Who were the most overrated winners of the Nobel Prize in Economics?

This is a question that in my view is misguided and somewhat futile for two reasons. First, as Jeremy Bulow noted, "these guys are all well up the ladder." Some were giants, like Arrow and  Samuelson (and of course, this is my own biased view) who literally changed and opened whole fields of discovery, while others contributed more narrowly but still shifted the way people think or the methods that they use. Second, and I believe more important, is the fact that Economics, maybe even more than literature, is not the kind of field that lends itself to such a prize. My understanding from my friends and colleagues who work in the hard sciences (chem and physics) or medicine is that for the most part, people in the field know what the current "Nobel worthy" questions are before they are answered. There is agreement that certain advancements will be path breaking if and when they occur, or that they are pathbreaking when they occur. Even in literature some books are quickly praised as monumental contributions shortly after they are published. In economics, however, most of the work that is considered pathbreaking is deemed so in hindsight, as a consequence of where the literature tended to go. Some will go as far as Peter Surey's answer who suggests that no one in economics deserves a Nobel prize (quoting Hayek). Well, there is a Nobel prize and those who get it deserve it by definition. So rather than quibble about who deserves it more than others, I suggest that people accept the limitations of such a prize and focus on what we can learn from the different recipients.

What is the economic term for a good whose demand increases with price because people assume that higher price is correlated with higher quality?

You are probably looking for the term luxury good, some of which are examples of a Veblen Good. There's a problem though, the term luxury good refers to goods that are not considered essential. The economic term for goods whose demand rises with a positive increase in price, are in fact called Veblen goods.

I get confused over this as well, you just need to keep in mind that the term luxury good refers to the income elasticity[1] of a good and Veblen good refers to the price elasticity[2] of a good.

Some luxury products have been claimed to be examples of Veblen goods, with a positive price elasticity of demand: for example, making a perfume more expensive can increase its perceived value as a luxury good to such an extent that sales can go up, rather than down.
Although the technical term luxury good is independent of the goods' quality, they are generally considered to be goods at the highest end of the market in terms of quality and price. Classic luxury goods includehaute couture clothing, accessories, and luggage. Many markets have a luxury segment including, for example, automobile, wine, bottled water, tea, watches, jewelry, high fidelity, and chocolate.
Luxuries may be services. The hiring of full-time or live-in domestic servants is a luxury reflecting disparities of income. Some financial services, especially in some brokerage houses, can be considered luxury services by default because persons in lower-income brackets generally do not use them.[3]

[1] [math] \frac{\Delta Q_d / Q_d}{\Delta I_d / I_d} [/math], the change of a good's demand w.r.t a 1% change in income.

[2] [math] \frac{\Delta Q_d / Q_d}{\Delta P_d / p_d} [/math], the change in demand w.r.t. a 1% change in price.

[3] http://en.wikipedia.org/wiki/Lux…

How is the Fed's zero rate policy increasing the price of risky assets?

Investors are chasing yield as a result of the low interest rate environment.  This is increasing demand for risky assets and therefore inflating the price, as supply has not increased in tandem with demand.
Be forewarned of the risk distortion in portfolios that this is causing.  Interesting blog post shows a simple demonstration of how the high-yield bond market has grown.  This is dangerous given the high default rates. 
following Debt: Low Interest Rate Environment Driving Higher Risk
Makes me wonder if the Fed is creating a bubble in risky assets and when it will pop.  That could be very dangerous.
The Fed attempting to control the economy's ups and downs is the "Fatal Conceit" Hayek spoke of

Why isn't stock trading classified as a matrix/pyramid scheme?

Financial theory says every stock should have an expectation of generating dividends or resulting in a payout when the company is acquired (the acquirer being able to directly harvest the free cash flow).

Yes, it's a confidence "game" on the company's fortunes when one buys with the expectation of selling before one of these outcomes are realised. But then so is staying in a country a confidence game that it won't blow up, holding cash that it won't be inflated away, holding gold that it won't plummet, etc.

It is not a Ponzi scheme as the shares try to approximate the productive value of the assets they represent ownership to – buying a tractor and putting it in your house is about the same as buying a piece of paper that says you own a tractor in a lot and neither is remotely Ponzi-ensqe for lack of presently producing cash flows. Stock of non-fraudulent companies represent real net assets while Ponzi shares don't.

Categorising the stock market as a Ponzi/matrix scheme either ignores that stock markets are not zero or negative sum games, i.e. they are not inherently unsustainable, or, defines a Ponzi/matrix operation so loosely as to include much of legitimate economic activity in it.

What econometric variables are functions of the 'velocity of money'?



  • M = the money supply a.k.a the amount of money in our system
  • V = the velocity of money a.k.a the average number of times a dollar is spent in a given time period
  • P = the price level
  • Q = the real economic output

By solving for V we get  V = PQ/M.

Let's say V increases, meaning that the spending frequency increases (this is what happens in a booming economy). Either three things could occur as a result:

1. P, or the price level, increases. This means that any increase in spending leads to inflation. An upwards pressure on the price level is most likely when we are at full capacity, meaning that factories are at top capacity in terms of production and jobs, and we have less room for real economic output.

2. Q, or real output/GDP increases. Real growth is more likely when we are at less than full capacity, like we are now, considering the incredible amount of job losses and cutbacks from companies.

3. M, or money supply, decreases. This makes sense. If the Fed decides to impose restrictive monetary policy and decrease the money supply, but the consumer still wants to spend as much as he/she always did, then the average amount of times that a dollar exchanges hands will increase.

Of course, the actual economy is not so simplistic, and these four variables are all changing simultaneously. If spending picks up, both real output and the price level are both likely to increase. However, the extent to which each variable is affected depends on capacity, which depends on the where we are in the business cycle.

However, all that I wrote above is probably not the best way to look at the actual economy. Instead of starting at V, we should start at M, considering the Fed has control over the money supply. Many economists argue that V remains rather stable. They say that the amount of money that people want to hold depends on the nominal level of GDP (PQ). Therefore, if the Fed increases M, then increased spending will lead to a similar increase in PQ while keeping V relatively stable.

Is humanity's tendency for monogamy natural, or is it a byproduct of institutional and economic forces? Are we more inclined to polygamy by nature?

To my knowledge genetic research shows that humans were polygamous in their beginnings and started becoming monogamous only relatively recently – a few thousand years ago – in their history.

The reasons for this change are a topic of hot debate which is very often influenced by the interest to prove the ideologies of a group or a religion (no offence meant to members of any group or religion).

It seems that being true to one partner and serial monogamy are relatively new solutions to partnership and upbringing of children in complex societies. And the question of the debate today is if they are the only possible solution.

The newest book about this is by David Barash, who, being a zoologist and psychologist, is one of the leading experts. He already had a book on this in 2001 one, and the new one once more sums up scientific findings: we are promiscuous and polygamous by nature. Short summary and links to more articles here:Maybe We’re All Polygamous: A Playboy Conversation with David Barash

The other important book, that goes even further is by Christoper Ryan and Cacilda Jetha, called Sex at Dawn.

Why did Christina Romer resign from Obama's economic recovery advisory board in August 2010?

The Washington Post reports two possibilities.  The first are the ubiquitous "personal reasons" which could be very real:

President Obama said in a statement that Romer's decision was guided by "family commitments." Romer has long signaled that her time in Washington would be temporary; her husband, economist David Romer, has been on leave from his own post at Berkeley and their teenage son is due to start high school this fall.[1]

The second is that she may be taking another position soon

Romer is also considered a serious candidate to replace Janet Yellen as president of the Federal Reserve Bank of San Francisco, one of the most important jobs in the Fed system. Yellen was recently named vice chairman of the Federal Reserve.[1]

[1] http://www.washingtonpost.com/wp…

What are the most popular fields in economics right now and in the future?

The popular fields right now, according to my (obviously not-terribly-objective) perspective, include the following:

  • On the more applied side: development. Esther Duflo won the most recent John Bates Clark Medal in part for her work with the Poverty Action Lab at MIT designing field interventions that not only help economies develop but that also help us figure out what kinds of interventions work. This field is combining some of the most innovative theory (the economics of social networks, e.g.) with some of the most exciting empirical methods. For more on the field (which is fun to learn about through the prism of Duflo's work), see: http://en.wikipedia.org/wiki/Est… , and the good New Yorker profile [subscription]: http://www.newyorker.com/reporti….
  • There's also public economics, the study of taxation, redistribution, and government services. Raj Chetty is one of the brightest stars in all of economics right now. He is using big data techniques (applied to tax data, for example) to analyze economic patterns at very high resolution. For example, Ihow does where you grow up affect your prospects of moving up (or down) in the income distribution?  You can see a popular introduction to his work here.
  • The intersection of macroeconomics and finance is very active, especially informational frictions in markets, etc. This research is motivated by  explaining the financial crisis and avoiding the next one.
  • Behavioral and experimental economics. A lot of classic theory is being recast with attention to biases and limitations of real economic agents, but the new grand paradigm is still missing.
  • The above is based on a lazy outsider's observation of what seems to be going on outside my subfield. In theory, a few of the trendy fields are matching and market design (for example: designing mechanisms to take families' preferences over public schools and decide who goes where, in such a way that it is in people's interests not to try to game the system; or designing ways to overcome the shortage of donated organs); dynamic games with reputations, a mature field that still attracts many of the best minds, and networks, which uses economic theory to analyze how patterns of relationships form and how they influence economic processes.

What are some of the weaknesses of Marxian economics?

There are so many weaknesses that the real question is whether there is anything left.  If you take the labor theory of value as the sine qua non of Marxian economics, then there really isn't much left.  I agree with W. David Marx that Jon Elster is a good source for the basic critique, though you'll find a more complete version of it in Making Sense of Marx than in Karl Marx: An Introduction.  John Roemer has taken a resolutely revisionist approach to Marxian economics.  If you want the all-math version you can see his Analytical Foundations of Marxian Economics and General Theory of Exploitation and Class.  For those of us who cling to words, he's written a primer called Free to Lose which shows you what's left of Marxist economics once the labor theory of value and other dubious bits (e.g., the falling rate of profit) have been taken out.

As for the work done by Marxian economists, you can find everything from people who seem to do nothing but try to resurrect the labor theory of value to those who have jettisoned all of the questionable Marxist baggage.  See Robert Brenner's The Economics of Global Turbulence for an example of the latter.

Among those who have little of the traditional baggage, one could point to the analytical Marxists (of whom Roemer, Elster, and Brenner are all one-time members), the post-Keynesians who find in people like Michal Kalecki and Joan Robinson a link between Keynes and Marx, most of the people who come out of the politics department at York University in Toronto (e.g., Sam Gindin, Leo Panitch, many others), ditto for most of the people in the economics department at U Mass – Amherst.  There's at least one Marxist economist who remains committed to the labor theory of value who nonetheless does excellent work – Anwar Shaikh at the New School.  Marxian economics tends to be more lively in Britain than in the US; during my year there, the economics department at SOAS was dominated by Marxists (of many different stripes).  There are also a ton of Marxists among economic geographers, of whom David Harvey is merely the best known.

So, if by Marxist economics you mean the economics of Marx in pristine and unchanged form, the objections are decisive.  If you mean by Marxist economics the work that's being done by economists who identify themselves as such, then the field is quite lively and diverse.