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Pragmatic Capitalism

Practical Views on Money & Finance

‘How To’

Economics is a Social Science, not a Natural Science

Economics is categorized as a “social science” alongside anthropology, psychology and sociology.  Which makes complete sense considering that economics studies the relationships that dictate how we produce and consume goods and services within the society.   But you wouldn’t know that from the way many economists discuss economics.  Too often economists try to establish economics… Read More

Some Thoughts on Risk Parity

This is a very good piece by Cliff Asness on his new blog.  If you don’t follow it then add it.  Cliff is one of the smartest dudes around.  Anyhow, his firm AQR runs a strategy called “risk parity”.  I am not positive where this idea originated, but it was made relatively famous by Asness… Read More

Saving is not the Key to Financial Success

You’ve probably heard it a million times from financial “experts” – the key to financial success is saving.  The idea is that if we save more now then we’ll have more to spend later.  And while that’s true at the individual level it’s actually disastrous advice in the aggregate.   Saving isn’t the key to financial success.… Read More

Who Determines Interest Rates?

I get this question a ton – who determines interest rates in the economy, the markets or the Fed?  The answer is actually neither.  The state of the economy determines how interest rates will be set. It shouldn’t be controversial that the Federal Reserve could, in theory, control the nominal rate of interest on US… Read More

What Causes Recessions?

I am still working my way through the Q&A from the other week and I really wanted to highlight this question because it’s a good one: “Noah Smith is always saying that no one knows what causes the business cycle, and in particular recessions. How would you respond to this?” Economists don’t tend to see… Read More