Streetwise Professor

December 30, 2013

I Have Not Yet Begun to Write: Responding to the New York Times’ Farrago of Dishonesty, Insinuations, and Ad Hominem

Filed under: Commodities,Derivatives,Economics,Energy,Exchanges,Politics,Regulation — The Professor @ 12:49 pm

The New York Times, in an article written by David Kocieniewski, has singled out me and the University of Illinois’ Scott Irwin for an extended ad hominem treatment alleging that our statements and research on commodity speculation are tainted due to financial connections with “Wall Street.”  As one individual put it to me, the article is “nasty, biased and thinly researched.”   All true (if incomplete-the list of sins is even longer).  But at the risk of providing credence to the incredible, I believe some sort of response is warranted.  So here it goes.

Let me start by saying I have been very fortunate. I have been able to pursue my academic passions, publish papers and books on them, and consult and testify as an expert witness on many matters related to these passions. Through each and all parts of this, I have been true to my Chicago School roots and to what I thought the data and good economics showed.  My opinions on speculation are the product of my training and my research, period.

Moreover, completely contrary to the impression in the NYT piece, the vast bulk of my consulting and testifying work has been adverse to Wall Street and commodity trading firms.  Virtually none of this work relates to the alleged subject of the NYT story: the impact of speculation on commodity prices.  In fact, much of this work relates to market manipulation (which is distinct from speculation) by commodity traders.  I have been, and continue to be, on the side of plaintiffs in attempting to hold traders who abuse markets accountable for their conduct.

The failure of David Kocieniewski to point out this salient fact alone betrays his utter unprofessionalism and bias, and is particularly emblematic of the shockingly shoddy excuse for journalism that his piece represents.

Moreover, none of the research or writing I have done on the speculation issue received financial support from any firm or entity with even a remote stake in this issue.  I started writing about this on my blog in 2006, and have been arguing this issue on my own time with no financial support from anyone.  Unlike, say, Ken Singleton (whom I admire immensely and am not accusing of anything remiss) I have not written any commissioned research on the subject of commodity speculation.  My work that has been done with firms that are connected, in some way, to commodities trading has been on subjects unrelated to financial speculation, and/or with firms that are not financial speculators, and/or took place well after my opinions on the subject were a matter of public record, including in national publications like the Wall Street Journal.  Therefore, to suggest some connection between my paid outside work and my opinions on speculation is misleading, deceptive, and plainly libelous.

True to my Chicago School roots, I believe this is a data issue informed by a strong understanding of the theory and empirics of commodity pricing-a literature to which I have  made many peer reviewed contributions.  And I have been open and remain open to reviewing any data on any market.  I further note that the vast bulk of other research on this subject, undertaken by world-class scholars including James Hamilton and Lutz Killian supports  my conclusions (and those of Scott Irwin).  Ironically, considering the where this piece appears, even Paul Krugman is in agreement.

The simple explanation for my views is that I am avowedly a “super-freshwater economist” by training and conviction.  Because I know that drinking saltwater makes you go crazy. Kidding aside, my work on speculation is a piece with all of my academic work, my background, and my training.  Randall Kroszner, former Fed governor, told me once that I was one of the last true Chicago School economists. That’s a compliment, that’s pretty accurate, and that’s aspirational.  That is a much better predictor of where I come down on any issue than anything else: including money.

What’s more, I do not solicit, have never solicited and would not solicit money for any institution or purpose based upon my views of speculation or the policy issues relating to speculation. Or any other issue.

A couple of other points before getting into specifics.

First, there are no coincidences, comrades. The NY Times has been Tiger Beat effusive in its praise for Gary Gensler of the CFTC.  This piece attacking two of the most prominent academic critics of Gensler’s efforts to impose a speculative position limits rule comes out days after the Commission approved a new version of the rule, and is in the midst of the comment period leading up to the formulation of a final rule.  Gensler fought for this rule for 5 years, and he views it as an important part of his legacy.  That is, there is a clear political agenda at work here: to kneecap those who have the audacity to oppose the regulatory agenda of Gensler and his media acolytes.

Second, this kind of ad hominem attack will have the effect (which is likely intended) of serving as a warning to other academics who cross powerful political interests with their academic research, and who have the temerity to speak out on controversial matters.  How can this be seen as anything other than having a chilling effect on other academic researchers in the the financial and commodity markets?  But maybe that’s exactly the point.

Now some specifics.

  1. There are many egregious distortions in the article, but the most egregious is Kocieniewski’s lying by omission.  Lying. By. Omission. Specifically, he omits the salient fact that the bulk of my consulting engagements (in the form of expert testimony) have been adverse to commodity traders and banks.  I have testified numerous times about manipulations by these types of firms, and have testified against them on other matters unrelated to manipulation.
  2. Let’s examine some of the firms I have been adverse to in my work over the past 20 years, shall we?  Off the top of my head: BP (twice); AEP; Ferruzzi (a commodity trading firm); Duke Energy; Nasdaq market makers; JP Morgan; MetLife; Morgan Stanley; Goldman Sachs; Cargill; Amaranth (a hedge fund that was one of the largest speculative-industry players in the country); Moore Capital (one of the world’s largest hedge funds, and another huge speculative industry player); Optiver (a major trading firm); Pimco (the world’s largest fixed income fund); Merrill Lynch (twice); Sumitomo (major copper trader); Microsoft; Cantor Fitzgerald (twice); and on and on.  A veritable murderers’ row of banksters and traders and energy firms.
  3. I say again: by omitting any mention of this work the Times is lying by omission, and presenting a biased and extremely distorted picture of me and my work.  This biased selectivity makes a joke of the Times’ motto “all the news that is fit to print”.   Leaving out this salient fact makes it plain that Kocieniewski and the Times have an agenda, and no interest in presenting a complete picture of me and my work.  The Times article (inaccurately-see below) lists some of my work on the side of commodity traders and exchanges to create the impression that I am their creature, but leaves out the work in which I have been their fierce antagonist-and in the performance of which I have contributed to their payment of damages running into the many hundreds of millions of dollars.  This failure to mention evidence that contradicts his pre-conceived conclusion is shoddy, dishonest journalism.
  4. Nowhere in the article does the article point out any mistakes or inaccuracies in my research or Scott’s, only making it plain that the problem is that our research does not fit his and the NYT’s preconceived notions about speculators.  I spoke to the reporter for quite a while.  Mostly about the substance of my arguments.  None of that made it into the article, and the reporter wasn’t even able to find another academic to criticize my arguments (or Scott’s): there’s no evidence he even tried, suggesting that the substance was irrelevant to him.  The failure to address the substance of my arguments is very telling.  If I am merely advancing some illegitimate commercial interest, my arguments would be easy to refute, no?  Moreover, Kocieniewski fails to mention my numerous peer-reviewed publications on commodities.  This provides independent validation (though imperfect, because I have serious criticisms of peer review) of my work on the behavior of commodity prices.
  5. There are several factual errors.  Most notably, Kocieniewski claims I wrote a “flurry” of comment letters on speculation/position limits.  I guess in the NYT Thesaurus, “flurry” is a synonym for “one.”   For I wrote a single comment on the issue: as I noted in an earlier post, the comment must have had something of an effect because the CFTC’s new speculative limit proposal eliminates language I had criticized in my letter.  (I also wrote a comment on the CFTC rule proposal relating to clearinghouse governance.  Thus my “flurry” of comments to the CFTC on Frankendodd totals two snowflakes.)  Also, the article ominously suggests that I simultaneously had undisclosed “financial ties” to banks and trading firms when I wrote the study on the systemic risk of commodity trading firms for the Global Financial Markets Association (GFMA).  This is not correct.  I agreed to write a white paper on commodity trading firms for Trafigura more than a year after writing the GFMA report.  Indeed, the GFMA report led to the Trafigura engagement.  Which again indicates that public revelations of my views typically precede any paid retention.
  6. Obviously, the story of the GFMA study, which I have discussed earlier on the blog, demonstrates clearly that my opinions are not for sale, and that I have stood up to and do stand up to “Wall Street.”  I would specifically note that one thing that I adamantly refused to remove from that study, despite the insistence of the attorney for JP Morgan’s commodity trading division, was my statements that commodity trading firms have been known to manipulate markets.
  7. Kocieniewski’s’ claim that I somehow conceal my consulting work by referring to myself “solely as an academic” is refuted by the biography linked to in his story.  That bio includes the following language, which I include in the bio for every speaking engagement I undertake: “Professor Pirrong has consulted widely. His clients have included electric utilities, major commodity processors and consumers, and commodity exchanges around the world.”  Therefore, Kocieniewski’s characterization of how I represent myself is deceptive and fundamentally dishonest.  I gladly reveal that I consult because it suggests I might actually know something about the real world that real people might learn from.
  8. Kocieniewski’s representations about disclosures are invalidated by his dishonest handling of chronology.  He insinuates that I did not disclose my work for the CME or commodity trading firms when I testified before Congress in 2008. But the work for CME Group, GFMA, Trafigura, etc., that Kocieniewski mentions occurred in 2011 and later.  My disclosures in my testimony were accurate at the time I made them.   But I guess I should have invented a time machine, or become Karnac the Magnificent and disclosed things that I would do in the future.
  9. The Times insinuates that my work for CME, Trafigura, TruMarx and others is related to the speculation issue, and hence taints my opinions about this matter.  My work for CME has consisted of evaluating the performance of the WTI contract as a hedging mechanism and an expert witness engagement regarding a patent on electronic trading systems: neither has anything to do with commodity speculation.  Trafigura is a physical commodity trader that uses derivatives almost exclusively to hedge, not speculate.  TruMarx launched a platform to trade physical energy, primarily between end users: again, nothing to do with financial speculation.  These matters and these companies are not related to the financial speculation issue, and Trafigura and TruMarx in particular have no real stake in the speculation debate.  Moreover, my work for them has nothing to do with the speculation issue.  Either Kocieniewski is ignorant of the fact that many commodity traders are not speculators, in which case he is not competent to be writing this story, or he is counting on the inability of his readers to understand the great diversity of firms involved in commodity markets, most notably the fact that many (most?) are not speculators, in which case he is attempting to mislead.  I know where I am laying my bets.
  10. The Times also mis-states facts about Scott Irwin, but that is mainly for Scott to correct.  One particularly egregious thing stands out which I cannot let pass though.  Kocieniewski talks about the $1.5 million that CME Group donated to the University of Illinois.  But not one cent-one cent-of that went to Irwin’s Department of Agricultural and Consumer Economics, let alone to Irwin personally.   To say that Kocieniewski’s connection of the CME’s financial support for the University of Illinois (a $4.4 billion dollar operation) and Scott Irwin is scurrilous is an extreme understatement.

I could go on, and may expand on this in a subsequent post.  But this should suffice to show that the New York Times published a hit piece to achieve a political purpose.  That piece is is a farrago of dishonesty, insinuations, innuendo, and ad hominem.  It is dishonest to its very core because of its egregiously biased omission of some essential material facts and deceptive presentation of others.

And pace John Paul Jones,  I have not yet begun to write-and fight-on policy issues that matter to me.  I will continue to bring my style of economics, data, and facts to issues upon which I can make a constructive contribution. The fact that the New York Times feels compelled to answer with fundamentally dishonest ad hominem means that it knows it cannot win on the substance, and that it views me (and Scott) as a threat to its agenda.  That’s all the encouragement I need to keep it going.

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  1. This is why I will never pay a single cent to that sleezy newspaper.

    Comment by Jason — December 30, 2013 @ 2:54 pm

  2. Lol. Mr. Kocieniewski, I believe the floor is yours…

    Comment by Charles — December 30, 2013 @ 2:56 pm

  3. This is why I will never a pay a single to that sleazy paper. They keep on sending me deals. Yeah, not on my watch. Their columnists are snakes in the grass with no credibility

    Comment by Ada — December 30, 2013 @ 2:57 pm

  4. The NYT piece was pathetic; but I’m glad to see that this attempted hit job will not be silencing your incisive analysis.

    Comment by Phil Rothman — December 30, 2013 @ 3:03 pm

  5. Glad you loaded up the cannons and am sure that you have enough ammo. Felix Salmon wrote a nice piece, and I was outraged when I read the NYT piece. This issue deserves to be taken wide, because the NYT has done the same on other issues. What I would like to see is the writers and editors of the NYT to be more transparent. Let’s see who they donated money to, which PAC’s they support and who they voted for. Full transparency just like you have done.

    I am not holding my breath.

    Comment by Jeff — December 30, 2013 @ 3:25 pm

  6. […] Pirrong has responded to the NYT’s story with a detailed and excellent post. « Previous Post Comments 8 comments so far | Comments RSS Dec 29, […]

    Pingback by The non-scandal of Scott Irwin and Craig Pirrong | Felix Salmon — December 30, 2013 @ 3:34 pm

  7. Nice try dipshit. I also see you’ve been deleting the many critical comments that have appeared.

    The general consensus seems to be that you’re a grubby scumbag. Hows the consulting work going?

    Comment by josephine.g — December 30, 2013 @ 6:01 pm

  8. @josephine.g. I haven’t deleted a single comment, let alone “many”. Do you work for the NYT? I sense a similar commitment to accuracy. Have a nice day!

    The ProfessorComment by The Professor — December 30, 2013 @ 7:05 pm

  9. @josephine,

    Since I don’t think I’m far off in guessing you are a fan of Paul Krugman and Elizabeth Warren (aka Lakota Lizzie), you must be ashamed of their work for the likes of Enron and NY banks, Paul and Lizzie, respectively.

    Comment by The Pilot — December 30, 2013 @ 8:38 pm

  10. The NYT is the left’s National Enquirer not to besmirch the higher journalistic standards of the Enquirer.

    You may get a medal from the Stae of Texas for this. Good job Professor.

    Comment by pahoben — December 30, 2013 @ 9:16 pm

  11. @The Pilot

    Lakota Lizzie fits so well

    This really caught Josephine at the wrong darn time of the month.

    Comment by pahoben — December 30, 2013 @ 9:40 pm

  12. I’m sure you’re a nice enough guy, but why can’t you just tell us who pays you and how much? Then your readers can fairly judge whether you might be unduly influenced.

    By the way, while I’m sure you felt insulted by the NYT piece, it didn’t accuse you of any evil-doing. The general point that pro-business views find a ready market and enthusiastic support from corps is not exactly stunning news. If you find this stuff shocking, you should get out of the ivory tower more often.

    Comment by Sherlock Trollmes — December 30, 2013 @ 10:01 pm

  13. […] of the shockingly shoddy excuse for journalism that his piece represents. – See more at: […]

    Pingback by Pirrong Responds | Organizations and Markets — December 30, 2013 @ 10:30 pm

  14. You must have missed the point of the article. The primary take away is that you have lots to say about certain financial industry related issues, but generally fail to disclose that you receive significant amount of financial
    compensation from that very sector of the economy. Disclosure is the necessity of objectivity.

    Comment by Jack — December 30, 2013 @ 11:22 pm

  15. […] Source […]

    Pingback by I Have Not Yet Begun to Write: Responding to the New York Times’ Farrago of Dishonesty, Insinuations, and Ad Hominem « Economics Info — December 31, 2013 @ 12:00 am

  16. I read the NYT piece and your blog response but you can’t seriously think with all your personal connections to these industries that a reasonable person wouldn’t be suspicious… Maybe someone so naive? Ad hominem or not if it quacks like a duck..

    Comment by Aitor — December 31, 2013 @ 12:15 am

  17. Professor,

    Sorry to say, I had never heard of you until I’d read the story in The New York Times. I found the piece interesting. Experience, however, taught me to check your website to find out a bit about you and to see, on Dec. 28, 2012, if you had yet responded to The Times’ story on your website. At that time, you had not written anything since Dec. 25. Understandable, it being the holidays and all.

    I also checked the comments on your post of that date, “A Christmas Message From Our New Messiah”. I found 12 comments at that time. Comments 5-12 dealt with the story in The Times. I saved a copy of Comments 5-12 as of Dec. 28.

    Those comments remain on that thread today, Dec. 31; in fact, the number of comments on the thread has grown to 18 total as I write this. I can find no evidence of the allegation by josephine.g that you deleted any comments on this matter.

    I should, and will, note that it’s possible you deleted comments, as josephine.g claims, between Dec. 28 and Dec. 31. I have no way of knowing. I will also acknowledge that Comments 13-18 on the aforementioned thread, including one of your own, are all favorable to you, derisive of critics, and/or deal with the Edward Snowden matter, which was the topic of your Dec. 25 post.

    So, josephine.g has offered no evidence of a deleted comment(s), and only you, Professor, know if you, and only you, deleted any comments. As you are an experienced professional and an academic of note, I tend to favor your side – and it will be up to josephine.g and/or any other critic to post a deleted comment with the time and date of said comment on this website prior to it being deleted.

    Back to The Times’ story.

    As you noted in Items 5, 7, and 8, the Times made several factual errors in its piece. Those errors are unacceptable and the paper should publish a formal correction. I understand that factual errors do occur in newspaper stories – regardless of the ideological viewpoint of the publication. A sound newspaper, such as The Times, must publish a correction of its factual mistakes. Again, I side with you.

    However. Yes, there had to be a however. Two, actually.

    In two areas, rather interwoven in nature, I cannot agree with you.

    From The Times:

    “While his university’s financial ties to speculators have been the subject of scrutiny by the news media and others, it was not until last month, after repeated requests by The Times under the Freedom of Information Act, that the University of Houston, a public institution, insisted that Mr. Pirrong submit disclosure forms that shed some light on those financial ties.”

    You work for a public institution, the University of Houston. The Times or The Houston Chronicle or The Podunk Gazette (if such a publication exists) has the legal right, under the Freedom of Information Act, to seek information about your financial ties to speculators – or to the Houston Texans football team, if that’s relevant to the story in question. The same holds true of any employee of the University of Houston. You were not singled out for any sort of special persecution. The Times filed an FOI. The University stalled. I imagine, as I do not know, that The Times’ legal representatives and the University’s legal representatives discussed the matter. The University’s lawyers realized that the law is on the side of the publication and could no longer fight the issue.

    Which brings me to the matter of Omission.

    You omitted this fact from this extensive response post that you have written. You did not tell your readers if:

    1. You were aware of the Times’ FOI requests;

    2. If aware, you opposed/supported/had no position on turning over said financial records;

    3. You met with the University’s legal representatives;

    4. You spoke with the Times’ legal representatives; and

    5. You sought outside legal counsel of your own on the matter.

    That’s omission – the very same sin of which you repeatedly accused The Times and the author, David Kocieniewski, of the piece in question.

    As you wrote in Item #1 above:

    “1. There are many egregious distortions in the article, but the most egregious is Kocieniewski’s lying by omission. Lying. By. Omission.”

    I agree. Mr. Kocieniewski and The Times apparently omitted your personal views from the story. Just as you omitted the fact about The Times’ repeated FOI requests from this blog posts. No doubt Mr. Kocieniewski and The Times had their reasons – everything from upsetting the narrative, as you suggest, to space constraints. I’d be curious to know what reasons Mr. Kocieniewski and The Times would note in response to your post. Of course, you, too, had your reasons for not addressing the matter of The Times and its frequent FOI requests of your financial records.

    In the post above, you also wrote:

    “My work that has been done with firms that are connected, in some way, to commodities trading has been on subjects unrelated to financial speculation, and/or with firms that are not financial speculators, and/or took place well after my opinions on the subject were a matter of public record, including in national publications like the Wall Street Journal. Therefore, to suggest some connection between my paid outside work and my opinions on speculation is misleading, deceptive, and plainly libelous.”

    Misleading and deceptive, perhaps. But “plainly libelous”? Nope. That doesn’t wash with me. Perhaps you’ve found legal counsel to take up your libel case against The Times. If so, I’d be curious to read the brief said legal counsel will file charging The Times with “plainly libelous” behavior in this matter. As with the FOI and a public university’s employees, I’d hazard a guess – a non-legal guess, to be sure – that 2+2 is not going to equal 4 and that you will file no such lawsuit on the grounds of “plainly libelous” behavior on the part of Mr. Kocieniewski and The Times. Of course, I’ve been incorrect before and will definitely be so again.

    In closing, I like your work. I don’t agree with all of it. I may not agree with half. As to Chicago, that was the stomping grounds of the late-Uncle Miltie and Megan “Charge The Gunman!” McArdle. Not two of my favorite people. (We won’t even discuss food processors.) For what it’s worth, you got caught – if you were nabbed – not for any acts of criminality and I don’t believe any have been alleged. Instead, a newspaper sought your financial records. You and/or your University balked. Repeatedly. Then caved, as you and/or your University realized that the law favors the publication and the public. The coverup, whether in false appearance or stubborn reality, made this a story. And it is a story.

    But I wouldn’t worry about your next teaching gig at Joe Stalin’s Siberian Work Camps new outlet branches in Alaska just yet. No one’s going to take away your job and/or your right – and it most certainly is a right that I support – to write, blog, and comment (and make a buck or three off so doing) for and/or against the financial and commodities crowd. People just know where you get some of your money. If they’re wise, they’ll read your response, and Felix Salmon’s, and then decide for themselves.

    Actually, I wouldn’t be surprised if you get a few appearances on Fox and CNBC and a book deal from Regnery or (post-Dylan Davis) Threshold out of this. Mary Matlin loves controversy.

    Please, keep writing. I’ll keep reading. Happy New Year to you and your family.

    Comment by Mark — December 31, 2013 @ 12:25 am

  18. lol

    Comment by alex nash — December 31, 2013 @ 1:21 am

  19. Hi SWP,

    As you know, I don’t comment here much often, regardless of the Hive’s continuing obsession with me. The reason I popped back was because of that NYT story and curiosity as to your response to it.

    At a basic level, I disagree that disclosure should be a prerequisite of objectivity. It is in fact a formal logical fallacy; all arguments have to be assessed on their own merits. I say this as someone who has no particular stake or interest in your academic specialty.

    Still, considering your wildly two-faced and hypocritical position on matters of funding and objectivity (“Putin’s pilot fish,” Snowden, etc), sympathy is distinctly lacking. Consider it karma, I guess.

    Comment by S/O — December 31, 2013 @ 1:52 am

  20. @joesphine and Mark there is some truth to what joesphine noticed. I was watching my comments after they were posted (I am paranoid like that) and they were gone when I was viewing them on another device. However, with that said and politics aside, Paul Krugman is a fight picker and extremely arrogant so I was willing to let this slide on the shear principle.

    Comment by Ada — December 31, 2013 @ 2:00 am

  21. You know, be it in internet forum or elsewhere, I am always puzzled at the psyche of those who jump up and down in exaltations to make exclamations in situations where and when they have nothing to contribute or what they say is of no relevance.

    Some of the commentators of this forum are no exception. Clearly, they have no clue about the subject, and even with the explanations given by the Professor have no ability to discern whether he is right or wrong. Yet, they feel obligated to say something – something highly irrelevant and clearly constituting nothing but insults.

    And all of them seem to be concerned about the possibility that the Professor might’ve received money from this or another source…

    This observation brings up an issue associated with the morality.
    Our civilization, whether viewed from a secular perspective or religious, and I think even the secular perspective is a derivative of the religious one, is shaped largely by the ten commandments.

    I find it remarkable that the 1st of these commandments states:
    “I am the Lord your God, who brought you out of the land of Egypt, out of the house of bondage. You shall have no other gods before Me.”
    The way I understand, it implies reprimand for pride and arrogance, which, in this particular case is not uncharacteristic of those who jump to raise their voice in a matter they have no clue about even after the given explanations.

    The other remarkable for me observation I’d like to reference is that of the concluding 10th commandment:
    “You shall not covet your neighbor’s house; you shall not covet your neighbor’s wife, nor his male servant, nor his female servant, nor his ox, nor his donkey, nor anything that is your neighbor’s.”

    I think having given a spot in the list of 10 commandments it points at as how low of a human trait envy should be recognized to be on the scale of all other human flaws.

    In the context of this thread I cannot help but to notice that the driving motivation of insults of the cavalry of the sudden arrivers into this forum is that, allegedly, somebody and not them, and in this particular case, the Professor, has gotten money.
    Now, if all these one-liner insults of what was meant to be commentary constitute something else but salivations over someone’s alleged earning of money, I would benefit from being corrected.

    Comment by MJ — December 31, 2013 @ 3:13 am

  22. SWP- lighted up :), and celebrate that the NYT and do-gooders have deemed you worthy of an article… it is a milestone in popularity. Use the article to expand your audience, and don’t worry about all the factual error and untruths. It is normal and par for the course with the mainstream media.

    Congratulations. and continue your insightful blog.

    Comment by scott — December 31, 2013 @ 5:19 am

  23. […] Streetwise Professor , a blog written by University of Chicago PhD, Craig Pirrong, currently a Professor at Bauer College […]

    Pingback by Chicago Daily Observer » Blog Archive » Professor not Buying NY Times Hit Piece on CME and His Own Reasearch. Takes a Swing Back — December 31, 2013 @ 7:21 am

  24. @josephine, Mark and Ada Only someone absolutely new to this blog can accuse Prof of deleting comments. I have read this blog for years and no matter how clueless or offensive the comments were, whether they were written in English or only pretended to be in English (my case), no matter how OT they were from his original post (60 comments of internet nobodies like us about whether Stalin was a good guy or not in a post about effect lower crude oil prices will have on Russian economy today), Prof did not bother to police, let alone delete any of them. Prof surely understands it would be easier to delete gravity than stop flood of stupid comments by internet trolls. So I am sorry if it hurts your feelings and self-esteem, but you are simply not worth the time it would take him to go through the trouble of deleting your comments. He tends to fight back and not run, hide or silence the opposition if anything, and you often get a reply from him, where he points out the logical errors and contradictions of your comments; that is, if your comments have at least some basis in reality and deserve a response…

    If you do not believe either of that, just check any of the older posts about Russia, which always generate the most comments from all the self-proclaimed geopolitics experts here (including myself, of course), and you will have a good idea how Prof interacts with readers of his blog.

    Comment by deith — December 31, 2013 @ 9:05 am

  25. @deith I can only testify with what I saw with my own two eyes. I could care less about this blog, The NYT (which i happen to agree with the Prof and why i posted it has been my experience too) or Russia for that matter. As the adage goes the enemy of your enemy is your friend, which is why i didnt understand why the comments were removed after i had posted them. I dont fully get how it all works in the blogosphere it could have been a problem on my end, as i said. And yes my comments are still here with the proper timestamps. Maybe i should be reporting to Apple or the writers of this blog.

    Comment by Ada — December 31, 2013 @ 10:22 am

  26. I mean the software writers of the blog.

    Comment by Ada — December 31, 2013 @ 10:29 am

  27. Keep up the good and honest work. I am a big fan of the NY Times, but just because you write an article that disagrees with its editorial perspective doesn’t mean the article is academically dishonest. Geez.

    Comment by Gary DeWaal — December 31, 2013 @ 10:33 am

  28. @Ada, deith, and josephine.g.

    As I wrote above:

    “I also checked the comments on your post of that date, ‘A Christmas Message From Our New Messiah’. I found 12 comments at that time. Comments 5-12 dealt with the story in The Times. I saved a copy of Comments 5-12 as of Dec. 28.

    “Those comments remain on that thread today, Dec. 31; in fact, the number of comments on the thread has grown to 18 total as I write this. I can find no evidence of the allegation by josephine.g that you deleted any comments on this matter.

    “I should, and will, note that it’s possible you deleted comments, as josephine.g claims, between Dec. 28 and Dec. 31. I have no way of knowing. I will also acknowledge that Comments 13-18 on the aforementioned thread, including one of your own, are all favorable to you, derisive of critics, and/or deal with the Edward Snowden matter, which was the topic of your Dec. 25 post.

    “So, josephine.g has offered no evidence of a deleted comment(s), and only you, Professor, know if you, and only you, deleted any comments. As you are an experienced professional and an academic of note, I tend to favor your side – and it will be up to josephine.g and/or any other critic to post a deleted comment with the time and date of said comment on this website prior to it being deleted.”

    I never accused the Professor of censoring statements. I could find no evidence to support the claims of josephine.g.

    As to deith, if you find what I wrote previously to be evidence of one of many (?) “stupid comments by internet (sic) trolls”, then I must ask if you consider a viable, credible comment that questions the Professor? Not to worry. Education hurts neither my feelings nor self-esteem. I look forward to your thoughtful, well-reasoned, fact-based response.

    Also, as I wrote above, I could find no evidence that the claims of josephine.g were incorrect. As such, I chose to side with the Professor, citing his standing as “an experienced professional and an academic of note”.

    Allow me to make the observation, though, that when I posted my comment on December 31, 2013 @ 12:25 am, this website registered the comment as the 14th on the thread. As you can see above, the comment is now listed as the 17th on the thread. Three comments did not appear on the thread as of December 31 @ 12:25 am. Those were the comments/pingbacks made by:

    14. Comment by Jack — December 30, 2013 @ 11:22 pm;

    15. Pingback by Economics Info — December 31, 2013 @ 12:00 am; and,

    16. Comment by Aitor — December 31, 2013 @ 12:15 am.

    I find nothing nefarious in this, of course. This additional fact only indicates that this website appears to vet or screen comments before they appear on the thread. Many websites employ this feature. It makes sense, as the proprietor of the website is given the ability to eliminate any comments containing foul language, spam, and/or “amazing offers” to earn $50,000 a year from the comforts of your living room.

    This information does lend some credence to the feasibility claims of josephine.g that comments may have been withheld or deleted, as noted by No. 19 Comment by Ada — December 31, 2013 @ 2:00 am. The Professor clearly has the means to delete or censor comments. As I wrote above:

    “So, josephine.g has offered no evidence of a deleted comment(s), and only you, Professor, know if you, and only you, deleted any comments.”

    So, what say you, Professor?

    And can/will josephine.g or anyone else provide evidence of comments deleted from this thread?

    Without hurting anyone’s feelings and/or self-esteem, of course. Call this the “Deith Factor”.

    Comment by Mark — December 31, 2013 @ 10:35 am

  29. I had to read WSJ when i took macro in college. When the WSJ started charging for online subcriptions i switched to the NYT and found their economics reporting woefully inept (an understatement). This piece by the NYT is just the tip of the iceberg of the agenda the editors have. How is it journalism?

    Comment by Ada — December 31, 2013 @ 11:15 am

  30. My sympathies are saltwater and I am a paying NYT subscriber but bravo for your methodical and well-wrought rebuttal. They messed up here and at the very least their Public Editor should own up to that and issue you an apology.

    PS – “Tiger Beat Effusive” is genius.

    Comment by KingCo — December 31, 2013 @ 11:36 am

  31. I agree Kocieniewski’s piece was a poor example of objective journalism. I sent him an email requesting the source and method of calculation for the statement “Financial speculators accounted for 30 percent of commodities markets in 2002, and 70 percent in 2008.” Information such as that is a matter of public record in weekly CFTC Commitment of Trader Positions reports. I am interested to know which markets he used as a reference , is it measured based on # of trade entities (non-commercial and commercial) required to report each week to the CFTC, or is the alleged 70% proportion of ‘financial speculators’ to overall trade measured based on the total open interest of all open futures and options reported to the CFTC? Based on the July 15 2008 report of open positions to the CFTC (when WTI Crude Oil peaked @ >$140) , non-commercials (a/k/a professional money managers) comprised 58% of the # of all traders (commercial and non-commercial) reporting open positions based on combined futures and options but only 13% based on the open interest of all open positions reported by all entities.

    In either case, neither method of measurement compares to the Kocieniwski’s 70%” and even if it did … anybody with knowledge of the price discovery function understands the importance of a well-balanced mix of commercial and non-commercial participation for an efficiently functioning market. In other words, he infers financial speculation is evil by its mere presence.

    Not surprisingly I have yet to receive a reply from Kocieniewski to my very basic questions. If he were a stock or a market I’d be limit-short Kocieniewski.

    Comment by ken — December 31, 2013 @ 12:36 pm

  32. These attacks have nothing to do with The Professor receiving consulting money. His “transgression” was only supprting a position counter to the leftist dogma of the day. If a similar situation had occurred even as claimed and The Professor had supported global warming, solar power, wind power, Obamacare,, economic benefit of gay rights, etc etc then this certainly wouldn’t have occurred. This is simply and purely a manifestation of the hideous politics of the monolithic left.

    One of the enquiring leftist posters above mentioned his pro business work and what a joke that is. He should have written his pro wrong business work. My God man they have bunk beds in the Lincoln Bedroom to help handle the lobbyist traffic at the WH.

    Comment by pahoben — December 31, 2013 @ 12:59 pm

  33. @ken. Don’t hold your breath. Kocieniewski quoted that number to me, and I told him it was a crock but he used it anyways. He cited Gensler as the source. Revealing, eh?

    @Mark. I haven’t deleted any comments. Since many of the commenters are new, they get hung up in my spam queue. Most pingbacks also get hung up there. I free things up when I get around to it. After all, I’m a busy man. So many masters to serve.

    @pahoben A couple of things get me about this. First, what makes me so worthy of being singled out? Huge numbers of academics in finance and economics and accounting do consulting work, expert work, etc. In finance in particular, some go back and forth between Wall Street and academic positions. Front page coverage of this is pretty unique (I certainly can’t think of anything remotely like it), but I’m not unique in this respect so why focus on me, or not even attempt to put what I do in context of the norms of the profession? The only answer that makes sense is what you suggest: that it is intended to achieve a political goal. It seems a classic example of the application of Alinsky’s Rule For Radicals #13: “Pick the target, freeze it, personalize it, and polarize it.” Second, I’m struck by the Six Degrees of Kevin Bacon aspect of this. The connections between my outside work and my writings on speculation are so remote and indirect. Which is why the NYT had to rely almost exclusively on innuendo and insinuation. Re getting a medal from the State of Texas: that hasn’t happened yet, but I did get a love letter. “GET OUT OF MY STATE.” That’s all it said. Not a fan, I’m guessing. But it’s just a guess.

    Re focusing on me, I asked Kocieniewski whether I would be the sole subject of his article, and he mumbled that no, it was about the role of academics in the speculation debate generally and their ties to corporations. I guess he didn’t lie flat out, because there was one other academic featured in the article, but he obviously gave a very misleading impression. Why so gutless?

    Others . . . I will try to respond in due course, but time is at a premium. Including (apropos @KingCo) composing a formal response to the NYT.

    The ProfessorComment by The Professor — December 31, 2013 @ 1:30 pm

  34. @ken Here is the source of the 70 percent number. A Gensler speech. I explained to Kocieniewski the problems with these sorts of calculations generally, but I might as well have been talking to a rock.

    The ProfessorComment by The Professor — December 31, 2013 @ 1:33 pm

  35. When you read thier tripe it is in detail hilarious. The silly presuppositions and dogmatic paths of thought. One put Houston Chronicle and podunk paper (its not even worth looking up his exact phrase) in the same sentence and I wondered if he meant that as an insult. If he did it is incredibly funny that he could so completely misread the audience here.

    It is leftist BS at its purest and you shouldn’t mistake the motives for anything other than that. No standard of reason could ever be applied.

    Are you sure the letter you received wasn’t postmarked in Berkeley. :)

    Comment by pahoben — December 31, 2013 @ 2:00 pm

  36. To malign a professor with such little evidence that a blogger with no knowledge of the professors work can dispute it and then publishing it under the lens of journalism is despicable. The NYT has a talented legal team and suing for libel is hard. Further, let’s call a spade a spade this is slander.

    Comment by Ada — December 31, 2013 @ 2:20 pm

  37. I read this piece on Saturday with a mixture of outrage and amusement. The Professor’s refutation above does not due justice to the sleazy propaganda quality of the article, which shines through in many micro writing and editing choices. My personal favorite is the use of the adverb “dutifully” in characterizing SWP’s speaking out at one point–such a conclusory description glows phosphorescently on the page in the middle of a “news” article. At one point the key fact about SWP’s report being suppressed by the client (because it didn’t say what they wanted) is sandwiched between two of his assertions of honesty, so that this fact will also appear to the casual reader to be merely SWP’s self-serving opinion. Quite a performance by the Gray Lady.

    Comment by srp — December 31, 2013 @ 9:14 pm

  38. @ The Professor,

    “@Mark. I haven’t deleted any comments. Since many of the commenters are new, they get hung up in my spam queue. Most pingbacks also get hung up there. I free things up when I get around to it.”

    Never said that you did. Figured, as I noted in Comment No. 28: “I find nothing nefarious in this, of course. This additional fact only indicates that this website appears to vet or screen comments before they appear on the thread. Many websites employ this feature. It makes sense, as the proprietor of the website is given the ability to eliminate any comments containing foul language, spam, and/or ‘amazing offers’ to earn $50,000 a year from the comforts of your living room.”

    Thought you probably had a spam queue. Hence the reason for the different comment numbers. Perfectly understandable.

    Also, you wrote: “After all, I’m a busy man. So many masters to serve.”

    Kinda the point of the Times’ story, wasn’t it?

    Which brings me – back – to the matter of Omission. As I wrote previously:

    “You work for a public institution, the University of Houston. The Times or The Houston Chronicle or The Podunk Gazette (if such a publication exists) has the legal right, under the Freedom of Information Act, to seek information about your financial ties to speculators – or to the Houston Texans football team, if that’s relevant to the story in question. The same holds true of any employee of the University of Houston. You were not singled out for any sort of special persecution. The Times filed an FOI. The University stalled. …

    “You omitted this fact from this extensive response post that you have written. You did not tell your readers if:

    “1. You were aware of the Times’ FOI requests;

    “2. If aware, you opposed/supported/had no position on turning over said financial records;

    “3. You met with the University’s legal representatives;

    “4. You spoke with the Times’ legal representatives; and

    “5. You sought outside legal counsel of your own on the matter.

    “That’s omission – the very same sin of which you repeatedly accused The Times and the author, David Kocieniewski, of the piece in question.”

    You still haven’t answered the simple question of why you and/or the University chose to rebuff the Times’ FOI requests. The Times’ had legal standing. As would The Houston Chronicle, The Podunk Gazette, and, in honor of pahoben and Comment No. 35, The Gazette’s sister papers, The Redneck Review, The Kenyan Anti-Colonialist (h/t Din Din D’Souza), The Saltwater Economist, and The Randian Record.

    (Satire, pahoben, the password is “satire”.)

    It’s clear that you like neither Gary Gensler nor The Times. Fair enough. But your dislike for both fails to explain why you fought a simple FOI request. And why you’ve omitted any explanation for said FOI fight.

    Comment by Mark — December 31, 2013 @ 9:28 pm

  39. Craig [Vlad has NEVER been given permission to call you that, but what the heck]:

    You don’t need to disclose any financial info. To do so would be ‘leading with the chin.’

    This is the same treatment as the hockey stick [global warming chicken little alarmists] cherry picking of data. Their idea of ‘peer review’ is to shout down any & all who disagree, INSTEAD of letting the facts fall where they may.

    “Then out spoke brave Horatius, the Captain of the Gate:
    ‘To every man upon this earth, death cometh soon or late;
    And how can men die better than facing fearful odds,
    For the ashes of his fathers, and the temples of his Gods.'”

    And Cap Weinberger, “To what agency of the government do I go to reclaim my tarnished reputation?”

    Now we are off facts. Off conclusions. Off biases. Off jaundiced reporters. And on to FOIs?!?!? See how the left uses rules & expects their targets to comply? While refusing to reveal their own?

    That is how the game is played now. You are on defense. Because they have told you that you are.

    Fight on, Professor! Don’t play by their rules.


    Comment by Vlad — December 31, 2013 @ 11:42 pm

  40. Professor:

    FOI requests are never ‘simple.’

    It is like an IRS audit. ‘Simple’ is what others use when talking about their neighbor’s audit, NOT their own.


    Comment by Vlad — December 31, 2013 @ 11:45 pm

  41. Most people, including finance professionals, had never heard of Pirrong until the NYT article appeared. So he should be thanking them for the free publicity. So, the claims that ‘these were the two most prominent academics in the debate’ are vastly overblown and nothing but a vain attempt at self-promotion: Google Scholar gives the most highly cited paper by Pirrong at 140 citations, hardly impressive for somebody who has been a professor for more than 20 years…
    Why would NYT or any other group (who?) waste a whole page to ‘attack them’? Dont be self-deluded just because somebody wrote an article about you…

    Comment by Jonas G — January 1, 2014 @ 4:28 am

  42. “all the news that fits, we print”

    Comment by elmer — January 1, 2014 @ 11:31 am

  43. […] give Craig the microphone for his own defense: completely contrary to the impression in the NYT piece, the […]

    Pingback by A lack of ethics | Bear Market Investments — January 2, 2014 @ 11:20 am

  44. I haven’t been on this website for quite a while; in fact you called me a leftist dipstick the last time I was on here. I’d forgotten about it until it was referred to in the NYT (I’m not a reader but picked it up via Platts)

    I agree that the NYT piece is quite unbalanced generally. However your own retorts are a little dishonest too – especially point 9:

    – Claiming that Traf is not a speculator is frankly laughable. Sure they have physical trading operations but they also have major spec operations too.

    – Your work on WTI as a benchmark was rather unbalanced too – and it was this which caught my eye a few years ago. You repeatedly slated Brent as a benchmark and question the motives of those who disagree with you -and IIRC predicted that WTI would shortly regain its crown as the world’s pre-eminent benchmark. Meanwhile the HOCL and RBCL integrated books on CME are practically dead – (HOCL volume on CME now is 1089).

    – Your recent post on the CME Brent fee holiday made me smile. There’s nothing in the FT article that is against competition – just against BS liquidity and misleading volume. Oh and sure, spreads move but it’s **much** easier to scratch a one month cal spread than an outright – and you have that Brent CalSpread liquidity on ICE to lean on. Trust me – I’m in touch with the real world!

    – You’ve used many emotional words here when it comes to defending CME and CL – “denigrate”/”throwing dirt” – who says money can’t buy me love!

    BTW you (dipstick) referred to being in contact with the real world/having skin in the game – in fact (unlike you) I trade energy futures for a living (HO/RB cracks mainly). Calling me a leftist was quite juvenile but rather typical of your shoddy, chippy and uncouth carry on. I felt there was much merit in your original (pro-speculation) conclusions however it struck me as odd that you take financial contributions given your position as [well paid] professor gives you the status of an independent arbiter. I mean isn’t publishing papers on WTI as a benchmark what you’re supposed to be doing?

    Comment by Jon — January 2, 2014 @ 12:14 pm

  45. For all those who remain interested in the “deletion” thread herein. I would note that on the day that the NYT article came out I wrote a reply to it in the NYT comments page. As I am quite familiar with Craig’s arguments, my post pointed out that the merits of his arguments were not properly debated, and also pointed out that the NYT was not without moral hazard itself as it is also in business to make money and was simply appealing to the prejudices of its primarily liberal audience.

    The NYT did not publish my post. They essentially deleted it before it hit the web. I have checked many times and it was never published. All the comments published were cheering on the journalist, which essentially proved my point. I found the NYT defends this practice here:

    Let’s all remember that newspapers are in business to make money just like the rest of us. They are fully capable of underhanded management of the public debate. In this case however, no one ever knew.

    Comment by Dan — January 4, 2014 @ 2:20 pm

  46. I read with interest your response to the story, and while the Times alleged impropriety regarding funding, it really failed to make a case that money directly influences your decisions. You win on that note.

    However, I can’t help but comment on the way you communicate your defense here. In explaining your views, you twice used the exact phase “true to my Chicago School roots”, and later again refer to “true Chicago School economists”. I come from the physical sciences, and I have to say that to my ear this manner of phrasing sounds weird, even a little creepy. There is no one – I mean no one – in the biological or physical sciences who defends their scientific position this way. However, you do hear this kind of phrasing in religion or politics a lot: Try replacing the phrase with “strong Christian upbringing” and the tone doesn’t sound off at all.

    None of this means you are corrupt, and I’m sure you aren’t. But it sure does look like your viewpoints are held together by social structure and status first, and only secondarily by data analysis. This is the writing style of the righteous, not the writing style of a scientist. Money, in this case, doesn’t buy your devotion as much as status does.

    Money and status are of course linked, so the accusation can be inferred and will always be held by some, even if it can never be proven by any objective metric and therefore always is vulnerable to a critique of it as an ad hominem attack. Sadly, however, the link is still there, and it can’t be removed as long as the defense remains one of “training and conviction” first, and (oh yeah) empirical analysis second. Your Church is the church of the monied class, and will always be tied to money by those outside it even as you rail against their indifference. And, to be frank, the peasants have a point here, because it’s very easy for that kind of church to become corrupt, even if it’s wrong to pin blame on just one or two priests.

    Comment by Seth Miller — January 4, 2014 @ 9:37 pm

  47. Seth doesn’t get it: Being Chicago School or saltwater is no more unscientific than being, say, a Dawkinsian “selfish gene” Darwinian rather than a group selectionist, or a classical probabilist rather than a Bayesian, or a symbolic AI proponent rather than a connectionist, or a Copenhagen interpreter of quantum mechanics rather than a Bohmian or a many-worlder. That’s without wading into the really crazy philosophical debates about the proper way to do cosmology that feature “anthropic,” “multiverse,” and classical schools, each with its own self-identified adherents. The idea that the natural sciences are free of interpretive schools of thought is ridiculous on its face.

    Comment by srp — January 5, 2014 @ 12:35 am

  48. To srp: Your examples of other fields of science with “schools” is interesting. Evolutionary biology did indeed break up into schools in the 1970s when Dawkins promoted the idea of the selfish gene. That didn’t last long, though, as people went through the data and decided that “Man, he has a point”. When there is a dearth of data in a field, you have no choice but to start from a viewpoint (a hypothesis) before you decide what experiments to do, but then as the data comes in people refine their hypotheses and views start to fall in line. Group selection has been mostly, though not entirely, routed by now. Science is messy: there is no “pure” Dawkinian analysis methodology because biology works in different ways in different contexts. Group selection still has something to add to the discussion, and will always be useful as an alternative model – hell, people still usefully call up Larmarkian genetics when talking about a breaking field like epigenetics. But again, no one at all in the field starts their conversations with phrasing such as “I’m first and foremost a proud Dawkinsian, and therefore…”

    The other examples you give are pure math, where its difficult if not impossible to prove one side right or wrong. These fields and their proponents break up into camps because they offer no hypothesis that is actually falsifiable by experiment. In short, they are not actually doing science, not in the classical way.

    These schools get into “crazy philosophical debates” because data isn’t available, and won’t become available during the life of the debaters. They are exploring a branch of mathematical philosophy, where are least they have checked their internal assumptions against available reality but then make assertions from there that are immune from further test. It’s good philosophy, and should be rewarded as such, but it shouldn’t be confused with science.

    The Chicago School, sadly, doesn’t quite reach that level. It too builds complex mathematical models of reality that it should rightly be proud of. But unlike string theorists, the economists don’t necessarily check their models against all the available data before sealing them up in walls and closing them to debate. The model will always survive assault – something that didn’t happen for group selection in biology, and doesn’t happen in any field where data drives scientists to do the next round of experiments.

    Now why do these models survive and stay “pure” in economics when in other fields scientists move on with their lives? Look to the money, and in particular look to how money drives status. There is lots of incentive for people with money to believe that they got it because they are righteous and good – they have high social status because of the money, and so they need a theory to explain why they deserve to be there. Anything that justifies this will be supported. Their status is all the data they need.

    By contrast, when you change the subject to the physical and biological sciences, you still do find stubborn old scientists clinging to previous paradigms until they die – not because they are right or special, but because they fear the loss of status that comes with admitting they were wrong. But the new generation ignores them, and the old models make way for new ones. The only way to retain status over the long term is to stay aligned with data.

    Economics, precisely because its about money, will sadly always have pockets where bad science persists. Human nature and our weird behavioral and social drivers are just too strong, and they provide plenty of long-term emotional, financial, and social support to those who stay wrong even in the face of contradictory data. As the penalty for being wrong is missing, you can argue that the Chicago School’s practitioners are at least acting in their own self-interest, so the theory is self-consistent in that way! In the Professor’s defense, this says he’s not being bribed but following the behavioral and social incentives provided by his school. That the defense of a Chicago practitioner is that he’s not driven by money… the world is not without irony.

    Comment by Seth Miller — January 5, 2014 @ 11:08 am

  49. The NY Times is full of morally corrupt writers who manipulate news for their Liberal and Obama constituency .
    This writer should be fired , and blackballed from ever working for a newspaper again .
    He should work for a left wing PR firm , where he belongs

    Comment by JJ Minihan — January 5, 2014 @ 2:04 pm

  50. @Seth & @srp. Seth-you misunderstand. I was quite clear what I meant by adherence to Chicago traditions: “True to my Chicago School roots, I believe this is a data issue informed by a strong understanding of the theory and empirics of commodity pricing.” That is, my view of the Chicago tradition is that it is predicated on a view that empirical evidence is the ultimate arbiter. Further, empirical tests must be based on hypotheses derived from rigorous theories. The one potentially controversial issue relates to what is an appropriately rigorous theory. I am a Chicago guy in believing that an appropriately rigorous theory is one based on firm micro foundations based on individual maximization and rationality. That is not a universally shared view, but I am being upfront in disclosing the framework upon which I rely. Everybody has a framework. Everybody. I don’t presume that I don’t. As @srp says, every intellectual endeavor-including the physical sciences-is moored in some “interpretive school of thought.” I’m just being upfront about what mine is.

    Further, the point is whether my opinions on speculation derive from the financial inducements of interested parties, or from some other source. Kocieniewski insinuates that my opinions have been bought. My invocation of the Chicago School demonstrates that my views have roots in a particular intellectual tradition. (An intellectual tradition that is eminently respectable, as demonstrated by the unmatched number of Nobel prizes award to Chicago economists.)

    So which is more plausible? That Pirrong’s views are not his, but have been bought and paid for? Or that his views are deeply rooted in his training and his analytical approach? Inasmuch as my opinions on the speculation issue are derived from methodologies and frameworks that were an essential part of my training, and that these opinions are broadly consonant with others that I have rendered that that are also strongly rooted in the Chicago tradition, I think the answer is pretty clear. Kocieniewski might have a “Gotcha!” if he could show that my opinions on speculation somehow contradicted my views on other matters: that would represent a rejection of the null hypothesis that “Pirrong’s views were the result of his approach to economics, rather than financial inducements of interested parties.” Since there is complete consistency between my views on speculation, and my broader intellectual outlook, this null cannot be rejected. The simplest explanation is that Pirrong says what he believes, rather than parrots what his paymasters tell him to. At the very least, Kocieniewski has provided no evidence that would reject the null at any acceptable level of confidence.

    The ProfessorComment by The Professor — January 5, 2014 @ 4:14 pm

  51. The non-scandal of Scott Irwin and Craig Pirrong
    By Felix Salmon ~ DECEMBER 29, 2013 ~ Posted by Christofurio 

    Ostensibly Respectable Academic Is In Fact A Hack: it’s a hardy perennial, and an enjoyable one at that. The best example is Inside Job, where big names like Ric Mishkin and Glenn Hubbard got their well-deserved comeuppance. And it’s a genre I’ve indulged in myself: last year, for instance, Ispent 4,500 words on a paper by Bob Litan, showing how he lies with numbers to arrive at his paymasters’ predetermined conclusion. RC: Pure Krugmanite of NYT/Princeton.
    But here’s the thing: for this kind of article to carry any weight, it has to demonstrate the mendacity or venality of the academics in question, ideally, those academics should have a high-profile reputation which deserves to be tarnished.
    Which is why David Kocieniewski’s article about Craig Pirrong and Scott Irwin this weekend is such a disappointment. It’s currently doing very well on the NYT’s most-emailed list, but it’s easy to guess who’s doing the emailing: people who love to hate Wall Street, and who will use just about any possible excuse for doing so. Because in this case Kocieniewski has missed the mark. Neither Pirrong or Irwin is mendacious or venal, and indeed it’s the NYT which seems to be stretching the facts well past their natural breaking point. RC: Pure Krugmanite of NYT/Princeton again.
    Let’s start, for instance, with the one part of the article almost everybody will read: the big picture at the top of the article, showing the gleaming and extremely expensive University of Illinois business school. “The Chicago Mercantile Exchange has given more than $1.4 million to the University of Illinois since 2008,” says the caption, “with most of the money going to the business school.” RC: MMmmm…:POTUS former law practice area. Let’s also remember CME is in 20 Wacker drive, a common habit of 20’s aged students. In fact I see the entire case one for wacker’s.
    That number — a very big sum, which is more than enough to buy research from for-sale economists — gets repeated further down the article: RC: Didn’t they know they can buy Krugman cheaper as NYT prove, but he isn’t crom the mob trained city, Albany NY is more the business end of the $.
    One of the most widely quoted defenders of speculation in agricultural markets, Mr. Irwin of the University of Illinois, Champaign-Urbana, consults for a business that serves hedge funds, investment banks and other commodities speculators, according to information received by The Times under the Freedom of Information Act. The business school at the University of Illinois has received more than a million dollars in donations from the Chicago Mercantile Exchange and several major commodities traders, to pay for scholarships and classes and to build a laboratory that resembles a trading floor at the commodities market. RC: MMmm…POTUS taught UC rather than UI, but taught all the same Illinois & Chicago pretty much one? UC being private research based with great accolades & Lauriat’s than the State Research UI same city anyhow, so same thinking UICU follows, rather than leads. Mr. Irwin, the University of Illinois & Chicago exchange all say his research is not related to the financial support.
    This is carefully written to be as damning as possible. Yes, it makes perfect sense that the CME would fund a major business school right in its own backyard — RC: MMmm… win POTUS support too perhaps??? & that it would fund activities related to its own business of commodities trading. But surely Kocieniewski is about to show us how the grants are linked in some way to Irwin’s research: no NYT reporter would write such a thing unless he had reason to believe that there was some kind of quid pro quo, or that the grants to the business school were written in gratitude to Irwin. RC: Can’t hurt to be at 20 Wacker drive either. Chicago has plenty of them. Always has since roaring 20’s. Anyhow now with POTUS former links entrenched, and On August 18, 2008, shareholders approved a merger with the New York Mercantile Exchange (NYMEX) and COMEX. The Merc, CBOT, NYMEX and COMEX are now markets owned by the CME Group, back in Krugman vested NYT’s area. That’s where NYT reporter might find a reasonable fear of being undermined by invading CME dudes into NYMEX. Or perhaps its just that Monsanto have vested interests in the subject research and a long hekld strong attachment to Illinois Viz., see Wikipedia “In1926 the company founded and incorporated a town called Monsanto in Illinois (now known as Sauget). It was formed to provide a liberal regulatory environment and low taxes for the Monsanto chemical plants at a time when local jurisdictions had most of the responsibility for environmental rules. It was renamed in honor of Leo Sauget, its first village president”.
    Except, if you keep on reading to the point at which you’re 2,500 words into the piece — and pretty much nobody reads that far — you’ll find this:
    While the C.M.E. has given more than $1.4 million to the University of Illinois since 2008, most has gone to the business school and none to the School of Agriculture and Consumer Economics, where Mr. Irwin teaches. And when Mr. Irwin asked the exchange’s foundation for $25,000 several years ago to sponsor a website he runs to inform farmers about agricultural conditions and regulations, his request was denied.
    RC: Now lets see vested research & Monsanto interests perhaps CME’s main Ag-field :~ “Commodity futures and options ~ Agricultural Commodity Contracts include: Live Cattle, Lean Hogs,Feeder Cattle, Class IV Milk, Class III Milk, Frozen Pork Bellies, International Skimmed Milk Powder (ISM), Nonfat Dry Milk, Deliverable Nonfat Dry Milk, Dry Whey, Cash-Settled Butter, Butter, Random Length Lumber, Softwood Pulp, Hardwood Pulp.

    This is real jaw-on-the-floor stuff. The NYT has published an article about how academics who write nice things about Wall Street “reap rewards”, in the words of the headline — and its main illustration is donations to a business school where the academic in question doesn’t even work! Anybody trying to hold academics to standards of intellectual honesty has to be intellectually honest themselves. And the fact is that there’s zero reason to believe that there’s any connection between the business-school donations and Irwin’s research.
    Or maybe Kocieniewski thinks that consulting contract is enough to demonstrate that all money in the general vicinity of Irwin is tainted by venality. Except, if you get to the very end of the article, you’ll find out a bit more about what this consulting contract comprises:
    Mr. Irwin also works for a business called Yieldcast that caters to agricultural producers, investments banks and other speculators, selling them predictions of corn and soybean yields. RC: Oh! Goody Monsanto prime subject at this time “Corn & Soybean GMO Yield accelerators” Mr. Irwin has said he does not consider it a conflict because he works only with the mathematical forecasting models and never consults with clients.
    This is pretty blameless stuff. If you’re a professor who puts together models of commodities prices, it’s fine to consult for a company which puts together models of commodities prices. Shouldn’t we be encouraging professors to work on real-world applications of their research, rather than implying that any such work is a dastardly conflict of interest? RC: Never fear Monsanto will practice those risks, and CME/NYMEX/NYT can also look & smell like roses.
    Once you realize how much of an axe Kocieniewski is grinding, then the rest of his article rapidly starts to crumble. For starters, as Evan Soltas says, both of these men are “super-freshwater” academic economists, working at freshwater schools. (In econojargon, “freshwater” economics happens far from the coasts, and is generally laissez-faire and pretty right-wing; “saltwater” economics takes place in coastal universities and tends to be more Keynesian, interventionist, and leftist.) Neither is inclined to write anything which deviates from freshwater orthodoxy. Kocieniewski takes issue with these professors’ defense of financial speculation — but that’s a central tenet of freshwater economics, and “orthodox economist is orthodox” is never going to be much of a story.
    What’s more, there’s clear evidence that Pirrong, in particular, does not simply churn out whatever his paymasters want him to write:
    Commodity trading houses are not “too big to fail”, says a report commissioned by the banking industry’s top lobby group, which had hoped it would conclude the opposite.
    That report was written by Pirrong, who is on the record as saying that the report was never officially published precisely because he refused to change its conclusions. (Kocieniewski quotes from Pirrong’s post, but doesn’t link to it.)
    Indeed, you don’t need to spend very much time reading Pirrong’s excellent blog before you realize that he’s one of those economists who will always speak his mind. Pirrong is not a grandee who can be counted on to deliver a certain conclusion if you pay him enough money: there aremany economists out there who I consider to be in the “bought and paid for” camp, but Pirrong is absolutely not one of them.
    So, what’s going on here? Three things.
    First, Kocieniewski has a bee in his bonnet about the effect of commodities speculation on commodities prices. He has not only convinced himself that speculative flows caused substantial increases in commodity prices; he has also seemingly convinced himself that anybody who disagrees with that position must be lying. So he’s taken aim at Pirrong and Irwin, not because they have made a lot of money from the financial-services industry, and not because they’re particularly conflicted, but just because they hold a position Kocieniewski doesn’t like. As Peter Klein acerbically puts it, “if you oppose the Times’s editorial position on regulation (or any other issue), you are compromised by financial or other ties. If you support the Times’s position, you are a scholar or public figure of great integrity.”
    Secondly, Kocieniewski has picked on these two professors in particular because they both work at public universities, which can be FOIA’ed. Kocieniewski put in freedom-of-information requests for the two professors — requests that private universities like Harvard or Yale could happily ignore — and used the results as the basis for his story. Thanks, David — you’ve just made it even more difficult for public universities to attract top economic talent.
    And finally, Kocieniewski seems to have bought into a much bigger conspiracy theory which he’s looking to illustrate — a theory summed up in the NYT’s “Professors as Pitchmen” subhed. It’s a theme which runs through Kocieniewski’s piece:
    Underwriting researchers and academic institutions is one part of Wall Street’s efforts to fend off regulation…
    Major financial companies have also funded magazines and websites to promote academics with friendly points of view…
    Financial firms have been able to use the resources and credibility of academia to shape the political debate.
    The Chicago Mercantile Exchange and the University of Illinois at Champaign-Urbana, for example, at times blur the line between research and public relations.
    The exchange’s public relations staff has helped Mr. Irwin shop his pro-speculation essays to newspaper op-ed pages, according to emails reviewed by The Times. His studies, writings, videotaped speeches and interviews have been displayed on the exchange’s website and its online magazine.
    Kocieniewski’s most explosive allegation, here — that major financial companies have paid magazines and websites to promote certain academics — is in desperate need of backing up: he needs to name the companies and the magazines in question, and explain exactly what he’s talking about. Is he just referring to advertorial content, or sites like the Financialist which are clearly sponsored by financial institutions? Or is he saying that financial-services companies have found a way to pay for certain content to find its way into the editorial pages of certain magazines? That’s certainly what he’s implying. RC: I think if you read my yellow research comments you may agree with this conspiracy theory viz., POTUS Chicago U ties, CME now NYMEX tec. NYT always open to Krugmanlike flexible $$$ Professors, CME Group Ltd., commodity futures & Option trading in ag., Monsanto 1926 links, their main emphasis today both players “Corn & Soybean GMO’s”~ Is this a starting place?
    Then again, when Kocieniewski starts babbling about “the line between research and public relations”, the simplest explanation starts becoming clear: that he’s just gone a little bit off the reservation. There is no “line between research and public relations”; rather, as every financial journalist knows, there is research, and then there is a small army of PR people who try to get journalists to write about that research. Those PR people might work for sell-side banks, or for the Federal Reserve system, or for private universities, or for public universities, or for non-profit think-tanks, or for-profit corporations — but in any event, their job is just to get certain pieces of research noticed. If the CME finds a piece of research that it likes, it makes perfect sense that it will feature that research on its website and tell journalists about it. No line is being crossed there. RC: Yep Monsanto lackies do that well.
    There’s no doubt that PR people can be infuriating at times, but Kocieniewski is taking this idea one step further: he’s saying that if an academic agrees with a certain corporate point of view, and allows the company in question to promulgate that view, then the academic has thereby basically become that company’s PR person. RC: Probably as “Money speaks louder than words” always.
    Once you understand that deep assumption, then the rest of the article starts to make more sense. Kocieniewski sees Pirrong and Irwin as PR people for financial speculators, and feels that no PR people should ever receive the kind of respect that these two economists get, especially in Washington. If Kocieniewski presented that view in a blog post, maybe at Daily Kos or Zero Hedge, few people would bat an eyelid. It’s a little on the overheated side, but I know a lot of people who would basically agree with it.
    The problem is that Kocieniewski isn’t presenting this view as opinion: instead, he’s presenting it as a fact, unearthed by his diligent use of freedom-of-information requests. Even though those requests revealed nothing surprising whatsoever. What Kocieniewski calls Pirrong’s “financial dealings with speculators”, for instance, Pirrong himself has another term for: “litigation consulting”. It makes sense that Pirrong would frequently be used as an expert witness: he explains things clearly, he’s well respected, and he’s entirely consistent in where he comes down on certain well-known questions. The causality here is abundantly clear: Pirrong’s views caused the commodities firms to hire him as a witness, not the other way around.
    In presenting Pirrong and Irwin as doing something deeply unethical, Kocieniewski is actually making sensible ethics reform much more difficult. The AEA code of ethics is an important document, which goes a long way towards addressing the conflicts in the financial-economics industry. But Irwin, for one, was clearly entirely in line with the code all along. (Pirrong, I think, should have been more forthcoming about the identity of the companies paying him substantial expert-witness fees.) If Kocieniewski can take a blameless professor and turn him into a poster child for graft, then it’s easy to see how the rest of the academy might come to the conclusion that they were better off when everything was secret.

    Comment by Rob Carter — January 5, 2014 @ 11:15 pm

  52. […] St. Reap Reward,” I would love Mr. Kocieniewski to respond to criticisms of his piece by myself, Craig Pirrong and others, including, but not limited […]

    Pingback by NYT vs Pirrong and Irwin: David Kocieniewski responds | Felix Salmon — January 7, 2014 @ 11:02 pm

  53. […] for Wall Street, Felix Salmon has a bit to say about that [Reuters, EconBrowser, Bainbridge, Pirrong] Daniel Fisher on a possible tie-in with Times reporter David Kocieniewski’s earlier piece […]

    Pingback by Banking and finance roundup - Overlawyered — January 10, 2014 @ 6:00 pm

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