But it’s also wholly irrational;. You see, a god is usually assumed to be a higher order of being, possessed of powers beyond the human. Usually that will involve omnipotence. That is, the power in this case to see the future – something economists believe we all have when building their models which is, however, untrue, and which is a good reason why they do not work for us mere mortals.
Or, alternatively, the bond god is a myth created by humans to serve their own purpose – a crux for their own beliefs. The sort of belief that we’re seeing acted out in Ireland. The sort of mythical belief that underpins neoclassical economics. The sort of myth that is confounded continually by evidence, but to which the true believers adhere none the less.
No, neo-classical economics does not believe in a \”Bond God\” nor does it make the claim that we can see into the future.
The claim is that we all, each and every one of us, have opinions about the future. Some of those opinions will be correct, some will be incorrect. Some will be correct given the information to hand today, some incorrect by that standard. Some will be made incorrect by events in the future that we don\’t know about (uncertainty, or Rumsfeld\’s unknown unknowns) and some that are incorrect by current knowledge will be made correct by the same.
All the bond market is, just as is true of any other market, is the aggregation and averaging of these opinions about the future.
That aggregated and averaged set of opinions may well be wrong: but it\’s the best that we can do. Blimey, you\’d think that Ritchie had never heard of Galton\’s Ox or the Wisdom of Crowds (and yes, I do know the conditions under which they don\’t work well).