The Gaussian Copula Formula (top) used by economists to justify credit default swaps, and the Pareto distribution - used to justify the allocation of most wealth to the richest. These are two illustrations of the bunkum taught at 'elite' universities to subvert economics in our nation and the world at large.
It was actually a comment from a nitwit poster on a Guardian (UK) forum that caught my eye. It was in response to a previous poster’s eloquent contribution and a citation of Prof. Stephen Cohen of NYU. The response comment read, taking on the source of the citation:
“From
a 2nd rate prof at a 3rd rate university”
Really?
Are there ‘third rate’ universities? In fact, not so much these days and hence
the inexplicable yen for so many t0 blow hundreds of thousands of bucks to compile massive debt just to get into an Ivy league school for the sake of name cachet. Or tens of thousands more merely to make futile efforts via applications, to enter the magic, golden doors. The fact is,
it makes very little difference which
university you attend (assuming it isn’t a ‘for profit’ or online version).
It is more the cachet and reputation of the specific department. From the May 2011 issue of MONEY magazine: "Don't assume an Ivy League education is better than one from a public or state university."
However,
as Chris Hedges observes in his remarkable book, ‘The Empire of Illusion’
it is the “Ivies” – the likes of Harvard, Yale, Princeton and others, that are the source of a continuing flow of
zombot, unthinking elites poisoning our nation and the world. To be clear, this
lot are being disgorged in specific academic areas, namely business, politics
and economics. Their toxic views are infiltrating the memosphere and
reinforcing the hegemony of the elites and their stranglehold on the country –
including the ongoing inequality.
Thankfully,
their scientific and math contributions remain relatively uncontaminated – unless they’re
in the areas which receive corporate grants to support oil shale and natural gas fracking,
or GMO foods. In astrophysics, for example, they’re generally fine.
Hedges’
takedown chapter is III: The Illusion of
Wisdom and he comes out swinging for the fences with his opening paragraph
(p.89):
“The multiple failures that beset the country, from our
mismanaged economy to our shredding of Constitutional rights to our lack of
universal health care to our imperial debacles in the Middle
East , can be laid at the door of institutions that produce and
sustain our educated elites. Harvard, Yale, Princeton, Stanford, Oxford,
Cambridge, the University of Toronto and the Paris Institute of Political
Studies, along with most elite schools, do only a mediocre job of teaching
students to question and think. They focus, through the filter of standardized
tests, AP classes, enrichment activities, high-priced tutors, swanky private
schools, entrance exams and blind deference to authority, on creating hordes of
competent systems managers. “
Adding:
“Response for the
collapse of the global economy runs in a direct line from the manicured
quadrangles and academic halls in Cambridge , New Haven , Toronto and Paris to the financial
and power centers of the world.”
They therefore would have little tolerance for a remarkable political thinker like Neoliberal
gadfly Henry Giroux, who for many years was Waterbury Chair Professor
at Penn State . But on account of his work and
resolute critical voice (one of “the most vocal critics of the corporate state
and destruction of American education”) he was driven to the margins of
academia in the United
States . The Neoliberal sock puppets and
their assorted lackeys simply couldn’t abide his independent research and critical thought and so
drove him to Canada where he
now teaches at McMaster
University . (Certainly
not a ‘3rd rate school’ if it has the likes of Giroux!)
But Giroux is only one of many examples of the minds marginalized because of their outspokenness. Hedges also cites those such as Noam Chomsky (linguistics prof from MIT), consumer advocate Ralph Nader, the late historian Howard Zinn and others who are shut out once they critique the system keeping us all down, as serfs in the alleged ‘land of liberty’.
How
do these wretched intellectual pretenders get away with this evisceration of
faculty and critical thought? Well, by an entrenched and well-rehearsed,
embedded template that sifts all yearly intakes to find the individuals that will be
the most easily molded - the most confident carriers of the elite virus and zombie ideas. (Mainly, as Hedges also notes, little dweezils that follow their profs all around - groveling- while also grafting for 4.0 in all their subjects.)
As for the zombie ideas forced down the willing throats of these sycophant students, like: “money is speech”, "corporate personhood", "free markets", "globalization" and “trickle down economics”, they ought to have died ages ago . But all are sustained via the publication of specious, pseudo-academic bullshit for which the dumpster would be the only rightful place in a rationally run institution of higher learning.
As for the zombie ideas forced down the willing throats of these sycophant students, like: “money is speech”, "corporate personhood", "free markets", "globalization" and “trickle down economics”, they ought to have died ages ago . But all are sustained via the publication of specious, pseudo-academic bullshit for which the dumpster would be the only rightful place in a rationally run institution of higher learning.
Hedges
details the methods at the outset of the chapter:
“They
organize learning around minutely specialized disciplines, narrow answers …it
allows students and faculties to retreat into these self-imposed fiefdoms and
neglect the most pressing moral,
political and cultural questions.”
And then later elaborates some more (p. 103):
"This is what the Harvard Business School method is about, a didactic system in which the logic employed to solve a specific problem always, in the end, sustains market capitalism. These elites are not capable of asking the broad, universal questions, those staples of an education in the humanities, which challenge the deepest assumptions of a culture and examine the harsh realities of political and economic power. They have forgotten, because they have not been taught, that human nature is a mix of good and evil. They do not have the capacity for critical reflection. They do not understand that for every answer there arises another question- the very basis behind the Socratic method's search for wisdom."
These
nasty devices were geared to enable commercial banks (the ones that hold your
passbook savings) to leverage their assets to preposterous ratios just like investment banks, sometimes as
high as 33:1. In other words, their
generation of profits would largely be based on phantom money – since they lacked
the reserves to make good if the bets (which is what the credit defaults swaps
were) failed. In the meantime, the Gaussian formula itself allowed the credit
derivatives to be sliced and diced numerous ways to package them throughout
ordinary securities such as collateralized mortgage obligations. The failure of the credit agencies themselves to recognize this enabled them
to be outfoxed by the specialized lingo and the presence of one fraction of
‘AAA’ bonds in each. This then led directly to the misrepresentation of junk bonds
as AAA and the collapse of the credit markets in 2008.
Since
then it’s become ever more evident why elite
economics is a failure and can’t even be regarded as a science like Physics, or
even in a “pre-scientific phase” as one respondent (Sanjay Bissessur) to an original
Financial Times letter of mine showed. But economists' failure to even
appreciate or use the Gaussian Copula formula correctly shows that they
aren't even in the pre-scientific phase. And
Bissessur’s pathetic efforts to compare the incident to “early physics” was plainly based on false analogy and disclosed his own lack of critical thinking.
In
the case of the Gaussian copula, invented by David X. Li and articulated in his (2000) paper: ‘On Default Correlation: A Copula Function
Approach” it isn't even a true mathematically
sound equation analogous to those used in physics or celestial
mechanics.. It is more an intellectual Frankenstein monster that never
should have seen the light of day any more than a four-headed baby with a
pointed tail. For example, Li's misuse of the distribution functions (FA(1))
and (FB(1)) would appall any genuine mathematician or physicist.
Each is actually based upon significant uncertainties via survival law
distributions which can vary enormously. There is no way to normalize any
probability based on (TA, TB ) so there is no way to equate
Pr[TA, TB] to anything on the left side. The equal sign
is dangerous recklessness masquerading as math. Did elite economists or
quants know any of this when they cranked out their credit default swaps?
The evidence of failure to predict the 2008 credit crash shows they didn't.
All
of which supports Hedges’ condemnation of these mental zombots, i.e. p. 98:
“They
cannot grasp that truth is often relative. They base their decisions on
established beliefs such as the primacy of an unregulated market or
globalization, which are accepted as absolutes.”
At least physics has and uses empirical testing before advancing to hard claims – so the odds are less that physicists will make asses of themselves. Not so with these economic, political elites. Unlike astronomers, who can accurately predict the position of Jupiter or Mars in 2050 or the next lunar eclipse or occultation of a star, the economists can't even predict simple stuff in their immediate domain - say like forecasting the U.S. economic growth would be 3.2 % in 2011 when it was only 1.7%
So why do we keep paying attention to these overpaid clowns? Just because they have Harvard,
Which elicits the question of whether Obama is caught up in this elitist matrix. It was clear in his recent salon.com piece Thomas Frank believes so, as he writes:
"The
Obama team, as the president once announced to a delegation of investment
bankers, was “the only thing between you and the pitchforks,” and in retrospect
these words seem not only to have been a correct assessment of the situation at
the moment but a credo for his entire term in office. For my money, they should be carved
in stone over the entrance to his monument: Barack Obama as the one-man rescue
squad for an economic order that had aroused the fury of the world. Better:
Obama as the awesomely talented doctor who kept the corpse of a dead philosophy
lumbering along despite it all.
The Age of the Zombie Consensus, however poetic it sounds, will probably not recommend itself as a catchphrase to the shapers of the Obama legacy. They will probably be looking for a label that is slightly more heroic: the Triumph of Faith over Cynicism, or something like that. Maybe they will borrow a phrase from one of the 2012 campaign books, “The Center Holds,” and describe the Obama presidency as a time when cool, corporate reason prevailed over inflamed public opinion. Barack Obama will be presented as a kind of second FDR: the man who saved the system from itself. That perhaps the system didn’t deserve saving will be left to some less-well-funded museum."
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