On August 6, 1971 Milton Friedman responded to a letter that Fischer Black wrote to him. Friedman told Fischer that his model was irrational. It is interesting that such a well known and intelligent man disregarded Fischer's model and despite being told that he was irrational Fischer still continued to study and develop his model. It shows that Fischer was not easily swayed in what he felt was a correct principle even when it was given by someone who is well known. Infact it actually made him work harder to develop a more sound model.
At Friedman's workshop Fischer had to present his paper on the model that he developed and basically defend it against many intillegent individuals. In the end Fischer came out on top despite all of the criticism.
C for Hoyt for grammatical and spelling errors. These aren't excusable at the MBA level.
ReplyDeleteIt sounds like Hoyt doesn't know enough about professors. Some of you may have noticed that SUU professors are full of themselves (me especially!). We don't hold a candle to the sort of people they have at Chicago though.
Friedman has to talk to Black this way because he knows that Black is absolutely sure he's right, and probably won't listen. And it didn't work, so he's probably right.
There's also a conflict here between Friedman — in the arts and letters tradition of economics — and Black in the business school tradition of economics. The fact that Laffer lines himself up with Black shows that Black is in the forefront of what became known as supply side economics.