Calling all economists

  • #26
716
9
...economics is not physics so I don't think the same standards, e.g. prediction, should be applied. As far as we know there is no fundamental force exist that govern social interaction as there exists in the physical world that govern physical interactions.
This reminds me of "psychohistory" from the Asimov Foundation series. The premise goes something like, although one cannot predict the behavior of an individual, one can predict the behavior of a large group, and the larger the group the more accurate the prediction.

Fiction, of course...
 
  • #27
talk2glenn
I've stated this in another post, but unless you a see fundamental breakthrough in economics, economics isn't going to have the same predictive power as there is in physics (or even weather science).
Define your expectations. If the price of movie tickets rises by 1% tomorrow, consumers purchases will fall by approximately 0.9%. This is confident predictive power. Economics has the disadvantage of transformity. The price elasticity of demand for movie tickets may vary over time, in response both to variables of economic interest and also to variables of no direct economic interest (changes in consumer tastes; the availability of substitutes). But the underlying assumption - that consumers will demand film in quantifiable rates relative to its price - will not.

Economics is sufficient to explain resource-maximizing behavior conceptually, and predict it practically. The former is unconstrained and theoretical; the latter dependent on the availability of data and the consistency of preferences. But this is no different in practice than any other science. A physicist holds constant the mass of the earth when calculating its gravity. From that derivation, a great deal more follows. The only distinction is the rate of transformity - a physicist can count on the mass of earth changing only fractionally moment to moment. An economist lacks that luxury.

Now, you might argue that a physicist can say, with a certainty, what effect a 25% overnight mass loss event might have on earths gravitational pull, and from there tell me lots of stuff about architectural engineering, gravity, etcetera. So could an economist. But you fault the economist because he cannot tell you when or even if the (metaphorical) mass of the earth will change by 25%.

News flash - neither can the physicist. Economists are held to an impossible standard. Predictive science is based on repeatability of results when inputs are held constant. Economics can tell you a great many things, and make a number of useful and repeatable predictions. It does not need to be immutable (the fact that it's changed 7 times in 70 years has no relationship), and neither does the tested environment.
 
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  • #28
This reminds me of "psychohistory" from the Asimov Foundation series. The premise goes something like, although one cannot predict the behavior of an individual, one can predict the behavior of a large group, and the larger the group the more accurate the prediction.

Fiction, of course...
But that was never my premise ...
 
  • #29
716
9
But that was never my premise ...
Oh, I know. I just said that what you said reminded me of it.
 
  • #30
If the price of movie tickets rises by 1% tomorrow, consumers purchases will fall by approximately 0.9%. This is confident predictive power. Economics has the disadvantage of transformity. The price elasticity of demand for movie tickets may vary over time, in response both to variables of economic interest and also to variables of no direct economic interest (changes in consumer tastes; the availability of substitutes). But the underlying assumption - that consumers will demand film in quantifiable rates relative to its price - will not.
Agree.

‘[T]he underlying assumption - that consumers will demand film in quantifiable rates relative to its price’ is observable and we’ve used the fiction of individual utility to provide a theoretical foundation for this observation. This has been my point this whole time. A utility function can depend on any infinite number of variables. This means ‘economists have been reduced to identifying relationship between variables that approximates what we actually see in the real world.’ Trying to identify which of the infinitely many variables (and the type of relationship between variables) is relevant is ‘hard work which isn't always fruitful’. The social world isn’t like the natural world where you have a simple relationship like for instance F = ma.

Economics is sufficient to explain resource-maximizing behavior conceptually, and predict it practically. The former is unconstrained and theoretical; the latter dependent on the availability of data and the consistency of preferences. But this is no different in practice than any other science. A physicist holds constant the mass of the earth when calculating its gravity. From that derivation, a great deal more follows. The only distinction is the rate of transformity - a physicist can count on the mass of earth changing only fractionally moment to moment. An economist lacks that luxury.
Agree. See my point above about identifying the relevant variables and the relationship between those variables.

Now, you might argue that a physicist can say, with a certainty, what effect a 25% overnight mass loss event might have on earths gravitational pull, and from there tell me lots of stuff about architectural engineering, gravity, etcetera. So could an economist. But you fault the economist because he cannot tell you when or even if the (metaphorical) mass of the earth will change by 25%.
I’m not faulting the economist. This is what I don’t get. You are making the same point I’m making but in different words:

News flash - neither can the physicist. Economists are held to an impossible standard.
I’m saying the same thing as you are: You can’t set the same standards for economists and physicists with respect to prediction. Physicists have an easier job because of the fundamental forces.

Predictive science is based on repeatability of results when inputs are held constant. Economics can tell you a great many things, and make a number of useful and repeatable predictions.
Agree.

It does not need to be immutable (the fact that it's changed 7 times in 70 years has no relationship), and neither does the tested environment.
Agree that it doesn’t need to be immutable but I only mentioned the fact ‘it's changed 7 times in 70 years’ to illustrate the point the ‘science’ of macroeconomics is hardly settled (because the relationship between in the social world a lot more difficult to discern than it is in the natural world). It was never an argument that economics should be ‘immutable’.

Look I’ve only skimmed read most your posts (so advanced apologies if I misrepresent you) but I’m getting the impression that you probably have a lot more confidence in the state of macroeconomic theory than I probably have. Fair enough. But it seems to me we are saying the same things with respect to economic prediction (even if it is in a different manner).
 
  • #31
Oh, I know. I just said that what you said reminded me of it.
Ok, I get it now. You meant 'fiction' literally as opposed to metaphorically. Cheers.
 
  • #32
149
0
Can you think of a field of study that has more variables, so few constants, and so many manipulative participants?
 
  • #33
716
9
No. And yet in principle one should be able to apply the scientific method to it, by isolating variables and looking for correlations. Maybe it just needs another few hundred years.
 
  • #34
149
0
No. And yet in principle one should be able to apply the scientific method to it, by isolating variables and looking for correlations. Maybe it just needs another few hundred years.
The scientific method should be applied to health care reform.
 
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  • #35
831
5
...I've stated this in another post, but unless you a see fundamental breakthrough in economics, economics isn't going to have the same predictive power as there is in physics (or even weather science). At best you're going to have approximations.
Wait... Weather science IS physics. The system is quite complex and nonlinear but nevertheless modeled by physical components which obey laws of physics.

Physicists developed finite element models (sometimes 1,000,000 x 1,000,000 matrices) of some of the Space Shuttle Orbiter subsystems to predict dynamic stresses and strains across the structures during ascent (mechanical vibrations). They at least had the advantage of testing the structures on the ground in order to adjust the models to produce the same vibrational resonance frequencies and other modal parameters. And even after all of that pretesting, the predictions of stresses and strains were in error by around 10% for certain modes of vibration, and in error of over 100% at high frequencies.

Just to make the point that even though F = ma is well established, there is no guarantee that the model for a given physical system will be simple. By the way, physicists don't even try to apply closed form solutions to predict interactions between the very complex molecules.
 

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