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Why Economic Models Are Always Wrong

Posted by samzenpus on from the soft-science dept.

mayberry42 writes "Did you ever wonder how and why professional economists often seem to get it wrong in terms of predicting consequences or policies accurately (or even at all)? Or how very few even saw the current economic collapse? This article provides an interesting, if obvious, reason as to why economic models are effectively always wrong."

3 of 676 comments (clear)

  1. Wow by Hognoxious · · Score: 4, Funny

    So small changes in inputs can produce big, unpredictable changes in the output of complex systems? It's almost as if a butterfly flapping its wings could affect the weather!

    They should find a snappy name for this marvelous discovery. Something like "chaos theory".

    --
    Confucius say, "Find worm in apple - bad. Find half a worm - worse."
  2. Adjusting gravitational constant by maxwell+demon · · Score: 3, Funny

    From the article:

    "If you had to readjust the constant in Newton's law of gravity every time you got out of bed in the morning in order for it to agree with your scale, it wouldn't be much of a law But in finance they just keep on recalibrating and pretending that the models work."

    Wait ... you are saying the growing number on my bath scale isn't because the constant of gravity is growing? :-)

    --
    The Tao of math: The numbers you can count are not the real numbers.
  3. Re:Obvious really by khr · · Score: 4, Funny

    The way I'd heard it phrased is "to an economist, the real world is a special case."