John Cochrane on Economic Puzzles and Habits of Mind | Conversations with Tyler
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- Опубликовано: 12 сен 2024
- What unites John Cochrane the finance economist and “grumpy” policy blogger with John Cochrane the accomplished glider pilot? For John, the answer is that each derives from the same habit of mind which seeks to reduce things down to a few fundamental principles and a simple logical structure. And thus, piloting a glider can be understood as an application of optimal portfolio theory, and all of monetary policy can be made to fit within the structure of a single equation.
John joined Tyler to apply that habit of mind to a number of puzzles, including why real interest rates don’t equalize across countries, what explains why high trading volumes and active management persist in finance, how the pandemic has affected his opinion of habit formation theories, his fiscal theory of price level and inflation, the danger of a US sovereign debt crisis, why he thinks Bitcoin will eventually die, his idea for health-status insurance, becoming a national gliding champion, how a Renaissance historian for a father and a book translator for a mother shaped him intellectually, what’s causing the leftward drift in economics, the need to increase competition among universities, how he became libertarian, the benefits of blogging, and more.
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I'm a big fan of John Cochrane, but my spidey-sense goes haywire when I hear him say give economists 10 minutes and they can solve all problems (1h3m). Economists don't seem to have a great great track record.. so while I have no doubt there's low hanging fruit that will lead to improvement (especially in health-care (34m) where there couldn't be a financially-worse system).. other issues may not be solvable by a traditional free-market approach.
For example, there was a great Freakonomics podcast (with Larry Summers?) where they talk about the issue with still using GDP as the goal in measuring a rich-nation's prosperity.. or the ever increasing arms race for college-education, at the detriment of society. I recommend Sam Harris' interviews with Michael Blastland , Fredrik deBoer , Daniel Markovits, Michael Sander , etc. Or Tyler Cowen on the Standard Industries Interview where he suggests Economics is 2/3 art, and 1/3 science (24m)!
You need your own podcast. I’d listen for sure!
The correct measure for FX arbitrage is real interest rates *_hedged by currency swap,_*
measured against risks of currency replacement, deposit seizure, capital controls, etc.
which are obviously higher in places like Brazil and Argentina that have some history there.
John Cochrane you are Brilliant !!! but I'd definitely be dealing with hearing loss if I i listen to your interviews with the extreme Volatility in your sound output .
Understanding social problems as dispassionate cause and effect things.
I would hazard a guess that efficient markets require lots of trading,
because trading is price discovery, trading distributes information,
and all continuous landscapes are constructed by knitting together
small patches of local knowledge with loops of coherent exchange.
For example: arbitrage is a certain net positive gain from a trading loop;
(hence) floating exchange rates are established by arbitrage loops.
I would further guess that this can all be explained mathematically
by Malaney-Weinstein economic gauge theory.
See, for example:
Maldacena J (2016)
_The symmetry and simplicity of the laws of physics and the Higgs boson_
iopscience.iop.org/article/10.1088/0143-0807/37/1/015802/pdf
Young K (1999)
_Foreign exchange market as a lattice gauge theory_
Smolin L (2009)
_Time and symmetry in models of economic markets_
arxiv.org/pdf/0902.4274.pdf
I heard someone tell that exact same Italian viper story the other day, except it was Cobras in India. Is this a made up story, that people change, or did both countries actually experience the same phenomenon?
On the question of 'who is trading so much', the buying (stock buybacks, passive investors) is not as puzzling as the selling. Morningstar reports top 20 'who is buying and selling' for each stock for example for APPL the buying is as I mentioned passive investors(who hold about half the market), the selling appears to be 'other trading strategies' like value funds that maybe parked some cash or who were overweight and now selling some based on their strategy(usually a non marketcap strategy) or are shorting the short part of their factor (eg., growth stocks with no momentum for a value fund). High Frequency traders and other 'market makers' likely net to zero buying and selling over a day or at the very least tiny amounts compared to the above but reportedly account for 70% of trades:www.morningstar.com/stocks/xnas/aapl/ownership
@24:10 Bear case for BTC
Please get a sound engineer who can even out the voices for you
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