Thursday, June 2, 2016

Jason Smith — Economics is wrong, therefore (by analogy) physics is wrong


Jason Smith absolutely eviscerates Megan McArdle.

Information Transfer Economics
Economics is wrong, therefore (by analogy) physics is wrong
Jason Smith

179 comments:

Bob said...

Some of the climate predictions will turn out to be wrong. This has to do with the number of differing predictions, not with physics per se.

After reading both articles, there appears to be a lot of projection going on from Mr. Smiths' end.

Tom Hickey said...

Why not go over to his place and school him about where he is wrong?

Bob said...

Why doesn't he go over to the article in question and post his rant there?

Kain said...

Meghan McArdle is simply terrible.

Bob said...

This is a link to the source of the spat:
http://www.coyoteblog.com/coyote_blog/2016/03/denying-the-climate-catastrophe-1-introduction.html

Matt Franko said...

Tom,

Maybe the global warming is being caused by a vast "neo-warmer conspiracy!" ?

Or maybe the warm is the "xenophobia!" to the cold?

Maybe somebody should write a book chronicling the history of how the warm has shrewdly operated over the recent decades to overcome the cold?

Bob said...

Too much hot air from Trump has cooked our goose.

Matt Franko said...

Neither Smith nor McCardle appear trained in the area of Systems Theory or Systems Design or Systems Operations/Regulation/Control..

Ryan Harris said...

If the measurements don't fit the model, what should be done by scientists (or economists) (or physicists)?
Fix the model to lower the sensitivity of response to CO2 lower maybe?
Becoming bombastic and accuse skeptics that point out problems of being terminal fools?
Change the measurements because they don't fit?
Look for confounding variables?
Complain about economics, vagaries of climate science and retreat back-to-envelope?

I don't understand why it is so controversial to say something like IPCC CMIP 5 model output doesn't work when is isn't fitting. It's not a matter of politics, it just doesn't fit, period. Going back to back-of-envelope is ridiculous, If you don't believe the measurements, well, there isn't alot we can do to help you with your quest. If there were other signs of increasing rate of ocean rise, artic or antartic ice outside of normal variability and ranges, desertification, more severe storms, anything...to support the claims that the measurements were wrong, maybe, but there just isn't any reason to think there is a "disasterous" outcome looming. We know that models above about 2.5 degree sensitivity are completely wrong. 2 degrees looks to be accurate but it could be lower. Does that really imply "disaster?" Not at all.

Frustrating. You can't really reason with these people, it's not about data but about the emotion of saving the planet, feeling empowered, and being enlightened in a dark world to feel power or something very basic in the human psyche.

Ryan Harris said...

Christian Religions used to provide a simple narrative, like climate change catastrophe that allowed people to feel like they were actively participating to make the human community better and to save depraved souls from eternal damnation. Perhaps the demise of religion has left many of these people without an emotional outlet for their isolation and powerlessness that is part of being so they channel their frustration into this fantasy about climate doom. The parallels to christian concepts like judgement day, heaven-bound enlightened and hell-bound bound degenerates is striking. Alot of older men and young people get very passionate, fundamentalist about it as well which is a similar demographic to religion extremism.

Tom Hickey said...

Warming is being caused by carbon emissions, as Jason argues, and that results from capitalism through negative externalities — capitalize the upside and socialize the downside.

Tom Hickey said...

Btw, negative externalities is a type of economic rent as a cost that is socialized.

Ryan Harris said...

The vents on every rooftop from household toilets release a continuous stream of methane and sulfur into the atmosphere. Capitalizing the upside and socializing the downside? **All** energy consumption produces heat and pollution, including our bodies. **ALL ENERGY PRODUCTION AND CONSUMPTION.** ALL The type of pollution you produce for your favored energy use activity is OK, but my pollution is not ok. What people favor is highly biased. My point is there are normative values being applied along with a christian theme narrative. The values need to be exposed, explored and discussed without all the nasty divisive rhetoric of the left-elite.

Tom Hickey said...

The way to deal with socializing the downside is taxing negative externality, or just prohibiting it.

For a long time the engineering solution to pollution was dilution. Now that the sinks are filling, that option is closing.

Ryan Harris said...

If they only look at C02, on the back of envelope, and ignore everything else.... then they can make bold proclamations about pollution. Sounds familiar, right? Economists love this stuff. Someone in India burning cow dung for cooking surely is better off burning propane or kerosene than cow dung (particulates and aerosols from dung/wood fuels kill people) even though cow dung is "renewable." Maybe climate change is an elitist worry as it is applied to others? George Carlin had a nice way with humor to show the normative hypocrisy of these economic analysis of environment by economists.

Tom Hickey said...

Where science comes in is measuring negative externality, and where economics enters is putting a cost on it. Then it's up to policy makers to deal with it, and they will only do so if an informed public demands it. So count on that information not being gathered or else either distorted or suppressed.

Ryan Harris said...
This comment has been removed by the author.
Ryan Harris said...

So true, we can't measure, because we get called terminal-fools by people that don't even realize they are being capricious. I'm not sure there is much hope, how can you tax carbon from fossil fuels without raising prices and causing people to use things like dung and wood that cause deforestation... these are difficult problems. Indian cooking fuel will offset all the savings americans do with solar panels and wind turbines. But then not cutting down trees for heat and cooking will cause a greening of India similar to what we've seen in the US, China and Europe as cheap fuels distribution happened. It's complicated. But to a Democrat or Green Economist it can all be summarized in two words: Exxon lied. That stupidity just fries my brain. Republicans close their eyes and pray.

MRW said...

Jason Smith’s article is BS, imo.

Ignacio said...

Nothing will be done, there is just too much interests at stake and humans are fixated with the short term.

You should focus on the permafrost and not on current volumes in the atmosphere IMO, not that it matters much anyway.

There is a whole industry in the making to provide 'eco-services' to make the planet habitable in the future, governments will pay for it and capitalists will profir from it.

Maybe oil companies can be retrofitted and changed to provide such services in the future (like BP), and continue their rent extraction schemes.


We have inadequate governing systems for thousands of millions of humans, our social systems only evolved to deal with locality and small societies, this all is waaaaaay over our head, and only the idiots in the top think it's fine,because they are on the top.

Good game.

Ignacio said...

Th first steep to fix a problem is acknowledging your limitations in the understanding of the problem, how many people is actually doing this?!

All camps involved are engaged in irrationality and ideology. Is again a battle of "moralism" and "who is right" instead of a battle of "what works vs. what doesn't". Is hilarious because is the same crap both in economics and 'climate science'.

When morality and ideology are involved we are not solving problems, we are projecting power against the "other" trying to defeat him.

Ryan Harris said...

This is what irritates me, Ignacio! Understanding the way humanity develops, right, A guy named, John Bannister Goodenough from Bell Labs invented the Lithium Ion Battery. Then an Exxon scientist named Stanley Whittingham produced the first rechargable lithium ion battery. They produced communications at Bell, but they also produced scientists and some of the very best science in the world. And one of the most productive and cutting edge battery labs in the world now is run by Linda Nazar, it is funded by energy giants, chemical giants, university and government sponsored research and other industries that will benefit from selling batteries. Linda Nasar is a former Exxon scientist and she has produced a couple hundred top notch scientists that work on the tech all around the globe. But this is how humans always develop. Exxon or Bell isn't responsible for doing anything besides producing communications or oil but they do produce knowledge and people as a positive externality that move on to produce the next great thing. It drives me crazy when people like Jason Smith rant about climate alarmism by taking everything out of context. He probably works for Boeing, on jet planes or something. Or software that sucks down electricity. Or is just political populist like Sanders or DrJill Stein display their ignorance of history when they summarize the "climate problem" into two words: Exxon lied. People deserve better leadership that doesn't encourage extremism, scape-goating and other populism but encourages real progress using progressive principles.

Tom Hickey said...

Jason Smith’s article is BS, imo.

No one has challenged Smith's argument in the comments over there yet. Here's your chance to be first to show him what's what.

Tom Hickey said...

Nothing will be done

I was recently reading something to the effect that historically challenges are never dealt with until they become so pressing as to require addressing. The article was about contemporary challenges that are rising are so great as to be existential threats by the time they are widely enough recognized to be addressed. As the challenges increase, at some point one is not going to able to be addressed effectively, and the result could be a mass culling of the global population.

Matt Franko said...

Interesting from Taleb here:

https://twitter.com/nntaleb/status/738475334748766208

"What are we measuring?
Clearly, the dose (represented on the x line) is
hardly ambiguous: any quantity can do, such as
pressure, caloric deficit, pounds per square inch,
temperature, etc.
The response, harm or benefits, f(x) on the other
hand, need to be equally precise
, nothing vague,
such as life expectancy differential, some index of
health, and similar quantities. If one cannot express
the response quantitatively, then such analysis cannot
apply."


(BOLD mine...)

You simply CANNOT make predictive statements without examining Derivative Action (of a Function)... otherwise it is trial and error...

Tom Hickey said...

Matt, keep that in mind the next time you go to the doctor and they prescribe something or recommend a treatment.

Seriously. If am prescribed something or a vaccination recommended, I ask about the research. The doctors generally know about it pretty much in detail. I would say if one's doctor cannot discuss it in depth, look for another one.

On, and don't forget to do your own research online, but remember the doctors have access to research databases you don't.

And then query the pharmacist, too. Most of them are up on the research also.

Ignacio said...

Most human work is a derivative oh trail and error, even in engineering there is a huge deal of it, within safety margins. We know very little, about everything, in general. Good bringing up medicine, as the science behind it is many times dubious at best.

Trial and error is an epistemic necessity of lack of true knowledge, we will never get rid of it, get on with it.

"He probably works for Boeing, on jet planes or something. Or software that sucks down electricity."

This is the greatest tragedy of 'nothing will be done', many times those doing most of the preaching have their personal carbon footprints through the roof. We are trying to unload the problem on others back and see who gets away with it, this is why "nothing will be done".

Matt Franko said...

Well fortunately I have never had to go to the doctor... (other than for occasional antibiotics)

But Tom the other day I took my son in and they wanted to give him FOUR shots! in one day!... (time domain...)

I said NO! (only 2...)

We will go back in a month or two for the others...

But I hear 'ya.... you have to wonder about a lot that is out there seeing what we see in the economics realm...

Ryan Harris said...

Why? his position is fairly clear, though obviously muddled.

Kaivey said...

Choose your experts with care, I say.

Kaivey said...

The latest research shows that cellphones really do cause brain tumors after all.

Kaivey said...

The Right elite are a lot more powerful.

Kaivey said...
This comment has been removed by the author.
Kaivey said...

But mainstream economics isn't science, it's rightwing propaganda. Obscure the facts with with maths, and ordinary people can be hoodwinked.

Tom Hickey said...

Microwave News
News Media Nix NTP Phone Cancer Study; “Don’t Believe the Hype”
Are More People Getting Brain Tumors?
GBMs, the Most Virulent Type, Are Rising

Kaivey said...

Industry pollutes a lot more than me.

Kaivey said...

A uk physicist was developing microwave weapons during the 60's and 70's and the army was beaming the waves into the soviet union. He said they were inducing cancers in Russian officials without them knowing. But when mobile phones came out he couldn't believe it, they were using the worst microwave frequencies, he said. He is now on a mission to warn the world. He seemed to be a very worried person.

He scared the life out of me, and I had just bought a Windows 10 tablet as well and was loving it. So I zoomed around the net and found out he had it wrong. Phew!

But now this new research has come out and it seems that he is right after all. I just hope it's not as bad as he says. I will have a look for him on the net and I will put out here some of his videos when I find them.

MRW said...

No one has challenged Smith's argument in the comments over there yet. Here's your chance to be first to show him what's what.

Why? More important things to do with my time.

The last IPCC AR5 explained that models like CMIP5 treat all variables in the models as linear processes; it’s the nature of models. However, in another chapter (might have been Chapter 9 in WG1 doc) they stated emphatically that the climate system is chaotic and nonlinear, the future cannot be accurately predicted. I looked for these quotes last night. I clipped them. Can’t find them. [Besides, read what NASA's International Satellite Cloud Climatology Project (ISCCP) said about models here: http://isccp.giss.nasa.gov/role.html#COMP_MODS. Scroll down to the two-paragraph section, "Cloud Climatology: Computer Climate Models.” Read them.]

Keynes said a similar thing about economics. He rejected uncertainty. He said that the future cannot be predicted on the probability distributions of the past.

The IPCC report is 1500+ pages long. No one read it. Did you? Did anyone here? I did. You think the NYT climate guy got any further than the summary report, itself 100+ pages? As Warren says when describing the Fed: the worker bees in the basement know how the accounting works. The political appointees have no clue, and the Fed economists know it. The AR5 Synthesis Report was written--finally approved--by appointees in Sept. 2014 after a contentious weekly all-nighter. Many scientists who contributed to the full report objected to what these appointees swept under the rug to go along with the prevailing climate agenda, and what they changed, but they were overruled. And furthermore, ridiculed by climate change advocates, ie: political science types, and know-nothing reporters—none of whom have a single hard science course under their belts (Bill McKibben is a glaring example)—as deniers.

So Jason Smith can wallow in his ignorance.

I don’t like Megan McArdle (sp?) but I didn’t have a problem with her article at all.

Tom Hickey said...

All you have to do is cut and paste this in his comments.

MRW said...

@Kaivey,

Calm down. It’s one guy. How many cellphones are there in the world? How much has cancer, relative to the increase in the population, increased?

This same radiation is used to cure cancers as well.

MRW said...

All you have to do is cut and paste this in his comments.

I don’t even know who the hell he is. Should I?

MRW said...

Smith strikes me as another Huckster guy (Michael Hoexter), the insufferable climate/marketing/linguist pedant on neweconomicperspectives who drove me from the place.

MRW said...

Kaivey, the GAIA guy--another Brit--was just as impassioned about how we’re all going to fry until he was 92. Then he recanted and said he was wrong.

Hicks did the same about the ISLM economic model but he died before he could get a full explanation out.

MRW said...

Tom, by way of explanation: when I contribute to a blog’s comment section, it is because I have studied the blog host’s writings and works. I spend a lot of time making that determination. It is not a willy-nilly, let’s show off and bluster, need on my part. I contribute to very few blogs.

Six said...

I don't know that radiation really cures cancer. It can be used to treat cancer ... It can kill cells or alter cancer cells so they no longer divide and eventually die. It does the same with non-cancerous cells also, and it can also alter them so they become cancerous. Sadly, when ever I read an article about a cancer "cure", it often adds a couple months to your life and makes the patient miserable.

MRW said...

I don't know that radiation really cures cancer. It can be used to treat cancer

You’re right. You’re more specific, which I wasn’t.

MRW said...

Radiation kills all cells, good and bad. The body has to rebuild the healthy ones.

Tom Hickey said...

Jason Smith has been looking at economics from the point of view a physicist. He has a PhD in physics and works in a non-academic position.

He is interesting for two reasons.

First, he has proposed a new approach to modeling in economics based on information. That is chiefly what his blog is about, and it might be interesting to some here on that score.

Secondly, he critiques economics based on modeling in physics. Economic modeling is something that is germane to this blog since MMT uses a non-standard type of economic modeling called stock-flow consistent modeling based on accounting.

The post above is peripherally about climate change. It is chiefly about modeling claims that McArdle made at Bloomberg comparing economics and physics. Smith's point is that she doesn't have a clue about it.

In the process of making that point he says some things about physics and climate change that he regards as non-controversial and that anyone who understands physics would not disagree with. regarding basic parameters. Complexity and the rest doesn't enter into it at that level.

In one case, the fundamental theoretical principles of the micro theory are known and tested to multiple decimal places; and in the other there are completely false assumptions of rational utility maximizing behavior and Calvo pricing.

Knowing the micro theory allows you to theoretically isolate variables to study the macro theory. Therefore there is no requirement about experiments isolating one variable at a time. If there was, astronomy would be in some pretty serious trouble because it can't isolate any variables.

In my personal opinion, this claim rises to the level of requiring a retraction of the article. It's like claiming 2 + 2 = 5; it's completely wrong….

In physics (and the natural sciences in general), there is a principle that we call "naturalness" where we use scales to understand the system. The choices for your dimensionless coefficients (numbers without units, having been removed by identifying scales) in your theory are restricted to the set of 0, 1, or infinity. You can think of infinity as the "dual" of zero that tells you that one-over your dimensionless number is zero. Choosing some other number -- like a thousand or a ten-thousandth -- requires an explanation. That's at the heart of the hierarchy problem as well as the strong CP problem in physics (they're sometimes called fine-tuning problems).….

This naturalness principle allows you estimate the effects of perturbations to variables without necessarily controlling the other ones.

In traditional economics [1] there is no such principle because coefficients could have been chosen by human decisions, bureaucratic inertia, or through some strange socio-political process (think 2% inflation). You can't make estimates of theoretical effects in economics because you can't isolate scales (almost everything is dimensionless except time) and use naturalness arguments.

McArdle's argument is that because economics has no scales, naturalness, or fundamental theory, physics (by analogy) has no scales, naturalness, or fundamental theory. Using that argument you could say that because economics is not empirically successful, physics (by analogy) is not empirically successful. I hope the sheer idiocy of making such a stupid argument is clear.


In making this argument he uses example from climate science. If you think he has that wrong, why not say (argue) specifically where he goes off the rails.

Tom Hickey said...

Kaivey, the GAIA guy--another Brit--was just as impassioned about how we’re all going to fry until he was 92. Then he recanted and said he was wrong.

He recanted but it turns out he was not wrong after all. Scientists are now acknowledging that warming taking place faster than the single variable models predict apparently because of the knock on effects of feedback that are too intractable for modeling.

Matt Franko said...

"MMT uses a non-standard type of economic modeling called stock-flow consistent modeling based on accounting."

Ex post data...

This is like what McArdle says here:

" because the models failed to outperform mindless trend extrapolation -- or as Kevin Hassett once put it, “a ruler and a pencil.”

SFC "models" do the same thing... it becomes "trial and error" at that point....

That's maybe why we can see Goldman's inaccuracy of late... if a lot of their calls are based on the Godley SFC type ex post stuff...

all you can do with ex post data is compare it to some "setpoint" or perhaps "target" over the same ex post time interval and make a correction based on that comparison....

When Mcardle says here: "but the problem was not really the computers; it was that the variables were too many, and the underlying processes not understood nearly as well as economists had hoped."

Its not only that they dont understand the process but they are inappropriately using ex post data to make projections which you cant do... this is a basic non-understanding of appropriate mathematical techniques...

Taleb makes a similar point in my reference above here: " If one cannot express the response quantitatively, then such analysis cannot apply."

so you follow the SFC stuff in making judgements about future events at your peril... as it would have to be trial and error eventually you are going to make an error...

Tom Hickey said...

For those interested in a scientific point of view, Jason Smith discussed SFC in this post, Post Keynesian blues

Scroll down to "What's up with stock-flow analysis?" and "Accounting may not be terribly useful for economics."

Bob said...

McArdle's argument is not that "physics is wrong" but that certain predictive models can be wrong. This shouldn't be controversial or come as a surprise to anyone.

McArdle references an article by a climate skeptic named Warren Meyer. The "lukewarmist" position is not that physics is wrong but that the evidence to date is lacking.

Instead of projecting arguments onto other people, he could post his critique in the comment section of those articles. Posting it on his blog is not going to attract an audience, let alone spark a discussion.

As for the climate models, they have a range of outcomes covered, from 2C to 6C. They can't all be correct, now can they?

Tom Hickey said...

As for the climate models, they have a range of outcomes covered, from 2C to 6C. They can't all be correct, now can they?

No and that is part of the campaign to deny there is any emergent problem that needs to be dealt with now. At least some of the deniers select either lowest and say that we can live with 2C, assuming it is stable and not increasing, eg, owing to knock on effects that are not well understood, or else question all the models.

The media, being fair and balanced, presents all arguments on the same level and most partisan promote the models that promote their views.

As I have said many time, regardless of the climate debate, the results on in on the health effects of pollution, and the costs are enormous. That alone is argument enough to address the negative externality of effluence for economic reasons alone.

Tom Hickey said...

BTW, I did look over at Bloomberg in the comment section for McArdle's article yesterday. There were already over 2000 comments, so I gave up on wading in.

Tom Hickey said...

Jason Smith:

Megan McArdle makes this seriously flawed analogy:
"Economists can't run experiments in which they change one variable at a time. Indeed, they don't even know what all the variables are. ... Because climate scientists, like the macroeconomists, can’t run experiments where they test one variable at a time, predictions of feedback effects involve a lot of theory and guesswork."


Smith says false equivalence, and points out how economics and physics are not in the same ball park wrt to modeling because measurement and scales.

Tom Hickey said...

Classical is determinative, equations can be written in terms of functions, and precise hypothesis can be formulated for testing against measurement. Physical models are constrained by tractability.

This is not the case in economics or other social sciences which are therefore chiefly stochastic, which is to say approximations. The problem in econ is not tractability but the ability to measure.

This goes to the heart of the Cambridge capital controversy, for instance, where K can't be measured. It's also an issue in the Walrasian natural rate, which also cannot be measured because it is conceptual. Calling it "natural" doesn't make it so in the sense of natural science.

Bob said...

Up to 2800 comments at Bloomberg... perhaps one of them will accuse McArdle of arguing that physics is wrong.

Smith says false equivalence, and points out how economics and physics are not in the same ball park wrt to modeling because measurement and scales.

There are no useful economic models?

Tom Hickey said...

here are no useful economic models?

Micro.

Macro not so much if "predictive" is meant by "useful."

Bob said...

It may be easier to make general predictions that are less useful.

Matt Franko said...

some might have been useful when we were under gold... but now I have to agree with Tom... ie no imo....

"models" are not we we need now we need "functions" under a numismatic system....

Bob said...

Is Bill Mitchell's employment buffer stock a function?

Matt Franko said...

Hey poor gal is taking a lot of incoming here:

http://www.bloomberg.com/view/articles/2016-06-02/a-sad-fact-from-today-s-bag-of-hate-mail

sheesh....

Matt Franko said...

no but the price of the wage would probably be a 'dimension' in some specific function used in association with the regulation of the JG...

and perhaps related I'm not looking for any "General Theory" ... I dont understand why anyone would be interested in such a "general" thing.... doesnt make technical sense...

We should regulate a JG within the Dept of Labor... the people then at Labor Dept would regulate the JG via the use of some 'function(s)'...

Tom Hickey said...

The primary rationale for a JG is that it is the "right" thing to do morally and socially.

What the compensation for an hour of unskilled labor should be as a benchmark is a math problem for econ to solve.

Tom Hickey said...

Matt, "writing a function" is what Taylor rules attempt to do.

Tom Hickey said...

http://www.bloomberg.com/view/articles/2016-06-02/a-sad-fact-from-today-s-bag-of-hate-mail


Climate change is a hot button issue that brings out the nutters on both sides.

Matt Franko said...

Bob first you need the policy... then the implementation...

The 'functions' are not used in policy formation...

iow the authorities have to first agree that we will build the bridge and then the implementation starts.. so we would need the JG policy FIRST ... then we would just get qualified/non-moron people involved for the implementation/operation who would accordingly use correct mathematical methods...

Matt Franko said...

Probably too general Tom and get the causality backwards under our now numismatic system but I'll look into those things...

MRW said...

Did anyone here watch Paul Davidson eviscerate Paul Samuelson for claiming that in order for economics to be a ‘science’ like physics, and therefore respected, it had to create and use models like physics does? otherwise, economics was just a social science and history.

The Appendix of his latest book is an absolutely delicious takedown of Samuelson for his presumptions, and the history he gives highly enlightening. I can make it available online if anyone interested. I PDF’d it out of my kindle copy of the book.

He called Samuelson a 19th economist who knew nothing about Keynes and who, in fact, admitted in an 1989 interview that he never understood Keynes and didn’t find it useful to read past chapter 16. Samuelson said he didn’t know what Keynes was writing about.

MRW said...

Yet Samuelson is considered keeper of the Keynes’ flame.

Malmo's Ghost said...


I'm a denier and in damn good company too:

http://blog.nj.com/njv_paul_mulshine/2013/04/climatologists_are_no_einstein.html

https://wattsupwiththat.com/2013/09/09/97-climate-consensus-denial-the-debunkers-debunked/

Tom Hickey said...

I'm not looking for any "General Theory"

For a general theory, some overarching framework is required, like conservation in physics. There isn't anything like that in economics and other social sciences. In addition, as Samuelson noted, ergodicity is required for formulating equations as functions.

In econ and the social sciences it's pretty much distributions and deviations (stochastic) rather than differentials.

Does anyone think that complementary laws can be expressed in terms of calculus as general theory in econ or the social sciences?

Stochastic differential equations maybe.

DIFFERENTIAL EQUATIONS (Social Science)

Bottom line:

Strictly speaking, in the realm of the social and economic sciences, applications of differential equations and systems of them are only approximations, because the state variables of social and economic systems cannot undergo continuous changes [as natural systems can].

Ignacio said...

Any chaotic system is impossible to predict, you can't write functions about them, are intractable problems hence you have to relay on stochastic methods and 'trial and error'.

We can't treat every problem deterministically because an information and computation deficit. This creates a space problem over which heuristics take over, "morality" and "ideology" are codename for heuristic (which is by definition, biases) solutions.

At core this is a problem about intractability and combinatorial explosion.

Matt Franko said...

Tom, Economics is NOT a social science... other social sciences like Psychology, etc maybe yes are "social sciences" I guess...

"house management" how is that a "social science"?

We already have the Work Breakdown Structure with the govt departments... Defense, Education, Agriculture, Treasury, Transportation, etc...

You just appoint qualified/non-moron ministers to each area and operate/regulate those functional areas via regular normal run-of-the-mill scientific methods whereby math is always involved... hopefully correct math if you hire qualified/non-moron people in the ministries...

MRW said...

Tom,

He recanted but it turns out he was not wrong after all. Scientists are now acknowledging that warming taking place faster than the single variable models predict apparently because of the knock on effects of feedback that are too intractable for modeling.

But the feedbacks are GUESSES by the modelers, Tom. They are not facts. Positive feedbacks are currently assumptions. And they are measured as anomalies against a mean. But guess what? The mean (using 1950-1980) was estimated, based on station measurements that were captured haphazardly worldwide.

Climate science is the only science that uses anomalies, not real observable temperatures. A temperature anomaly is when you subtract the average temperature (in a baseline range) from real temperature data.

There’s just one problem: the “average temperature” of the baseline everyone uses was made up (scientists adjusted to this mean since 1979 and have agreed to it). There are no reliable global temperature records except for discrete regional climates (like Central UK for 400 years, and weather stations in the US) before the start of the satellite era in 1979, the lauded start of “record history” in headlines. So the 1950-1980 baseline was guessed at. NASA GISS says so. It says that it subtracts a subjective “best estimate for the global mean for 1951-1980.” Not only that, government ‘scientists’ (Karl) are going back and changing those monthly archival anomalies without explanation which is making the past colder than the present, and real climate scientists worldwide who use this base data in their models are furious with the US government for permitting this.

I don’t the time or energy to go through my gigs of papers to prove it to you, but i will if you insist. I could show you a copy of NASA’s 2011 “GLOBAL Land-Ocean Temperature Index in 0.01 degrees Celsius base period: 1951-1980” text file (actually 1880 to present), and what it is now. They changed the fucking past; did you read about it? NO. How in hell do the historical temperatures change? This is an uproar in the science world right now that is not, repeated not, being reported in the MSM.

A good but brief explanation of the statistical mess is here, and will address your point about the variables:
http://wmbriggs.com/post/17849/
The issue has become as controversial as medical research papers of late. Some of the top climate journals in the past year have now insisted that they will not accept papers unless a separate statistician has blessed the model assumptions, and are insisting that the papers contain the datasets used. Climate scientists are not statisticians. Neither are the modelers. And climate reporters know zip about it unless trained in it. They don’t even know to examine them. They write their articles off fucking press releases.

As statistician Briggs says in the short article I link to, “The temperature values (anomalies) they use are presented as if they are certain, when in fact they are the estimates of a parameter of some probability model. Nobody knows that the temperature anomaly was precisely -0.10 in 1920 (or whatever value was claimed).”

Matt Franko said...

Oh come on youre telling me we cant go out and add another lane to 40miles of Interstate unless we cant "model!" that stochastically or some shit???? wtf???

You guys have to drop the whole "stochastic" schtick youre caught up in...

A numismatic system is 100% deterministic.... what are you saying "we're out of money!"????

Come on.....

MRW said...

Matt,

Tom, Economics is NOT a social science. Well, it sure the hell ain’t physics. And Tom is right about the ergodic axiom. Keynes rejected it. But Samuelson said you have to use the ergodic axiom in order for economics to be a science like physics, in order for you to make use of the models he devised. it’s a fucking house of cards.

Search Paul Davidson on youtube for his explanation of this.

Matt Franko said...

You know you atheist/agnostic guys should consider if this is the effect your Darwinism is having on you guys.... everything has to be thought of stochastically under that... perhaps is leaving less room for deterministic thinking....

MRW said...

Davidson gave a brief but pithy explanation of all this in four short (3-5 min) vids with the INET guy. Well worth listening to.

The longer version was a luncheon speech to Univ of Chicago undergrads, also on youtube.

Thank god for youtube!

MRW said...

Matt, who’s thinking stochastically? That’s the ergodic axiom.

Matt Franko said...

MRW,

Well Biology isnt Physics either so what?

You have to seek to be SPECIFIC ie not GENERAL in science...

Matt Franko said...

MRW I'm talking to/about Ignacio here:

"We can't treat every problem deterministically"

What in economics can we NOT treat deterministically if we want to approach it that way????

"money supply!"? "bond vigilantes!"? "confidence fairy!" ?

Come on!

MRW said...

Matt, OK, a hard science.They can pretty much tell how a plant to going to grow in a given area and project future crops or vegetation accurately, with the normal exceptions for drought or flooding. Better yet, astronomy. They can pinpoint when the sun is going to come up tomorrow and the rest of the year, and the movement of Mars through the sky for the next 100 years.

They can’t do that with economics. There is no calculable probability. We do not have the basis to know. How the hell does anyone know the price of oil in 10 years or whether there will be a war.

Matt Franko said...

Go to any University, they have a separate COLLEGE of Science..... the college has DEPARTMENTS....

What are you saying this organizational breakdown into SPECIFIC depts evolved from the apes? That is a stochastic outcome?????

Come on....

MRW said...

I don’t know what you are arguing anymore.

MRW said...

Paul Davidson: Paul Davidson - The Trouble With the Ergodic Axiom 2/4 7 minutes.
https://www.youtube.com/watch?v=YAbnuwsid4Q

Ignacio said...

You are confusing correlation with causation.

You can make up (make up) all the functions you want, that doesn't mean you are describing reality as it is, at all. In fact, that's what economists do all the freaking time, write functions (non-stochastic) that describe reality, with a set of (usually wrong) axioms as an anchor to a system.

You think you know, but you don't know, that's what radical uncertainty is about, and that's why science is "debunked" all the freaking time and theories dumped.

I know, it's disturbing admitting that absolute certainty is not possible, and that we operate by trial and error (most policy is implemented by trial and error, not some nerd writing functions and doing derivatives ;) but there is no way around it.

BTW this also happens all the time within HARD science and engineering when the problem is sufficiently hard.

As I said is a problem of combinatorial explosion and intractability, there is no fucking way around it.

Tom Hickey said...

Economics is NOT a social science.

Science is categorized as either natural or social, or physical , life, and social. some make the distinction between empirical science and formal science like logic and math, but many hold this to be a spurious distinction in the logic and math are methods rather than sciences. There is also a distinction drawn between theoretical science, experimental science, and applied science.

Either econ is not a science or it fits in one or more of those categories, or it is in a category of its own with it being the only member of the subset.

The Wikipedia article on branches of science lists econ as social science. (Of course, Wikipedia is not definitive.)

The social sciences are the fields of scholarship that study society. "Social science" is commonly used as an umbrella term to refer to a plurality of fields outside of the natural sciences. These include: anthropology, archaeology, business administration, communication, criminology, economics, education, government, linguistics, international relations, political science, psychology (especially social psychology), sociology and, in some contexts, geography, history and law.[19][20]>\

Bob said...

Bob first you need the policy... then the implementation...

The 'functions' are not used in policy formation...

iow the authorities have to first agree that we will build the bridge and then the implementation starts.. so we would need the JG policy FIRST ... then we would just get qualified/non-moron people involved for the implementation/operation who would accordingly use correct mathematical methods...


Bill Mitchell is using the employment buffer stock as a means of convincing the academic community that a JG is the correct policy. It describes how a NAIBER is to function in the macroeconomy. An employment buffer stock is a challenge to the status quo, typified by the NAIRU.

This theoretical debate is required before the authorities can agree to build the bridge. When it comes to economic policy, we're supposed to defer to academics, and not make it up as we go along. Of course, the suspicion is that mainstream economists have been making it up the whole time...

Bob said...

What do psychologists and sociologists think of economics' portrayal of the rational calculating agent? Piss poor?

Kaivey said...

Yes, I forgot. He was also predicting loads of deformed babies, but mothers have been using cellphones for generations now without there being an epidemic.

Kaivey said...

What's even more alarming is the models predicting positive feedback in global warming. When the temperature reaches a certain point, the methane under the ice caps get released and then there is runaway temperature rises leading to the world that is a desert.

Tom Hickey said...

Humans can't explain everything or come even close to it. Our extraordinary successes submerge that ignorance but events continually smack us down and we can't anticipate it or explain it fully even in hindsight after the fact in a way that is established by criteria that are so well anchored as to compel assent.

Macro is like that and its application to policy demonstrates it.

Climate science is like that. Phenomena like melting glacier, melting poles, ocean temps rising, etc. are strong signals that some is up that calls for an account. So far, there is no explanation so definitive enough to force addressing the issues raised, which the world's militaries have set forth as one of the great challenges they face in this century.

Until an overwhelming consensus is arrived at, action will not be taken sufficient to address the issues, and humans may be frogs in a pot. Or maybe not. Or maybe we are and the causes are natural so we can't do much about it by reducing pollution.

We'll see.

I would at least like TPTB to address the pollution that is fouling the nest. It's not just a matter of air pollution but more far-reaching. This is something that is measurable and the health effect and its cost are known. It's something that the media has actually addressed in terms of the science. Search on pollution, public heath, economic cost.

Tom Hickey said...

Oh come on youre telling me we cant go out and add another lane to 40miles of Interstate unless we cant "model!" that stochastically or some shit???? wtf???

That's an engineering problem that is solved using classical physics, which is determinative and measurable.

Kaivey said...

I could never understand how they could measure the utility of eating an apple, say, and then turn it into mathematics. Even by using averages and assumptions for generality it remains purely subjective, like trying describing the taste of a banana.

Bob said...

Addressing pollution has not been given the same media coverage that global warming and climate change has. And in spite of the focus on AGW, progress to mitigate it has been minimal.

Tom Hickey said...

What do psychologists and sociologists think of economics' portrayal of the rational calculating agent? Piss poor?

Gary Becker's Crime and Punishment (1968) was one of the most influential papers not only in econ but the social sciences.

Gary Becker showed us the power of economics

Kaivey said...

As we can't be certain that the Earth won't become the another dead planet in the solar system, then we could be wasting our money if we try to do something about it, say the deniers. But is it ever a waste of money to develop cleaner, cheaper, and safer energy?

There's no way of knowing when playing Russian roulette whether the next pull of the trigger will be fatal, or not, but why take the risk.

Those who invested in solar power are now reeling in the benefits.

Bob said...

Gary Becker's Crime and Punishment (1968) was one of the most influential papers not only in econ but the social sciences.

Right. That article is good, but from the wrong perspective. What do psychologists and sociologists think of Gary Becker's portrayal of criminal behavior, among other things?

Tom Hickey said...

I could never understand how they could measure the utility of eating an apple, say, and then turn it into mathematics. Even by using averages and assumptions for generality it remains purely subjective, like trying describing the taste of a banana.

Utility theory was developed for this purpose. Aristotle's ethics was consequentialist, as well as being based on virtue (excellence). For Aristotle, happiness is a byproduct of the pursuit of excellence.

Utilitarians adopted Aristotle's consequentialism and attempted a materialistic interpretation of it by asserting the happiness is the outcome of utility, so that the measure of utility is also the measure of happiness.

This was a move from the subjective (happiness) to the objective (utility). Then the issue becomes creating a model in which utility can be measured directly or calculated from observations, making it "scientific."

Using a simple example, the utility of apples over say pears is the price differential in the market. Some might prefer pears to apples but in general, a higher price commanded by apples would indicated that apples in general have more utility than pears in general measurable by the price difference. But the price difference also applies outside the category of fruits,, so utility becomes a potentially good move if it can be made to work in economic models. Whether this has been done satisfactorily is controversial.

Tom Hickey said...

Addressing pollution has not been given the same media coverage that global warming and climate change has. And in spite of the focus on AGW, progress to mitigate it has been minimal.

That's true and the media do not present the pollution as controversial as they do global warming. Air pollution has been addressed in many areas of the US, and very aggressively in California, with some positive results for the environment. Same with water purity. There is actually quite a bit of environmental activism wrt to pollution in the US. But it was years building.

Tom Hickey said...

What do psychologists and sociologists think of Gary Becker's portrayal of criminal behavior, among other things?

It was a game changer.

Becker was Professor of Economics and of Sociology at the University of Chicago and at Chicago Booth.

Tom Hickey said...

Regarding psych, the academic field was ruled by the behavioral psych of B. F Skinner that was based on stimulus-response. Becker's analysis was more sophisticated. Around this time and thereafter, game theory became prominent in psych, too.

Bob said...

A game changer in what way?
Did these professionals abandon their own research and begin applying economic dogma? Were the problems they were working on solved by applying rational choice theory? Are there any critiques of G. Becker's work?

You're making this seem rather grim.

Matt Franko said...

You guys are waaaaayyyy over thinking all of this.

Bob said...

Yes, I would hope that these fields have made progress since the 1960s.

Bob said...

Tangents, Matt.

Tom Hickey said...

The problem with the social science and economics where agents are human is making the explanation objective, causal and predictive. Becker's method was an advance, which is why it caught on.

I would not say it is grim. It's just difficult to pull this off. It really hasn't been done satisfactorily in econ and the social sciences yet in comparison with the natural and life sciences. Physics didn't get it's big break until Newton, and molecular biology transformed biology. We're still groping around in econ and the social sciences.

Matt Franko said...

"They can pretty much tell how a plant to going to grow in a given area and project future crops or vegetation accurately, "

MRW, That IS economics.... what the hell do you think it is? Mental masturbation like Paul Davidson?

Tom Hickey said...

"They can pretty much tell how a plant to going to grow in a given area and project future crops or vegetation accurately, "

MRW, That IS economics.... what the hell do you think it is? Mental masturbation like Paul Davidson?


Could have fooled me. I thought it was biology.

Ryan Harris said...

For people that are seriously worried about C02 ending the earth, it's worth having a look at the historical levels of C02. The size of the current rise isn't correlated with major climate change, we're all arguing over small bits of change.

As it turns out, the methane under the ice caps doesn't make it to the surface, when the ice melts. Also, The antartic is continuing to accumulate record ice 2 std dev above "normal", while the arctic is the inverse, about 2std dev. below "normal". We only have 30yrs of data to define normal

And greenland stubbornly won't lose ice and remains right at it's average

The good news, we started from a very, very historically low level of C02 before industrialization. The current rise is worrisome, needs to be fixed, but shouldn't have people worried about their grandchildren. But that doesn't mean we can stop putting pressure on policy makers to clean up pollution and promote safer energy use. Tom's fouling the nest metaphor is apt.

Bob said...

William Black weighs in (article from 2014):
http://neweconomicperspectives.org/2014/06/gary-beckers-nobel-prize-getting-wrong-family.html

Bob said...

Could have fooled me. I thought it was biology.

But isn't this agronomy?

Bob said...

Thanks Ryan :)

Tom Hickey said...

The issue is not only CO2. Carbon-based fuels also release particulate matter that is visible as smog and invisible as nanoparticles.

And it is not just fuel. the US used to burn most of its waste that would burn, or it was dumped into the ocean far enough offshore that it didn't wash up.. Now it gets recycled or is dumped in landfills. Some progress but lots more needed.

Matt Franko said...

Oh ok Tom we have a agricultural policy and we don't care what happens there? We don't do economic estimates ? We don't monitor prices and output? Dont track planting acreage? Please...

Bob said...

Wiki says:
Agronomy (Ancient Greek ἀγρός agrós 'field' + νόμος nómos 'law') is the science and technology of producing and using plants for food, fuel, fiber, and land reclamation. Agronomy has come to encompass work in the areas of plant genetics, plant physiology, meteorology, and soil science. It is the application of a combination of sciences like biology, chemistry, economics, ecology, earth science, and genetics.

Ryan Harris said...

When I took risk analysis classes, we learned how difficult it was for humans to understand large and small scales.

So here goes for oil to put in perspective how much oil has been burned since 1850!

It is around 1 trillion barrels of oil, a bit more but round numbers make this easy!. A barrel of oil is about .16 cubic meters. And a cubic kilometer is a billion cubic meters so we are looking at about 160 cubic kilometers. How much is that? Lake Tahoe in California holds about 151 cubic kilometers of water. So all the oil ever burned would just fill up Lake Tahoe in California and a bit more.

For scale to the size of earth, this is Lake Tahoe. So imagine that when you think about these things to keep it in perspective.

Bob said...

That's true and the media do not present the pollution as controversial as they do global warming. Air pollution has been addressed in many areas of the US, and very aggressively in California, with some positive results for the environment. Same with water purity. There is actually quite a bit of environmental activism wrt to pollution in the US. But it was years building.

More was accomplished quietly, and perhaps because clean air is more readily seen as a quality of life issue. The effects of climate change are more visible to actuaries than the general public.

Tom Hickey said...

But isn't this agronomy?

Yes, they teach agronomy at agriculture school. It's ag tech based in life science.

Tom Hickey said...

Oh ok Tom we have a agricultural policy and we don't care what happens there? We don't do economic estimates ? We don't monitor prices and output? Dont track planting acreage? Please...

Ag tech uses econ. It is not econ. It's part of life science.

Agronomy (Ancient Greek ἀγρός agrós 'field' + νόμος nómos 'law') is the science and technology of producing and using plants for food, fuel, fiber, and land reclamation. Agronomy has come to encompass work in the areas of plant genetics, plant physiology, meteorology, and soil science. It is the application of a combination of sciences like biology, chemistry, economics, ecology, earth science, and genetics. Agronomists of today are involved with many issues, including producing food, creating healthier food, managing the environmental impact of agriculture, and extracting energy from plants.[1] Agronomists often specialise in areas such as crop rotation, irrigation and drainage, plant breeding, plant physiology, soil classification, soil fertility, weed control, and insect and pest control.
Wikipedia Agronomy

Bob said...

I would not say it is grim. It's just difficult to pull this off.

After reading Bill Black's five-parter, some of that grimness has been dispelled. Becker's ideas were not implemented, but god help us if they ever are.

Tom Hickey said...

Oh ok Tom we have a agricultural policy and we don't care what happens there? We don't do economic estimates ? We don't monitor prices and output? Dont track planting acreage? Please..

Same as in industry. Agriculture is now an industry like other industries and farmers are now "engineers." Really.

Engineers use econ as in "cost it out, but engineers are not economists and engineering is not economics.

Tom Hickey said...

After reading Bill Black's five-parter, some of that grimness has been dispelled. Becker's ideas were not implemented, but god help us if they ever are.

A lot of this reduces to formal models. In the scientific age" people really really want formal models. Conceptual models are too close to "philosophy." that is, speculation, to them.

The challenge for heterodoxy is making what they do look like science more than the folks writing formal models even though the assumptions are not realistic.

This is not just math, and increasingly even philosophers are formalizing based on logic. This was Rudolf Carnap's aim, for instance.

Tom Hickey said...

This has a label in philosophy. It's called reductionism.

Increasing simplicity is a virtue until it isn't.

MRW said...

Young Master Kaivey,

What's even more alarming is the models predicting positive feedback in global warming. When the temperature reaches a certain point, the methane under the ice caps get released and then there is runaway temperature rises leading to the world that is a desert.

You can rest easy. One week ago today, CAGE, the Center For Arctic Gas Hydrate, Climate And Environment, released a press release about an important new study and letter about it, Arctic Ocean methane does not reach the atmosphere.
http://www.eurekalert.org/pub_releases/2016-05/c-cf-aom052716.php

You need to read it. Because your statement that "When the temperature reaches a certain point, the methane under the ice caps get released,” is inaccurate. It’s going on all the time. As the article says, "250 methane flares release the climate gas methane from the seabed and into the Arctic Ocean. During the summer months this leads to an increased methane concentration in the ocean.” But these emissions don’t reach the atmosphere. (Methane can’t reach the atmosphere when there’s ice.)

QUOTE:
"Our results are exciting and controversial", says senior scientist Cathrine Lund Myhre from NILU - Norwegian Institute for Air Research, who is cooperating with CAGE through MOCA project.

The results were published in Geophysical Research Letters.
ENDQUOTE.

This was funded by a Norwegian government agency and involved multiple-university scientists and state of the art equipment used below the ocean surface, on ships, and in research planes.

In short, there is no threat. Read why.



Ben Johannson said...

The Eurekalert article claims methane can be prevented from reaching the atmosphere under certain temporary conditions, and that's all it claims. The headline itself is an outright falsehood.

Ignacio said...

That's an engineering problem that is solved using classical physics, which is determinative and measurable.

Tom, even problems of classical mechanics require stochastic methods for the set of problems which sufficiently hard, ie. cannot be computed cleanly using linear algebra due to combinatorial explosion and insufficient information (measurement problems).

There are many problems in engineering which use 'trial and error' mixed with known data to construct statistical models to make intractable problems at least moderately tractable and thanks to that too, the set of problems which move from the intractable set to tractable set are more. Because our technology and knowledge gets better the uncertainty is reduced, but still, uncertainty is never zero, even for apparently absolute certainties.

This lala land of Matt where you have absolute certainty about results only exists in his mind. I can say "the Sun will raise tomorrow over the East", and this is one of the statements most humans will agree to be as sure as it gets, yet I cannot guarantee with absolute certainty that it will happen that way.

All this, talking with rigour, ofc we have to conform and bend out theories about how reality functions through induction and assume certain contiguity on how our universe operates otherwise it would be chaos... But let's not fool ourselves that we can write a function about ANY problem and predict future outcomes, things like climate change is where we collide with measurement problems and combinatorial explosion, hence we should be ware of any science bhind it and always maintain a skeptical mind.

Matt Franko said...

"Increasing simplicity" : oxymoron

There is something wrong there Tom... its not increasing simplicity...

Tom you have to be mindful of which way you are going...

iow if you are starting with nothing and then creating something, that is going one way.. this is characteristic of economics (done the right way ie deterministically)

otoh if you are presented with something, and then try to break it down into components that is going another way... this is characteristic of science where one is studying a creation not trying to create something...

Again I see your all's Darwinism coming in here are you are less sensitive to the creative process, less deterministic, more stochastic and appear to be solely studying a creation rather than looking at things creatively...

I had lunch with Roger (biologist) and JD Alt (Architect) a while back and Roger was trying to tell JD that the design process was over rated and probably not even necessary... like if you just took all the building materials out to a site, eventually a building would be constructed by itself... I sat there in shock watching them go back and forth on this.... but I think this encounter illustrates the differences in the two types of approaches pretty well...

I would challenge you or Ignacio to come up with an economic situation that cannot be addressed deterministically here? What would be an example? "we cannot determine the effect of a 10% increase in M1 !" ? LOL!

Ignacio said...

It's simplification. If you have a policy which will favour certain industry now over other, and which will displace resources from one place to an other, how can you tell that is the best outcome X years from now? You can't, and you can't write a function to determine it.

You are getting some aggregates and saying that right now, you can write a function to predict a future outcome. But that's entirely dependent on current circumstances, is a one pony as much as any other, and it doesn't tell me anything about any actual universal human production and exchange "laws", just the ones where your cultural biases and under the current circumstances stand. Those are NOT universal laws lol.

Funny enough, we are just leaving most of those mechanisms to something like trial & error: corporations, states, societies grow and die all the time, and no one is engineering how they evolve or change. There is no 'determination' by anyone, is collective actions of different agents which determine outcome, not someone predicting the future.

It's simplicity, it's all that it is.

Tom Hickey said...

"we cannot determine the effect of a 10% increase in M1 !"

We can't without knowing liquidity preference, and that is dependent on shifting conditions that are not known because of know unknowns (complexity) and unknown unknowns (called in econ "surprise" and "shocks").

M1 was going through the roof in QE and the "smart" folks were predicting runaway inflation. Even the Fed was surprised they didn't generate any inflation at all.

Tom Hickey said...

Every explanation is a simplification because that is a purpose of explanation, to reduce the more complicated and less clear to the simper and easier to understand. The art is filtering the trivial and retaining the important for the purpose of the explanation.

If something highly relevant is either left out of the account, then the explanation become simplistic and unfit for purpose.

Matt Franko said...

Tom, that is because there is no functional effect of the M1 level on prices... we can see that ie we are not stupid...

WE know that if you want to increase prices, then just have the govt start paying more for everything (increase bid) and increase the conforming loan limits for the fiscal agents (banks)...

Tom, if you went out and got a brand spanking new 787 Dreamliner and took it up to 30,000 feet and then got out of the seat and strapped in a chimpanzee if the chimp pushed forward on the wheel the plane would still nose down... iow it would not be the 787's designers/builders fault... if you can see what I mean...

Ignacio that is called 'tolerances' they are completely normal and used all the time... no big deal to get all excited about....

Give me a SPECIFIC situation where we cannot address an economic problem deterministically ?

"no food!": Increase plantings

"too much unemployment!" : JG

"seniors in poverty!" : Increase SS

"veteran's heathcare wait times too long!": allow access to non-VA providers

"drought!" : build dams and aquaducts

What??????

Tom Hickey said...

What is the function to set the inflation rate?

Tom Hickey said...

Hint: that's what the Taylor rule is designed for, but rules don't work all that well in practice.

The formula used for the Taylor rule looks like this:

i= r* + pi + 0.5 (pi-pi*) + 0.5 ( y-y*).
Where:

i = nominal fed funds rate
r* = real federal funds rate (usually 2%)
pi = rate of inflation
p* = target inflation rate
Y = logarithm of real output
y* = logarithm of potential output

Read more: The Taylor Rule: An Economic Model For Monetary Policy | Investopedia http://www.investopedia.com/articles/economics/10/taylor-rule.asp#ixzz4AcoAYCTl

Ignacio said...

What are you talking about... You are talking about predicting the future deterministically via functions, and now you come up with that bullshit argument because it does not suit you. What the hell are those "tolerances" for, if you can deterministically predict something you don't need error margins. You are just talking about magnitudes: "oh, but it's not a big deal... it's just a little problem". FUNDAMENTALLY you either can or cannot predict something, are you kidding me now!? just answer me:

How do you tell if one policy is better over other X years from now if it displaces resources from one place to an other or consumes one type of resources over other? Ah you can't, I thought as well.

All of those examples assume a set of current conditions and extrapolate to the future, what you are missing is that those conditions may change in the future. But you can't either tell WHAT is important or not (why and how do you tell), and to what magnitude is important or not!? The problem is that what APPEARS unimportant to YOU may not be unimportant to OTHER, and that is completely determined by context (including culture, education, your material conditions, etc.).

Take for example your solution to "drought!", you build a dam in a place, and how do you know those dams will be useful in the future X years from now? Don't you see you can't? And is the fact of building a dam not affecting something else in unexpected ways (good or bad is against subjective)?

OFC after X years you will tell me: "ah ok that one is useless now, so let's build an other one over other place", this same example is perfect because it's exactly like that in Spain, where many das where built against "drought!" (and for generating electricity) yet they are now almost useless. Someone should have told the engineers 40 years ago that they should have wrote a function that would have predicted 40 years in the future those dams would be useless.

Your other example which involves REAL resources ("no food!") is exactly the same lol, damn someone should have told farmers who did lost crops, or . Funny enough that half of the financial industry evolved precisely from that (futures, insurance, etc.), to deal with uncertainty.

I'm talking about REAL economy, which deals with REAL resources, with REAL allocation and with REAL problems. The problem with all this is that the appearance of neutrality is in the eyes of the beholder.

The next time a policy affects one industry or an other, or that there is some material change or an other, I'll just ask where is the axiomatizing mathematical system that predicts that's the better policy over other.

Ignacio said...

Just clarification in case something is being lost in translation:
FUNDAMENTALLY you can either have certainty about something or not, that's what I'm talking about. Does that mean you cannot fix any problem or do anything? It has absolutely nothing to do with that, completely missing the point.

Going back to the original OP, in the case of climate change and economics, is not much different: there is a problem of knowledge surrounding both, whether we can inform and predict to a certain degree of confidence if we do something or not, so it's not far fetch off to compare both.

Does this mean that we cannot enact policy to try deal with both economic and climate problems given our current knowledge best way possible? No it doesn't, but fundamentally we have to be very clear that unexpected outcomes can happen from those policies because, well, as much as M.F. would like us to believe: we cannot predict the future as those problems have indeterminable solutions.

Matt Franko said...

Tom,

"inflation!" would be properly 'defined by' a function... not 'set by' a function...

As these people do things now, they report their "inflation!" ex post I suppose based on survey/observed price information for various items/services...

Like when oil is seen to collapse in price from $100 to $40 then 'inflation!" goes UP... so its hard to understand their whole concept of 'inflation!'....

We should perhaps be looking at how prices are varying not "inflation!"...

Bob said...

This has a label in philosophy. It's called reductionism.

Increasing simplicity is a virtue until it isn't.


That is not acceptable in fields that affect people's lives. You can have models for their explanatory power, as a guide, or as a diagnostic resource so long as you are not doing more harm than good. An example would be the adoption of the Duluth model by the police and social services. It is explicitly described as a trade-off.

Adopting an ideologically driven model in the field of criminology and psychology is unethical. Adopting a model in order to achieve a predetermined outcome may also be unethical, such as having more private prisons. Hello, since when do we imprison people for profit? When did we vote for this?

Professionals can have their models, but they will be judged on the results of their work. When the public demands better mental health services, or improved economic conditions, the relevant experts had better come up with new approaches.

Matt Franko said...

"i = nominal fed funds rate
r* = real federal funds rate (usually 2%)"

Tom, no competent scientist modifies their units... this is some sort of leftover from the gold standard era or something...

this is like saying a run in baseball today is worth more than when Babe Ruth played or something... absurd...

Bob said...

Analyzing opportunity cost is like analyzing your next move in a game of chess. Even a computer does not have the time to do an exhaustive analysis. What it can do is come up with a solution that is good enough to defeat the best human players.

What are the opportunity costs of having mass unemployment? Is our analysis sufficient to justify running an experiment? Is it sufficient to justify a change in policy?

Matt Franko said...

"those problems have indeterminable solutions."

You still are not providing a CONCRETE example of one of "those problems" ????

What is the issue with those dams? Why dont they work ater 40 years? Leaks? Then repair the leaks... what is the big deal????

Population has grown and water use is exceeding that of the 40 year old dam? S-H-O-C-K-I-N-G!!!! .... build another one or use current Reverse Osmosis. tech .. what is the big deal???

"hey! the city has grown by 1 million people and now the 40 year old dam is inadequate for water what will we ever do????" I know, get out the Monte Carlo simulator!!!!

?????????


People who design things always have a useful service life in mind for what they are putting together... eg autos dont last forever that is what the scrap yards deal with, etc...

Ignacio said...

That is not acceptable in fields that affect people's lives.

Which are basically ALL fields except maybe those which are purely intellectual liberal arts (and even so, those WILL affect people lives too, even if less). It's just "tolerance" Bob!

Let's say the country of Botsuana has enough resources for one large project over a period of 10 years, and for "whatever" reasons the authorities decide to build a dam in one spot. 20 years from now we find out that those resources would have been better spent investing in technology and training for local farmers. The real opportunity cost of that decision we will never be able to tell, because radical uncertainty, but there is a very real effect which will impact the lives of much people for the good or for the bad.

Decisions like this are made every day, every where, and due to how a complex system behaves, we can't tell what would have happened "if we have done this differently" due to the butterfly effect. Investment in this industry instead of that? Who knows, that may have ended extending the career of a group of researchers at this corporation which may have turned to advance some sort of important technology, but maybe instead what we have is a bunch of guys working at a big HF in Wall St. trying to find how to move numbers faster between computers at two different spots.

Shit happens, deal with it! They should just have "printed money" and be done with the interesting questions.


I mean, wtf does people think are the current US elections for if not anything else!? The major difference between both candidates right now is probably which industries they will end up favouring or not! But we should just worry about this or that aggregate and believe that the "market" will sort it out, or that's what is being sold to the public, but far off the real story.

Bob said...

Mirabel airport north of Montreal, Quebec would be an example. Huge white elephant.

Ignacio said...
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Ignacio said...

"You still are not providing a CONCRETE example of one of "those problems" ????"

You provided thmn, both the dam and the crops problems have indeterminable solutions (are indeterminable systems). That does not mean that they don't have solutions, but that also depends on how you define a solution.

Because you only care about aggregate outcomes that favour your cultural prejudices you will say is fine and just "tolerance".

If I live in a place where the dam will be built, it won't be a solution for me, for example. If I'm the CEO of a competing industry not favoured by a government policy over other which is, it won't be a "solution" to me. If I care about other things you may not care about, it won't be a "solution" to me. One person solution can be an other person problem, again youa re just simplifying because it suits you.

You can't either tell if one of the other possible "solutions" would have had better outcomes, you can't account for externalized and hidden costs, you can't tell about the sustainability or not of certain solutions n time in the future, or how they disrupt in X or Y way. That's because you only care about one thing, but that's not what this discussion is about. Is about the certainty you have about the outcome of an action in the future, and well, you simply can't. Or better said, how well you can write a function that will define a system behaviour, and you simply can't.

If all you have is a hammer, everything looks like a nail. You are making exactly the same mistakes mainstream economists do btw.

Matt Franko said...

Aqueducts/pipelines and RO then...

What do we think that we never have to do anything anymore?

This is whole problem with the Picketty stuff the Picketty people think that "wealth" is permanent or something...

Here look at this house this is what happens if we dont do anything:

http://thumb9.shutterstock.com/display_pic_with_logo/1220030/332243012/stock-photo-an-old-abandoned-house-overgrown-with-vines-that-are-showing-the-colors-of-autum-332243012.jpg

This house might have been "wealth" at one time but isnt worth jack shit now I can tell you that....

"Ralph do you think the weeds need trimming back? I dont know honey, let me get out the Monte Carlo simulator...."

?????????

MRW said...

Ben Johannson said...
The Eurekalert article claims methane can be prevented from reaching the atmosphere under certain temporary conditions, and that's all it claims. The headline itself is an outright falsehood.


The headline comes from the title of the actual Research Letter in AGU’s Geophysical Research journal: Extensive release of methane from Arctic seabed west of Svalbard during summer 2014 does not influence the atmosphere.
http://onlinelibrary.wiley.com/doi/10.1002/2016GL068999/full

This research was funded mainly by the Research Council of Norway.

Eurekalert is a press release distribution service; it doesn’t write them. CAGE (Centre for Arctic Gas Hydrate, Environment and Climate), which is located at the University of Tromso, Norway, is listed as the second author. CAGE wrote the press release. Accusing them of "an outright falsehood” is rich. Besides, I’m surprised you aren’t heartened or at least intrigued by their findings. Instead? A dismissive handwave. They used state-of-the-art equipment, listed in the supporting info doc. It is the first time that resources of this kind have been used simultaneously, and measurements of this scale and detail for arctic methane detection, have ever been taken.

Supporting info (journal under paywall): grl54347-sup-0001-2016GL068999-S01.pdf

MRW said...

And the institutional participants in this study aren’t too shabby, either.

Matt Franko said...

"both the dam and the crops problems have indeterminable solutions "

What are you talking about it could be sketched out on the back of an envelope in 15 minutes...

Tom Hickey said...

"inflation!" would be properly 'defined by' a function... not 'set by' a function...


The assumption is the the independent variable is the interest rate. The cb controls inflation rate through the interest rate that it sets.

MRW said...

Furthermore, Ben, it does not say that "methane can be prevented from reaching the atmosphere under certain temporary conditions.” You have it backwards.

It says that any ocean-atmosphere flux of the CH4 accumulated beneath the pycnocline may only occur if physical processes remove this dynamic barrier, like wind.

From the press release from a CAGE scientist: “[...] it is the sea itself that adds obstacles to methane emissions to the
atmosphere in the summer. The weather is generally calm during summer, with little wind. This leads to stratification of the water column whereby layers of different density form, much like oil over water.

This means there is no or low exchange of water masses between the surface layer and the layers below. A natural barrier [not a temporary barrier] occurs, acting as a ceiling, preventing the methane from reaching the surface. But this condition does not last forever: wind blowing over the ocean can mix these layers, causing this natural barrier to disappear. Thus the methane may break the surface and enter the atmosphere."

Tom Hickey said...

"i = nominal fed funds rate
r* = real federal funds rate (usually 2%)"

Tom, no competent scientist modifies their units... this is some sort of leftover from the gold standard era or something...

this is like saying a run in baseball today is worth more than when Babe Ruth played or something... absurd...


I am not arguing for a Tayor rule. I just cited it as an example of writing a rule in econ.

There are two choice that central banks face, either operate based on rules or by "guessing."

Obviously, rules are preferable to guessing but only if they work.

Is it possible to write a (deterministic) rule that works reliably wrt to monetary policy — or not. If so, what does it look like?

MRW said...

What are you talking about it could be sketched out on the back of an envelope in 15 minutes...

But you would only be dealing with the results of proposed (back of envelope) actions taken. But there are consequences to those results. The real meat of the matter. They appear over time. 15 minutes doesn’t cut it for figuring those out.

Tom Hickey said...

What are you talking about it could be sketched out on the back of an envelope in 15 minutes...

Like the Laffer Curve.

Amazingly, diehards like Brownback are still trying to make it work.

Ignacio said...
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Ignacio said...

Exactly... I like Bob post above btw:

Analyzing opportunity cost is like analyzing your next move in a game of chess. Even a computer does not have the time to do an exhaustive analysis. What it can do is come up with a solution that is good enough to defeat the best human players.

What are the opportunity costs of having mass unemployment? Is our analysis sufficient to justify running an experiment? Is it sufficient to justify a change in policy?


Coming back to my anterior posts: is a problem of combinatorial explosion (which prevents exhaustive analysis), in the case of radical uncertainty is worse than chess. Because chess is a closed system and has a closed, even if large, solution space; while open problems like "where we invest our resources and how we distribute and share output" which is the basic problem of economics have unknown unknowns, and are not well defined problems. That's why you can't predict if 40 years in the future a dam will be useless or not, for example, and if those resources would have been better spent elsewhere.

I don't think you realize that we have to determine where to invest resources and those decisions shape out future in very real ways and this is what REAL economics is about, not about deciding if interest rates go up, down, or sideways. Asking me for examples makes no sense because basically EVERY decision is an example. And I'm not even talking about material resources (nevertheless money, which I'm completely ignoring here), but time (and all human effort is basically a race against time so, not trivial observation).


Matt an indeterminable system does NOT mean that it does NOT have solutions. Multiple solutions, with multiple outcomes, each one involving an opportunity cost and completely depending on context.

We are talking about different things apparently. Regardless, you cannot predict how the system will evolve over time, that's the whole point of what I'm saying, so you cannot predict the future, you cannot write your famous function because you can't contemplate every freaking input in that function.

MRW said...

open problems like "where we invest our resources and how we distribute and share output" which is the basic problem of economics have unknown unknowns.

And therein lies the problem, imo. The only issue, imho, is to define what we want the future to look like. THEN, we decide where we invest our resources and all the rest. At that point systems design becomes fruitful.

I object to a bunch of economists making these decisions. They have no business deciding the future for the rest of us. Their job is to effect it once we’ve decided. Currently, we have an ineffective means of declaring what that collective future is, and the institutional mechanisms to establish that as the collective goal which the economists have to follow.

Matt Franko said...

Tom the Laffer curve works short term as we use withholding taxes....

It's similar to one iterative adjustment of a Proportional action in a PID control arrangement...

You and Ignacio are making mountains out of mole hills...

Matt Franko said...

Tom I realize you are playing Devils advocate wrt Taylor stuff sorry ...

Trying to refute the whole economist idiocy is like a "do you still beat your wife?" Type of issue

Matt Franko said...

"But there are consequences to those results. The real meat of the matter. They appear over time."

What like people being hydrated and having hygiene? Sanitary systems running?

Hmmm I don't know if any of that would be a good idea without consulting my Monte Carlo simulation....



Tom Hickey said...

Matt, I am arguing that very little of economics or social science is determinative, for the simple reason that it is not ergodic (pace Samuelson). Change is not continuous and the future is known both owing to endogenous complexity and also exogenous surprise.

Not only are functions unreliable methodology, unlike the natural sciences that discover laws of nature, e.g., laws of planetary motion, but also even statistics, as Lars Syll and other point out. Sometime, and unfortunately at crucial junctions, we really don't know and are either presuming or guessing. A lot of policy is flying by the seat of the pants. Even if it were possible to write equations, the data are not available reliably in real time. Even after the fact, initial reporting is often revised.

This is a major argument against adopting command systems and for a market-based system because it is self-adjusting over tine (in the long run). This doesn’t imply that market solutions are desirable, only that they will use available resources efficiently. If resources are not available for all, they price rationing will disadvantage or exclude some cohorts. That is not viable politically however, where those cohorts are large and can vote.

Matt Franko said...

" you cannot write your famous function "

I'm not trying to write one ... I'm saying if you DONT HAVE ONE, then you cannot make predictive statements...

This is what Taleb is trying to say here imo: "" If one cannot express the response quantitatively, then such analysis cannot apply."

Taleb is not saying "you are using the wrong function!" and neither am I... I'm saying if you dont have one then all you can do is trial and error based on how the ex post data readings compare to some sort of target value over the same ex post time interval...

This is a scientific argument I am making not some fantasy accusations of a "neo-liberal conspiracy!" or some other ancient history shit about what dead people said 50 years ago or 200 years ago...




Tom Hickey said...

BTW, ofc I am not arguing for an exclusively market-based system or even a dominant one. Just point out that there is a large grey area between a command system that runs on "laws of nature" whose outcome is reliably predictable and a market-based system in which price, hence income and wealth, are the arbiters.

We can know how to do many things about organizing and deploying real resources in terms of scientific understanding but there is no comprehensive engineering solution to policy on the table. Moreover, the decision making process is infected with ideological presuppositions and disagreements.

So it's possible to build a highway system and cost it out. But there may be controversy over how to allocate real and financial resources. That's why Ike frame the US highway system as a defense system that would enhance logistics and maneuverability.

Tom Hickey said...

known in the above should be unknown.

Tom Hickey said...

If you say that it is not predictable, then how get around the conclusion that choices should just be left to individuals in markets?

Defense is a good example. The general staff tries to figure out what is needed wrt to the likes challenges of adversaries when both sides are keeping secret what weapons system they are creating, what's in the pipeline, what scale they can produce at, etc. Moreover, the effectiveness of weapons system is unknown until tested agains the adversary in actual combat, where a lot of extraneous factors come into play.

So we can't predict, but we plan anyway and allocate enormous resources.

Firms function under similar conditions in a competitive world.

Planning spans a spectrum from rigor to guessing.

Matt Franko said...

"Moreover, the decision making process is infected with ideological presuppositions and disagreements."

Tom you are jumping the gun here.... the problem is more basic and prerequisite to any negotiating we may have to do wrt priorities, who gets resources, etc...

The people who are supposed to be doing these prioritizations think "we're out of money!"... why? How do we refute this? We have to tackle this one FIRST.... THEN get to those others...

We are getting NOWHERE, there are reasons why we are getting nowhere in that those leading this effort are manifestly at least INCOMPETENT and/or tainted by being in the academe too...

Tom Hickey said...

Most know we aren't out of money now. Even Alan Greenspan axed that one. Those who are stupid enough to believe in lack of affordability will never be convinced.

The problems they imagine are inflation, exchange rate, interest rates, public debt/GDP ratio, IGBC. The first two are related as monetary volatility, and the final three are related to fiscal sustainability. Interest rates relate to both sets.

These are the chief objections that we need to be hitting on.

There is also a fear that taxes will need to be raised. That's not true in the case of needing to tax to get munnie. But taxes could have to be raised to curtail inflation under functional finance.

Kaivey said...

I put out the video here that shows that solar power is nite the cheapest form of energy, and wind power has become cheapest too. A house fitted with solar power can supply itself everyday, charge a car that can do 300Km and still have power left to put in the national grid. Imagine they, never having to pay for fuel in your car again.

So, things are looking better, the world might not bake after all. But the ruling class who make $billions out of fossil fuel are still going to carry out their misinformation campaign.

Bob said...

What's not to like about solar? Wind farms on the other hand, are a bit of an eyesore...

Matt Franko said...

Let's look at a Xeon processor as a complex system:

"The transistor count is the number of transistors on an integrated circuit chip. Transistor count is the most common measure of semiconductor integrated circuit complexity. As of 2016, the highest transistor count in a commercially available CPU (in one chip) is over 7.2 billion transistors, in Intel's 22-core Xeon Broadwell-EP."

Over 7 Billion xsistors....

According to you guys, this processor should never be able to work or we should never have been able to figure it out... yet it works perfectly normal....

You guys are not looking at things correctly....

To me it's like you look at things from the "outside > in" rather than from the "inside > out"...

Going about it "the hard way.... "

Tom Hickey said...

According to you guys, this processor should never be able to work or we should never have been able to figure it out... yet it works perfectly normal....

Why. The laws of physics apply to transistors. It's an ergodic system.

Where issues arise is in AI where emergence could enable the system to "go rogue" according to experts. The people developing AI are devising a kill switch in this event.

Bob said...

Transistor count is a measure of manufacturing prowess. The circuits within are not that complex if you look at them by function. Nowadays algorithms can be used to generate logic circuits and their layouts.

Matt Franko said...

Tom,

Economics is only about material systems.... Intel has a material system here with over 7b components they are managing and they know exactly what is going on with each of them... This is not hard...

The economists want to make all of this hard or it is too hard for economists aptitudes....

Matt Franko said...

Tom you read too many economists....

Tom Hickey said...

Economics is only about material systems.

That what neoclassical economists assume. Therefore, deterministic and no uncertainty in the system.

Keynes objected and pointed out that people are not atoms and don't function like the atoms interacting deterministically (this the purpose of assuming economic rationally) in markets as force fields (agents subject to market forces), as neoclassical economics assumes.

Because animal spirits and the non-neutrality of money.

Institutionalists provide other reasons, such as asymmetrical knowledge and power.

Ofc from an engineering POV, knowledge is available to build out a real economy. But the way that happens is crucial to the process of if and how it happens.

Because the existing economy is a monetary production economy.

Tom Hickey said...

Should add that in the neoclassical picture, everything will be built out globally in a deterministic way because markets function deterministically (iaw laws), and the wealthy will own everything because marginalism, merit and just deserts.

The other option is to build it out deterministically under a command system rather than a competitive one. Just what that command system would look like and involve is unclear.

"Meritocracy" versus technocracy.

Matt Franko said...

"Meritocracy" can get you as far as we've come, but it leaves the cohort IDed by the Lord here: "the poor you will always be having"

This is the best result we can expect when we try to self-justify... Rather than what Paul taught which was unmerited favor (grace)...

We're going to finally have to get to a much better understanding of grace in order to see that "poor" cohort converge to zero... In the mean time things can be very good (materially) and just fine for those who find themselves outside that "poor" cohort...

Tom Hickey said...

"Meritocracy" can get you as far as we've come, but it leaves the cohort IDed by the Lord here: "the poor you will always be having"

That's amounts to the same as arguing that it's no use helping disadvantaged people because "karma."