My blurb on how I think that the whole "economics is too complex to make neat mathematical models" argument really just tends to assume itself (i.e. the original meaning of question begging) was picked up over at Mike Norman Economics, where it was put in an interesting way. Sociologists et al say economists need to prove economics is not too complex to model and economists say sociologists et al need to prove it is too complex to model.Information Transfer Economics
That is to say we have sociologists and economists making a play for the null hypothesis.
My personal view is that economists should get the null hypothesis in this case, but not for reasons that economists think they should.…
Economics as and versus social science
Jason Smith
2 comments:
The main problem, and I think it is the one that Jason misses as well, is that the 'agents' in this instance are highly intelligent and learn rapidly.
In other words their behaviour changes in response to the policy inputs. So you can't work in the aggregate space without taking into account the agents - because policy works on the agents, not the policy space.
This is the problem with algorithms in financial markets - the anomalies fill in rendering the initial analysis moot.
It's the essence of the Lucas Critique, but of course Lucas tries to tie it into rational expectations with his 'deep parameter' nonsense. What you find when you look for the deep parameters is the same as in the other social sciences. The answer is almost always 'it depends'.
I'd throw another problem in the ring as well. The empirical evidence is wrong.
There is a TV advert out there somewhere where an Indian chap has an advert of a German car and spends ages with a hammer knocking his Indian Car roughly into the shape of the German Car. The idea of course is that everybody wants to have a German shaped car.
The current economy has spent the last 40 years been knocked into the shape of neo-liberalism. It is not the economy you would have without the beliefs. So the data you get will be 'German Car shaped' because you can't escape the filter.
What we have is an economy that has spent 40 years on the rack as the powers that be force every economy in the world to fit the Procrustean bed they have designed.
How do you know the movements of a free man if you can only get data from one in a straitjacket?
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