The problem with economics
Economics was a subject I knew almost nothing about but as I near my leaving of graduate school into the "real" world I figured I should broaden my horizons and people are often talking about economics. So I did some learning.
One of the most shocking things I learned was that most economists went into the field to try and improve the situation of their fellow man. There motivation was to understand the economy and find ways to have it keep growing and benefit everyone, a much nobler cause then I had anticipated. But the road to hell is paved with good intentions and we can still see some of the problems that the field faces since it purports to be able to tell you how money will flow and since most human endevours are tied to wealth has lead to many problems (such as the introduction of manditory child labor in France). Even today we have people on TV and radio talking about trade deficits as if we still need to acquire all the bullion in the world.
But in the end what is going on and more importantly is what they say useful (it is interesting that almost every show with integrity has programs with a few economist who sit around and proclaim that was they do is a prescience and should be taken with a cup of salt). Firstly it has been realized that one of the most useful aspects of a market economy is that under normal circumstances price is optimized meaning the price someone is willing to pay vs the price someone can charge is very rapidly found (a failing of other planned economic systems). But this happens at the lowest level of interaction and so is very hard to come up with a model since the causes are as complicated as human decisions get. Economists tend to look mostly at macro numbers and then try and predict what will happen. It is not clear that is approach cannot work but I have some idea why currently it can't.
Classic economic arguments are primarily first-order arguments and it very much depends on the economist as to what the first-order interaction is. The entire argument is based on a single train of reasoning. this is due to the immense complexity of the problem and is understandable and physics does much the same thing. One (there are many) difference seems to be that wrong ideas keep getting recycled but not modified or refined as in physics, such as supply-side economics.
While modern economics tries to use a mesh of different models they are still very crude and have little of explaining past data let alone making an accurate prediction. Then their is the emphasis placed on them. In the old dark days people would throw chicken bones, sacrifice product or talk to their imaginary friend (many still do) for predictions. While are models are slightly better when they make a forcast and people think of it as science, the field capable of wiping out the plague, polio and going to the moon, self-for filling prophecies become the issue since saying everything is ok and therefore pushing people to spend will actually make it ok and vice versa! So what do we do? We are years away from passable models. Ask them to lie?
One of the most shocking things I learned was that most economists went into the field to try and improve the situation of their fellow man. There motivation was to understand the economy and find ways to have it keep growing and benefit everyone, a much nobler cause then I had anticipated. But the road to hell is paved with good intentions and we can still see some of the problems that the field faces since it purports to be able to tell you how money will flow and since most human endevours are tied to wealth has lead to many problems (such as the introduction of manditory child labor in France). Even today we have people on TV and radio talking about trade deficits as if we still need to acquire all the bullion in the world.
But in the end what is going on and more importantly is what they say useful (it is interesting that almost every show with integrity has programs with a few economist who sit around and proclaim that was they do is a prescience and should be taken with a cup of salt). Firstly it has been realized that one of the most useful aspects of a market economy is that under normal circumstances price is optimized meaning the price someone is willing to pay vs the price someone can charge is very rapidly found (a failing of other planned economic systems). But this happens at the lowest level of interaction and so is very hard to come up with a model since the causes are as complicated as human decisions get. Economists tend to look mostly at macro numbers and then try and predict what will happen. It is not clear that is approach cannot work but I have some idea why currently it can't.
Classic economic arguments are primarily first-order arguments and it very much depends on the economist as to what the first-order interaction is. The entire argument is based on a single train of reasoning. this is due to the immense complexity of the problem and is understandable and physics does much the same thing. One (there are many) difference seems to be that wrong ideas keep getting recycled but not modified or refined as in physics, such as supply-side economics.
While modern economics tries to use a mesh of different models they are still very crude and have little of explaining past data let alone making an accurate prediction. Then their is the emphasis placed on them. In the old dark days people would throw chicken bones, sacrifice product or talk to their imaginary friend (many still do) for predictions. While are models are slightly better when they make a forcast and people think of it as science, the field capable of wiping out the plague, polio and going to the moon, self-for filling prophecies become the issue since saying everything is ok and therefore pushing people to spend will actually make it ok and vice versa! So what do we do? We are years away from passable models. Ask them to lie?
Labels: Freethinking
posted by Eddie | 10:41 AM
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