There Is No Nobel Prize in Economics
Continued from previous page
Friedman’s monetary theory was used by Federal Reserve Bank Chairman Paul Volcker to restrict the money supply, plunging American into a deep recession, doubling the unemployment rate and had the added bonus of getting Reagan elected President. . . . And Hayek and Friedman were just the beginning.
For instance, in 1997 two economists won an award for their derivative risk models that minimized risk, just before the derivatives would explode in the 2000s real estate bubble.
The award was shared by economists Robert Merton and Myron Scholes for their work in figuring out how to value derivatives so as to minimize risk. The two economists used their Nobel-worthy economic models to run “the world’s biggest hedge fund,” which was called Long Term Capital Management (LTCM). And the fund really lived up to its name. Nine months after winning the Swedish Central Bank Prize in Economics, LTCM went belly-up, racking up over $1 billion in losses over a period of just two days. It was of course bailed out by then-Federal Reserve Chairman Alan Greenspan, who considered LTCM “too big to fail.”
Then there’s Vernon Smith. In 2002, Vernon Smith, adored and funded by Libertarians like Charles Koch, won the “Nobel” — his patron looked at the money he spent funding Smith’s academic career as a good investment, saying simply: “The Koch Foundation’s gift was an excellent investment.”
Smith’s research basically entailed setting up theoretical “wind tunnels” to test how, for example, the privatizations of markets would respond in various conditions all in a way that has nothing to do with reality.It will take a brave act to bring this sham to the attention of the public.
One year, one of the prize winners will have to speak out, and explain this ruse to the public as he wins the award.