Posted March 17, 2009 12:15 PM
By David Todd
The Perils of Sunspots and MBA Graduates
Now that governments are starting to employ so called ‘quantitative easing’ (printing money to buy assets) that threatens to begin an era of ‘stagflation’ (economic stagnation AND inflation), I have to ask how we came to this? While executives’ bonus targets, financial deregulation, credit rating errors and the ‘gambling instinct’ of bankers have all been blamed for the credit crunch and world economic downturn, there could be other causes.
It was William Stanley Jevons (1835-1882) who famously suggested in his work ‘Commercial Crises and Sun Spots” that crises in the economy may also be down to the appearance of sun spots. His reasoning was that sunspots affected the weather and rainfall, which, in turn, affected crops and the economy as a whole.
Sun spots as seen in an telescope projected image – Courtesy: Wikipedia
This work has been followed up by more modern researchers including Theodore Modis in his paper ‘Sunspots, GDP, and the Stock Market’ in which he predicted from predicted sun spot numbers in the 11 year solar cycle, that the stock market would peak in 2008 and then crash. It looks like he was more or less right. If this ‘peak and trough’ trend carries on it then looks like there could be a new peak in the New York stock market in 2019 or so.
Percent deviations with respect to the long-term trends as calculated via 11-year moving averages. The arrows note “significant” DJIA (Dow Jones Industrial Average) peaks. The last arrow was a forecast that in reality just about came true. Courtesy: Theodore Modis (http://ourworld.compuserve.com/homepages/tmodis/Sunspots_GDP_Stock_Market.htm)
But this time it may not just be the sun spots or bankers’ ‘short-termist’ targets that are the villains of the day. It seems that business education itself may be at fault as most of those business and banking ‘leaders’ that are being blamed for the financial disaster had MBAs (especially those from the Harvard Business School). The Times of London has an excellent article on the subject: http://www.timesonline.co.uk/tol/news/uk/education/article5821706.ece
For most of the last five decades, having an MBA – the Master of Business Administration degree - became ‘de rigueur’ amongst ambitious business men and women; to the point that even your correspondent once considered doing one. While during his own Masters of Science studies at Cranfield, this writer once asked an MBA student at the University’s highly rated business school what his course was like. The MBA student’s reply was: “Imagine being locked in a room with 20 megalomaniacs and you will get the picture!”
Leave a comment