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“The first edition of Paul Samuelson’s textbook [Economics from 1948] had a graph of the price level, not the inflation rate. If you think the price level is mean-reverting [as it would be on the gold standard], when you have more inflation, you expect more deflation. “
How that’s changed: Bouts of deflation were expected, after bouts of inflation. Both could spiral out of control, and the Fed was explicitly mandated to target “reasonable” price stability with a mean target of zero inflation.
Now the prevailing belief seems to be that bouts of modest “mean reverting” price declines will inevitably lead to collapses and that permanent 2% increases in prices are essential.

But where o where is the evidence for this (or the legislative mandates reflecting the will of the public)? That the gold standard is, desirably, defunct is no argument for the desirability of the shift, though as Larry points out, it may be an explanation.

The day Kabul fell I found myself at a Peet’s in Harvard Square.

I had an inkling the barista might be from Afghanistan, so I asked him whether he was.

He was.

I asked if he still had family there.

He did.

I said I was very very sorry and hoped they would be unharmed.He seemed oddly unaffected.

He was there at Peet’s again yesterday. I asked him how his folks were.

He said that banks and other such services were closed, but for the rest it was fine.

They were safe?

Oh yes. The security situation was much improved. There used to robberies and murders before. All stopped now.

That I found discouraging, but I didn’t tell him that.

Sadly horrible regimes often get their start and staying power precisely because of prior disorder and capricious misrule.

Today’s Wall Street Journal has an interview with a U Penn historian, whose image of the Founding Fathers is similar to what I formed and tried to convey in my research on modern day entrepreneurs.

In other words, Mr. McDougall doesn’t flinch from acknowledging the fallenness of the founders—but in contrast with the woke, he attributes it to their being human, not white or male or wealthy. He also celebrates the power and success of the institutions they created, but unlike the Whigs, he chalks it up to the fortuitous result of crafty self-interest, not “American exceptionalism.


This is my last month at HBS and I thought I’d squeeze in one last working paper, Renewing Knightian Uncertainty (just posted on SSRN). The real meat, if you can call it that, should be in the next two parts. I had first thought of writing a great big long paper. But I realized smaller pieces might be more digestible.

And here’s the back story for my quixotic enterprise.

One hundred years after its publication, Frank Knight’s Risk Uncertainty and Profit remains in print. But although a select group calls it a classic, very few economists now even read the book, much less use it in their courses or research.

Knight himself carries considerable blame. The book’s thesis is true by definition – and therefore cannot be verified or falsified. More importantly Knight provides no direction for extension or modification and thus no help to scholars who must produce ‘normal’ research guided by a common paradigm. Knight himself made no further attempt to build on the thesis of his book, which was based on his PhD dissertation at Cornell and published when he was an assistant professor at Iowa. Rather, Knight would go on to become an eminence grise at the University of Chicago through his extensive writing on a range of topics which had little to do with uncertainty or profit and his leadership of a world-class economics department.

And the writing is truly terrible, possibly reflecting a “rural education” (as Angus Burgin put it).

I had never heard of Knight or his book in my graduate courses at Harvard’s business school and economics department.  Even Richard Caves’s wide ranging survey of Industrial Organization that I took in 1985 made no mention. Then, a couple of years or so after I joined Harvard Business School’s faculty to teach entrepreneurship in 1988, Dean John H. McArthur summoned me to a nearly three-hour lunch at his corner table in the faculty club. We talked about everything — except why we were having lunch. At the end he said something like: “perhaps you’d like to know why I asked you to lunch. Well I’ve been reading your stuff and I wanted to put a face to the writing, to know who this person was who was writing this stuff.”


Gave me joy to write this nomination

In nominating Richard Nelson, I feel both honored and nervous. He has secured so many glittering accolades and well-deserved tributes that it is difficult to say anything that has not already been said. I will therefore provide a personal perspective; and, what stands out most for me, is the versatility – the range of Nelson’s contributions.

1. The decades over which Nelson has been active provides an obvious, temporal marker of his exceptional range. ‘A Theory of the Low Level Equilibrium Trap in Developing Countries,’ considered his first “landmark” publication, was published in the American Economic Review in 1956. This was a year before Nelson had started his first faculty job at Oberlin College. Three years later, in 1959 another landmark — The Simple Economics of Basic Scientific Research — A Theoretical Analysis, was published in Journal of Political Economy. This paper formalized the externality problem of R&D: Nelson’s model predicted that profit-seeking firms would underinvest in basic science because they would not be able to fully capture the returns from such investment.

 The output never ceased. In every succeeding decade, Nelson published as much significant work as most scholars would hope to produce in their entire careers. More than sixty years later, Nelson now aged 91, is still producing scholarly work. The October 2020 issue of Industrial and Corporate Change has a sole-authored article by Nelson.  


First oped in more than a year (when I was maniacally trying to get my medical innovation course done…

Trigger warning: starts with a suicide and more personal than my usual fare


by Amar Bhidé June 01, 2021

Summary.   Investors fall into two camps: value investors, who base decisions on a careful analysis of revenues and costs, looking for steady performance, and growth investors, who place bets on risky projects with very high potential payoffs. A capitalist economy needs both kinds — those willing to back transformational ventures as well as those who reward prudence and thrift.

The new course on medical innovations I developed and  just taught at HBS started disastrously.

Fortunately, miraculously, by the end of the term, I thought it was the most substantive course I had ever taught, but it was far from the smoothest and I was on tenterhooks about what the student evaluations would say.

They did not disappoint. I have never received so much feedback about case quality. That to me was also the biggest unknown (I believe that after 30+ years I’m now an adequate teacher): could really dense, technical/historical cases with no protagonist “work” in an HBS class? Fortunately, the answer at least for students who chose to stick with the course seems to be yes – though a lot of work remains to realize the potential.

But where?

It’s a pity that after investing heavily in the offbeat experiment, HBS can’t/won’t see a way to continue it. Anticipating just this, I had started talking to places where there might be a better fit for the course even before I started teaching it. I hope the evaluations help, and as Mr. Micawber said, something is bound to show up!

Done with my LTMA course. Good or bad, is for my students to say in their evaluations but it was like nothing I have ever taught or taken.

I said at the end of the last class that teaching my entrepreneurship course is like being a tour guide at Disneyland. I know every ride, there are no surprises, virtually ever.

Teaching this was like being a rookie whitewater rafting guide in class 4 or class 5 rapids: Thrilling, but at any moment could end in disaster.

And you have to make it up, moment by moment.

The final class was no exception. The case was on Cicely Saunders’s founding of the modern hospice movement, as told by her brother, Christopher. (He’s an HBS MBA 1950 who has been a friend for several decades now.)

Christopher, now 94, attended class via Zoom as did his daughter, Kate. Kate is Chair of Trustees at the Arthur Rank Hospice in Cambridgeshire.

Christopher was tired — or the connection was bad perhaps. But his daughter filled in splendidly.

The Big Surprise was my HBS ’79 classmate, Tom Dickerson. Tom used to be a health care VC and more importantly, as he told me on a walk on Sunday, his wife had died in a hospice. So, I had invited Tom to class. As always, he was eloquent and engaging. (He is a 3 H after all).

Of course, that meant completely changing my teaching plan on the fly.

I think it – and the course — worked. But my taste isn’t everyone’s taste. Most curious what the students will say.

In less than nine months, I’ve put 15 case studies through the HBS system, which may be a record for a single submitter. (About 10 were reconfigured working papers, but they still had to be turned into a teaching product.)

As of next Thursday, I had hoped to have taught all 15 in my Transformational Medical Innovations course. (Teaching a new full credit elective with all new cases might be a record too).

Regardless, yesterday’s class upset the plan. I assigned two cases — and invited a superstar cancer researcher Michel Sadelain, as the guest for the first of them. I thought I’d teach the case for about 45 minutes, turn it over to Michel for 15-20 minutes and then move on to the next case. (I had been told Michel didn’t have much time).

About 30-40 minutes into the case discussion, I asked Michel if he could stay a little bit longer.

He said he was finding the discussion fascinating so I should take as long as I liked.

Long story short. Never got to the second case. And Michel was inspirational. Just stellar.

And it may be the best class I have ever had. It is a high that’s hard to describe.

The other guests and classes have been uppers as well.

I am one lucky dude to have had this chance, if only once.

Shorter and possibly more accessible version of Making Economics More Useful. (originally published, under CC in Applied Economics) Fair warning: contains commercial for my Productive Knowledge obsession/agenda.

Long ago, when I had a persistent cold, my father had taught me the yogic practice of ‘jala neti.’ So when I began to read stories about the prophylactic effects of nasal sprays I googled. And sure enough someone has looked into it. (I have already been, out of an abundance of caution, gargling whenever I return from the outdoors)

Do saline water gargling and nasal irrigation confer protection against COVID-19?


This report provides a perspective on the relevance of saline water gargling and nasal irrigation to the COVID-19 crisis. While there is limited evidence concerning their curative or preventive role against SARS-CoV-2 infection, previous work on their utility against influenza and recent post-hoc analysis of the Edinburgh and Lothians Viral Intervention Study (ELVIS) provide compelling support to their applicability in the current crisis. Saline water gargling and nasal irrigation represent simple, economical, practically feasible, and globally implementable strategies with therapeutic and prophylactic value. These methods, rooted in the traditional Indian healthcare system, are suitable and reliable in terms of infection control and are relevant examples of harmless interventions. We attempt to derive novel insights into their usefulness, both from theoretical and practical standpoints.

The venerable sage, Bob Aliber (and co-author of Manias, Panics, and Crashes), sent along this fine memory of the late, legendary George Schultz (and then kindly agreed to let me post it here).

February 14, 2021


George P. Shultz, Dean, University of Chicago Graduate School of Business, 1962-1968

“The Man with the Plan”

Robert Z. Aliber


This note was inspired by Paul Wolfowitz’s op ed in the Tuesday, February 9th, Wall Street Journal, titled “Statesman of the Century”; his paean to George Shultz is in the title. For the record, Paul and I first met on the squash courts at Bartlett Gyn in the winter of 1965. Paul was studying deterrence theory with Alfred Wohlstetter in the political science department. Paul sought to take advantage of my advanced age when we were on the squash court; I took advantage of his inexperience. In the late 1990s, Paul was Dean of the Paul Nitze School of Advanced International Studies of John Hopkins University in Washington and he signed my monthly check when I was a visiting professor. The theme of the op-ed was the centrality of trust in George Shultz’s zeitgeist.


A monthly Hayek seminar at the London School of Economics on risk and uncertainty sets a reliably high standard for intellectual stimulation, with quite the diverse constellation of luminaries (and just a few stragglers like me).

Most regard themselves as social scientists; I don’t see myself as a scientist, in the modern sense:   I like to study social phenomena from a pragmatic perspective (in the William James sense, of what’s useful rather than what’s “true.”)

This week’s session further clarified what these two perspectives mean for thinking about economic models.

The ‘classical’ economic scientist’s approach, going back to J.S. Mill, was to start with axioms, and deduce what “tendencies” followed. Mill for instance defined economics as the deductive science of inferring tendencies that result from seeking wealth. He emphatically did not assume that wealth seeking was the only – or even dominant or uniformly distributed — motivation. Therefore, the tendencies deduced might not actually be observed in specific instances or even in the aggregate.

We have of course come a long way since then, both in the sophistication of deductions and efforts for empirical validation. This has prompted new deductive models — and backward induction from observation. This effort would include behavioral and evolutionary economists (of various stripes), the Santa Fe complexity folk, and George Soros’s ‘reflexivity.’

For all that, I think it’s fair to say that the gap between models and observations remains vast and most everything – as far as I can tell — is over determined (with many plausible explanations for the same thing).

The most that ‘scientific consensus’ can realistically expect is some kind of ‘abductive’ generalization: the “best” explanation for the widest possible phenomena. And I’m skeptical that without some kind of intellectual bullying such a consensus is possible.

The alternative ‘pragmatic’ enterprise (in the William James sense) looks for whats useful rather than what’s universally true — and thus (as John Kay and Mervyn Kay argue in Radical Uncertainty) to ‘situational’ abduction: the best possible inference about a particular circumstance. They further argue that such abduction requires a kind of “plumber’s tool kit” of models. Charlie Munger (of Berkshire Hathaway fame) says this as well in arguing for a diverse ‘latticework’ of models.

This prompts the further pragmatic question: which tools, used under which circumstances? Plumbers learn this in trade school, through apprenticeships, learning by doing, learning by watching (again to borrow from Mervyn King) etc. Yet Knightian uncertainty (perhaps short of ‘radical’) about tool selection and use seems unavoidable.

I think social scientists have something to bring to the pragmatist’s table: more suggestive tools and heuristics for their selection and use. It would be a pity if this were lost in a dogmatic striving for the “best” model and approach.

The course seeks to encourage and guide innovators in health care and other industries using case-histories of transformational advances, supported by a framework of productive knowledge. After describing these basic ‘ends and means,’ this syllabus summarizes the required pre-class submissions, final paper, and grading methodology.  (A downloadable version also includes the provisional schedule and assignments)

Ends and Means.

Popular media routinely tout imminent breakthroughs that often fizzle. Our case histories of treatments and tests that actually revolutionized medical practice in the last quarter of the 20th century, reveal patterns still common in medical innovation today. They show how protracted, multiplayer innovations – not solitary breakthroughs – typically produce transformational results. Yet venturesome individuals who won’t follow the crowd remains crucial.

The case histories present a vast number of facts through engaging stories which make the facts more memorable and easier to recall. Yet the course treats learning new facts mainly as a valuable byproduct. Rather we use the case histories to support innovators in two more subtle ways, namely:

Developing skills and judgment, particularly in recognizing opportunities and anticipating problems, adapting ideas from other domains, evaluating alternatives and so on. Learning by personally doing – or by personally watching – is often crucial for developing ‘skills of the hand,’ such as changing a car tire. But for many ‘skills of the mind and heart,’ learning from past instances is more practical and feasible. Studying historical wars and battles has long been an important part of training military leaders for example. Moreover, the skills and judgment emphasized go beyond particular techniques (which may become obsolete) and support more than just medical innovations.

Sharpening goals and aspirations. The case histories include stirring stories that showcase the romance of human progress. But they do not preach or sugarcoat: they include controversies about the marketing of antidepressants and the overuse of expensive procedures. Great adventures, they remind us, require great risks and difficulties and succeeding in what’s safe and easy – or just financially rewarding — is not always uplifting. In the coronary bypass case for example we encounter a German researcher who fails to “meet the scientific expectations” of his boss, loses his job, switches from surgery to urology, joins the military, and becomes a prisoner of war. Eventually he gets a Nobel prize, but can never secure a professorship because he had not finished his PhD. Another surgeon who performs the first successful bypass is forbidden from doing another. An Argentinian who then does many bypasses at the Cleveland Clinic and comes to be known as the ‘father’ of the surgery, ends up committing suicide after the institute he starts in his homeland cannot pay its bills.


Email from a distinguished, very thoughtful, and classically educated, pillar of the UK establishment concludes:
“Meanwhile I send you our warmest wishes for a better 2021 than this Plague Year. I’m reading Pepys’s Journal and although the disease killed perhaps a quarter of the population of London, they seem to have remained rather more cheerful than their modern counterparts.”
To which I responded:
“On Pepys’s London: a morbid thought, but we really do seem to have lost our acceptance of death, making our societies psychologically brittle and tormented.”

Another friend pointed me (on Facebook) to C.S. Lewis’s famous “Living in an Atomic Age” essay from 1948 – which seems very on point more than 70 years later.

“In one way we think a great deal too much of the atomic bomb. “How are we to live in an atomic age?” I am tempted to reply: “Why, as you would have lived in the sixteenth century when the plague visited London almost every year, or as you would have lived in a Viking age when raiders from Scandinavia might land and cut your throat any night; or indeed, as you are already living in an age of cancer, an age of syphilis, an age of paralysis, an age of air raids, an age of railway accidents, an age of motor accidents.”

E, a Latina immigrant and single mother, who tidies my (bijou) apartment just heard her son was admitted to Harvard College.
She used to have a business with her husband. After the business and marriage dissolved, E has supported herself providing housekeeping services – with great diligence and remarkable cheerfulness.
I found her through J, a student from more than 20 years ago and, subsequently, a friend.
J’s a big (he could have had a career in professional sports) and big-hearted guy. His father, a first- or second-generation Italian immigrant, started as a construction worker, built his own construction business, and saw J (and his brother) through Harvard College. After getting his MBA and MPA, J worked in private equity and then started a buyout firm which has done splendidly.
J helped E’s son – she’s been working with him for many years — get into a ‘posh’ private school (which J’s son also attends) and wrote a letter supporting the boy’s Harvard College application.
Good people can apparently still make good things happen.

European Financial Managment has just published ‘Symmetrical Ignorance: The Cost of Anonymous Lemons.’

It’s (kind of) a 50th Anniversary ‘inversion’ of Akerlof’s 1970 paper. Usually, increasing the information available to buyers reduces information asymmetry (‘lemons’) problems. But decreasing the information of potential sellers also reduces information asymmetries.

I argue that in finance, rules  to decrease seller information has sustained anonymous markets that lemons problems would not otherwise allow to exist. And the induced ignorance does not necessarily serve the public interest.

The publication is under the broadest creative commons copyright.  So do with it as you will!


I’m privileged to participate in a seminar (with far more distinguished scholars than I) with diverse views and research agendas but joined by a common skepticism about the mainstream model for decision making under uncertainty.  After the first session presented by John Kay (based on a chapter with his book with Mervyn King) I posted the following reaction on the seminar’s bulletin board:

“(A). The question of alternatives to the standard model came up a few times. Gert brought it up explicitly, I think. To me, this raises the issue of to what end — how does it matter? To use William James’s possibly crass pragmatic formulation, what is the “cash value” of alternatives that we are looking for?

For my two cents/pennies worth, I’d make a distinction between alternatives for making ‘abductive’ assessments to inform specific decisions where something meaningful is at stake versus alternatives for deriving and defending propositions about recurring, universal phenomena. (The latter to include general propositions about abductive assessments and choices.)

This takes me (it would, wouldn’t it!) to the distinction between engineering and science and their respective methodologies). And this is not at all intended as a put down: the overall orientation of the group seems towards general (albeit) heterodox propositions that are ‘better” than what the mainstream has to offer.

(B). On the issue of “correctness” — the individual forecasts of the probability of rain that can never be wrong. This is a problem both in the scientific and practical domain since counterfactuals are often difficult to come by and abduction is almost inevitably a just so story telling process.

I would propose replacing the sharp falsifiability standard of science to a variant of Dewey’s (again pragmatic) formulation of truth as a “warrantable assertion.” This would lead me to the following tests:

  1. Is the inverse plausible? In business management at least one encounters lots of vacuous propositions whose inverses cannot be defined or that are pima facie implausible.

and (assuming the first test in met)

  1. How strong are the warrants for the claim (and its competing inverses) in this particular situation?

Good to see their scholarships for “girl students” in science (;-)) keeps growing.
I gave one in my parent’s name some years ago.
My mother was a founding member and later served as its President. My father’s support for her remarkable life and career was itself remarkable: He found her (an unfunded) phd slot in Brussels, paid for, and pushed her to go. I was 18 months old when she left India and she didnt come back till she finished her phd.. In between, my father was the “single parent.” (All that in the 1950s!)

Trimmed and anonymized talk given to a group in London (whose identity has been edited out). Ive also removed the more indiscreet Q&A.
The picture (which was taken at a Bloomberg Radio studio) has no relationship to the venue. Unfortunately you cant just upload audio to you-tube, so this is a bit of a chimera.

I regard death from disease, storms, earthquakes, accidents, and misadventures as an integral part of the natural order. Certainly sad for kith and kin, especially if life is cut short. But dying is integral to the process of birth and renewal. I have far fewer years ahead of me than I have lived and the inevitability of my demise holds no terrors.

Death from a policeman’s brutal boot deliberately placed on a helpless neck shakes me to the core. It destroys not just a particular life but savages what we value about living, what we believe makes humans and human civilization special.

And how could this happen in Minnesota, the bluest of blue states, renowned for its neighborliness and generosity to strangers near and far? Montgomery maybe. But Minneapolis?

But then I remember: today’s kindly Minnesotans descend from settlers who massacred Native American tribes, who in turn did not flinch from scalping enemies. I think of the brutality of Buddhist monks in Myanmar and Sri Lanka, Christian wars of religion and burnings at the stake, Hindu pogroms, ISIS cleansings ….

Perhaps our humanity is really only a flimsy facade. Perhaps, perish the horrifying thought, humans are worse than animals who kill for food.

From the May 14 2020 Scottish Mortgage Investment Trust Board announcement:

“Professor John Kay has decided not to stand for re-election at this year’s AGM and will retire from the Board in June after twelve years’ service as a Director. John’s career has spanned academic work, think tanks, business schools and consultancies. Scottish Mortgage has been extremely fortunate to have had the benefit of his input over the past twelve years. He joined the Board just before the start of the Global Financial Crisis and served the Company through the subsequent fall out, as he has done over the course of the current Global crisis and all the intervening years. His great intellect and wit are known and appreciated by many, through his writing as well as his presence at Scottish Mortgage events. I know I speak for all of my colleagues when I say it has been a real privilege to sit alongside John, to benefit from his great expertise always delivered with a quiet, unassuming style that never fails to hit the mark. He will be sorely missed and we wish him well in all future endeavours.

“I am delighted to announce the appointment of a new Non-Executive Director, Professor Amar Bhidé

Our article (full text below) highlights the crucial role of local knowledge and action in global pandemics.

While regretting the grim circumstances, I’m encouraged by this collaboration with Leif  — a stalwart Social Democrat who broke ranks to keep Sweden outside the Euro: apparently it isn’t just Hayekians who fear of over-centralization. And, syncreticism is likely to produce better — and better coordinated — local choices than sectarian commitments.

The piece also hints at the trade offs of case studies including of “outliers.” I have long been a fan of studying individual ventures, innovations, and events that highlight the importance of of specific circumstances and concrete ‘down-and-dirty’ choices. But doing this honestly requires acknowledging the great difficulty of broad, reliable generalization from a few cases. You cannot say South Korea has been successful at controlling Covid because of A and B or Norway has fewer deaths than Sweden because X and Y.


An oped in today’s WSJ about “Rage[ing] Against the ‘Bioethicists’ and the Dying of the Light” reminded me how different Hindu/Vedantic attitudes to life and death are from Judaic/Christian ones.

I had emailed this to a stressed friend about ten days ago (nobody had died btw)

“I guess I am very Hindu about all this.

“This is from the Bhagwad-geeta (P.Lal translation).

For death is sure of that which is born, and of that which is dead, birth is certain.
Why do you grieve over the inevitable ?

“All things are unmanifest in the beginning, manifest in the middle and unmanifest at the end.
Is this a cause for grief ?

“This embodied atman, Arjuna, is imperishable. You have no reason to grieve for any creature.”


Much is being made of the “success” of covid containment in South Korea and Taiwan.

This seems based on rather superficial news reports. The BBC reports on Taiwan for instance say that people who were ‘suspected’ of infections were tested. What does that mean? Just symptomatic patients — or people who had come into contact with symptomatic patients, or what? Which tests were used? Who administered them? Was there (as in Aids) confirmatory testing?

The details are important. Effective practical interventions in any sphere have many moving parts — which have to fit with each other and with the specifics of the circumstances. (Which is why I think most RCTs are largely useless for designing practical interventions).


Then, there is the question of whether containment has simply kicked the can down the road?

Finally, I’m reminded of the unbridled enthusiasm for the East Asian corporatist/authoritarian model — which I had criticized before it peaked (in a WSJ oped, ‘The Crucial Weaknesses of Japan Inc,’ in 1981). So I take claims that S.Korea/Taiwan/Japan got it right with large helpings of salt.

At best we can say we wont know — if ever — many years from now. Even now, former Japanese students express grave reservations about the overreaction. (I have no former South Korean or Taiwanese students who Im in touch with).

My general personal preference is, when faced with vast irreducible “knightian’ uncertaintly, to make choices that focus on reducing the most likely/obvious harm. Not the most imaginable harm. (This rule of thumb does not alas answer to the ethical ‘trolley problem’)

The metaphor Id use is of pre-Galilean astronomers observing a large asteroid hurtling towards the earth. With the crude astronomical tables and crude telescopes available to them, they guess the meteor is a year away but they cannot calculate with any precision where it will hit the earth — or pass harmlessly by. It would then not be a sensible choice, in my view, to evacuate of all densely populated areas to minimize the loss of human life. Though, of course, if you could say with some confidence the asteroid would hit a large metropolis you would evacuate that place.

I understand that how to deal with this kind of Knightian/radical uncertainty involves highly personal preferences. But, Id prefer we recognize that there is ton of Knightian uncertainty out there concealed in a blizzard of models and graphs and make choices accordingly.

This fine post by Maria Chikina (Pitt) and Wesley Pegden (CMU) reaches important if unpalatable conclusions, including:

“There is a simple truth behind the problems with these modeling conclusions. The duration of containment efforts does not matter, if transmission rates return to normal when they end, and mortality rates have not improved. This is simply because as long as a large majority of the population remains uninfected, lifting containment measures will lead to an epidemic almost as large as would happen without having mitigations in place at all.”

To which Id add: draconian containment may be doing more social harm than good if a majority has already been infected.

And, I don’t think the technology or infrastructure exists for reliable mass or randomized screening to figure that out. Cutting edge molecular  assays for old fashioned influenzas (according to the CDC) can miss up to a third of infections; some cannot distinguish between Type A and Type B influenza viruses. (The CDC of course frames these facts in a more positive way.)

And advocates of randomized testing: Which test? And who will administer them: send out the people who do household employment surveys? Imagine a can opener as the saying goes..

A simpler, harm minimizing alternative: strict norms/rules to treat people with ambiguous symptoms as presumptive Covid cases and keep them at home.. Also possibly people already in poor health and of advanced age.

April 2 update:

The media is beginning to catch up with the realities; an article in today’s Wall Street Journal reports:

“Health experts say they now believe nearly one in three patients who are infected are nevertheless getting a negative test result. They caution that only limited data is available, and their estimates are based on their own experience in the absence of hard science.

“That picture is troubling, many doctors say, as it casts doubt on the reliability of a wave of new tests developed by manufacturers, lab companies and the U.S. Centers for Disease Control and Prevention. Most of these are operating with minimal regulatory oversight and little time to do robust studies amid a desperate call for wider testing.”

Why should this surprise anyone?

My oped on covid 19 that the FT has just kindly published, emphasizes we are operating in a fog — of irreducible, radical uncertainty. As Mervyn King wisely put it. ” “No one can really know the nature of this virus.”
Six years of studying medical advances — Im going to be teaching a new course on this at HBS next year — convince me there is no techno magic that will clarify.  Reliable, large scale screening is a Theranos like fantasy: its not just the “upstream” scientific breakthroughs that are a bottleneck — there is a long “downstream” chain — of producing tests, distributing them,  training operators to administer them and physicians to interpret them that are at least as great a constraint.
(There is a reason the CDC recommends against routine laboratory testing for flu diagnosis — even though the tests and protocols are well established.)
And without tests, uncertainty about infection and death rates — and efficacy of containment choices is unavoidable.
Our best guess/guide at this point I think is the 2009 swine flu pandemic. Covid could be better. it could be worse. But i dont see any reason for doing more than was done in 2009. This certainly wasn’t nothing — but it didnt involve fnearly global lock-downs and immediate large-scale, harm to people’s livelihoods. And with no exit plans or criteria even.
Some can afford extended sheltering in place.  A great many cannot.

My email and facebook feed is filled with pictures and videos of exponential growth functions.
The flood originates, I believe, in epidemiological hubris, namely that:
1. The form of equation governing infection growth is known and unchanging; and,
2. That the parameters of the equation — the now infamous R0 — also don’t change, and therefore can be reliably estimated from the data.
Yes, you can “fit” the initial *recorded* covid infections to an exponential curve — as you could “eyeballs” in the early phases of the 1999 internet bubble. But as Herbert Stein famously observed “if something cannot go on forever it will stop”; very likely, I might add tailing off before it stops for many phenomena. The reasons will of course vary from case to case.
The conflation of the convenience of a mathematical model with is correctness is common in economics (eg Cobb-douglas production functions) and financial risk models (normally distributed price changes). Sometimes, as in 2008, with disastrous consequences.

A pro-screening friend posed this question — in response to my strong objections to mass screening.

To which I replied:

“It depends on the purpose, costs and the consequences.

Testing witches by tying weights to suspects’ feet and tossing them into ponds was a terrible idea. Yet at the time, many authorities decided it was a conclusive test — real witches didnt drown — and crucial to containing the scourge of witchcraft.

If I could offer some serious personal examples: When I was twelve, a servant in the house (yes that was common in India) was diagnosed with leprosy. Everyone in the family was immediately tested (with relatively crude, indirect tests) in a public hospital. I tested positive and was prescribed — and immediately started taking — a drug that would cure the disease but would eventually seriously damage my liver.

My mother, a cancer researcher not a medical doctor, wasn’t persuaded by the diagnosis. About a year later, after reading whatever she could find on the top, she took me to a specialized leprosy hospital. They redid the crude test and this time I tested negative. But since there was a prior diagnosis — and there was some abnormal scaling of skin — they performed a much more invasive, accurate test. They took out a large chunk of skin (about 5 mm deep) which they tested in a culture. After several weeks the culture showed there were no leprae bacteria. The drugs were immediately discontinued and later, when it was discovered I had developed an allergy to nylon socks, the scaling went away.

Accuracy here was crucial.

But what if the better test wasn’t available? Would I urge using the crude test to screen the population for leprosy. Absolutely not. But for people who had symptoms or circumstances that indicated the possibility of leprosy, yes. Even if misdiagnoses needlessly harmed their livers.

Another example: I am a sucker for all kinds of testing even when I know the accuracy of the test has not been tested (and is probably low). I have several gadgets to test blood oxygen saturation levels in my sleep (as an indication for apnea).  Im sure they are extremely dodgy. But they are harmless. Likewise, I know the 23andme genetic tests have no medical value to me. Yet I did them for sport — and got the “risk factors” for a thousand of my genes which I know are utterly unreliable.

The CDC has sensible criteria for testing for the flu (generally it recommends against). In my judgement those are pretty good ones for the corona virus as well.

And if you are really interested in the general issue of testing methods and tradeoffs look up the readings on that topic in my practical knowledge syllabus

Comparisons of coronavirus infections to the mundane seasonal ‘flu have invited widespread mockery. In fact, the comparison is oddly and usefully apt. Estimates of infection and death rates –for both – require heroic, unverifiable assumptions. And how we deal with flu outbreaks provide useful lessons for coping with what the World Health Organization has declared a global pandemic.

Like many, I never see a doctor when I believe I’ve gotten the flu. Most patients who do see physicians are “clinically” diagnosed, in a rough and ready way. The US Center for Disease Control (CDC) recommends laboratory tests only for hospitalized or high risk patients. And, according to the CDC, “proper interpretation” of tests requires consideration of numerous factors such as whether the specimen is taken from the upper or lower respiratory tract, accuracy of the test used as compared to a “gold standard” test, and the prevalence of the flu in the patient population.

These interpretations (like my personal guesses and physicians’ clinical diagnoses) are fallible: laboratory testing isn’t like dipping litmus paper into a beaker.

Attributing deaths to the ‘flu is also a fallible judgment call, not the unambiguous result of a foolproof test.

How many are diagnosed, whether by themselves, clinically by physicians or nurses, or through lab tests, is also a guesstimate. I keep my self-diagnosis to myself and professional results aren’t entered into a national registry or data base.


Brilliant observation from Knight’s Risk Uncertainty and Profit: “We live in a world full of contradiction and paradox, a fact of which perhaps the most fundamental illustration is this: that the existence of a problem of knowledge depends on the future being different from the past, while the possibility of the solution of the problem depends on the future being like the past.”

I see this as an extension of Hume’s more famous induction paradox: “Why should we believe that the sun will rise again in the East tomorrow?” To say that because “its always risen in the East before” is not a reason — its simply a restatement of the belief. Hume’s answer is that there can in fact be no “reason” — its a matter of animal instinct.

This kind of animal instinct makes many kinds of “routine” knowledge problems trivial. The interesting ones become “when or how might the future be different from the past (or how could we make it different)”? And whatever mental process we use (eg the application of science) relies on some ‘likeness’ with past situations. Note “likeness” is crucial. If “identical” we could fall back on the simple animal instinct of extrapolation.

The compositor has sent  the “final” version of Making Economics More Useful: How Technological Eclecticism Could Help (though the official publication in Applied Economics wont be till July or August.)

I nearly emptied my research budget to make it completely open source so feel free to download, pass around, republish, excerpt or whatever.

Its a huge relief after a dozen or so summary “desk rejects”. One editor suggested I was “insulting economists.” (I don’t: but it might be an expiation for my careless years at the Indian Institute of Technology).

Ultimately I found a brave editor at Applied Economics and an exceptional referee who asked for a significant rewrite — and pushed me to make bolder, broader claims, instead of the customary niggling and narrowing.

Whew! And Happy New Year!

I got a “revise and resubmit” for my paper on making economics more useful on the very day the Nobel prize in economics was announced.

I have long been skeptical of the practical utility of Randomized Control Trials (RCTs) in general and field experiments in developmental economics in particular. I had not gone into this in my first round submission but I think I’m going to risk this in the re-submission.

The argument I plan to make is as follows:

A foundational question for disciplinary economics is whether it should limit itself to being a science which privileges general propositions; or, should it also include knowledge (as in engineering or medicine) that pertains to the design and use of physical or virtual artifacts (airplanes, drugs, surgical procedures)?

The Deaton and Cartwright critique of RCTs correctly observes that RCTs are ‘optimized” to validate general principles rather than evaluate or improve actual designs. Thus the RCT finding that textbooks alone don’t improve learning supports the general principle that complements matter; other field experiments support the general idea that incentives (including monetary incentives) matter. (The latter has been a staple of older econometric research as well: Zvi Griliches’s hybrid corn research comes to mind.)


Srikant Datar, Fabio Villa, and I are happy (and relieved) to complete this case history on the evolution of coronary bypass operations. This is by FAR the hardest writing I’ve ever attempted: the story is incredibly complex, and I knew nothing the topic when I started. Fabio bailed us out with his expertise — and patience with my profound ignorance. (He’s a heart surgeon, turned psychiatrist.)

Katherine Stebbins’s and Caitlin Bowler’s research and writing was crucial in the other cases (links below).

The narratives have been filtered through a thesis about practical knowledge, although the cases do not explicitly advance an “argument.” A planned book compilation of the cases will clarify.

If you can’t wait, this manifesto-like syllabus outlines my general thesis of practical knowledge and an earlier Critical Review essay how this applies medicine.


While preparing for for my practical knowledge seminar last week I saw something in Chandler that had been hiding in plain sight, which I think aligns Chandler with Frank Knight — and away from the transaction cost view of organizations advanced by two Nobel Laureates Ron Coase and Oliver Williamson. (Chandler felt strongly that Williamson had misapplied his histories).


I am a staunch free-trader with strong but pragmatic libertarian leanings. I am also an immigrant (of “color” in the prevailing euphemism). All this makes me seriously conflicted about immigration, which I cannot reduce to a matter of high libertarian principle.

The questions are difficult:how many immigrants can our public infrastructure tolerably accommodate? How do we prevent criminal contamination of refugee inflows? How freely do we admit immigrants whose backgrounds cannot be reliably checked or from countries which celebrate honor killings and punish homosexuals and blasphemers? How do we treat those caught trying to beat the rules? How about their children?

Unfortunately, immigration demands more pragmatic tough mindedness than trade as my oped argues. Timidity or tender-heartedness will simply allow authoritarians and demagogues to more harshly exclude or expel immigrants.

Why Is Immigration Different from Trade?

Jan 11, 2019 Amar Bhidé

There is no doubt that immigration brings a host of benefits, both to immigrants themselves and to the native-born population. But if broadly beneficial immigration is to be sustained, destination countries must acknowledge and address the real risks that it raises.


Talking heads on “financial” TV channels have always provided “infotainment” — information so blended with entertainment that you couldn’t tell where one stopped and the other started.  One rated the Fed Chair’s “performance” at his press conference on the Fed decision to hike rates an “F”.
But why should the Fed and its chairs have to “perform” for the market or soothe its tantrums, my just published oped argues.

WSJ OPINION   |   December 26, 2018  p. A21

Stock-Market Volatility Can Be Good for the Economy

Cheap, abundant capital doesn’t create good ideas. Scarce, expensive capital helps weed out bad ones.

Amar Bhidé


Paul Volcker’s critique of 2% inflation targets in his recent memoir spurred me to write this oped just published in the Wall Street Journal. Volcker focuses on the economic hazards of the targets; I question the legitimacy of “independent” appointees in making inherently political choices about ends and not just means. The Constitution envisions a republic messily governed “by the people” not just “for the people” by philosopher-kings in an efficient Kallipolis.

My argument (which Volcker may well dispute) echoes the problem raised in Dick Nelson’s 1977 classic, The Moon and the Ghetto, of carelessly throwing policy goals “over the legislative wall” to experts. I plan to expand on this in a book based on my practical knowledge seminar (This become a consuming obsession for me, so Id love to get any thoughts on the seminar’s manifesto-like syllabus).

But here I’d like to add my two bits to the flood of eloquent, well-deserved tributes occasioned by the Volcker memoir.


The WSJ op-ed reflects my ingrained First Amendment-absolutism: fake news will always be with us and any remedy is likely to make things worse.

(Yes, I did recently suggest corralling infopolists’ assaults on privacy. But, our Constitution protects the exercise of free speech not of market power — even if the power was “fairly” secured. Moreover, as Emerson said, a foolish consistency is the hobgoblin of little minds.)

Skepticism Beats Snopes as an Antidote to Fake News

These days what’s called ‘fact checking’ is no more than a comprehensive gotcha effort

Sophisticated netizens swear by the myth-busting of Snopes, a website that has debunked many an urban legend. But Snopes—or any other enterprise established only to check facts—can’t stop the epidemic of fake news allegedly pervading social and traditional media.

When customer reviews of sellers first appeared on eBay , scholars quickly lauded—and backed with rigorous, fact-based research—the benefits of independent evaluation. But it didn’t take long for scammers to produce fake reviews. Sellers learned to pay not-so-independent reviewers to post glowing evaluations of their products and viciously bad-mouth the competition.


I am viscerally skeptical about expanding state power but recognize that technological advances do often require new rules: Automobiles required brake inspections and traffic police for instance.

Similarly, I argue in this just published Project Syndicate oped,  the digital economy poses new risks and requires new rules. The info-monopolists are not your great grandfather’s oil trusts. Market power can deprive us of more than the loss of the “little triangles” of consumer surplus as I think Zvi Griliches used to put it.

The question of how to encourage innovation while limiting the abuse of market power long precedes the advent of the digital age. And today, the need to strike the right balance is nowhere more apparent than in the case of dominant information-technology companies like Facebook and Google.
In a modern capitalist economy, we celebrate innovations that produce market power, but fear the risks of unchecked dominance. Nowhere are those risks more apparent than with today’s information-technology monopolies. (more…)

This article in many ways, is the “debt” counterpart to my 1993 Journal of Financial Economics piece and offers an even broader critique of the reflexive belief that more complete financial markets are always better.

I conclude thus:

Lemon problems do not stop the sale of well over a million used cars in the U.S. each year, but they do prevent the operation of a market in which buyers place sight-unseen bids for used cars offered by unknown sellers. In fact, anonymous markets for physical goods are restricted mainly to metals or agricultural commodities. Most goods—including new or secondhand cars, shoes and homes—are purchased from identifiable sellers.
Buyers also prefer to examine specific items—test-driving cars or trying on shoes, for instance—before they make a purchase.

Outside finance, revolutionary technological advances have not turned many goods or services into anonymously traded commodities. Rather, the advances have reduced the cost of communicating and using detailed information, mitigating information asymmetries, and helping buyers select items that match their preferences. And technology has reduced anonymity: in contrast to the street-hailing of taxis, users of ride-hailing apps can screen drivers based on their ratings. Similarly, consumers can review the ratings of plumbers on the web instead of randomly picking one from the telephone directory.



(Manifesto-like) Syllabus

This seminar examines the development of knowledge embodied in artifacts (including physical objects, protocols, and organizations) intended to transform “existing conditions into preferred ones.”We are particularly interested in knowledge “inclusively” produced by the many and for the many. Thus, we care more about how ready-to-wear footwear is designed, produced, and sold, than in customizing handcrafted boots for buyers who don’t think about the price. Likewise, general tools and techniques commonly used to produce a variety of artifacts are of greater interest than specialized tools. Thus, we are interested in how consumer goods, not just shoes, are designed, produced, and marketed.

By traditional intellectual standards, studying practical knowledge may seem undignified and uninspiring. The ancient Greeks venerated contemplation, music and the other arts, abstract truths, and mathematical reasoning. Merchants and craftsmen (including, presumably, builders of large hollow horses) occupied the bottom rung of Plato’s idealized society; their knowledge and toil was but a means towards the realization of the good life by a small enlightened class. Modern society has raised science into the pantheon of the wisdom we venerate. Engineers, physicians, lawyers, entrepreneurs, managers, and accountants earn high incomes; but, many dismiss their knowledge as a mere application of deeper scientific ideas or simply unfounded superstition. Similarly, in higher education: the first European universities started by offering practical medical and legal training and the University of Pennsylvania emerged from Benjamin Franklin’s 1749 proposal for an Academy to teach “those Things that are likely to be most useful.” But now, some in the upper reaches of the Academy deride professional education as verging on the teaching of trades that must be kept in its subordinate place.



Fair-lending laws turned consumers into anonymous credit scores—and a target for identity thieves.

In a longer working paper I further argue that reducing individuals to scores has also undergirded the vast growth of anonymous markets in securitized consumer and mortgage loans.

My working paper just posted on SSRN synthesizes ideas Ive been working on for my practical knowledge seminar, a case writing project on medical innovation and a forthcoming paper in the Journal of Applied Corporate Finance.

I argue that economics lacks an “engineering” counterpart to its “physics” side. That’s fine as long as you don’t rely just on the “science” of economics to make practical choices. But wouldn’t we be better off with an engineering side? (I grant social engineering is a scary phrase!)

Keynes thought it would be “splendid” if economists became more like dentists. They have instead become more like physical scientists who focus on propositions about invariant tendencies amenable to decisive verification. This predisposition, I argue, limits the utility of economics in evaluating concrete policy choices. I further suggest that emulating the more pluralistic and less decisive techniques used to develop and test new engineering and medical technologies would mitigate these limitations. Additionally, I offer an example of how a simulation model can help evaluate policies that affect the extension of credit.

My article, just accepted by Ekonomisk Debatt, will be published after translation by the Swedish Economics Association in May.

The argument is half-Hayekian in the sense it argues for an important role for the decentralized, private sector creation of the medium of exchange, which Hayek presumably would have approved of, but anchored in a government monopoly for creating base money that Hayek did not favor, but which dates back to antiquity.


The decentralized enterprise that sustains the dynamism of economies makes top-down monetary interventions, such as quantitative easing, that target aggregates such as overall inflation, futile. Moreover, economic stability and dynamism also require prudent, decentralized lending to decentralized borrowers. But, sustained monetary interventions aimed at aggregate inflation (or employment) targets induce imprudent credit extension, jeopardizing stability and dynamism.

Amar Bhidé

Financial Times  August 16, 2016

Easy money is a dangerous cure for a debt hangover

Amar Bhidé and Anders Barsk

Quartz June 21, 2016

Brexiters are making a dangerous mistake in their argument for leaving the EU

From Quartz  January 7, 2015

When it comes to ISIL Europe is repeating the sins of its fathers

Widespread private and public cheating in Greece is old hat. Michael Lewis documented it splendidly in Vanity Fair in 2010.

What’s “novel” in this just published piece (tho Ive made it a few times before) is that the Euro doesn’t need or can’t have “convergence” of standards of living or in the quality of governance.  Rather the common currency needs rules and structures that *minimize* the supporting standardization and regimentation.

 “Standardize and centralize only when necessary” is a staple of modern management.  And figuring out what and how to centralize (establishing “loose tight controls as Peters and Waterman put it) are an important part of a CEOs job. (more…)

A civil libertarian and free-speech absolutist’s concern about the Charlie Hedbo demonstrations

By Amar Bhidé

Mass demonstrations of solidarity in favor of free speech and against the Charlie Hebdo killings are understandable, but they could inadvertently give cover to actions that subvert the very liberties the protesters cherish. Legitimate public outrage should not be channeled into declaring or escalating wars on Islamic (or any other kind of) terror. Democracies should coolly rely on existing tools and procedures against criminal conspiracies.


Talk at Cato conference on the future of US growth

Sent off this email to colleagues. God knows with what consequence. But I am close to retirement age, and if I don’t resist I would be a complicit enabler. <> on behalf of Amar Bhide <>
Sent: Wednesday, October 13, 2021 11:38:24 AM

To: fletcherfaculty@elist. edu <>
Subject: [Faculty] Re The Gender Politics of (Office) Space: A Fetcher Tale  

From the emails below:

But as I watch male colleagues complain about the additional 20 minutes of instructional time …-I still marvel at the ways in which entitlement works.

Then Karen:
Further on the matter of gendered entitlement, I too was struck at the recent exchange about the additional 20 mins of class time, and who was complaining and who wasn’t. Quite illustrative.

There were just two who “complained:”  Sulmaan raised the issue of the governance of the process and of student fatigue. I sent a one line email saying that I found the extended time suboptimal; then after polling my class, I reported that my students, male and female, unanimously concurred.

That both of us happen to be male (and coincidentally racial minorities) is surely not evidence of gender entitlement, unless your priors (stereotypical prejudices?) are extremely strong in that direction.

I see no connection *whatsoever* between views about optimal class length and gender entitlement. I also see practical reasons for class lengths that might be suboptimal for learning — I taught three hour classes at the U of C to executive MBAs

What bothers me deeply about Kimberly’s and Karen’s assertion is the implication that faculty who happen to be male, should have no voice in anything because everything they say reflects their gender entitlement.

This would be just as horrifying as claiming that two privileged white women (one South African) cannot countenance the uppityness of colored faculty. 

I cannot imagine my cancer-researching mother (and co-founder and former president of the Indian Women Scientists Association) claiming any such thing.  And god knows she encountered considerable gender prejudice (and racial prejudice when she worked in places like middle America in the 1960s and Germany in the 1970s).  But then she actually had responsibility for a large department in an institute with roughly equal proportions of male and female researchers and several female directors. Casually tossing off accusations of gender entitlement would have been unthinkable. 

That should be verboten at Fletcher as well.


Last week, a colleague of subcontinental persuasion who had been on leave last term sent around an email expressing surprise that 20 minutes had been added to the length of seminar classes apparently without any faculty discussion. He further added that the extra time was draining for his students.

A torrent of emails were sent in response all supporting the pedagogical value of the change.

I thought the new class length was sub-optimal and said so in a one line email. I also queried my students. They too, unanimously and unhesitatingly, said it was a bad idea.Today another colleague sent around an email suggesting that dissenting from the added time, reflected the “gendered entitlement” of the dissenters.

All two of us.

Am I wrong to think such claims have a chilling effect on the expression of views (that have nothing to do with gender) among colleagues? And that the optics of a white South African woman accusing two possibly uppity brown guys of shirking, aren’t great either? Not to mention the historic irony. (My mother’s aunt was a Godbole for EM Foster fans)