Wednesday, March 16, 2016

Jason Smith — Derp genera

We could easily recognize whatever comes next has never been compared to empirical data -- and never will be because the priors are too strong.
I doubt the issue lies chiefly with the priors being too strong. The problem is no adequate framework to approach the subject matter and a lack of methodological understanding. Science is basically about applying a method to a subject matter. The issue seems to lie with the subject matter, specifically the type and amount of information, which so far has eluded capture in terms of any framework at all that satisfies the requirements of science — formal consistency, generality of explanation, and predictive results based on empirical corroboration. Methods that have proven productive are limited to study of special cases under specific restrictive conditions.

This applies to the social sciences, too, where there is no general theory based on empirics that explains "human nature" or human action in general terms, let alone one that has been formalized. These sciences, along with management science, have adopted a case approach or a study approach rather than a theoretical one that seeks to provide a general theory in formal terms that generates hypotheses that are testable empirically.

Thus the level of explanation and prediction here is entirely different from the physical sciences and life sciences. But even the life sciences are categorically different from the physical sciences owing to the difference of subject matter.

When the Russians shocked the world with Sputnik, JFK countered with a space program to put a man on the moon. Figuratively speaking, he hired scientists who knew how to do it and provided them with all the resources they needed to do it a fast as possible. The rest is history. It's didn't take very long and it was extremely successful, even though the challenges were great and the tolerances tight.

No country has been able to do anything similar with respect to its economy and financial system, let alone at the level of the global economy. The expertise is just not there. So different schools dispute among each other over alternatives without being able either to prove their point based on empirics or to get the job done credibly over time.

The Great Moderation became The Great Recession that is still going on globally. Instead of the end of the business cycle, economists are now arguing over "secular stagnation" and "the end of growth."

Economists should just admit that they are largely guessing about the things that actually count.

Some time this as implying that governments should discontinue being involved in economic policy at all and turn money creation over to the private sector to be handled by the invisible hand of the market. But this assumes that there is an invisible hands that spontaneously leads to the emergence of natural order as on autopilot. That's a pretty strong prior, too.

Information Transfer Economics
Derp genera
Jason Smith

No comments: