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Economics....
May. 21st, 2014 09:24 amIn a discussion elsewhere about economics I was getting caught up over an assertion that economics is currently too primitive a 'science' to be useful.
I disagreed. I think actually we're getting to a point where we have economic theory and models that do a pretty good job of modeling complex macro-economic situations and we have a tool box that includes some fairly well understood methods of dealing with different problems. That's not to say that we won't hit a new set of economic conditions that we'll need to adapt to (secular stagnation being a worrying example) but on the whole we've a fairly good set of historical information and models that do a very good job of telling us that if we do X or Y then Z will happen.
It's not a 'science' like, say physics, but there are some parallels. Keynesian economics is no more dead than Newtonian physics just because we have Special Relativity. You just have to know what circumstances in which to use the correct models to get the expected outcome. Modern economics actually does a pretty damn good job with explaining the mess of the last few years and explaining how to deal with it and also explaining why we don't have German style hyperinflation.
It's also a lot like engineering. Most engineering is actually models based on observational evidence that kinda, sorta, maybe explains whats going on. The only significant difference is it's really easy to model fluid flow in pipes and repeat, but a lot harder to do that with economies and see what happens next.
The core problem then actually is political. Politicians like to claim that economics is wrong, or that there are competing theories at work, whereas, really, there's a lot of consensus and looking at the data there's a lot of very clear models that just work. But then, people get involved. And as we've seen. People are a problem.
I disagreed. I think actually we're getting to a point where we have economic theory and models that do a pretty good job of modeling complex macro-economic situations and we have a tool box that includes some fairly well understood methods of dealing with different problems. That's not to say that we won't hit a new set of economic conditions that we'll need to adapt to (secular stagnation being a worrying example) but on the whole we've a fairly good set of historical information and models that do a very good job of telling us that if we do X or Y then Z will happen.
It's not a 'science' like, say physics, but there are some parallels. Keynesian economics is no more dead than Newtonian physics just because we have Special Relativity. You just have to know what circumstances in which to use the correct models to get the expected outcome. Modern economics actually does a pretty damn good job with explaining the mess of the last few years and explaining how to deal with it and also explaining why we don't have German style hyperinflation.
It's also a lot like engineering. Most engineering is actually models based on observational evidence that kinda, sorta, maybe explains whats going on. The only significant difference is it's really easy to model fluid flow in pipes and repeat, but a lot harder to do that with economies and see what happens next.
The core problem then actually is political. Politicians like to claim that economics is wrong, or that there are competing theories at work, whereas, really, there's a lot of consensus and looking at the data there's a lot of very clear models that just work. But then, people get involved. And as we've seen. People are a problem.
