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A criticism which seems to be gaining traction is that many traditionally held economic beliefs were not sufficiently established by data, with their adherents
by dougabug 11y ago
A criticism which seems to be gaining traction is that many traditionally held economic beliefs were not sufficiently established by data, with their adherents often being satisfied with a (single) model, consistent with a limited set of observations. The rise of advanced statistical methods with vast amounts of data is a relatively recent phenomenon.
A purported major factor in the collapse of Lehman Brothers was that their economical models failed to anticipate a dramatic drop in property prices because they didn't include data reaching far enough into the past.
Much of the machinery for large scale data analysis was developed in the context of trying to understand complex physical systems. Even basic linear regression has its roots in the study of celestial mechanics by scientists such as Laplace and Gauss. Von Neumann was the co-creator of game theory, John Nash proved its foundational result. Economics is not beyond the analytical abilities of physicists and mathematicians to investigate, although certainly they benefit from collaboration with domain experts to resolve basic misunderstandings.
Ignoring energy and entropy in a dynamical system does seem a bit curious. It's not really clear that GDP can be made both rigorous and meaningful in the sense of these thermodynamic terms. David Goodstein points out that oil companies haven't produced a drop of oil in their entire existence. They simply process the oil which biophysical forces produced over a hundred million years. This oil (and all other fossil fuels) will run out in something on the order of 100 years. After this, civilization will end. I find his prediction difficult to dismiss, although not a foregone conclusion. All the solutions to the problems Goodstein raises remain speculative.
- Retric 11y agoThere is several hundred years worth of coal in the ground. Further civilization only started using oil very recently. It's loss mipay seem huge but it's not that important.
- dougabug 11y agoSince our energy consumption has grown exponentially in modern industrial times, most of the energy consumed has been during the age of oil. Further energy is not the only dependency modern civilization has on oil. You can't glibly dismiss Goodstein's analysis. He addresses this belief (canard) that we have hundreds of years of coal in the ground, or that the resource limitations which restrict the future of oil do not also apply to coal. To replace the energy, fuel, industrial and agricultural uses of oil, coal consumption would have to increase by at least 5x, with catastrophic environmental consequences. Goodstein also points out the unreliability of estimated reserves, which in many cases are political rather than scientific.
- Retric 11y agoActually farming still consumes vastly more energy than oil has provided. 1kw / m^2 is a lot of energy even if plants suck and significant parts of the globe have been under cultivation for thousands of years. http://www.zmescience.com/research/us-navy-synthetic-jet-fuel-seawater-0423432/ http://www.zmescience.com/research/us-navy-synthetic-jet-fue... US navy synthesizes jet fuel solely out of seawater; costs $3-6 gallon Wind is already cost competitive with coal. Sure, if oil was going to run out in 10 years that would be a huge issue, but when we have 50+ years to deal with the issue and it's bound at ~3x current costs it's just not that huge of a problem. PS: The navy is interested in this because shipping fuel around is a major issue for them where nuclear reactors can provide plenty of energy.