Wednesday, November 4, 2009

The Spymaster and the Economist

Jan Kmenta, Professor of Econometrics

The work of the best novelists and scholars burrow into the psyche. Peculiarly in my own mind the British intelligence officer and novelist David Cornwell (aka John
le Carré), and Czech-born Jan Kmenta, the wry professor of econometrics, are inextricably linked. Both exemplify their generation's dedication to finding truth in ambiguous settings through careful application of craft.

Kmenta would begin his graduate course in econometrics with a set of definitions:

  • An Economic Historian goes into a dark room looking for a black cat.
  • An Economic Theorist goes into a dark room looking for a black cat that is not there.
  • An Econometrician goes into a dark room looking for a black cat that is not there and declares: "I found it!"
The rest of the course (and the three that followed) was devoted to an arduous study of the theory and practice that would keep us from making any such a mistake. With humor Kmenta could shoulder the futility of his quest, but he could not abide those who mistook shortcuts for progress.

John le Carré

These ruminations began when by some happy accident I picked up my decade-old copy of John le Carré's The Tailor of Panama. Writing in the mid-1990's, as the West was celebrating the end of the Cold War,
le Carré adapted his method to the times. Turning away from the earnest style of his previous spy novels, le
Carré surprised his readers with a comic approach.

His unlikely protagonist, an expatriate tailor with a good heart and a questionable past, is recruited by a novice spy of uncertain virtue.
Together they set out to prove the existence of conspiracy fabricated from whole cloth. True to his craft but inept in spycraft, the tailor weaves selective data with imaginative storytelling to flatter the careless and comfort the powerful. The institutions charged with analyzing and verifying his reports fail to question false information that suits their narrow interests. Let loose in a benign environment, the misdirected agents of change wreck havoc.

In the aftermath of the intelligence failures of this twenty-first century, John
le Carré seems eerily prescient. By the same token, clients are advised to select their consultants and govern their projects with unusual diligence. It is all too easy to prove the existence of black cats that were never there.

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