Let’s take our friends Alice and Bob. They come to you and ask you where should they invest their pennies. You tell them “low cost broad based index funds”. They blink at you and say “Could you please give us the names of the funds?”
And I still have no idea what do you mean by “optimal”.
there are different types of complexity and looking at financial market data isn’t a type of complexity LW tends to deal with.
That is true as a matter of empirical observation. But the real question is about capability: can LW types deal with the financial-markets type of complexity? Why or why not?
Most Americans invest in mutual funds via their firm’s pension plan and have limited choices. I have index funds with Vanguard and Fidelity on the S&P 500.
can LW types deal with the financial-markets type of complexity? Why or why not?
Even for those who could, it wouldn’t be worth the time cost for those of us who don’t work in finance since you would likely conclude after lengthy study that yes, one should just buy index funds.
How do you know? Isn’t that rather blatantly begging the question..?
I have a PhD in economics from the University of Chicago.
So, in which sense having a long-only portfolio of large-cap US equities is optimal?
The S&P 500 is effectively international since big U.S. companies do lots of business in foreign countries. For diversification reasons you might also want to own bonds and invest some in smaller cap stocks.
I have a PhD in economics from the University of Chicago.
First, appeal to authority is a classic fallacy.
Second, if you’re doing the Ghostbusters bit, live up to your billing. Instead of vaguely regurgitating HuffPo-level platitudes, formulate a claim, provide the necessary tight definitions, outline the reasoning why your claim is true, provide links to empirical data supporting your position.
I suspect we have differences in two areas: the credibility of the EMH, and the approach to the problem of asset allocation.
Let’s keep the EMH debate out of this thread—it’s a beast of its own—but even under EMH the asset allocation issue is far from trivial. In fact, it’s quite complicated. However this complexity is NOT a good reason to just give up and point to a suboptimal solution which does have the twin advantages of being (a) simple; and (b) not the worst; but is NOT “best for everyone” which is what it’s sold as.
It’s rude to ask someone how they came to believe something, and then dismiss their experience out of hand.
formulate a claim, provide the necessary tight definitions, outline the reasoning why your claim is true, provide links to empirical data supporting your position.
It’s rude to ask someone how they came to believe something, and then dismiss their experience out of hand.
I am not asking about personal experience—“how did you find your path to Jesus” kind of thing. I am asking to provide supporting evidence and arguments for a claim about empirical reality. “I have a PhD” is neither supporting evidence nor an argument.
Step up your own game.
My claim is negative: there is NO investment optimal for everyone; optimality is hard to define and even harder to estimate; equity index funds are just an asset class, one among many; etc.
I see the advice “you should just invest in index funds” as similar to advice “you should just eat whole grains”. Yes, it’s progress if your baseline is coke and twinkies. Yes, it’s not the worst thing you can do. No, it’s not nearly an adequate answer to the question of what should you eat.
My claim is negative: there is NO investment optimal for everyone; optimality is hard to define and even harder to estimate; equity index funds are just an asset class, one among many; etc.
This comes nowhere near the standard you’ve tried to impose on your interlocutor.
You are either willfully or autistically not parsing English as an English speaker would normally intend it. “Is not evidence” normally means “is not good evidence”. The speaker does not have to insert the word “good” for it to have that meaning.
I’m sorry, but are you projecting? I’ve outlined how much evidence I ascribe to this situation, and Lumifer has been clear that he ascribes much less. This isn’t a debate over omitted modifiers.
Either you think that “I have a PhD” is evidence but not good evidence, in which case you are indeed complaining about the omitted modifier, or else you think that “I have a PhD” is good evidence, which is a claim I find astonishing.
Furthermore, you just got finished saying that logical fallacies are (possibly weak) evidence, as if being weak evidence would be relevant, and you linked to a post which says that evidence that is not good is still evidence. These support the interpretation that you were talking about PhDs being evidence at all, not about PhDs being good evidence.
No, it depends on the authority. Being rational means giving appropriate weight to the opinions of other people and these peoples’ education has some impact on the optimal weights. Also, you did ask the personal question “How do you know?” and I interpreted this as your wondering how I, James Miller, acquired my knowledge of financial markets.
you did ask the personal question “How do you know?” and I interpreted this as your wondering how I, James Miller, acquired my knowledge of financial markets.
A bit of miscommunication, then, my question referred to the quote directly preceding it which is
since you would likely conclude after lengthy study that yes, one should just buy index funds
I meant “How do you know that I would likely conclude after lengthy study that yes, one should just buy index funds?”
If you read LW you are likely the kind of person who, after massive study, would agree with economists on microeconomic issues on which most economists agree because microeconomics is really math and logical reasoning applied to human behavior and economists are, relative even to the LW population, good at these things.
If you read LW you are likely the kind of person who, after massive study, would agree with economists on microeconomic issues
Let me provide a data point for you: I have studied this issue sufficiently well. I have NOT come to the conclusions which you expect.
microeconomics is really math and logical reasoning applied to human behavior
Yes, but badly applied :-D Economics is only starting to realize that actual live humans are not Homo economicus and that equilibrium models of systems with omniscient fully rational agents driven solely by the desire to have more money are not much like the real world.
Once economists leave the rarefied atmosphere of DSGE models and such and have to deal with the reality-provided empirical data, they can hardly agree on anything. A recent case in point—the Piketty book.
Could I suggest that you actually read the article? Authorities aren’t necessarily correct, and so it would be fallacy to appeal to an authority as necessarily correct… (but what , for a Bayesian, would be necessarily correct...?) …even so, “authorities can be correct in their field of reasoning” (and are more likely to be than non authorities....to state, in theory, what everyone does in practice)
That’s still very VERY non-specific.
Let’s take our friends Alice and Bob. They come to you and ask you where should they invest their pennies. You tell them “low cost broad based index funds”. They blink at you and say “Could you please give us the names of the funds?”
And I still have no idea what do you mean by “optimal”.
That is true as a matter of empirical observation. But the real question is about capability: can LW types deal with the financial-markets type of complexity? Why or why not?
Most Americans invest in mutual funds via their firm’s pension plan and have limited choices. I have index funds with Vanguard and Fidelity on the S&P 500.
Even for those who could, it wouldn’t be worth the time cost for those of us who don’t work in finance since you would likely conclude after lengthy study that yes, one should just buy index funds.
So, in which sense having a long-only portfolio of large-cap US equities is optimal?
How do you know? Isn’t that rather blatantly begging the question..?
I have a PhD in economics from the University of Chicago.
The S&P 500 is effectively international since big U.S. companies do lots of business in foreign countries. For diversification reasons you might also want to own bonds and invest some in smaller cap stocks.
First, appeal to authority is a classic fallacy.
Second, if you’re doing the Ghostbusters bit, live up to your billing. Instead of vaguely regurgitating HuffPo-level platitudes, formulate a claim, provide the necessary tight definitions, outline the reasoning why your claim is true, provide links to empirical data supporting your position.
I suspect we have differences in two areas: the credibility of the EMH, and the approach to the problem of asset allocation.
Let’s keep the EMH debate out of this thread—it’s a beast of its own—but even under EMH the asset allocation issue is far from trivial. In fact, it’s quite complicated. However this complexity is NOT a good reason to just give up and point to a suboptimal solution which does have the twin advantages of being (a) simple; and (b) not the worst; but is NOT “best for everyone” which is what it’s sold as.
Logical fallacies are still (possibly weak) evidence.
It’s rude to ask someone how they came to believe something, and then dismiss their experience out of hand.
Step up your own game.
I am not asking about personal experience—“how did you find your path to Jesus” kind of thing. I am asking to provide supporting evidence and arguments for a claim about empirical reality. “I have a PhD” is neither supporting evidence nor an argument.
My claim is negative: there is NO investment optimal for everyone; optimality is hard to define and even harder to estimate; equity index funds are just an asset class, one among many; etc.
I see the advice “you should just invest in index funds” as similar to advice “you should just eat whole grains”. Yes, it’s progress if your baseline is coke and twinkies. Yes, it’s not the worst thing you can do. No, it’s not nearly an adequate answer to the question of what should you eat.
You’re simply wrong. It is evidence.
This comes nowhere near the standard you’ve tried to impose on your interlocutor.
Obviously, I disagree.
That’s because I don’t go around telling people that the problem of investment allocation is solved and all you need to do is invest in index funds.
Have you read this?
You are either willfully or autistically not parsing English as an English speaker would normally intend it. “Is not evidence” normally means “is not good evidence”. The speaker does not have to insert the word “good” for it to have that meaning.
I’m sorry, but are you projecting? I’ve outlined how much evidence I ascribe to this situation, and Lumifer has been clear that he ascribes much less. This isn’t a debate over omitted modifiers.
Either you think that “I have a PhD” is evidence but not good evidence, in which case you are indeed complaining about the omitted modifier, or else you think that “I have a PhD” is good evidence, which is a claim I find astonishing.
Furthermore, you just got finished saying that logical fallacies are (possibly weak) evidence, as if being weak evidence would be relevant, and you linked to a post which says that evidence that is not good is still evidence. These support the interpretation that you were talking about PhDs being evidence at all, not about PhDs being good evidence.
No, it depends on the authority. Being rational means giving appropriate weight to the opinions of other people and these peoples’ education has some impact on the optimal weights. Also, you did ask the personal question “How do you know?” and I interpreted this as your wondering how I, James Miller, acquired my knowledge of financial markets.
A bit of miscommunication, then, my question referred to the quote directly preceding it which is
I meant “How do you know that I would likely conclude after lengthy study that yes, one should just buy index funds?”
If you read LW you are likely the kind of person who, after massive study, would agree with economists on microeconomic issues on which most economists agree because microeconomics is really math and logical reasoning applied to human behavior and economists are, relative even to the LW population, good at these things.
Let me provide a data point for you: I have studied this issue sufficiently well. I have NOT come to the conclusions which you expect.
Yes, but badly applied :-D Economics is only starting to realize that actual live humans are not Homo economicus and that equilibrium models of systems with omniscient fully rational agents driven solely by the desire to have more money are not much like the real world.
Once economists leave the rarefied atmosphere of DSGE models and such and have to deal with the reality-provided empirical data, they can hardly agree on anything. A recent case in point—the Piketty book.
The fallacy is appeal to inappropriate authority....
No it isn’t. For support I appeal to Wikipedia.
Could I suggest that you actually read the article? Authorities aren’t necessarily correct, and so it would be fallacy to appeal to an authority as necessarily correct… (but what , for a Bayesian, would be necessarily correct...?) …even so, “authorities can be correct in their field of reasoning” (and are more likely to be than non authorities....to state, in theory, what everyone does in practice)
I think I just misunderstood the referent of “the fallacy” in the great-grandparent, i.e., the fallacy in general / the alleged fallacy above...
Anyway, cheerfully withdrawn.