“What is Economics Good For?” is the provocative New York Times essay by Alex Rosenberg and Tyler Curtain. They point is that economics is no kind of science and never can be. This is an excellent essay and worth reading. The basic thesis is that economics is incapable of accurate predictions.
- Predictions of future economic changes have always been poor
- Economics cannot improve its predictive record. (This is based on a couple of centuries of observations.)
Rosenberg and Curtain point out that economic ‘theory’ is not falsifiable as are the scientific logic structures that survive testing and are called theories. (If a scientific theory failed a test, it would be called a model (sometimes hypotheses).
Tests of Newton’s Laws show they are inaccurate for certain applications – the laws are models. General Relativity corrects Newton with a logic path capable of being disproved by testing. It has passed every test during its 101 years of existence. GR is one of the few physics models that is a tested theory. Note that quantum events seem to follow the incredibly accurate Standard Model; but SM may be subtly incomplete.
Yes, my economic ‘theory’ didn’t work when I predicted it would but that was because of this and this. Just wait a bit, it will come to pass …
Yah·But is a cultist’s answer after his End-of-World ‘theory’ passes its expiration date.
Since economics is filled with untestable supposition and wish projections, economists are no more scientists than are astrologers. One follows an economic ‘theory’ from faith that it accurately describes reality, not proof.
Maskin’s Challenge This is contentious. Economists really do not want to be shifted from the Science list to the Conjurer list. The New York times Thursday, 2013 Aug 28 presented their weekly challenge topic – a letter from Eric Maskin, Harvard Nobel lauriate in Economics. In a strong statement, Maskin asserts Rosenberg and Curtain are just wrong – Economists are Scientists period The NYT Sunday Review section for 2013 Sep 1 will feature pro and con arguments from the public.
Economics can never be right, therefore,
Economists are not scientists
Economists face a common challenge for situations where the action happens in the current time, the instant of Now. Problems arise when economic prediction are expected to actually happen.
Background Example of an analogous state
Imagine your friend’s happy, bouncy young puppy. You look out your window and see puppy playing in its yard. An hour passes; you glance up and see her dash into the street and be hit by a car. Up to this exact Now, puppy could have gone any direction, done a multitude of things. One could not predict when she would run into street or even, with certainty, that she would do so. There are too many different possible directions she could choose to run.
Only afterwards can you identify the connected chain of events that did happen. Only afterwards are the chain of events causal. What really happened was the actualization of one chain of connected events out the total ensemble of all possible connected actions that could have been taken.
You might have guessed that she could be hit, but you could not make accurate predictions. It might be reasonable, but you cannot improve your power of prediction until “hindsight” can be used.
We will examine further using our Ideologue post for the reasons feedback control is important.
If we could only communicate an hour after-Now back to an hour before-Now, we could keep (or have kept?) the puppy happy and enjoying life. English becomes hard-going when discussing moving backwards in time.
Events that do not happen until a particular Now can not be well predicted in advance.
The reason is that, for perfect predictions, we need a time machine to pass messages from the present-belonging-to-the-future backwards to the present-belonging-to-the-past so that effective decisions can be made back then.
The puppy’s final Now is the activity described in the Communications box. The output monitor would be the observer an hour-after-Now; the input controller would be the unsuspecting observer an hour-before-Now.
Economists are not scientists
LastTechAge agrees with Rosenberg and Curain. If you followed last paragraph’s language twist-up, you probably understand why economics can only be a study of the particular set of causal paths (out of the ensemble of all potential paths) that were realized and therefore led to an observed action, not the inevitable paths leading to the necessarily only possible action.
There are many alternatives that might have connected to each other and led to an economic event’s Now, but only one chain of causal events actually did. Only in emotional retrospective that can we look back and think things happened the way they did because that is the only way they could have happened.
Science studies many instantiations of same process, finding out how such a process can take place. Careful observation of many processes as close to similar as possible, along with analysis and modeling of the causal paths that operate work about as well as a future message passed back to the past.
Science has good predictability, but only for processes that fit in well-studied pattern. How science really works is the topic for many advanced degrees.
Economists can never do experimental testing, all they can do is look at a small sample, make a possibly emotional judgement based on their knowledge of Truth. This is an ideologue’s fallacy. Why are there predictive errors?
- Misinterpretation that something has happened when a bit different something occurred. Misinterpretation of the chain of events generates faulty judgement calls.
- Incomplete information about the all the events that have been happening prior to the Now of the prediction. Incomplete information leads to poor extrapolation .
- Complete trust that the information received is complete, comprehensive, and totally accurate. Why would anyone would lie to cover up personal motivations. Who would not say they are planning to sell a block of stock if they plan to liquidate their entire holdings tomorrow? Another reason for complete trust is that the report validates one’s own preconceptions. Complete trust in reports leads to biased predictions.
Conclusion: Economy is a model not a science, Economists aren’t scientists
We have looped back to the conclusions of our Ideologue post. Things cannot be ever truly predicted if they happen in a temporal sequence, where a large set of exact duplicates cannot be tested to destruction.
The only way an economist’ model could become a trusted theory is described in this box. But time machines are idle dreams. Actually, this has been a post in out Time-Path series.
Economists are as much scientists as are line officers in a battle. Both can be aided by scientific analysis, but there are no Output Monitors and everything is a guess.
Charles J. Armentrout, Ann Arbor
2013 August 31
This is listed under General … thread General > Time Path
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