准版主moontory和majia20112011吵架的神贴～技术or直觉？

moontroy

B-S model, at its era, was quite technical to the Finance academic community and that is why binomial tree model comes out.

moontroy

Even agreeing what you said (although I do not think Merton's formulation is not quite technical), the spirit of B-S can be summarized in one simple plain sentence without mentioning any of the algebra and that is the spirit. I never look down upon technical stuff. In fact, most of the Econometrica papers are quite technical. However, you need to use technique for a good reason, not just show people how good you are in techniques. All great findings in asset pricing and corporate finance, no matter how technical they might be in appearance, can be summarized in at most a couple of plain sentences without mentioning any of the techniques involved and a good example is Revelation Principle.

-- by 会员 majia20112011 (2011/3/29 2:00:05)

What is your point? When people say some paper are quite technical, it is not necessarily non-sense. In fact you can find many technical paper with great economical insight. Great idea has no significant relationship with the technics  it was illustrated, a very simple idea may need a quite technical model to show, and in many cases some simple and sounds reasonable idea often turns out to be wrong if you model it carefully. B-S model(sorry, it is not Merton's model, though they were related), when it first came out, was quite technical(though basic to physicians) to the Finance academic community that very few people really understood it, you can see many rumors about how the model came out and how ONE of them try to build and solve the model.

moontroy

[bgcolor=#ffffff]My point is very simple: there are quite a few papers nowadays which are purely a showoff of techniques without any economic insight. The rest is what you have said. Papers with good economic insight is because their ideas are good and intuitive and their conclusion can be summarized in at most a couple of plain English sentences.  If those idea needs to be illustrated using whatever technique as necessary, then use it. But do not use technique solely for the purpose of showing off something unless you have some real interesting economic story to tell. The art of economic modelling is to illustrate your point using the simplest possible model, although sometimes the simplest possible model might be quite technical. At least this is what I have learnt from Bob Lucas and Ed Prescott.  They write technical papers, but they use technique for good reasons.


I have no idea if the technique in B-S is basic to physicists, but their idea is simple and intuitive and can be expressed in plain English. If that needs to be done in such technical way,  that is fine. You seems to be indicating finance people do not have as much technical skills as physicists. But, rather than derivative pricing, I do not see any physicists making real big contributions to the finance literature (exclude John Cochrane or Steve Ross who has a undergraduate physics degree because their PhD training are solid econ and finance), in particular the corporate finance area. What's more, as somebody in the board pointed out a long time ago (sorry I cannot remember the ID) in recent years most job market stars (especially Chinese) are from traditional finance and econ background and that does contribute to the point that economic intuition and  institutional knowledge are more important than pure technical skills.

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I agree with your basic point but I may not holding such a strong attitude as you. Start with a great idea and then find a way to model it is a good way to do research, but there are many other possible way to contribute.
There are indeed some very technical papers at their era but without too many fresh economics insight, but they provide some very useful tool for following researches(a not so good example might be theoretical econometrics, they mainly try to solve some problems in applied field, or just theoretical interest, but the solution itself often lack of any economic insight).
There are also many other great works with some intuitions difficult to express in plain sentences, like Arrow's impossibility theorem, in those situations, technical work often provides some results out of people's intuitive thoughts, and it is those technical results which push people to rethink some so called "common sense", and change our view of the world. There are many examples in Micro theories generating those "counter intuitive" results, and many of them are not easy to explain in a very few sentences.
And I think you know that there are many models and famous papers analyzing the same issue but generate totally different results with their own great ideas(like Macro, since you mentioned Lucas and Prescott), and the first step for us to compare them is to understand the technical details.
And even though technical level itself has no direct relationship with the quality of the paper, I would say it is still a not so good indicator of quality of research in different field, the history of economic or finance research in a field is a history of relaxing assumption or finding problems in previous methods, both often requires a more technical method to deal with.


I'm not saying you are wrong, and no offense. I just say technical issue is not a secondary factor as you mentioned, it is a very important part of the research and I would be very cautious to make those statements.

moontroy

I would be very curious about how to present the insight of Arrow's impossibility theorem in a few PLAIN sentences, if you find this one too difficult, then try Aumann's Agree to disagree. I am very cautious to say "any, all", since I have faced many false intuitive claims in technical courses.

moontroy

[quote]
ex-ante and ex-post preferences differ because of agents' rational expectations which fails the optimal control theory.
[quote]

Sorry, although it maybe a very plain sentence in your mind, I could not understand it. Maybe I am wrong, but not every layman of economics know optimal control theory and ex-ante, ex-post preferences. I agree that SOME great work can be summaries into several sentences, but your example is not of the cases.


Kreps uses around 5 pages trying to give some intuitive explanation of Arrow's impossibility theorem to students, maybe you could do a far better job than him. I think many big names use less than 5 pages to explain Agree to disagree, but non of them would say it is very intuitive, and in fact there are tons of new papers trying to explain why it is so counter-intuitive.


Do not kick out econometrics so carelessly, talk to your classmates doing theoretical econometrics and try to tell the difference between econometrics and statistics.

moontroy

Here is my understanding which might not be correct: transitivity of ordinal preferences can be violated whenever the number of alternatives is no less than three.

Please tell us the insight of Arrow's impossibility theorem in a few PLAIN sentences.

-- by 会员 moontroy (2011/3/29 12:48:53)

-- by 会员 majia20112011 (2011/3/29 12:56:00)

Tell me the economic insight in this sentence:transitivity of ordinal preferences can be violated whenever the number of alternatives is no less than three.

moontroy

Well, this is a good example about idea and technical issue: without any precise definition of plain sentence and intuitive idea, your statement that every great idea(or nobel prize theory) can be stated in several plain sentences is full of confusion and changes all the time. You already change your definition about economics(exclude econometrics is not a very good argument to me, but it seems that you have a pretty strong ideology). And I still can not read any economic insight from the sentence: transitivity of ordinal preferences can be violated whenever the number of alternatives is no less than three. What common sense that everyone knows generates this result? I have learnt that before, but I can not understand your "intuitive explanation", in fact I am quite confused about that statement.
Let me give you a good example of great idea with simple words: search theory
It is costly to wait, but you may find a better job tomorrow.
Given this really plain sentence, it is easy to guess that higher finance aid for jobless people may in fact rise unemployment rate, and there will always unemployment in the market, and also the job allocation maybe inefficient. Even a common people with little economic knowledge can understand them intuitively.

If "transitivity of ordinal preferences can be violated whenever the number of alternatives is no less than three."  is a plain sentences, then why "contract in continuous time can be achieved with martingale representation theorem "  is not a plain and intuitive one?

moontroy

Before I mention econometrics, you never exclude that field in your argument(and you continuous arguments like ALL nobel price thoery, which with no doubt include many econometrics theory), I don't know how could you state "you never change", maybe you have different definition of economics in your mind, but that is absolutely not a common knowledge. Please give me a clear definition of "insight". If insight, as you argued in the Arrow's case, is just a statement of a theorem, then almost every technical paper can also get some plain and short statement, like "continuous time contract behaves similar to static contract but with existing time", is that a economic insight, or a result? You don't need to tell me that "transitivity is non trivial", it is interpretation of and what we learn from the result, not the economics insight(or you have a somewhat different definition of insight).

Thanks for your AEA/AFA case, but there are plenty of alternative theory to explain it.  For a school which may interview 30-40 people in 2 days, the most efficient way is a short interview to ruled out most of those interviewees, and then investigate those candidates in flyout. I assume you have attended many job talks, and I assume you may have seen many cases that some candidate with very promising abstract(or first 5 minutes presentation), and states a very interesting result but end up with dull and trivial logic.  These cases happened again again and again simply because people usually only states the interesting result and very general idea(like coordination problem, or market friction) in the interview, which make people have no clue to really judge their paper. Those papers often have a quite interesting title or result, but is in fact trivial or with ridiculous assumptions, they appears "insightful" in first 1 or 2 minutes.

moontroy

Apparently we have quite different default definition of economics and economics insight, so I will not continue the discussion. I agree your idea in your definition, but I would not say technical issue is a second order factor, that is too strong is unfair to many excellent work. Again, no offense, just a debate to make things clear.

moontroy

It seems we also have quite different understandings about mathematics and physics, and I will keep silent on your statements about researches. That is fine, we need some different opinion to think those problem throughly, thanks for your input anyway