Wednesday, November 26, 2008

How Scientists Helped Cause Our Financial Crisis

Garbage in, Garbage out. Models are not reality. Models only help explain reality and therefore help our understanding of a reality that is generally too complex to fully grasp. These ideas are taught in every stats, econometrics, and finance class worth its weight. On every test students use (indeed sometimes overuse) "data limitations", "it uses historical data", and "surprises (or black

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