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Category Archives: Musings
Milton Friedman’s Scientific Legacy
I wrote the following for the celebration of Friedman’s centenary by the Becker Friedman Institute in November 2012. By any measure, Milton Friedman has had a tremendous impact on our world. Friedman is one of the most recognizable economists of … Continue reading
Thinking Probabilistically – HIV screening in the U.S. and South Africa
How can the same HIV test and screening process have the dramatic differences that show up between the U.S. and South Africa? Thinking carefully about probability is so often useful in our every-day lives. I was reminded of this once … Continue reading
Posted in Miscellaneous, Musings
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Graceful Failure and JPMorgan’s Loss
The biggest challenge facing regulators and politicians following the financial crisis is to engineer a regime that allows graceful failure for systemically important financial firms. Failure is, ironically, one of the great strengths of a market-based economy – the creative … Continue reading
Personal Income and Consumption
Summary I have argued for some time that a robust recovery will occur after households adjust spending downwards. The “savings rate” in the U.S. has risen since the financial crisis, but this reflects changes in taxes, not changes in household … Continue reading
Posted in Economics, Musings
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Risk, Black Swans, and Brown Turkeys
The mathematics of volatility and VaR alone are just not enough for understanding risk in today’s environment. We are living in extraordinary times – probably the most extraordinary in three generations. (Don’t get me wrong – I’m not arguing that … Continue reading
Posted in Economics, Musings
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JPMorgan Chase loss seems to be an idiosyncratic trading loss
The JPMorgan Chase loss seems to be a plain-vanilla trading loss – unfortunate and bad news, but not a sign of something more serious in the financial system. Bad as they are, we have lived with these kind of trading … Continue reading
Rights and Wrongs of Value at Risk (VaR)
With the loss announced by JPMorgan Chase last week there are, once again, loud and varied denunciations of Value at Risk or VaR. Unfortunately, such talk sheds little light upon and often shows misunderstanding of the underlying issues. Take the … Continue reading
JPMorgan Chase loss and idiosyncratic vs. systemic risk
The loss announced by JPMorgan Chase last week raises many interesting questions, one being the distinction between idiosyncratic and systemic risk. The distinction between idiosyncratic risk versus systemic risk (and idiosyncratic vs. system events) is vitally important because the sources … Continue reading
Posted in Musings, Risk Management
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Personal Income and Consumption
Summary I have argued for some time that a robust recovery will occur after households adjust spending downwards. I believe that households must adjust spending down to reflect levels of lifetime wealth that are lower, after the global financial crises … Continue reading
Black Swans and Brown Turkeys
Black Swans and Brown Turkeys The term Black Swan was introduced by Taleb to denote an event not only unexpected but not even considered within the realm of possibility – something so unexpected that it completely changes the terms of … Continue reading
Posted in Musings, Risk Management
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