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June 03, 2014

"Regulatory and academic capture"

Seems correct to me.

If these are the reasons why regulators are captured, it is not clear why economists are not captured as well. While not all data economists use are proprietary, access to proprietary data provides a unique advantage in a highly competitive academic market. To obtain those data academic economists have to develop a reputation to treat their sources nicely. Hence, their incentives to cater to industry or to the political authority that controls the data are similar to those of the regulators. 

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Jack PQ

That's why good economic theory is essential. Theory is the best BS-detector. Larry Summers once said nobody has ever changed their mind over a regression (econometric analysis of data).

I don't think that's quite true (some are swayed), but theory should trump regression (ahem, Card-Krueger).

Ken

It's clear by the likes of Paul Krugman that economists are in fact captured.

eric falkenstein

Hedge fund indices were biased upwards for years, backfilling data with surviving firms. That was only eliminated after some academics shamed them. Even still there are biases in these indices that inflates returns. As the industry works closely with the data providers, there's a clear incentive at work: no one wants to give data to a group that will make them look bad.

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