Nobel Prize time in Economics – Fama & Schiller are consistent enough

15 Oct

Some complaints in the press (and among the academics, who should know better) about both Eugene Fama and Robert Schiller (plus the third man, Lars Peter Hansen) jointly winning the Nobel Prize for Economics.

Personally, I think it’s a great example – a theory (the efficient markets hypothesis) is developed, and leads to practical implementation in areas such as the development of indexed funds. Then another academic comes along (Schiller) pointing out the limitations of the theory. All three place a heavy emphasis on empirical validation – Fama from publishing his data, Schiller from creating the Case-Schiller House Price index for the US, and Hansen (OK, I hadn’t heard of him either) for valuable work in econometrics (see http://goo.gl/5PDxYW). Isn’t that what Kuhn’s theory of scientific revolutions is supposed to be all about?

 

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