Economists From The United States

"Nothing in life is as important as you think it is when you are thinking about it."

"A plausible interpretation is that higher income is associated with a reduced ability to enjoy the small pleasures of life. [...] There is a clear contrast between the effects of income on experienced well-being and in life satisfaction. Higher income brings with it higher satisfaction, well beyond the point at which it ceases to have any positive effect on experience. [...] Life satisfaction is not a flawed measure of their experienced well-being, as I thought some years ago. It is something else entirely."

"A rare event will be overweighted if it specifically attracts attention. [...] And when there is no overweighting, there will be neglect."

"Unless there is an obvious reason to do otherwise, most of us passively accept decision problems as they are framed and therefore rarely have an opportunity to discover the extent to which our preferences are frame-bound rather than reality-bound."

"Many unfortunate human situations unfold [...] where people who face very bad options take desperate gambles, accepting a high probability of making things worse in exchange for a small hope of avoiding a large loss. Risk taking of this kind often turns manageable failures into disasters."

"There is no evidence that risk takers in the economic domain have an unusual appetite for gambles on high stakes; they are merely less aware of risks than more timid people are."

"He weights losses about twice as much as gains, which is normal."

"There is a deep gap between our thinking about statistics and our thinking about individual cases."

"It took Francis Galton several years to figure out that and regression are not two concepts – they are different perspectives on the same concept. The general rule is straightforward but has surprising consequences: whenever the correlation between two scores is imperfect, there will be regression to the mean."

"The lesson is clear: estimates of causes of death are warped by media coverage. [...] The world in our heads is not a precise replica of reality; our expectations about the frequency of events are distorted by the prevalence and emotional intensity of the messages to which we are exposed."

"Our comforting conviction that the world makes sense rests on a secure foundation: our almost unlimited ability to ignore our ignorance."

"disbelief is not an option. The results are not made up, nor are they statistical flukes. You have no choice but to accept that the major conclusions of these studies are true."

"A reliable way to make people believe in falsehoods is frequent repetition, because familiarity is not easily distinguished from truth."

"Subjective confidence in a judgement is not a reasoned evaluation of the probability that this judgement is correct. Confidence is a feeling, which reflects the coherence of the information and the cognitive ease of processing it. It is wise to take admissions of uncertainty seriously, but declarations of high confidence mainly tell you that an individual has constructed a coherent story in his mind, not necessarily that the story is true."

"It is the of the information that matters for a good story, not its completeness. Indeed, you will often find that knowing little makes it easier to fit everything you know into a coherent pattern."

"You should inform your gut and then trust it."

"The first advice is to slow down, and not follow your first impulses."

"And there is something else, which is very important, I think. Which is that almost all psychological hypotheses are true, that is, in the sense that, you know, directionally, if you have a hypothesis that A really causes B, that it's not true that A causes the opposite [of] B. Maybe A just has very little effect, but hypotheses are true mostly, except mostly they're very weak, they're much weaker than you think..."

"A recurrent theme of this book is that luck plays a large role in every story of success; it is almost always easy to identify a small change in the story that would have turned a remarkable achievement into a mediocre outcome."

"Intelligence is not only the ability to reason; it is also the ability to find relevant material in memory and to deploy attention when needed."

"He's taking an inside view. He should forget about his own case and look for what happened in other cases."

"I placed too much faith in underpowered studies. As pointed out in the blog, and earlier by Andrew Gelman, there is a special irony in my mistake because the first paper that Amos Tversky and I published was about the belief in the “law of small numbers,” which allows researchers to trust the results of underpowered studies with unreasonably small samples. We also cited Overall (1969) for showing “that the prevalence of studies deficient in statistical power is not only wasteful but actually pernicious: it results in a large proportion of invalid rejections of the null hypothesis among published results.” Our article was written in 1969 and published in 1971, but I failed to internalize its message. My position when I wrote “Thinking, Fast and Slow” was that if a large body of evidence published in reputable journals supports an initially implausible conclusion, then scientific norms require us to believe that conclusion. Implausibility is not sufficient to justify disbelief, and belief in well-supported scientific conclusions is not optional. This position still seems reasonable to me – it is why I think people should believe in climate change. But the argument only holds when all relevant results are published. I knew, of course, that the results of priming studies were based on small samples, that the effect sizes were perhaps implausibly large, and that no single study was conclusive on its own. What impressed me was the unanimity and coherence of the results reported by many laboratories. I concluded that priming effects are easy for skilled experimenters to induce, and that they are robust. However, I now understand that my reasoning was flawed and that I should have known better. Unanimity of underpowered studies provides compelling evidence for the existence of a severe file-drawer problem (and/or p-hacking). The argument is inescapable: Studies that are underpowered for the detection of plausible effects must occasionally return non-significant results even when the research hypothesis is true – the absence of these results is evidence that something is amiss in the published record..."

"In one experience I remember vividly, there was a rich range of shades. It must have been late 1941 or early 1942. Jews were required to wear the Star of David and to obey a 6 p.m. curfew. I had gone to play with a Christian friend and had stayed too late. I turned my brown sweater inside out to walk the few blocks home. As I was walking down an empty street, I saw a German soldier approaching. He was wearing the black uniform that I had been told to fear more than others - the one worn by specially recruited SS soldiers. As I came closer to him, trying to walk fast, I noticed that he was looking at me intently. Then he beckoned me over, picked me up, and hugged me. I was terrified that he would notice the star inside my sweater. He was speaking to me with great emotion, in German. When he put me down, he opened his wallet, showed me a picture of a boy, and gave me some money. I went home more certain than ever that my mother was right: people were endlessly complicated and interesting."

"People who make a difference do not die alone. Something dies in everyone who was affected by them. Amos made a great deal of difference, and when he died, life was dimmed and diminished for many of us. There is less intelligence in the world. There is less wit. There are many questions that will never be answered with the same inimitable combination of depth and clarity. There are standards that will not be defended with the same mix of principle and good sense. Life has become poorer. There is a large Amos-shaped gap in the mosaic, and it will not be filled. It cannot be filled because Amos shaped his own place in the world, he shaped his life, and even his dying. And in shaping his life and his world, he changed the world and the life of many around him."

"There's literally no difference between a physician recognizing a disease from a "facial expression", and a little child pointing to something and saying "doggie"."

"No one ever made a decision because of a number. They need a story."

"Ninety-nine percent of what you read about investing in magazines and newspapers, and 100% of what you hear on television is worse than useless."

"Investing is not a destination. It is an ongoing journey through its four continents - theory, history, psychology and business."

"Investment planning and execution are two completely different animals."

"Journalism attracts people with exceptional linguistic talent, but I have found that very few have the mathematical sophistication to appreciate the difference between skill and luck."

"It is often said that a monkey could run an index fund. Nothing could be further fro the truth. Precisely tracking an index requires a very high degree of market savvy, discipline and nerve."

"If markets were truly efficient, then you shouldn't be able to make any money rebalancing."

"The advent of modern communication technology has simply facilitated the rapid dissemination of increasingly trivial information."

"Human beings are not very good at taking losses or admitting failure."

"We tend to think of technological progress as an ever accelerating affair, but it just isn't so."

"The wealthy are different than you and I: they have many more ways of having their wealth stripped away."

"In other words, since you cannot successfully time the market or select individual stocks, asset allocation should be the major focus of your investment strategy, because it is the only factor affecting your investment risk that you can control."

"Wealthy investors should realize that they are the cash cows of the investment industry, and that most of the exclusive investment vehicles available to them - separate accounts, hedge funds, limited partnerships, and the like - are designed to bleed them with commissions, transactional costs, and other fees."

"It is one thing to coolly design a portfolio strategy on a sheet of paper or computer monitor, and quite another to actually deploy it."

"Value stock returns are impossible to estimate using the traditional methods, because most of the excessive return arises from the slow improvement in valuations that occurs as doggy stocks become less doggy over time."

"In finance as in life, there is often a huge chasm between what is expected and what actually transpires."

"The worst possible time to invest is when the skies are the clearest."

"Most great financial innovators come from humble circumstances - nothing arouses fascination with financial assets quite like their absence."

"And lest I offend art lovers, it should be pointed out that even an old master, bought from the the artist for $100 and sold 350 years later for $10,000,000, has returned only 3.34% per year."

"In fact, using entirely reasonable assumptions, you can make the Dow's discounted market value almost anything you want it to be."

"In fact, the nation's biggest investment pools are the retirement funds of the large corporations and governmental bodies, such as the California Public Employees Retirement System (CALPERS), which manages an astounding $170 billion. These plans receive a level of professional management that even the nations wealthiest investors can only dream of."

"The Gordon Equation is as close as being a physical law, like gravitation or planetary motion, as we will ever encounter in finance."

"At a very early stage in history we are encountering "survivorship bias" - the fact that only the best results tend to show up in the history books."

"The rub here is that buying when prices are low is always a very scary proposition. The low prices that produce high future returns are not possible without catastrophe and risk."

"We tend to think of the stock and bond markets as relatively recent historical phenomena, but, in fact, there have been credit markets since human civilization first took root in the Fertile Crescent."