1. In 2003, when I was asked to teach finance and investments and given a selection of "highly respected textbooks" to choose from I told my supervisor and colleagues at a business school that EVERY MODEL in said textbooks were IMMEDIATELY and DEMONSTRABLY FALSE, and asked shouldn't we instead try to teach something closer to the truth and reality of the financial markets? I was told that I shouldn't worry so much, that it was such a bother to dig out the truth or discuss the realities, and that it would best for everyone if I just towed the line because if I did come up with something new, it would be even more bothersome for my colleagues to learn this new stuff. Besides feeling like I needed to wipe the poop off my face, I was a bit surprised by this attitude but I suppose this institutuonal attitude is replicated 10s of thousands of times throughout business schools which receive their own funding, and basically, operate completely enclosed and cut off from the rest of the humanities. Business Schools which have become independent are in effect suffering from the solipsism, moral hazard and adverse selection of dogmas which have been disproven empirically and yet they sit imperially at the top of the hierarchy of reproducing "untruths" for the sake of replicating power structures for the "sons, daughters and upstarts" of the moneyed oligarchy of bankers and financiers who manage and control the future cash flows of all individuals plugged into the global financial system.
2. What to do? To not feel like commiting philosophical murder, I would start my lectures on finance and investments by declaring that EVERY THEORY and MODEL they would study and learn are DEMONSTRABLY FALSE. If this is true, then they should understand WHY they would bother learning this stuff. So, a student would naturally ask "WHY THEN?" My answer is a bit Aristotelian. I would say, "Because this is the language and parts of the culture which you need to learn if you wish to communicate with those in finance and power." I justified my stance to myself as a matter of teaching anthropology. So, in fact, I would rehearse "how investment bankers would think through problems" and students would get high marks if they could do just that. Immitation of behaviours and beliefs is not the same as an examination of the truth. Also, to do some personal penance, I published notes on our internal learning management system on "corrections" to the major textbook we were using, which happened to be in its 11th edition. I think my students enjoyed my notes which happened to get longer and longer as we got deeper and deeper into the text. My longest "note" was 55 pages (!!) for a chapter that was 30 pages long. At the end of the lecture series, I had approximately 350 pages of corrections and when I told the publisher of the textbook in question that I had compiled so many corrections, she asked me for a copy. I then said, "Why? They are obvious errors that should have been corrected long ago and anyway, it's a good test of the teachers and students understanding to FIND the errors." Smiling.
3. So, who's to blame for the continuous credit crises? The morphism points to me. And think of all those 35 year old PhDs in finance making a buck. Do any of them have a way of thinking through these problems? I am quite sure that no PhD in Finance from any of the brand named schools has contributed anything except positively to increasing the potential problems inherent in the academic models which they have studied and believe so automatically.
4. What do I propose? A Platonic solution. One where elders above 55 years having no skin in the game ask simple questions to get to the truth. A little bit of wisdom is what we need.
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