Fama-Shiller, Economic Sciences Prize Committee and the “efficient markets hypothesis

 

Bernard Guerrien and Ozgur Gun, “Fama-Shiller, Economic Sciences Prize Committee and the “’fficient markets hypothesis’”, real-world economics review, issue no. 66, 13 January 2014, pp. 58-64.

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  1. September 6, 2014 at 9:06 pm

    The ‘Economics Nobel’ Committee’s credibility is questioned long ago (Navarro, 2009). That prize is considered as a political award and not as a scientific award. Moreover, “Fama and Hansen developed models of financial markets ignoring completely a basic and elementary fact: the political impact on such markets is the determinant of their behavior” (Navarro, 2013).

    Besides, the heterodox economy is rejected in a similar way to the Copernican turn. In a similar way as defenders of Ptolemy’s geocentric model tried reject Copernicus’ heliocentric model. “… We see how easy it is to let preconceived theories shape the way we view evidence instead of letting the evidence shape our theories. A Copernician leap may thus be prevented by a thousand Ptolemaic epicycles. (Defenders of Ptolemy’s geocentric model of the solar system resisted Copernicus’ heliocentric model by using the concept of epicycles to explain away observations of planetary motion that conflicted with their model).” (Flew, 2007: 86).

    What are the ‘economic epicycles’? From homo economicus to ‘efficient markets hypothesis’. Also the famous demand-supply-equilibrium law. The idea of ‘equilibrium’ is an enormous ontological fail of the conventional economic theory (Lawson, 1997).

    Indeed, financial markets are not exist. Navarro (2012) explain it well: “In a market, the responsibility of a default loan is shared. It is a failure of the person or institution who requested the loan, but also a failure of the person or institution offered the loan. And this is not happening. In this situation it is penalizing the former in order to save the interests of second”. And adds: “You can not talk about the irresponsible borrowers without also talking about the irresponsible lenders”. Moreover, Baker (2013) suggest that, by mere linguistic consistency, the word “risk” should be removed from financial language, because the market is not exist, “if they know that government will back up the bank if it gets into trouble, then investors have little reason to properly evaluate the risk”.

    Neoliberal ideology must be stopped now!

    References

    -Baker, D. 2013. Big bank immunity: When Do We Crack Down on Wall Street? Truthout, 11/03/2013, http://truth-out.org/news/item/15048-big-bank-immunity-when-do-we-crack-down-on-wall-street
    -Flew, A. 2007. There is a God. Harper Collins. New York.
    -Lawson, T. 1997. Economics and Reality. Routledge. New York, London.
    -Navarro, V. 2009. Los premios Nobel de Economía. Temas 170, 10-12.
    -Navarro, V. 2012. El por qué de los recortes. Diario Público, 12/07/2012, http://www.vnavarro.es (posted 12/07/2012).
    -Navarro, V. 2013. El gran error del conocimiento económico dominante. Revista Digital Sistema, 25/10/2013, http://www.vnavarro.es (posted 25/10/2013).

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