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“
Academic Economics:Strengths and FaultsAfter Considering Interdisciplinary Needs”Herb Kay Undergraduate LectureUniversity of California, Santa BarbaraEconomics DepartmentBy Charles T. MungerOctober 3, 2003
Transcript by Whitney Tilson, T2 Partners LLC (feedback@T2PartnersLLC.com
) who didoriginal light editing and added web links. Later light editing by the speaker.
TABLE OF CONTENTS
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Introduction by Rajnish Mehra......................................................................................................1Munger’s Opening Remarks:.........................................................................................................1 Non-use of Efficient Market Theory at Berkshire.............................................................2Personal Multidisciplinary Education................................................................................3The Obvious Strengths of Academic Economics..............................................................4What’s Wrong with Economics.........................................................................................51) Fatal Unconnectedness, Leading To “Man With A Hammer Syndrome,” Often Causing Overweighing What Can Be Counted...........52) Failure To Follow The Fundamental Full Attribution Ethos of HardScience.......................................................................................................63) Physics Envy..............................................................................................7Washington Post case study.......................................................................7Einstein and Sharon Stone.........................................................................74) Too Much Emphasis on Macroeconomics.................................................8Case study: Nebraska Furniture Mart’s new store in Kansas City...........8Case study: Les Schwab Tires..................................................................9Causes of problem-solving success...........................................................95) Too Little Synthesis in Economics..........................................................106) Extreme and Counterproductive Psychological Ignorance......................137) Too Little Attention to Second and Higher Order Effects.......................14Mispredicting Medicare costs..................................................................14Investing in textile looms.........................................................................14Workman’s comp madness......................................................................15 Niederhoffering the curriculum...............................................................158) Not Enough Attention to the Concept of Febezzlement..........................179) Not Enough Attention to Virtue and Vice Effects...................................18Religion....................................................................................................18Pay for directors and judges.....................................................................18 Not a vice that some systems are deliberately made unfair.....................19-i-
TABLE OF CONTENTS
(continued)
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Contributions of vice to bubbles..............................................................19Paradoxical good contributions from vice; the irremovability of paradox.........................................................................................19Conclusion.......................................................................................................................20Clinging to failed ideas – a horror story..................................................20Repeating the big lesson..........................................................................21Q & A ..............................................................................................................................21-ii-
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