Thursday, May 03, 2018


... [B]ad papers take a lot of time too, so let us just write a good one.

Attributed to the Princeton economist Dilip José Abreu by his junior colleague Markus Brunnermeier, as reported in Rohit Lamba's essay on Prof. Abreu and his key contributions.

The full paragraph presents the context in which these words were uttered:

In the late 1990s, as Abreu started to develop an interest in financial markets, a young Markus Brunnermeier, now a leading financial economist, joined Princeton. The duo teamed up to write a paper that explained why financial bubbles sustain. Investors are uncertain of when others will start trading against the bubble, making it worthwhile to continue riding it until its painful burst. For example, in the prelude to the 2008 financial crisis, banks kept issuing subprime mortgage backed securities, even as it was becoming clear that the mountain of debt was going to collapse. The then chief executive officer of Citigroup, Chuck Prince, uttered the now iconic words, “As long as the music is playing, you’ve got to get up and dance.” Bubbles emerge and persist in many such situations, breaking the hypothesis that prices internalize all possible information. It was as if Prince had received the Abreu-Brunnermeier memo, but a tad late. Brunnermeier is effusive in his respect for Abreu: “He has been a mentor… He sets very high standards for himself. As we worked through many models of bubbles and I grew anxious as an assistant professor, he joked that bad papers take a lot of time too, so let us just write a good one.” And boy they did.