We don't have a clue, the Ten Commandments and a birthday present for me (please!)

Now that the weeks of Nobel-prize winning announcements are over, we can do a little evaluation. The Peace-prize was given to an organisation that not many knew before, a Belgian (François Englert) shared the prize for physics together with Peter Higgs, but the prize that raised many eyebrows was the one for economy. First of all, this isn't a real Nobel prize anyway as it is awarded by the Swedish Central Bank and not by the Nobel Committee.Only physics, chemistry, medicine, literature and peace were named as official prizes in Nobel's testament. Since 1968 the Swedish Central Bank prize for economy in commemoration of Alfred Nobel was instituted. So actually it is the odd one out and shouldn't actually be part of the Nobel prize-list anyway. Economy is not art (like literature), does not serve mankind (like working for piece) and it definitely is not a science. This year the economy prize went to Eugene Fama, Lars Peter Hansen and Robert Shiller. Summarising why those three won it could be done like this:

• Fama proved that "the value of shares are not predictable (in the short term) and do a random walk"
• Shiller proved that  "the value of shares is predictable on the long term"
• Hansen is an econometrist who found some complicated way how to "estimate  population parameters by equating sample moments with unobservable population moments and from that estimate the quantities..." (yes I know... I read this as "if you don't know the defining parameters of a population, you estimate some of these parameters and then calculate the quantities". Not helpful either? Let's just say if you don't know what you are looking at, you estimate what it is and from that estimation you then calculate it. Or even simpler: a statistical method to measure Fama and Shillers theory against the real prices).

But next to that hocus pocus, I think the real message behind awarding those three with the prize of the Swedish Central Bank is: "about economy - well... we don't have a clue either". It's about time someone finally admits economy is not a science. I would have preferred if the Swedish Central Bank would have just bluntly stated this and abolished their prize. Alfred Nobel would rest in piece again if they did. After all, they got it spectacularly wrong in the past. In 1997 Merton-Scholes got awarded the prize because they found a formula to put a price on options. They started their own hedge fund in 1994 using their self invented formulas, received the Nobel prize in 1997 and went spectacularly bust in ... 1998 loosing 2,3 billion $ in 3 weeks for a total of 4,6 billion $ loss.


Former Nobel peace-prize winners met this week and Lech Walesa came up with an inspiring proposal. He said we should make a new version of the Ten Commandments that would be accepted by all cultures, nations and religions: "We need to agree on common values for all religions as soon as possible, a kind of secular Ten Commandments on which we will build the world of tomorrow." That's the kind of idea that stimulates my mind! At first sight one might say that Mr Walesa is a bit too ambitious, that it is impossible for everyone to agree on ten basic rules. On the other hand, we are all human and irrespective of our culture, religion or political system, we all experience the same emotions that make us tick. In his speech Mr Walesa stated that besides universal values, the international community needs to focus on the economy of tomorrow, which definitely should not be based on communism nor on capitalism as we have it today. He is definitely right about this!
I am not going to post the Ten Commandments Moses brought back from the mountain, let's do this exercise with an open mind. the floor is yours.

Picture AFP

My birthday is coming up next moth and for those of you who are still desperately looking for a nice birthday gift, please have a look at this website: http://www.rmauctions.com/lots/?SaleCode=NY13&feature=0&sort=lot The 1966 Jaguar E-Type or 1956 Aston Martin DB2/4 MkII would be highly appreciated. I'll show you my eternal gratitude by taking you for a spin!

Pictures courtesy of RM Auctions