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How economists rode maths to become our era’s astrologers
- soVeryTired 9y agoMacro has a pretty bad reputation, but economists often point to successes of the field as a counterpoint. Noah Smith points to four areas: Matching theory, discrete choice theory, gravity trade models, and auction theory [0]. Does anyone know about these topics? Are they really as successful as their proponents claim? [0]http://noahpinionblog.blogspot.co.uk/2017/06/is-economics-science.html http://noahpinionblog.blogspot.co.uk/2017/06/is-economics-sc...
- barry-cotter 9y agoAt a push gravity trade might be considered related to macroeconomics but they're all really microeconomics, i.e. the branch of Economics that has made and continues to make progress.
- meri_dian 9y agoI studied economics and philosophy in college. Did a bit of economics research for a senior thesis. I was encouraged to study economics as a more "practical counterbalance" to philosophy. The funny thing is, I've found philosophy, in how it helped me improve the rigor of my thought, to be much more useful and practical than anything I learned in economics. Economics needs to rely more on computation and data than on abstract mathematical models if it ever hopes to have real predictive power.
- stupidcar 9y agoYeah, it's weird. Early economists clearly didn't have the data or computing capability available to do analysis on the real world. So instead the took some inspiration from it and then built these simplified models, that were at least possible to study and make conclusions about. However, because real-world economic outcomes are so important, politically and socially, people ended up taking their conclusions and trying to apply them back to the real world. It's as if, after early AI researchers who took some inspiration from biology to create neural networks, the medical establishment then took their results and decided to use them as a guide to performing brain surgery.
- maxxxxx 9y ago"It's as if, after early AI researchers who took some inspiration from biology to create neural networks, the medical establishment then took their results and decided to use them as a guide to performing brain surgery. " I like that analogy.
- beberlei 9y agoIf you read Hayek, Mises ("Human Action", very hard to follow) or later Rothbart ("Man, Economy, State"; easier to read), they all derived the same conclusions entirely based on philosophy rather than the "neoclassical economists" who use mathematical models. And all this was researched and known before math creeped so deeply into economics.
- IshKebab 9y agoVery true, however you make it sound like economists actually do caveat their hilariously simple economic models with "this is a wild guess of how the real world works". Whenever I've read it it has been presented as "this is how a market works" or whatever.
- neilwilson 9y agoIt can't rely on data. The data is collected in a context of a policy arrangement and is therefore tainted by that policy. Economists think they can look beyond that and divine the deep truths. But they can't. They are looking for the philosophers stone. If you collect data about a man in a straitjacket you can only predict the movements of a man in a straitjacket. You can say nothing about what would happen if you took the straitjacket off. The purpose of economics is to embed the beliefs of those funding economists. Particularly the idea that there is no alternative - because data.
- 1_2__4 9y agoPolicy is also data. I don't know why you don't acknowledge that. In fact most data sets are tethered to their context. So I don't actually get your point, other than that trying to analyze data sets contextlessly won't work.
- smhcf8 9y agoHis point is that policy data, unlike most sources of data in the sciences/computer-science world, is contaminated by behavioral adjustments. This is a point that was first brought up by the famous (and frequently misunderstood) Lucas critique. https://en.wikipedia.org/wiki/Lucas_critique https://en.wikipedia.org/wiki/Lucas_critique And the central tenet of the critique has been reaffirmed by decades of meticulous "natural experimental" studies and small-scaled field experiments which show that real-world economic causal effects do not often correspond to observational data on policy changes. Believe it or not, both of you, there are plenty of competent economists working on that exact methodological problem and resolving other statistical issues that are rarely encountered in non-behavioral sciences. James Heckman's works on this topic have been so widely influential, and lauded, that his papers are now frequently taught as canonical texts in graduate-level statistics courses. And this is a guy that started out only wanting to estimate returns to early-childhood education and basically carved out the best way to do it over 10 years. Here's a long review paper by Heckman on the literature on microeconomic policy evaluation: http://www.nber.org/papers/w11259.pdf http://www.nber.org/papers/w11259.pdf The language is clear, the use of statistical theory and technical concepts is brief but rigorous (the proofs are on p.54 onward), and literally all 80 pages are devoted to reviewing other recent papers on the best statistical methods to analyze policy data towards making accurate causal inferences. Realize the sheer size of that body of work? Maybe, just maybe, there are good academics in every discipline who aren't hopeless idiots that fit into your grandiose stereotypes. And maybe a random one-liner "omg they should look at policy data" isn't exactly a well-informed criticism in the context of the sheer amount of contemporary empirical work that you've never heard of in a discipline that you aren't familiar with.
- digi_owl 9y agohttps://en.wikipedia.org/wiki/Steve_Keen#Minsky_software_project https://en.wikipedia.org/wiki/Steve_Keen#Minsky_software_pro...
- beberlei 9y agoThere is a whole branch of econometrics that has endless methods of doing macroeconomic quantitative analysis using data. It just doesn't work on the macro level, the data is too aggregated, the system is too entangled with dependencies between collected data and incomparable between countries, results have only historic and not predictive value and even then they are usually more voodoo than anything else. So I disagree: Macro economics needs less computation, data and abstract mathematical models. The Hayek quote that CaseySoftware wrote into another toplevel comment sums it up perfectly: Only pretense of knowledge coming from this.
- Mikeb85 9y ago> Economics needs to rely more on computation and data than on abstract mathematical models if it ever hopes to have real predictive power. In industry it does. Every major bank and hedge fund employs economists, and generally they have a pretty good grasp of what's going on. Of course those models are kept secret, much like trading algorithms. That's why stuff like Econometrics is taught, and why (at least in the program I took) a decent amount of stats courses are required. There's many branches of Economics which look at different things; you have macro which is mostly theoretical and constructs broad models which attempt to model behaviour in a somewhat abstract way, micro which attempts to model individual behaviour, game theory which is practical but not necessarily for predictive power on a broad level, and Econometrics which is very practical, but doesn't necessarily provide much insight beyond medium-term predictions.
- yvdriess 9y ago> In industry it does. Every major bank and hedge fund employs economists, and generally they have a pretty good grasp of what's going on. Of course those models are kept secret, much like trading algorithms. How useful are those models, however? Without knowing much of the field, I do see the managed funds not outperforming index funds over the long term. Would the current run to the large unmanaged funds not demonstrate how limited their trade secret models are? In the case of automatic trading models, occasionally running wildly off the rails, there is probably still value, in that it does something we otherwise could not. A hedge fund manager that fails to outperform the index over the long term is not providing any value, except perhaps in providing a social function.
- mvindahl 9y agoAnd even then I think that it's important to realize that you can only get that far in terms of predictability. First off, it's a complex system; your sampled data set is incomplete by definition. Secondly, your theory is part of the system that it's measuring, at least if it ever becomes popular enough to influence policy. I think economics has some valuable insights into human nature -- not necessarily applicable to every human but applicable to enough of us to be of use -- but they should stop cargo culting mathematics. Or more accurately, everyone else should call their bluff.
- booleandilemma 9y agoRelated article: https://www.theguardian.com/news/2017/jul/11/how-economics-became-a-religion https://www.theguardian.com/news/2017/jul/11/how-economics-b...
- fnl 9y agoExcellent article, thanks. HN discussion: https://news.ycombinator.com/item?id=14781426 https://news.ycombinator.com/item?id=14781426
- fpadilha 9y agoThis article confuses how top-level economists (who are de facto politicians) that attribute sometimes questionable decision making to models (most of the times due to political pressure) with a honest and very complex (at the edge of academic research) profession. It points out the it got so "mathy" that it kind of decoupled from non-technocrats but that can easily be said about literally any field today. What amazes me most is that the author complains about how that happens in the US, the most transparent and actually research-based application of economics in the world. I would invite you to go to some other less developed countries to see how "wonky" economics couples with intelectual dishonesty tries (and many time succeeds) to fool the many in favor of the few. And again, using wonky arguments to fool people is a practice that happens in any field, dismissing an entire profession who actually brought many advances to modern societies is ridiculous. The advance in statistics and econometrics is what made machine learning possible... I have to say, it has been a while since I've read such nonsense trying to pass as a good analysis/critique.
- Pamar 9y agoThis happened in USA, right? http://www.newyorker.com/news/john-cassidy/the-reinhart-and-rogoff-controversy-a-summing-up?currentPage=all http://www.newyorker.com/news/john-cassidy/the-reinhart-and-...
- fpadilha 9y agoCherry picking a controversy doesn't do much to generalize an entire field (if you want I can find some Freud controversies and say that psychology is hocus pocus). By the way, I'm not american. Funny enough, that one you picked is exactly the opposite from here. The authors were harshly criticized for NOT applying "mathy" rigor. The conclusion from "This time is different" is exactly what common sense would tell you, don't get too much debt or else you might grow less in the future and they got crushed because they did not entered in the extreme math/econometrics analysis. What the article criticizes is exactly what "This time is different" did, it applied less data rigor to point out almost a common sense and yet it backfired, so what is it? Should economists apply more or less "math"? I guess either way, this misses completely the point about economics and dismissing the entire field because of it is ridiculous.
- finolex1 9y agoYes, economics has not been very successful at making predictions with pinpoint accuracy, and yes, people might place too much faith in economic theory. But the stark reality is that the existence of economics as an academic discipline is inevitable. Policymakers worldwide make decisions that impact billions of people and involve trillions of dollars, and it simply either isn't palatable to the public ear to proclaim they're going by intuition alone, or involve proposals so complex that our intuition just can't evaluate them - they need an academic foundation to stand on. And that's where economists come in - they might quibble over more esoteric topics, or waver in giving specific recommendations, but there are areas where they can say what definitely won't work in the long run - for e.g. when foreign aid might work instead of foreign trade, currency manipulation, regulation of monopolies, use of state subsidies, impacts of tariffs etc. The academic consensus in areas like these are a lot stronger than the media make it seem.
- nafey 9y agoThe libertarian counter argument to this is that public servants/bureaucrats shouldn't be in the business of investing trillions of dollars. The market gets to decide which investments get made and the investor takes the fall for bad decision instead of sucking on taxpayer's teats for a bailout.
- em500 9y agoIn most Western countries, the amount controlled by public servants/bureaucrats is decided by governments and parliaments elected about every four years. If libertarians believe that amount is too high, they need to do a better job convincing voters to elect parties that decrease public spending.
- stephen_g 9y agoThe problem with that line of economic thinking is that it all hangs on the efficient market hypothesis, which has proved to be nowhere near as robust as most libertarians claim. You are also assuming that taxes actually pay for things, which isn't really how modern monetary systems work (Governments who have their own central banks actually spend money into existence and taxes destroy money). So Governments do have an important issue to play being the monopoly issuer of money.
- MatthiasP 9y ago"To put it bluntly, the discipline of economics has yet to get over its childish passion for mathematics and for purely theoretical and often highly ideological speculation, at the expense of historical research and collaboration with the other social sciences. Economists are all too often preoccupied with petty mathematical problems of interest only to themselves. This obsession with mathematics is an easy way of acquiring the appearance of scientificity without having to answer the far more complex questions posed by the world we live in." Piketty T. "Capital in the 21st century", p. 36.
- throwaway7645 9y agoNot sure if that quotation inspires much confidence. Economics has math behind it. Subjects like Sociology have none of the rigor of math and are thus a large waste of time.
- jbooth 9y agoThe takeaway is that the math used in econ obscures the truth while lending a fake gravitas to pure opinion. At least sociology is honest that they're going pure opinion.
- crdoconnor 9y agoThe math is a red herring. It's the buried assumptions that underpin the math which is where the real bullshit usually lies.
- lottin 9y agoExactly. The answer is not less mathematics, but more empirical work.
- olavk 9y agoThis is exactly the fallacy he is addressing. Math = rigor, so clearly the discipline which uses the most math is the most rigorous, right? But actually math is only useful when it is based on a useful model of reality. If the underlying assumptions are unfounded or faulty, then math does not help you at all.
- oriol16 9y agoAll these articles from opinionated outsiders aiming at "stimulating debate" sound extremely arrogant to academic economists. Do you really think you are telling anything new?
- owuire14 9y agoThe people silencing you by fading you into the background do.
- nabla9 9y agoI don't buy argument. It confuses economics used to advance political or commercial goals with academic economics. Economics is far ahead other social sciences because it uses mathematical modelling. Models make it easier to see the limits and the scope of the arguments. Ability of outsiders to clearly see oversimplification s is strength. Rational actor model is the best first order approximation of behaviour. Moving to others, there are others, should be justified carefully. Other social sciences have it worse. Btw. Economics is only partially social science. Actors don't have to be humans.
- fiatjaf 9y ago> It confuses economics used to advance political or commercial goals with academic economics. Does it? Or is this totally confused in the practical world too?
- nabla9 9y agoIt's not. For example, the austerity debate has been academically settled. Politicians took one academic paper (outlier) with error and used it to screw things up. IMF did mea culpa after data disagreed.
- nickik 9y agoThe same bad arguments against economist repeated again and again. The people who write this are either stupid or simply write what people want to read.
- owuire14 9y agoThe issue is that dumb unemployed programmers love to hit the 'up' button on articles shitting on things they don't understand.
- fiatjaf 9y agoSee also how the Austrian School of Economics does not fall in that category at all and has created sound, useful and correct economics without math, but only pure logic.
- lottin 9y agoIf I recall correctly, the Austrian School of Economics has a tradition of rejecting the scientific method and instead using something they call praxeology, which is most definitely not a scientific methodology.
- arethuza 9y agoI found this quote from von Mises when trying to work out what on Earth praxeology is: "They are, like those of logic and mathematics, a priori. They are not subject to verification or falsification on the ground of experience and facts. They are both logically and temporally antecedent to any comprehension of historical facts." Sounds more like ideology than a science to me....
- fiatjaf 9y agoSo you think mathematics is an ideology?
- arethuza 9y agoNo - science and engineering use mathematics to model the real world and generally do a mighty fine job of it. Arguing that your subject, which most definitely is attempting to model part of the real world is actually a part of the a mathematical world and therefore not subject to the same rules as sciences seems a bit dubious to me.
- beberlei 9y agoBut mathematics is itself a science! It uses a priori truths and deduction from it to arrive at new results. Additionally several branches of philosophy and logic use a priori facts to derive results from it. Praxeology is one of different ways of scientific reasoning. Just because you cannot get quantitative results from it, doesn't mean its unscientific. It cannot get you very far in predicting concrete human action, because in its view, humans act based on a subjective value "function" that has a discrete scale (you can only say: A is better than B, not by how much). and since every human is unique with their own values, which are simply not objectively comparable, there is just no way to make predictions or qualitative assumptions from this approach to science.
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- lottin 9y agoA lot of people don't get that economics isn't about making predictions nor that the fact that a statistical model may lack predictive power has nothing to do with whether the model is correct. All a statistical model tells you is that the dependent variable will take this or that value given some values of the independent variables. So predicting the dependent variable requires you to know the values of the independent variables in the future, which means most of the time the model is completely useless for forecasting purposes. That doesn't mean that the model is useless in a general sense, or unscientific.
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- arethuza 9y agoSo what can you use a model for if it doesn't make predictions? Presumably a non-predictive model can't explain things either? Also, if a model doesn't make predictions how can you compare it to reality to see if it is actually a useful model or not?
- lottin 9y agoYou can say: if X and Y happen, then with a great degree of certainty Z will follow. That's explaining things, despite not being able to predict if Z will occur or not. There are many ways to test the validity of a model, for example, you can "forecast" past values (using known values of the explanatory variables) and check the accuracy of the predictions.
- arethuza 9y ago"if X and Y happen, then with a great degree of certainty Z will follow" How is that different to normal scientific predictions?
- lottin 9y agoIt's not different. What I'm saying is your ability to predict Z is contingent on your ability predict X and Y. If X and Y happen to follow regular patterns, then you can predict Z, if not you're out of luck. The point is that claiming that something is not science on the grounds that it can't predict Z makes no sense.
- cromwellian 9y agoThere are other fields where prediction is hard, geology (earthquake prediction), medicine, etc I think using a single data point (e.g. Interest rates) doesn't represent the aggregate, which is if you ran the same experiment 100 times, would Economists do better than chance?
- sldoliadis 9y agoThis is an implicit appeal the article is making that is really unfounded at some level. They seem to be arguing that, because economists missed the Great Recession, economics is a failure. The problem is the assumption is that a severe, large event is inherently very predictable because it is severe. The opposite often happens, though. As you say, predicting volcanic eruptions, earthquakes, suicide, violent acts are all notoriously difficult to predict, and you could make the argument that severe economic events are the same (I'm not saying this is true, only that it's an equal counterargument).
- soVeryTired 9y agoI think it's more that the economics establishment had convinced themselves that the Great Recession was impossible than that they didn't see it coming.
- dbcooper 9y agoAeon is by far the dumbest site that is regularly submitted here. So many articles making huge claims with nothing to back them up. It's awful. Come at me.
- oriol16 9y agoSoftware profession seems to be the last corner where to expect some sound knowledge about economics. Looks like a McDonalds cashier would have a better understanding of business cycles.
- friedman23 9y agoWhy do software engineers think they are intelligent enough to criticize other professions? The vast majority of the people on this forum are dumb code monkeys with a bachelors degree and an extremely basic understanding of math.
- owuire14 9y agoYou are correct. They think this way because they spend less than 5% of their time talking to other people, whereas the normal population spends bare minimum 30% of their time interacting with humans directly.
- owuire14 9y agoI agree.
- adwhit 9y agoFor 40+ years, the economics profession at large has advocated policies which have massively favored the wealthy over everyone else (globalisation/neoliberalism). The same economists were showered with huge pay packets, consulting fees and prizes (just look at how many Nobel prizes the Chicago school hoovered up). The profession as simply another means by which the wealthy exercise control over the rest of us. So it's all a bit late for this hand-wringing now. They used you, you got paid, enjoy your privileges and try not to think what you've done.
- mobilefriendly 9y agoThe last 40+ years of globalization have raised more people out of poverty than at any other time in history, and spread progress and prosperity around the world. Check your envy and hatred, friend.
- rtx 9y agoBoth of you are correct. The issue I see is that we could have done more.
- acalderaro 9y agoThis isn't at all related to the OP's comment. Globalism has allowed multinational corporations to expand their economic and political influence - since they have the economies of scale to expand globally. It's true that more people have been lifted out of poverty, but the fact remains that globalism favors wealthy owners of multinationals over everyone else. Look at how much influence western oil/tech companies have in countries around the world. Lobbies are stronger in our political realm, it really isn't fair to say that these policies benefited the poor more than the wealthy. That's not to say that globalism is bad. But we need to be careful because as the wealthy's influence and power grows, it becomes harder to solve the problems that will come with the age of automation.
- jrauser 9y agoIs it possible that the game isn't zero sum? To lift a phrase from your second paragraph, is it possible that globalism favors wealthy owners of multinationals AND everyone else? You're right to point out the risks of vast wealth disparities and the corrupting influence of money in politics, but I think that problem needs to be combatted separately, and not by making everyone less well off.
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- jbmorgado 9y agoI think this in fact comes from this engineering of language in order to pass some agenda. You create something that is really not science and call it social "sciences" and then you put inside those stuff like economics and all the shebang. Of course that some people think those are actually scientific and then, when all the predictions fail not only stop believing the social "sciences" like economics, but in fact start looking at all sciences, even the real ones, as some fake agenda from someone. In the end it's a double wrong, first because you are telling people that social "sciences" like economics actually predict anything and second because we are destroying the public view of real science. I think what we need is some outreach program that explains people what the real sciences are in order to regain credibility for science and to get people suspicious of any predictions coming from social "sciences". Not to say that some social "sciences" are not worthy of research, but we must understand that they are only ad hoc fields of knowledge and that they don't predict anything. For instance like history, a respected area that doesn't need to get some fake validation from calling itself a science.
- caseysoftware 9y agoOr as FA Hayek described it.. the "Pretense of Knowledge" - > Hayek’s greatest contribution to economics was to show that society is far more complex than we realize, with little pieces of knowledge dispersed among millions of individuals. “The curious task of economics,” he famously wrote in “The Fatal Conceit,” which he published in 1988, “is to demonstrate to men how little they really know about what they imagine they can design.” > Recent government interventions suggest that politicians and bureaucrats today think they can design just about anything. This ignorance has backfired, as it always does, bringing with it what economists call “unintended consequences.” Ref: https://www.washingtonpost.com/news/volokh-conspiracy/wp/2014/10/13/f-a-hayek-and-the-pretense-of-knowledge/?utm_term=.32a263ba3ea4 https://www.washingtonpost.com/news/volokh-conspiracy/wp/201...
- awkwarddaturtle 9y agoOr as feynmann described... pseudoscience. https://youtu.be/tWr39Q9vBgo https://youtu.be/tWr39Q9vBgo
- amygdyl 9y agoI can't even bear to compare my own four decades of head scratching about economics with Feynmann's insights, but I can offer you a realisation that I have attained through the kind of haphazard real world that experience the sort of life that I remember reading about in Surely You're Joking Mr Feynmann? Only to understand why the insight was late in arriving, you see I read Surely.. Joking about when I was ten, and growing up in the bosom of a well to do upper middle class family, with my father retired and mother devoted homemaker and a professor my half brother by our father's first marriage and uncle was a DoD director and scientist who also had no children and was devoted to my early years... And so I grew up in a world in which I was sure that I could attribute to everyone I met, the possession of a underlying and rational logic, even when I was unsure of how they themselves understood what motivated their decisions. I'm surveying a decade of watching my life and world in the most complete definition possible, being systematically destroyed. Possibly result of accidentally discovering a corruption of immense and blatant scale. I learned from this experience, of prison and acquittal ("we should never have been in this court.." began the judge after a five year onslaught of abuse, clearly wrecked my mental health, and irreparably my physical health, I see from my now recovering vantage)... .... there's nothing that motivates people in any reliable way I see purely random behaviour to be the norm... And economists are won't to portray the world with the idea of rationality of interests. Erm.... NOPE! Try another model.... Oops that's the primary assumption... Okay, back to my aimless broken life, unable to communicate with anyone in normal life because I find no motivation for anything, no systems no values... All outsourced to the Nanny State and red masthead newspapers.. Edit: not in any reply to anyone I've not checked out yet for a update, but I was purposely ignoring the STFUARTFA of econometrics and the various things I have done with along my career, particularly auction and micro markets theory and logic, which I just noted to my loyal but only in title one remaining limited partner is among the memories that I have been thoroughly unable to recall of in any part of my work, which spanned more than half of my years on this planet. I certainly know that economics is far beyond the kind that The Economist newspaper is given to making accessible to proverbial common man hypothetical problems and quandary. I never thought that economics was ever limited and possibly that same belief in the limitless application of Economic Theory (intoned with great reference by all who utter the wisdom denounced from whom they are unable to question, not because they lack the ability, but because they are presented with unintelligible morass of signal free human volume)... May be that that limitless applicability which is the candle that will burn both ends forever in some kinds professionally employed as economists, is precisely what should have been the very warning sign, alerting us to a problem. I mean, has any other profession, reached across the desk, and leaning over the work of a unrelated practitioner, suggested that their input was capable of unbounded insights and discovery? Yet, like the populous hope for Panacea or else a Soma, we all have our moments of susceptibility...)
- HillaryBriss 9y agoMy favorite line: Occasional governmental efforts to scientifically micromanage farm life in different climes using li ended in famine and mass migration.
- praptak 9y agoKahneman in "Thinking, fast and slow" covers expert overconfidence. Some funny quotes: "The Duke scholars collected 11,600 such forecasts and examined their accuracy. The conclusion was straightforward: financial officers of large corporations had no clue about the short-term future of the stock market; the correlation between their estimates and the true value was slightly less than zero!" "The wide confidence interval is a confession of ignorance, which is not socially acceptable for someone who is paid to be knowledgeable in financial matters. Even if they knew how little they know, the executives would be penalized for admitting it."
- MarcusBrutus 9y agoEconomists started using mathematics purely out of Physics Envy. I am obviously not talking about financial products which require some statistics and complex probabilistic models due to the way they're structured. All the great economists of the liberal tradition up to and including Von Mises wrote monumental works without the need for equations. It was Keynes who first used mathematics both as a quest for respectability (Physics Envy) and as a way to convince credulous politicians like FDR that this stuff is complex and best left at "experts". The disastrous results are still with us today. And no, Keynesian politics did not end the Great Depression, they actually prolonged the misery and it took WWII and the destruction of all global competition to end it. Not to mention that what passes as "mathematics" among the economists is laughable among mathematicians. Latin was employed towards similar ends by the Roman Catholic Church (although a plausible defense could be mounted that a standard language better preseved the Doctrine against heresy). Ditto for the complex models sometimes employed by astrologists. A con game, 'nuff said.
- 21 9y agoQuotes from Nassim Taleb regarding economists: An economist is a mixture of 1) a businessman without common sense, 2) a physicist without brain, and 3) a speculator without balls. Those with brains no balls become mathematicians, those with balls no brains join the mafia, those w no balls no brains become economists. To have a great day: 1) Smile at a stranger, 2) Surprise someone by saying something unexpectedly nice, 3) Give some genuine attention to an elderly, 4) Invite someone who doesn't have many friends for coffee, 5) Humiliate an economist, publicly, or create deep anxiety inside a Harvard professor. A trader listened to the firm's "chief" economist's predictions about gold, then lost a bundle. The trader was asked to leave the firm. He then angrily asked him boss who was firing him: "Why do you fire me alone not the economist? He is too responsible for the loss." The Boss: "You idiot, we are not firing you for losing money; we are firing you for listening to the economist." Discussing growth without concern for fragility: like studying construction without thinking of collapses. Think like engineer not economist. Success in all endeavors is requires absence of specific qualities. 1) To succeed in crime requires absence of empathy, 2) To succeed in banking you need absence of shame at hiding risks, 3) To succeed in school requires absence of common sense, 4) To succeed in economics requires absence of understanding of probability, risk, or 2nd order effects and about anything, 5) To succeed in journalism requires inability to think about matters that have an infinitesimal small chance of being relevant next January, ...6) But to succeed in life requires a total inability to do anything that makes you uncomfortable when you look at yourself in the mirror. [On his greatest disappointment]: That I am unable to destroy the economics establishment, the press. Friends, I wonder if someone has computed how much would be saved if we shut down economics and political science departments in universities. Those who need to research these subjects can do so on their private time. Being nice to the wicked (or economist) is equivalent to being nasty with the virtuous.
- arkj 9y agoI do not think the whole of economics is a waste. But your post made me lol. May be its not a 'science' subject as physics or engineering. In my part of the world it is still listed an arts subject.
- smhcf8 9y agoIt still amazes me that people unironically cite these Taleb quotes without addressing how plainly neurotic these comments are. Does this increase or decrease your prior belief in his actual ability to carefully read, and then entirely dismiss, an economics academic literature that involves nearly ten thousand active young academics with backgrounds from all over the world, an undergraduate education that ranges from mathematics to physics to philosophy, and markedly diverse political beliefs, and who mostly work on topics that have nothing to do with financial math? Or does it perhaps tell you that this top b-school PhD graduate, who 1. works on similar financial-math topics as the people he viciously smear in the media 2. publishes in the same journals that econ/finance academics publish in 3. had key results inspired or derived from previous economists including Daniel Ellsberg (who, by the way, is a national hero) 4, and was repeatedly hired by top econ/finance departments, but was never able to keep the same appointment for more than a few years perhaps has deep-seated personal, psychopathic issues that prevent him from simply getting along with other academics in his own discipline, and that the academic world wasn't stacked against him and his insights? and perhaps his actual academic analysis don't give you the sweeping indictment of his fellow academics that he'd have you believe in his bitter tirades? and maybe you shouldn't take him that seriously when he periodically goes into his online rants and show a vicious tendency to smear and destroy any individual that's responsible for a perceived slight on him?
- imh 9y agoThese complaints against economics are getting ridiculous. It's the same BS that's getting levied against climate science, coming from a place of ignorance. Science is hard. It feels like, "Physics can't unify QM and gravity, it must be wrong!" Well yeah, there might be parts that will be discovered to be broken, and it can't describe everything yet, but there are parts that are totally valid and incredibly important. Econ is like that, just younger and less mature. Not having all the answers doesn't make it astrology. Imagine that some poorly understood aspect of physics was incredibly important. Maybe we get devastating earthquakes across the country every 6 years. Physicists can't predict these very well, so physics is astrology? Even without perfect understanding, the government has to make decisions about earthquake relief and planning. I would hope they turn to the scientists to see which areas have the highest risk, even though the predictions will likely still be way off. Earthquake-ology is young and hard, but it's better than letting actualy astrologers drive. More surprising than anything in this article is the suggestion that the math and stats are a bad influence. I flip a coin, telling you it has a 60% chance of coming up heads. It comes up tails, 'proving me wrong.' Are you going to accuse me of peddling pseudoscience?
- westoncb 9y ago> Are you going to accuse me of peddling pseudoscience? For that example, no. The actual issue is analogous to making calculations with very high precision when your input data is of much lower precision; if you use those latter decimals to draw conclusions, you may as well be casting tea leaves or whatever. I think where people have an issue with Econ is where it takes some vague tendency in human behavior that kind of makes sense to think of as a rule that maybe holds, and then use it as a basis for making rigorous deductions on the supposition that the rule holds absolutely. (At least this is the complaint I'm familiar with, that much of its grounding is based in outmoded pop psychology.)
- vbuwivbiu 9y agoIsn't the difference simply that physics has theories backed by reproducible experiments, whereas economics has theories but one can't do such reproducible experiments without an inspectable multiverse to settle all the counterfactuals.
- Finnucane 9y agoWe should stop referring to 'Nobel prize' winning economists, and instead say 'Sveriges Riksbank Prize,' just to take them down a notch.
- princeb 9y agoI guess we could, if the nobel foundation didn't keep giving out the economics prizes at the same award ceremony and put the economics prizes on the same website as all the other prizes.
- Mikeb85 9y agoYes, economics is too mathy in constructing models. At the same time, maths and computation do have predictive power. So you have to discern between academics trying to model the economy, and economists in industry just trying to make short-medium range predictions (and who are generally more accurate).
- rubyn00bie 9y agoThis is crap. For one I find the authors background highly dubious to be writing on economics, philosophy and religion? Yes both are very concrete sciences. /sarcasm Next he says no economists predicted the Great Recession but then references Krugman. Krugman did predict it, he even republished his book predicting it, with a new foreword pretty much saying "I told you so." As well, economic theory did help us in the fallout from the crash. I can't say how my jaw dropped when he alleged it didn't. The issue of economic accuracy isn't the math, it's that people treat it like a belief system instead of a science. Economics should not have politics involved, the science itself has no room for it. Tangentially, I blame religion for this tainting of the science's perception but that's a whole long other conversation. This same problem has affected the "hard sciences" throughout time and still does to date (i.e. Racism and bigotry in biology are still present). Mathematics in economics is highly underrated by those who don't understand it or think for some reason it's malicious. Why? Because they don't understand how feeling and math can go hand and hand. People believe quantifying things is some sort of evil, but is it? Why? If you take enough economics you realize by and large the units people get so hung up on are nearly irrelevant compared to the relationship between them. Those relationships are economic models. Can models can be simplistic-- sure, but the assumptions are there for you on paper listed clear as day (normally). The "rational man" isn't something people take seriously as a reflection of the world in Econ (at least sane educated people don't)-- it's merely a starting point which gives us traction to move forward and see how the real world measures against it. It's not permanent, it's not looked at as real, but it's merely somewhere to get some leverage to move forward. Economics actually helped me understand a great deal of high level mathematics because I was able to "feel" it by looking at economic models. Something I couldn't do from pure math. The ability to talk about the world around us in mathematics is an advantage not a hinderance. Being able to then describe my world using math has a been a very great advanatage for me in life and one I would not underrate. Finally, the author gives no hard examples of its failure but merely quotes some random people to support his claim. There is no real analysis here. The Li he refers to is a shit comparison. He shows no math or statistics and expects his point to be taken seriously. Why? Are the two even comparable? I mean c'mon. It's just the ramblings of someone who doesn't like not being taken seriously academically or is paid less. Economics is hard and it's probably always gonna be that way, taking away the math isn't going to make it easier it's gonna make it even more bullshitty. Ignoring the math will leave gaping holes in your ability to understand and think critically about it. People assume economists haven't figured out how to do things properly. They're wrong. What really has happened is politics and money have shit all over the science and made it difficult for outsiders to find those answers. One of the reasons I'm pro socialism is because that's what the science shows works. The sciences shows how having a gold standard is idiocy and only bothers the ignorant. Libertarians, republicans, and gold bugs hate me for saying that but it's true. I'm tired of ranting and economics on HN is literally worse than Twitter because people think they're educated on the subject so I'll stop right now.
- WheelsAtLarge 9y agoI always thought Economics as a discipline is iffy. On the first day of my Economics 101 class I was introduced to "economic man" or to make it more academic "Homo economicus." According to my professor this is a, "hypothetical person who behaves in exact accordance with their rational self-interest." Not only was he hypothetical but this is how we all behave whether we knew it or not. According to him I had this strange power to make 100% rational decisions. And I didn't even know it. I have never gotten passed that economic principle. And that economist uses it as its fundamental truth. WOW, talk about building on sandy soil. And upon that rationalize it as truth with math. The truth is that like any social science, ideas and behaviors change depending on how the person feels at that moment. There are no fundamental laws that can be found other than those that are needed to stay alive and even they vary depending on the individual's mental state at the time. Economists would do their profession a favor if they treated it as the social science that it is rather that the hard science they profess. A perfect example of advancement in the field is the Nobel Prize given to Daniel Kahneman in 2002 for his and Amos Tversky work on cognitive basis. Their field is psychology, yet they got their prize in economics. No where do you see math as the tool they used to get to their discoveries. Yes, they might have used statistics to refine their ideas but not to find the fundamentals. Yes, you might say that they call their field behavioral economics but the reality is that human behavior is what economists study and as such they should treated it as the soft science it is.
- laaph 9y ago> On the first day of my Economics 101 class I was introduced to "economic man" or to make it more academic "Homo economicus." Of all criticisms you could make, this is pretty iffy. Did you complain in your physics class when they said "calculate speed of an object and assume no air resistance"? Or when they tell you to "consider it as a point mass"? Here they are making the assumptions they work with apparent. You can't define exactly how people are, so we need to make some assumptions. That lets us clarify where and when these things might work or not work, and possibly look for explanations when our results are completely wrong. Imagine if they were to teach the same material, without the disclaimer "this only works if you make the assumption of homo economicus". Any science works with models, and we need to define those models to be able to determine if they are useful or not. "The best material model of a cat is another, or preferably the same, cat." --Norbert Wiener
- RealityNow 9y agoFantastic analogy. Most of economics, especially macroeconomics, is quackery and neoliberal political agendas masqueraded by complex equations and mathematical models divorced from reality. The fact that only a handful of economists saw the recent economic depression is extremely telling. The data is often so aggregated that a lot of the broad conclusions are practically useless. The obsession over maximizing faulty metrics like GDP and the U-3 unemployment rate is ludicrous.
- grenoire 9y agoOf all the topics in which HN has provided me immensely deep insight, its userbase has failed equally immensely in economics. Comments from people who took just one Economics 101 class in college baselessly trashing the field making it to the top of the comment list disappoints me. You know someone has no credibility on the matter when they mention homo economicus, as if it was the keystone.
- chimeracoder 9y ago> Comments from people who took just one Economics 101 class in college baselessly trashing the field making it to the top of the comment list disappoints me. Yeah, as someone who actually has a degree in both computer science and economics, it's really embarrassing to see the level of discourse that pervades threads on economics. It's like seeing an economics student who's taken half an introductory CS class argue that CS is "a fundamentally broken pseudoscience", because they just found an implementation of an O(log(n)) algorithm that was slower than an implementation of an O(n^2) algorithm.
- soVeryTired 9y agoFor you and GP: it's not enough to claim that a criticism is ill-founded. You need to show how it's ill-founded. Your defense in particular sounds a lot like an argument from authority.
- MustrumRidcully 9y agoI have a Ms in Economics and work as an economist. Most of the criticism and debate I see here is quite interesting, and the reflexions of the author of the article are similar to mines after working several years in the field. You fall in the category of people who think that debate about science should be limited to those who know science theory. The problem I saw in the field is that people talking have to much to loose, hence forbidding a reworking of the fundamental assumption and a trashing of the useless models that we keep producing. If you want to do real science, go ask the ones who are practicing economics daily about their heuristics. Nightclub owners figured out their economics interest long before two-sided market theory was out there, after all.
- graycat 9y agoI'm torqued at the economists, but from what I saw in the OP I should be torqued at that, also. The article seemed to say that econometrics or some such was not within their criticism and that, instead, they were criticizing the -- pure, theoretical, mathematical Nobel-prize seeking, etc.? -- economists or some such. Uh, it was not too clear just which brand, type, style, category, etc. of economists they were criticizing. Okay, I'll defend some of the economists! The field of economics is a train wreck, a theoretical, empirical, practical, intellectual, scientific, academic train wreck. E.g., they still have no F = ma (Newton's second law), and their predictions are as bad as those for the weather. Why? Sure, likely like the weather, the economy is darned complicated. Next, it's tough to get good data about the economy, e.g., the usual US Department of Labor, etc. statistics are crude approximations to reality. E.g., for the crash of 2008, it was mostly a fairly closely held secret just how bad so many of the mortgages were, and those bad mortgages were the key to the crash. So, for the 2008 crash, which was over 8 years ago and that we are still pulling out of, that is, has been 2/3rds as long as the Great Depression, we were missing clear views of just the basic data. Outrageous. E.g., at http://www.pbs.org/wgbh/pages/frontline/oral-history/financial-crisis/richard-kovacevich/ http://www.pbs.org/wgbh/pages/frontline/oral-history/financi... see the Frontline interview of Well Fargo CEO Richark Kovacevich with in part: "... when they came to me, I would say: 'This is toxic waste. We're building a bubble. We're not going to like the outcome. I'm very concerned.'" Not many people had enough data to see the problem. Outrageous. Next, emotions, fear, mob behavior, the news looking for headlines all can affect what people do and the economy. So, to do economics as a science is tough. Well people in high end academics are supposed to do research. In the case of economics, they are supposed to try to make a good science out of it. So, they try. In particular, the most respected work in science mathematizes the field. Recently on the news was a remark about something else, but we can use it here: "Ask a Navy Seal how to eat an elephant, and he will say 'One bite at a time'". Well, in trying to make economics a science, in particular, to mathematize the field, about all the high end research academic economists can do is try one bite at a time. So, they do. So, the work has not yet eaten all the elephant, moved all of the mountain, cleaned up all the mess, finished building the castle, etc. So, it's a work in progress. In particular, for the castle, they are still working on the foundation, and so far there is nothing like a roof. So, when it rains, there's no roof and anyone in the castle gets wet. Or, the kitchen just isn't ready to serve good food yet; the land is not cleared, and we are not ready to grow a crop yet. Some of the mathematics I studied for my Ph.D. and some of the math research I did and published is close to some of the math some of the economists have tried to use. So, that math gives me a view of math in economics. For that math, some of it really is okay for some questions about economic things. E.g., optimization, mathematical programming, e.g., linear programming, linear integer programming, actually can and sometimes do save money in some economic, business situations. The academic economists usually call such situations micro economics. So, some decades ago, as such math was developed for operations research or whatever, the math got used by academic research economists. IIRC linear programming was the core math of several Nobel prizes in economics. My view is that linear programming, and optimization more generally, has next to nothing to do anytime soon with predicting, say, the growth in GDP over five years, but one could call that use of math in the research one bite of the elephant, one brick for the castle, one tree stump on the way to clearing the land ready for row crops, etc. E.g., there was a famous paper in mathematical economics by Arrow, Hurwicz, and Uzawa. Arrow won his Nobel prize long ago, and Hurwicz won a few years ago. The paper makes use of optimization, in particular, the Kuhn-Tucker conditions (KTC) of non-linear optimization. So, in grad school, when I was studying the KTC (not much like KFC), I saw a tricky problem, didn't see a solution in the library, did some research, and got a solution. Later when I went to publish I saw that my work also answered a question stated but not answered in the Arrow, et al. paper. Okay. So, alright, in some sense I knew the KTC as well as or better than Arrow, etc. My opinion of the KTC is that they have next to nothing to do with predicting, say, the growth in GDP over five years, but maybe that use of the KTC is a little progress. Maybe that work got some Nobel prizes not because it was especially good work, say, did for economics what Newton did for physics, but because it was the best work in economics the Nobel committee could find that year! So, net, economics is not yet a science; some researchers are trying to make it a science, in particular, to mathematize the field. There is a description of how this research goes: The researcher looks at some math and the economy, makes some simplifying assumptions about the economy, so, has a model of the economy, sees where they can apply that math to that model, makes the application, reads off the consequences for that model economy, publishes the stuff, and hopes for a Nobel prize, at least for tenure, and hopes that their students will do more along such lines. Yes, it's like in freshman physics were we have a frictionless ball bearing and no air resistance and, then, calculate how fast the ball would roll except, e.g., the KTC, much worse. Gee, if the research is really bad, then there should be a big opportunity to jump into the field, get a relatively good salary, maybe get a Nobel, get famous, get high consulting fees, maybe get some adoring coeds, etc. For me? I've got a startup. I've already done the original applied math research and written the software and am eager to go live. If the startup works, I'll be nicely wealthy. So, I'll stay with my startup! Besides, when I tried to study economics, I thought that the subject was so badly done I should just close the book and f'get about it. But once it was suggested that I take a course in economics. So, I did. I showed for the class, took notes, and said nothing. That was the first day with lots of freehand supply and demand curves. After the class, with just the prof and I, I asked him, nicely I thought, just what he was assuming about his curves, continuous, differentiable, continuously differentiable, infinitely differentiable, continuous and differentiable almost everywhere with respect to Lebesgue measure, convex, pseudo-convex, quasi-convex, etc. (or some such). Soon I got a call and was told "You are out of the economics class.". Gee, I was just asking! Gee, those questions were not so bad! For that thing I did for the KTC and the Arrow, et al. paper, part of the work was to show that for the real numbers R, a positive integer n, a set C a subset of R^n and closed in R^n with the usual topology, there exists an infinitely differentiable function f: R^n --> R so that f(x) = 0 for all x in C and f(x) > 0 otherwise. E.g., the Mandelbrot set is closed. So, there's an infinitely differentiable f 0 on the Mandelbrot set and strictly positive otherwise. Instead of the Mandelbrot set, use a sample path of Brownian motion, a Cantor set of positive measure, etc. -- amazing. So, gee, for the Arrow, et al., paper I considered infinitely differentiable!
- mcappleton 9y agoEconomists these days are basically trying to find a way to avoid hard work and thrift. Unfortunately the only way we get better computers is by very smart people working very hard to develop better machines. The only way we get houses is by people building them. And the only way to obtain a net worth is to save more than one spends. However, economists seem to think that with enough money printing, borrowing, and other shenanigans they can somehow get more houses built in the places they are most needed. Of course, it is a joke and wrecks out everybody's wealth in the process. As Hazlitt taught: 'The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.' Anyone interested in clearing through the crud should read Henry Hazlitt's Economics in One Lesson.