Archive for April, 2009

The Evolution of Thinking– about Investments

Thursday, April 30th, 2009

Many investment managers are seat-of-the-pants, hunch-based investors.テつ Some of them are quite good at that.

I prefer a different approach, looking explicitly at the data describing the companies and the economy.テつ It’s an inherently conscious, logical approach.テつ With that in mind, I was intrigued by a recent article, supplemented with some web discussion of the philosophy of scientific research.

“The late twentieth century was the heyday of deductive economics. Talented and facile theorists set the intellectual agenda. Their very facility enabled them to build models with virtually any implication, which meant that policy makers could pick and choose at their convenience. Theory turned out to be too malleable, in other words, to provide reliable guidance for policy.

In contrast, the twenty-first century will be the age of inductive economics, when empiricists hold sway and advice is grounded in concrete observation of markets and their inhabitants. Work in economics, including the abstract model building in which theorists engage, will be guided more powerfully by this real-world observation. It is about time.”

–テつ Barry Eichengreen, “The Last Temptation of Risk,” The National Interest, 28 April 2009

which led me to find a quick review of deductive vs. inductive logic:

William M.K. Trochim, “Deduction & Induction,” Web Center for Social Research Methods, 2006.

That site is fascinating.テつ The next page in the series was a real treat, getting much deeper into the philosophy of science, what’s knowable and how we can increase our knowledge:

William M.K. Trochim, “Positivism & Post-Positivism,” Web Center for Social Research Methods, 2006.

I hope you enjoyed perusing that as much as I did.

March CapitalDrain is available

Thursday, April 2nd, 2009

I just posted the March issue of my Capital Drain investing opinion newsletter.テつ You can link to it via the newsletter page.