Orbital Teapot Syndrome And Success-Bias Economics

By: Andrew_McKillop

Doctor Les Woodcock Says
The former NASA consultant scientist, Dr Les Woodcock of Manchester University UK says he has had enough of Global Warming hysterics. His argument that an unsubstantiated hypothesis cannot rule supreme in climate science also applies to the flagrant and mindless meddling with  the economy, for example by 'Super' Mario Draghi of the ECB using his Keynesian spin doctors for the chorus line.

Leslie Woodcock is a professor emeritus of Chemical Thermodynamics with decades of academic research experience. Interviewed by 'Climate Depot' on 3 April 2014, he said that the theory of anthropogenic global warming is just that and only that - “an unsubstantiated hypothesis”.

The CO2 theory of global warming certainly wasn't invented yesterday. Merely repeating it, and endlessly repeating it doesn't make it true. It is unsubstantiated. The argument from Draghi that “inflation is too low in Europe” is the same nonsense. The economy is “running too slowly” therefore there is “not enough inflation”. So the ECB has to print and hand out – only to banksters of course – vast amounts of money for them to firstly “disintermediate” and then play and lose the rest of the windfall gains from the ECB on their 24/7 casino. Called “the financial markets” this is a Nintendo playstation for mindless chip-shuffling and effortless gains – when their traders stay lucky. When their traders get more reckless than usual, like Jerome Kerviel of SocGen, they are “criminal”.

Market traders think they have a “success bias” but they are always wrong. Statistics prove this.

But what about the “central Keynesian hypothesis”? Why would the absence of inflation, or Heavens Forbid deflation, show the economy is in bad shape? The ECB-Keynesian theory is gibberish.

According to Dr Woodstock, the Global Warming hysterics built their implausible hypothesis from the straw man of CO2 – calling it a “toxic gas” - despite the fact that all plant and therefore all oceanic and terrestrial life depends on this gas which makes up only 0.04% of the atmosphere. He asks why are the GW hysterics totally uninterested in water vapour, which is vastly more present in the atmosphere, with proven climate changing capabilities?

He said: “If you tell me that you have a theory there is a teapot in orbit between the earth and the moon, its not up to me to prove it does not exist. Its up to you to provide the reproducible scientific evidence for your theory. Such evidence for man-made climate change theory has not been forthcoming.” 

When In Doubt Repeat What You Just Said
We have no proof at all that because Europe is steadily deflating – not inflating – this in turn proves its necessary to unleash the extremest-possible Keynesian quick fixes, and then be “amazed” at the damage they cause. Reforming the banks might be a much better idea. But because Keynesian “success bias” remedies are touted round the clock, the elites buy this nonsense.  Global Warming hysterics, thanks to their friends in high places like Bill Gates and Obama's chief science adviser John Holdren can get their sweaty hands on the funds and resources to carry out “geoengineering experiments”, like chemtrail spraying – which is very likely harmful and most probably not beneficial.

Like Keynesianism this is a supposed quick fix, but does it make sense? No it does not.

The quick fixes, when they drag on year by year and always become more extreme, intensify the problems they were supposedly going to fix.

Friedrich Nietsche said : “Among individuals, insanity is rare. But in groups, political parties, nations and epochs it is the rule”.

Put another way groups (and especially elite groups) will be responsive to and will accept a ridiculous theory – if it is repeated enough times. Of course this also applies to small children, in kindergarten groups listening to fairy stories, but they are not an elite group with executive power. In other words nonsense will rule and this observation of the real world and group behaviour cannot be brushed aside. What we are concerned about, today, in the global economy, are several related one-way mega shifts all caused by too much lazy-minded nonsense ruling the roost for much too long.

No Such Thing As Investment
One shift is totally clear. What was called “investment” suffered a one-way mutation from “hedging” to “speculation”. What are called hedge funds, today, do not hedge. They speculate. There is a complete and total difference between these two states.

Likewise, a central bank isn't there to feed speculation and reward constant and extreme risk-taking, but to regulate the money system. Climate scientists are not there to tell us ridiculous lies, to militate for unrealistic and uneconomic panic changes of national energy policy, and to rationalise ludicrous 'geoengineering' experiments which themselves are likely harmful.

More than 20 years ago, Hyman Minsky argued that economic and financial experience since the late 1970s and early 1980s showed that the dominant previous hypothesis of the economy being “constantly an equilibrium-seeking and sustaining system” ignores the growing effects and impact of what he called “speculative and Ponzi finance”. This finally pushed the entire economy towards a permanently destabilized state and system.

He called it the “deviation amplifying system”. This is an imposed unnatural system and has significant and identifiable effects.  Minsky said that what are normally called exogenous shocks, which can start or terminate an economic cycle, become less important - or even disappear completely - when the economy “goes deviant”. Business planning which was formerly based on the existence of these cycles, the simplest of which is called “the business cycle”, no longer has any meaning

Randomness, Chance and What Happens
Like the climate scientists, it is necessary to argue for “thresholds and tipping points” in a complex process that may only be describable post facto. That is we only knew what happened after the crisis.

Taking the main argument of Minsky that the before and after states of the economy are a shift from stable, and therefore predictable, to unstable and therefore not predictable, we should find at least some proofs of this process in action.

In what some consider his best book “Fooled By Randomness” Nassim Taleb disparages what he calls the “fragilistas” who think they are able to and can manage the future, can rule out surprise shocks, and will make Humanity fit a tidy paradigm. Whichever of the “tidy paradigms”, whether NSA-style or not, depends on which one is chanted the loudest by the elites and their Hooray Henry clowns.

If the vogue is “reformed Marxist and socialist”, we get the IMF-friendly book from Thomas Piketty. If it is market liberal capitalist, we get another – but we will always get the same bottom line which is what we can call “extremest-possible Keynesian”. The same upstream ideology-package is used to justify the taxing or even confiscation of savings – and the “random walk” casino finance playstation economy with QE bailouts for the banksters, and the 24/7 poker tables and roulette wheels.

State kleptocracy feeds crony capitalist kleptocracy.

Perhaps Taleb's main point about randomness is the many proofs he gives for what we often attribute to skill or talent - being really due to luck or random chance. For some careers in the technical domain, including dentists or pianists or computer programmers, skill is needed.  However, in the Monte Carlo-model financialized economy you can be successful simply because your line of business or trading temperament matched the conditions of the market. Also, the Herd Effect is ultra powerful and herd numbers also play a major role. With a large number of traders, the probability of one or more of them being consistently successful over a multi-year period due to pure luck is very high, but by exactly the same metric, sooner or later their luck will run out. 

While at the top of the greasy pole of luck, they will of course disparage the Born Losers, the lazy, and the do-nothings – calling them “envious” and showing the sociopathic contempt with which the greedy-lucky view society and their fellow citizens. Without society however, no economy and no stock exchange casino would or could exist. How do you pillage society when it doesn't exist?

Henry Hazlitt and later Ayn Rand worked the storyline of justifying luck, greed and kleptocracy, as long as it is private kleptocracy and not State kleptocracy. What clever people they were.

 Taleb gave two invariable reasons for why the greedy-lucky (calling themselves 'talented') run out of luck. The first is that when perched at the top of the greasy pole, traders are drugged with “success bias” thinking. They have a 'stock picking system which breeds success', whether it was an an astrological approach, a tea leaf-reading approach, an algorithmic approach or plain old insider trading. In fact, the traders just happened to be in the right place at the right time. That is all.

The second is they always fail to prepare for the ineluctable case where their system fails -  because of their “hubris” or delusional belief their system is infallible. 

Probably You're Wrong
Even experts in probability analysis make glaring errors. Human emotions interfere with “pure” probabilistic thinking. One of the simplest examples – and a basic reason why the casino finance players always come back for more, until the really bitter end -  concerns our emotional reaction to a win we make after several losses. The win, even if it in no way compensates the accumulated losses, will be an emotional godsend and “encouraging” -  for you to make more and further losses. As a hedge fund trader, of course, this is other peoples' money so you are not all that concerned. After all, they are fools to lend it to you! They should beware of 'forward looking statements'!

Supposedly, the economy is the domain of rationality. Treated as such, rational analysis must be applied to allow us to decide between equal-value options. In fact, the hubris-driven speculative process totally replaces this paradigm, by making it obligatory for players to fool themselves by not looking at results very frequently - losses are always worse than the emotional high from an occasional gain.

One identifiable result of this process, which has a cumulative basis Minsky argues, is that previous and former economic and business cycles are replaced by a new and constant series of anomalies. These are endless “special situations” for which previously rational economic information is no longer relevant. The economy necessarily becomes more unpredictable, which in turn reinforces “success-bias”. The role of self-delusion grows, as economic failure grows.

This has a large ripple effect and spreads its pernicious effects. In what passes for “economic policy” today, there is only Keynesianism – at least for the elites! Keynes has “success bias”. Just like the junkscience CO2 hypothesis of Global Warming.

Nassim Taleb is sometimes criticized as taking an extreme-harsh line with what he calls “entertainment thinking” typified, for him, by the business press and media. He is quite often accused of “pure arrogance” – but he is making a simple statement of fact. Entertainment herd thinking disguised as ideas, news, views and opinions is an essential and pernicious component of the brainwashing process which not only reinforces the elites in their own arrogance, and comforts the traders in their mindless greed, but also ensures that the economy is in a mess.

If it wasn't, would we need Keynesianism?

By Andrew McKillop

Contact: xtran9@gmail.com

Former chief policy analyst, Division A Policy, DG XVII Energy, European Commission. Andrew McKillop Biographic Highlights

Co-author 'The Doomsday Machine', Palgrave Macmillan USA, 2012

Andrew McKillop has more than 30 years experience in the energy, economic and finance domains. Trained at London UK’s University College, he has had specially long experience of energy policy, project administration and the development and financing of alternate energy. This included his role of in-house Expert on Policy and Programming at the DG XVII-Energy of the European Commission, Director of Information of the OAPEC technology transfer subsidiary, AREC and researcher for UN agencies including the ILO.

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