3 ms·

I don't say that having abstract theories is bad, after all one of the most successful theories in Physics, general relativity, was formulated without much data

I don't say that having abstract theories is bad, after all one of the most successful theories in Physics, general relativity, was formulated without much data or even experimental hints to work with. The difference is that this theory was later put to scrutiny by performing experiments and by observing natural phenomena (e.g. light bending by gravity), which have failed to falsify the theory so far. So what I'm saying is that a theory that cannot be falsified experimentally is not very useful. The real danger here is that these theories -most of which are supported by no or very slim experimental evidence- are used by governments to formulate economic policies, which in turn affect the life of millions or billions of people. For me, this is a bit like developing an "idealized" theory of nuclear physics and then trying to build a nuclear power-plant based on it. I, personally, would not want to live near one of these ;)

lottin 11y ago
I don't disagree, I was criticising the idea stated in the article that one can understand the economy without using theoretical models.
yummyfajitas 11y ago
In your nuclear power example, the counterfactual is don't build the power plant. Suppose governments did not formulate economic policies with these imperfect models. What would they do instead?
- arethuza 11y ago
  I wonder to what extent politicians formulate policies based on models or make high level policies based on ideology or perceived voter preferences and then select the economic models to justify what they have already decided. Edit: this isn't a comment about economics but how economics is used in a political context.
- ThePhysicist 11y ago
  Of course they will have to take some decision even if they don't have a solid theory to back it up, but the problem today is that many governments try to make reality fit their idealized theories while it should be the other way around. I understand your point though, the lack of quantitative understanding of societal phenomena -on a national as well as international level- is a huge problem.

lottin 11y ago

I don't disagree, I was criticising the idea stated in the article that one can understand the economy without using theoretical models.

yummyfajitas 11y ago

In your nuclear power example, the counterfactual is don't build the power plant. Suppose governments did not formulate economic policies with these imperfect models. What would they do instead?

arethuza 11y ago
I wonder to what extent politicians formulate policies based on models or make high level policies based on ideology or perceived voter preferences and then select the economic models to justify what they have already decided. Edit: this isn't a comment about economics but how economics is used in a political context.
ThePhysicist 11y ago
Of course they will have to take some decision even if they don't have a solid theory to back it up, but the problem today is that many governments try to make reality fit their idealized theories while it should be the other way around. I understand your point though, the lack of quantitative understanding of societal phenomena -on a national as well as international level- is a huge problem.