For Ramsey probability is not related to a disembodied body of knowledge but is related to the knowledge that each individual possesses alone. Thus personal beliefs that are formulated by this individual knowledge govern probabilities leading to the notion of subjective probability. … Ramsey argued that the degree of probability that an individual attaches to a particular outcome can be measured by finding what odds the individual would accept when betting on that outcome. … Despite the fact that Ramsey’s work on probabilities was of great importance again no one paid any attention to it until the publication of “Theory of Games and Economic Behavior” of John von Neumann and Oskar Morgenstern in 1944.
Frank P. Ramsey, Wikipedia
Frank Ramsey died in his 26th year. His passing was arguably the greatest too-soon loss of genius in the 20th century. I once sat down and tried to read (digest?) his mathematics as it pertains to economics. Like near-all, I failed.
Mohamed El-Erian did not.
Here, Sree Vidya Bhaktavatsalam and Alexis Leondis write up El-Erian’s exit from Pimco.
(Bloomberg Surveillance reporting can confirm that Dr. El-Erian was flatly rejected by Head Coach Rex Ryan of the New York Jets. El-Erian had offered to coach, for $1.00 per fumble, the special teams for his beloved Jets using a Bayesian kickoff-and-punt-return strategy. Bloomberg Surveillance could not confirm a fumble by whom.)
Who are these guys? And actually, why does anyone care what El-Erian thinks?
I am daily, and I mean daily, just floored at how the media conflates economic, finance, and market “experts” into buckets. Buckets urgently in need of replenishment to feed the media beast.
Each Nobel laureate, every academic, strategist, and analyst is made same. They conflate and equate Ritholtz and Holtz-Eakin.
Spence is not Stiglitz. David Rosenberg is not Jeffrey Rosenberg. They and all others I speak to are wonderfully nuanced and distinctive. Each has special abilities and voice. Michelle Meyer nobly synthesizes American housing through a different prism than Robert Shiller.
So why El-Erian? Why the exhaustive demand from the media for his perspective in and out of crisis, his Egypt dissolving or nonfarm payrolls surging.
No one today carries forward the application of game theory as applied to our fears and worries like El-Erian.
There are others who think about these things and the path from Ramsey to von Neumann & Morgenstern to John Nash and then the beautiful moderns such as Avinash Dixit at Princeton. But no one applies real, conditional, and subjective probabilities in real-time like Dr. El-Erian. (There is a massive recursive pun there, but I can’t sort it out this soon after the Marissa soirée.)
Americans make note that should-have, could-have, will-be-able-to is a cottage industry of the Old World. Think De Grauwe, Roubini, and Taleb. Think Oxbridge; not Stanford. Heaven forbid not Carnegie Mellon. Americans have been known to be infected by the disease. See Spence. For further up-and-at-’em reading, go cover-to-cover with Mark Blaug and Bruce Caldwell. Read Soros for a reflexive Popperian take.
Back to El-Erian.
The good Doctor needs some down time. (You would too after the Jets last set of seasons, and the likely outcomes forward in time.)
Some will miss him; others will not. All will miss his distinctions made in our game of guessing. His silence gives us fewer degrees of not freedom, but confidence.
Worlds and markets will collide. I await his return, his uncanny ability to translate the complexity of the human condition away from second-rate certitude and toward a wiser, probabilistic set of outcomes.