Institute for Financial Transparency

Shining a light on the opaque corners of finance


PhD Economist Derp: The Pretense of Knowledge

PhD Economist Derp knows no limits when their self-proclaimed expertise in markets is challenged.

Harvard professor Dani Rodrik suggests ten commandments for non-economists when talking about Economics, particularly when talking to a PhD Economist.  Number 8 is a perfect example of this self-proclaimed expertise.

Economists don’t (all) worship markets, but they know better how they work than you do.

I haven’t figured out what bothers me more about this “commandment”: the incredible level of condescension or the pretense of knowledge about financial markets ten years after the financial crisis showed it isn’t true.

His “commandment” Number 2 asks the non-economist to do the Economists work for him.

Do not criticize an economist’s model because of its assumptions; ask how the results would change if certain problematic assumptions were more realistic.

This “commandment” is incredible.  Professor Rodrik is asking the non-economist to know the Economists’ models so well the non-economist can identify the “problematic assumptions”.  Then, the non-economist is suppose to politely ask, I assume on bended knee, what would be the change in results if the flawed assumptions were replaced with “more realistic” assumptions.

If Economists are experts, it is their responsibility to know what assumptions they are making AND make sure none are “problematic”.

This “commandment” is PhD Economist derp in action.

Of course, Professor Rodrik doesn’t want to talk about what happens when someone shows up who actually does understand the Economists’ models and can identify the problematic assumptions.  He doesn’t want to talk about how PhD Economists respond when non-economists point out the problematic assumptions and offer “more realistic” assumptions.  He doesn’t want to acknowledge like the rest of the PhD Economists he too immediately turns to credentialism to discount and ignore what the non-economist has to say.

The fact is, the Economics profession failed to develop the Information Matrix or recognize the existence of the Blind Betting quadrant.

Information Matrix

                                      Does Seller Know What They Are Selling?

Does Buyer Know What They are Buying?

Yes No
Yes Perfect Information Antique Dealer Problem
No Lemon Problem Blind Betting

If you don’t know the Blind Betting quadrant exists, you cannot explain why the global financial system is designed the way it is, where financial crises come from or how to successfully end them while protecting the real economy.

This failure stands as evidence PhD Economists don’t know how markets work better then you or I.