Re: The Taylor Rule: Response to Barkley and Henry Liu

[Christopher Niggle <niggle@xxxxxxxxxxxxxx>]

Henry and Barkley:

If the only concrete result of the Black-Scholes approach to pricing is
that it has "spawned the entire derivatives industry," pray tell me how we
could regard it as in any way a socially useful step forward for mankind?
Especially if we understand that at some point its users still have to
make a guess about the risk of the security?  It is just an elaborate and
socially useless example of what old Maynard called "pretty and polite
technique," isn't it?

I mean, other than providing employment opportunities for overeducated
parasites and speculative opportunities for hustlers, how could we see
positive results from the introduction of most forms of derivative
securities?  (Other than perhaps mortgage backed securities, etc., whose
purchasers and traders do not need to use Black-Scholes to price them,
right?)

Chris