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Quote: "However, a financial crisis in the Western hemisphere coupled with other macro/socioeconomic factors has lead to a reduction in scientific and engineeri

by lutusp 13y ago

Quote: "However, a financial crisis in the Western hemisphere coupled with other macro/socioeconomic factors has lead to a reduction in scientific and engineering budgets and later-stage investment in such technologies." Translation: The recent worldwide economic meltdown was caused in part by quants' inability to accurately assess investment risks, or to influence decision-making, or both. The fallout was public distrust (justifed or not) of quants and what they do for a living. The bottom line is that reliable quantitative analysis hinges on the degree to which economics is a science. Economics isn't a science. Any questions?

VladRussian2 13y ago
>Economics isn't a science. A science is a method, not a domain or result or anything else. I.e. one can approach economics or medicine or traveling salesman problem using the scientific method, or one can approach it using woodoo.
- lutusp 13y ago
  > A science is a method, not a domain or result or anything else. No, this is false. Science is defined more clearly than this. Science is not a method, it is a set of rules for creating a method. Primary among those rules are a requirement for empirical evidence in support of scientific theories, and falsifiability -- meaning scientific ideas must be testable against reality, and those that fail the test must be discarded. TL;DR: Science is more principle than method. > ... one can approach economics or medicine or traveling salesman problem using the scientific method ... By that reasoning, astrology is a science, because it can be studied using the scientific method. But this is not how science works. For X to become a science, scientific study must support the theories that define X. Explanation here: http://arachnoid.com/psychology/index.html#The_Architecture_of_Science http://arachnoid.com/psychology/index.html#The_Architecture_... Economics is not a science. Title: "10 reasons why economics is an art, not a science" Link: http://articles.washingtonpost.com/2013-08-09/business/41217034_1_economists-economic-data-10-reasons http://articles.washingtonpost.com/2013-08-09/business/41217...
  - VladRussian2 13y ago
    >By that reasoning, astrology is a science, because it can be studied using the scientific method. exactly, one can do pure scientific study of correlation between that star position and people's lives and most probably would find zero correlation - it would be a valid (though practically useless given current state of science in related areas) scientific study in the domain of astrology. That domain happens to be full of non-scientific results and statements while has no useful non-trivial scientific results known. Thus people label the domain as 'non-science'. Economics has a lot of both.
  - notahacker 13y ago
    The problem with rejecting economics' claim to be a science on the basis its underlying assumptions survive even as models based on them are usually out by a few percentage points (and under certain circumstances give counterintuitive results) is that you'd probably have to throw a lot of natural science with the bathwater. Physics is the exception rather than the rule for the accuracy and robustness of falsifiable predictionswhilst medics - like economists - are left with statistical tests, ad hoc explanations of confounding factors and a raft of exceptions that arguably falsify claims as uncontroversial as "drinking in excess is bad for your health". On the other hand, unlike astrology or homeopathy neither discipline is afraid of testing its assertions against a null hypothesis.
    - michaelt 13y ago
      As I understand it there are several 'schools' of economics which use different models and which council different responses to the recent financial crisis - sometimes completely opposite responses. I'd be more inclined to consider economics a science if, of the multiple contradictory models, all but one had been falsified. Personally I don't consider social sciences to be real sciences for the same reason. If you want to say economics is a social science I would agree with that.
    - konstantintin 13y ago
      most economists are not very serious about testing their models. this is reflected in the way the subject is normally taught.
brown9-2 13y ago
I think you are mixing up finance and economics.
vijucat 13y ago
Blaming quants for the economic crisis is like blaming programmers for the 2001 tech bubble. In both cases, there's a decision maker to whom the quant/programmer reports, an executive who decides which boat the company wants to float. The engineer's role is just to inform his/her manager that, "Uh, boss, this boat will probably sink. We shouldn't be claiming otherwise". The manager's response in both cases was to say, "Shut up and do your job, we'll go to IPO with just a business plan / we'll sell so many CDOs just the commission is going to make us millionaires. Fuck consequences". If you want to blame someone, I believe you need to look at the executives who took the decisions. This meme of "the quants did it" is a bit ridiculous, and it irritates me because it successfully removes attention from the real culprits. Be honest : you have never worked on Wall Street. This is just some opinion that you picked up from your favourite newspaper or conspiracy web site.
- lutusp 13y ago
  > Blaming quants for the economic crisis is like blaming programmers for the 2001 tech bubble. I should have blamed trust in quantitative analysis. That would have been more fair, and it was the point I was trying to make. My shorthand way of saying it may have given the impression that I was speaking of the analysts, not the idea of analysis. > Be honest : you have never worked on Wall Street. Be honest -- where I have worked isn't the topic. And if I had worked on Wall Street, that would represent a much better justification for doubting the merit of my views.
barrkel 13y ago
Translation: The recent worldwide economic meltdown was caused in part by quants' inability to accurately assess investment risks, or to influence decision-making, or both. Part of the problem is the science has a feedback effect; theories based on observations change actors' behaviours, which in turn breaks the theories. So macroeconomics is not on very solid ground as a science. It would work better if it were performed by aliens. The bottom line is that reliable quantitative analysis hinges on the degree to which economics is a science. Economics isn't a science. I think you're confusing macroeconomics with economics.

by lutusp 13y ago

VladRussian2 13y ago

>Economics isn't a science. A science is a method, not a domain or result or anything else. I.e. one can approach economics or medicine or traveling salesman problem using the scientific method, or one can approach it using woodoo.

lutusp 13y ago
> A science is a method, not a domain or result or anything else. No, this is false. Science is defined more clearly than this. Science is not a method, it is a set of rules for creating a method. Primary among those rules are a requirement for empirical evidence in support of scientific theories, and falsifiability -- meaning scientific ideas must be testable against reality, and those that fail the test must be discarded. TL;DR: Science is more principle than method. > ... one can approach economics or medicine or traveling salesman problem using the scientific method ... By that reasoning, astrology is a science, because it can be studied using the scientific method. But this is not how science works. For X to become a science, scientific study must support the theories that define X. Explanation here: http://arachnoid.com/psychology/index.html#The_Architecture_of_Science http://arachnoid.com/psychology/index.html#The_Architecture_... Economics is not a science. Title: "10 reasons why economics is an art, not a science" Link: http://articles.washingtonpost.com/2013-08-09/business/41217034_1_economists-economic-data-10-reasons http://articles.washingtonpost.com/2013-08-09/business/41217...
- VladRussian2 13y ago
  >By that reasoning, astrology is a science, because it can be studied using the scientific method. exactly, one can do pure scientific study of correlation between that star position and people's lives and most probably would find zero correlation - it would be a valid (though practically useless given current state of science in related areas) scientific study in the domain of astrology. That domain happens to be full of non-scientific results and statements while has no useful non-trivial scientific results known. Thus people label the domain as 'non-science'. Economics has a lot of both.
- notahacker 13y ago
  The problem with rejecting economics' claim to be a science on the basis its underlying assumptions survive even as models based on them are usually out by a few percentage points (and under certain circumstances give counterintuitive results) is that you'd probably have to throw a lot of natural science with the bathwater. Physics is the exception rather than the rule for the accuracy and robustness of falsifiable predictionswhilst medics - like economists - are left with statistical tests, ad hoc explanations of confounding factors and a raft of exceptions that arguably falsify claims as uncontroversial as "drinking in excess is bad for your health". On the other hand, unlike astrology or homeopathy neither discipline is afraid of testing its assertions against a null hypothesis.
  - michaelt 13y ago
    As I understand it there are several 'schools' of economics which use different models and which council different responses to the recent financial crisis - sometimes completely opposite responses. I'd be more inclined to consider economics a science if, of the multiple contradictory models, all but one had been falsified. Personally I don't consider social sciences to be real sciences for the same reason. If you want to say economics is a social science I would agree with that.
  - konstantintin 13y ago
    most economists are not very serious about testing their models. this is reflected in the way the subject is normally taught.

brown9-2 13y ago

I think you are mixing up finance and economics.

vijucat 13y ago

Blaming quants for the economic crisis is like blaming programmers for the 2001 tech bubble. In both cases, there's a decision maker to whom the quant/programmer reports, an executive who decides which boat the company wants to float. The engineer's role is just to inform his/her manager that, "Uh, boss, this boat will probably sink. We shouldn't be claiming otherwise". The manager's response in both cases was to say, "Shut up and do your job, we'll go to IPO with just a business plan / we'll sell so many CDOs just the commission is going to make us millionaires. Fuck consequences". If you want to blame someone, I believe you need to look at the executives who took the decisions. This meme of "the quants did it" is a bit ridiculous, and it irritates me because it successfully removes attention from the real culprits. Be honest : you have never worked on Wall Street. This is just some opinion that you picked up from your favourite newspaper or conspiracy web site.

lutusp 13y ago
> Blaming quants for the economic crisis is like blaming programmers for the 2001 tech bubble. I should have blamed trust in quantitative analysis. That would have been more fair, and it was the point I was trying to make. My shorthand way of saying it may have given the impression that I was speaking of the analysts, not the idea of analysis. > Be honest : you have never worked on Wall Street. Be honest -- where I have worked isn't the topic. And if I had worked on Wall Street, that would represent a much better justification for doubting the merit of my views.

barrkel 13y ago

Translation: The recent worldwide economic meltdown was caused in part by quants' inability to accurately assess investment risks, or to influence decision-making, or both. Part of the problem is the science has a feedback effect; theories based on observations change actors' behaviours, which in turn breaks the theories. So macroeconomics is not on very solid ground as a science. It would work better if it were performed by aliens. The bottom line is that reliable quantitative analysis hinges on the degree to which economics is a science. Economics isn't a science. I think you're confusing macroeconomics with economics.