* If the private sector people did anticipate the embargo, then I would explain that Nixon's price controls and high tax rates would make it pointless for speculators to build up inventories before the crisis hit. So SPR isn't necessary, we just need to unleash the market to do its job.
* If the private sector did NOT see the OPEC move coming, then I would explain that this isn't a strike against the market and FOR the government; after all, the planners were caught off guard too. So the question going forward is, okay, now that we realize OPEC could do this again, who is most likely to prepare for it better? Private speculators who are risking their own money, or bureaucrats?
Now, is anybody else slightly troubled by this? It gave me the willies when I realized that my solution was going to be the same no matter what had happened historically. Now granted, this is partly the point of Misesians who stress that economic theory is a priori. But still, I could definitely understand if a leftist thought this simply proved how dogmatic I was.
We've become so busy we can't afford the time to say "it."
Were the police afraid that the passengers in his car would again mistake him for a dead man if he left the makeup on? That they'd get another phone call: "This time he's been murdered for sure!"
I really didn't know what to say. What I thought was, "Yes, just as it has been for about 720 periods of several days each earlier in your life."
"Anyone who links Islamic radicalism to the terrorist campaigns that are being waged against America, Europe and Israel and against non-radical Muslims in places such as Darfur, is automatically labeled an 'Islamophobe.'"
Has anyone, anywhere, ever so denounced someone else? Is there anyone who denies that these terrorist campaigns are linked to radical Islam? Sure, there are some of us who argue that it's not OK to kill millions of Moslems because a few of their fellow believers commit terrorist acts, but that's a slightly different point.
…, 1010, 1011, 1000, 1001, 1110, 1111, 1100, 1101, 10, 11, 0, 1, 110, 111, 100, 101, 11010, 11011, 11000, 11001, 11110, ...
My initial bias is to be skeptical of the value of such an approach. Mathematical futures/options forecasting seems similar to Max Cohen's grandiose attempt to predict the mathematical patterns in the stock market in the movie Pi (an excellent film); an illusory objective, like perpetual motion or attempts to square the circle. Mapping the current state of the economy is one thing, but making toy models of previous markets and simulating them based on the future seems a blind bet on intelligence to model what is not amenable to insightful modeling: human actions and behavior in the future.
Thinking about it, I realized my bias against such modeling came back to Mises' illustration of two approaches to economics. Murray Rothbard writes, 'One example that Mises liked to use in his class to demonstrate the difference between two fundamental ways of approaching human behavior was in looking at Grand Central Station behavior during rush hour. The " objective" or " truly scientific" behaviorist, he pointed out, would observe the empirical events: e.g., people rushing back and forth, aimlessly at certain predictable times of day. And that is all he would know. But the true student of human action would start from the fact that all human behavior is purposive, and he would see the purpose is to get from home to the train to work in the morning, the opposite at night, etc. It is obvious which one would discover and know more about human behavior, and therefore which one would be the genuine "scientist."'
Certainly this example illustrates a natural division of approaches, and to my mind makes a succinct and convincing case for praxeology, but the behaviorist may not be down for the count.
Before picking up the thread, it should be noted of course that financial engineers and quants are not (generally, anyway) trying to derive scientific truths or general principles. On the contrary, they are concerned with modeling many particular truths, especially particular generalized patterns that underlie particular phenomena. Everything is contingent and models are always susceptible to review.
It is less obvious, then, what particular, if any, contingent patterns or principles a financial engineer may uncover. The reason to hire a financial engineer, of course, is to help traders make money by exploiting inefficiencies in the market. Hayek's explanation for apparent "inefficiencies" in a given market is that since knowledge is dispersed asymmetrically, it is expected for there to be a kinked array of market prices within a short interval, there is no perfect knowledge. Behaviorial economists formulate much the same principle, but assert that modeling such inefficiencies may provide tangible insight into the patterns of knowledge distribution, or more precisely, the patterns of it's output given certain inputs.
In essence, one might say that a financial engineer is creating a telescope that allows traders to obliquely understand what tends to happen given a relatively stable(but disparate) distribution of knowledge. This is an empirical question, but I think there may a basis in this example, for a weak (but sound) case that even behavioral economists have some contribution to the development of an applied economic science, potentially aiding praxeologists in much the same way telescopy has aided astronomy and physics and computers have aided number theorists.
Addendum: It's come to my attention that Gene has already written about this topic in depth here, thoroughly discussing the philosophical importance of financial modeling, but most interestingly (to me, anyway), providing some key insights into the practical significance of modeling. I liked this analogy:
"Mathematical equations can be useful for modeling the result of people following through on previously made plans, for capturing "equilibrium-like" phases of markets.
"Analogously, we could say that once a player in a basketball game decides to shoot jumper, we could use an equation that, based on the initial force vector that the shooter chooses to apply to the ball, then predicts the progress of the shot. Such an equation will be of little use, however, in predicting whether the player will change his mind and pass instead."
Needless to say, that's not the argument in this WND article.
But my complaint concerning the above situation is that the odds of being in a car accident are not really odds at all. That's because those "odds" are arrived at by treating the occurence of accidents as purely random events that simply "happen" to drivers, like being struck by a meteor. To the contrary, any individual driver's likelihood of having a collision is affected quite significantly by how she drives -- her skill, her knowledge of her car, her degree of focus, and how much caution she exercises. For instance, one can only collide with another car after first closely approaching it. (Automobiles have not been observed making quantum jumps that instantaneously bridge the distance separating them.) Therefore, any driver who stays as far away from other vehicles as possible is far less likely to collide with one of them than is someone who habitually tailgates or weaves through traffic. And that means that it is methodological nonsense to treat "the odds" for having an accident calculated by treating all drivers as indistinguishable and without influence over the degree of risk they face as if they applied equally to each individual driver.
On the other hand, a passenger on an airplane really does have little he can do to alter the possibility of the plane he is on crashing. (Little but not nothing, e.g., he can refrain from violently taking over control of the aircraft and then deliberately flying it into a building.) In general, this is risk beyond his control, and I see nothing irrational about one being more adverse to such risks than to those one deliberately can control.
I think I will write an article about this. I am too speechless at the moment to do it justice.
1) Evolutionary epistemology. Yes, our history and our genes will be relevant to how we know things and what sort of things we know. But some people want to go further and say, "Any confidence we can have in our knowledge can only be grounded in the fact that evolution has steered things so that our minds can successfully cope with reality, because, of course, only organisms that successfully cope with reality will survive."
The problem with that is you're grounding all your other knowledge on your theory of evolution -- but how do you know that's right? For instance, I reject your idea with my theory of evolution: Nature is perverse, and has assured that only the least fit creatures with the worst cognitive maps of reality have survived, by wiping out all of the most fit ones with earthquakes, floods, droughts, etc.
Of course I think the latter theory is dumb, but it certainly can't be rejected by pointing to the former theory, because that's precisely what's being disputed! So it turns out that we do, after all, have epistemological resources independent of counting on evolution to have weeded out bad ideas.
2) Formal epsitemology: Again, formalism can be useful, sure, but it can't take the place of "old style" epistemology. I can't find the fellow's web site now, but I ran across a guy who said, "There are two types of philosophy: formalized philosophy, and vague philosophy that never resolves anything."
And, once again, the difficulty with mistaking a useful tool for the subject ought to be obvious: A formal analysis may clarify one's thinking on a problem. But the formal analysis can't tell you itself if it does so! For example, let's say I tell you: "You want to know what beauty is in art? That's easy -- just look at the Pythagorean Theorem!" This is obviously silly, but the formalism itself can't tell us that! To see what formalisms are relevant to what philosophical problems, and in what way, requires a non-formal judgment.
"Hi is Alicia there?"
"Sorry, you have the wrong number."
"Is this [my home phone number]?"
"Hmm, that's the number she gave me. [pause] Are you her brother by chance?"
I realize it is unfair to actually analyze this, but I must: Did she expect me to say, "Oh, you wanted my sister Alicia?! I had thought you were asking for a stranger with the same name, and that's why I thought you had the wrong number. Hang on, I'll go get her..." ?
Much better idea: I was at a site the other day that instructed me: "Put the answer to 3 + 4 in the box to the left." No letter guessing involved! Rotate the questions automagically, i.e., "What is the name of the animal that says 'meow'?" and you're good to go.