Question

To the Editor:

Raj Chetty’s argument that, despite the differences between the Nobel winners Robert J. Shiller and Eugene F. Fama, economics is nonetheless a science just like medicine will be vindicated when the Nobel Prize in Medicine is given to two doctors, one of whom accurately predicts the occurrence of heart attacks and the other who declares that heart attacks don’t exist.

PAUL DUGUID
Berkeley, Calif., Oct. 21, 2013

The writer is an adjunct professor in the School of Information, University of California, Berkeley.

what was his point in this paragraph, and what does it say about the research of the three nobel winners? explain

Answer 1

The writer wants to raise the point that the hypothesis framed by Eugene Fama and Robert Shiller, both are actually correct. Both the economists have been compared to two different doctors. Like for a same disease or same symptoms, two doctors gives different prescription, in the similar manner, for the same problem of efficient markets, both the economist have come up with their own set of assumptions and has actually proved it true by their researches. Ans actually because of limited experiments that can be done by the economist, Raj Chetty has described both of them true on their part.

The research done by Eugene fama revolves around the fact that market inculcates every peice of nformation available and hence the price of the stock reflects all available information. Hence he has been described as a doctor who has actually predicted the cause of heart attack or in other words, he has identified as to why the stock behaves the way it does. On other hand, the study done by Robert shiller suggest that investor is irrational and fundamental analysis in stocks is completley irrational and hence he has been described as a doctor who believes that heart attack does not even exist.