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Well, I find it difficult to imagine, what laws of nature would apply to economics? The best and most resilient example I know is the Black-Scholes equation -
by jevgeni 11y ago
Well, I find it difficult to imagine, what laws of nature would apply to economics?
The best and most resilient example I know is the Black-Scholes equation - a framework to model option prices - based on a heat diffusion equation. Thing is, now it's never used with its original assumptions, but rather with a bunch of fixes. Oh, volatility isn't constant as we thought, let's add stochastic volatility. Oh, stock pricess are fat tailed and don't behave according to a geometric brownian motion, let's add discontinous jumps. Not to mention, that nobody uses historic volatility anymore. A hack of hack of a hack. So much, in fact, that the original elegant theory has just become a sort of convention, how everybody does their calculations.
I really don't understand the argument that laws that have been proven to work in one domain should work in another. I think it's a kind of quantitative mysticism.
- emodendroket 11y agoOK. Imagine there are no more fossil fuels tomorrow. Is the economy going to keep chugging along, unaffected by this change?
- icebraining 11y agoWas the argument that the economy never had downturns? Because I don't think that's what's being argued against. Obviously the economy would be affected. But would it die forever?
- emodendroket 11y agoI think we could sum up the argument like this: 1. Continued economic growth requires continued increased energy use. 2. Any energy source will eventually generate so much waste heat that the planet becomes uninhabitable. 3. Therefore, sustained economic growth is impossible. How could the economy possibly plow through and ignore the physical limitations of the Earth? The author anticipates one might argue a larger portion of the economy goes to services of various points but suggests reasons this is implausible.
- icebraining 11y agoThe simple answer is: by expanding beyond Earth. Achievable right now: putting computers in orbit.
- emodendroket 11y agoI suppose that's a possibility but we're a pretty long way from having space colonies and it's not entirely clear how we would power such an endeavor.
- icebraining 11y agoIt's not entirely clear when and how we'll hit the theoretical limit of power usage either, particularly if efficiency keeps increasing. All this discussion is about hypothetical situations.
- jevgeni 11y agoThat is not what this is about. I have a problem when physical models are naively applied to economic models, i.e. "let's assume global supply is a liquid with variable viscosity" and the whole econophysics approach. The article is not hardcore econophysics though, but basically a little bit of regression and then deference to physics without any economics.
- peterashford 11y agoI mean no more than I would by saying that Minds are affected by Biology in the same way that Economies are affected by the physical world. One supervenes on the other. Just as it is nonsense to say that Psychology is independent from Biology, it's nonsense to say that Economies are independant from the physical realities which underpin them. I'm not sure what "quantitative mysticism" means, but I'm not proposing anything quite so social-science-waffle sounding.