Saturday, October 24, 2009

Matthew Yglesias on John Meriwether's new Hedge Fund

Yglesias notes the Financial Times article about John Meriwether, of Long-Term Capital Management infamy, setting up his third hedge fund and writes,

I’m not a huge believer in human rationality, so I totally understand how this scam worked once. That he was able to get a second fund off the ground is pretty amazing. If he finds investors for a third spin around the wheel I’m going to propose confiscating all the rich peoples’ money and giving it to capuchin monkeys.


JK said...

For many, "Third time's the charm!" is quality logic.

As far as rational choice and economics, check out this article by Posner, brought to my attention by way of Steve Hsu's excellent blog. (You may also be interested in this post of his about what it takes to be a successful investor.)

Anonymous said...

I don't know what the ins/outs of his 2nd fund were, but his first fund, the one that made him infamous, had a lot of happy investors for the first part of it's life. It's not inconceivable that he tapped just the right people at just the right time.

DaveinHackensack said...


Thanks for the links. Re Keynes, you may be interested in this column by Bruce Bartlett, Supply-Side Economics, R.I.P.. Excerpt:

As I thought about the cycle that SSE had gone through from a response to the failure of Keynesian economics in the 1970s to triumph in the 1980s to caricature in the 2000s, it occurred to me that SSE and Keynesian economics had a lot in common. Each had been developed in response to serious economic problems that the existing orthodoxy was incapable of dealing with, both struggled for acceptance but were ultimately implemented to great success, both were then misapplied in inappropriate circumstances, thus leading to them becoming discredited.

So basically the book is about the rise and fall of Keynesian economics followed by the rise and fall of SSE. Although the Keynesian part of the book was originally intended to flesh out my model of the rise and fall of economic theories, it turned out to have very valuable lessons for today. Indeed, the circle appears to have come around to where Keynesian theories are now the best ones we have for dealing with today's economic crisis.

One thing I did in the Keynesian section that helped me a lot in my thinking was to largely ignore John Maynard Keynes' technical writings. What was much more useful in understanding his thinking were his popular writings. For example, Keynes had what today we would call an op-ed article in the New York Times on New Year's Eve 1933 that may be the single best thing written during the Great Depression on its cause and what to do about it. It's certainly more accessible than The General Theory of Employment, Interest and Money, much of which is incomprehensible even today.

The General Theory, I think, was really just Keynes' way of making some relatively simple ideas look scientific in order to make them more acceptable to policymakers.