them the cash failed because, like in the current financial crisis, they did not adequately consider the risks they were taking.
Almost. The perception is that doctors should be like doctors were before a medical license became a ticket to becoming a millionaire. There was really a time when a successful doctor might have the nicest house on the block, but not also a nice house in St. Lucia and a nice house in Aspen and a nice apartment on the Gulf Coast.
You think so? A general practitioner might be earning as little as $80,000 per year after expenses because we don't pay doctors much for preventative care. And that is while working 70-90 hour weeks doing it. Add in the 8-10 years of medical school and residency and the fact that you don't really get to start practicing until you are in your thirties, long after most people have had a career and it starts to look not so attractive. Try working 60-100 hour weeks for a decade straight for little pay, a mountain of debt and see how idealistic you are afterward.
Yes some physicians earn a lot more but I'm around them and they earn every penny of it. Hardly anyone becomes a doctor strictly for the money. Most of the doctors I know will tell you that if you can imagine yourself doing anything else, you probably should do the something else. It's just too hard otherwise.
So now doctors fear that if we have universal health care in the US, they might have to go back to being part of the community in which they serve.
We already have something close to it and it's called Medicare. It's a huge part of the compensation for the majority of doctors. And frankly doctor compensation is not the big driver of health care expenses. The real drivers are problems of adverse selection and/or moral hazard to use economics terms. Look at ANY analysis of drivers of health care costs and physician compensation will be at the bottom of the list if it is even on the list at all. Don't take my word for it.
The people who are going into medicine these days are doing so because there were no more spots left at Northwestern's B-school.
Ha! You don't know a lot of doctors personally do you? I'm married to one and as a result I know lots of them. Most of them are among the smartest people I know and most of them got into medicine for reasons other than money. It's only after they get to med school that they have the honorable notions figuratively "beaten" out of them. Most of them could get into even the top B-schools easily and yet they choose not to. If your goal is to make a lot of money there are a lot easier ways to do it than being a doctor.