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Machine Learning Could Solve Economists' Math Problem

An anonymous reader writes: Noah Smith argues that the field of economics frequently uses math in an unhealthy way. He says many economists don't use math as a tool to describe reality, but rather as an abstract foundation for whatever theory they've come up with. A possible solution to this, he says, is machine learning: "In other words, econ is now a rogue branch of applied math. Developed without access to good data, it evolved different scientific values and conventions. But this is changing fast, as information technology and the computer revolution have furnished economists with mountains of data. As a result, empirical analysis is coming to dominate econ. ... [Two economists pushing this change] stated that machine learning techniques emphasized causality less than traditional economic statistical techniques, or what's usually known as econometrics. In other words, machine learning is more about forecasting than about understanding the effects of policy. That would make the techniques less interesting to many economists, who are usually more concerned about giving policy recommendations than in making forecasts."

157 comments

  1. Same issues by milgram · · Score: 1, Insightful

    Isn't this the same as having economists doing the work, just faster? You are still using past data to predict the future,

    1. Re:Same issues by nitehawk214 · · Score: 2, Insightful

      No, because most of economics was not scientific. Economists would get a "feeling" of how it should be, then fudge the numbers to prove their theories.

      --
      I'm a good cook. I'm a fantastic eater. - Steven Brust
    2. Re:Same issues by Anonymous Coward · · Score: 0

      Neural Networks can mathematically justify their cognitive biases.

    3. Re:Same issues by Anonymous Coward · · Score: 0

      No, that's even worse. Today we have economists making theories to predict the future. A bad prediction equals bad theory, a good prediction show that some theories are not total crap. At least you get some knowledge. With this new approach there is no knowledge, only faith in the "machine".

    4. Re:Same issues by Anonymous Coward · · Score: 2, Funny

      > Isn't this the same as having economists doing the work, just faster?

      Of course not! A machine is a cold, emotionless, insensitive, empathy-deprived entity, while an economist...

      Hmm, it really is the same...

    5. Re:Same issues by fustakrakich · · Score: 1, Insightful

      Economics is not scientific in the mathematical sense. It takes no account of the irrational human animal. That is why it is more like the weather than mathematics. You will learn more about real economics from Freud than from Friedman.

      --
      “He’s not deformed, he’s just drunk!”
    6. Re:Same issues by pla · · Score: 4, Insightful

      Isn't this the same as having economists doing the work, just faster? You are still using past data to predict the future

      Yes and no. In a sense, letting AI learn the salient traits of the available data just saves a human from needing to do it; but, you can do something with an algorithm that you can't reliably do with a human - You can model the existing system, then test billions of hypothetical situations to see how they respond.

      Humans work amazingly well at pattern matching, even in the absence of understanding of "why". We can even get good at predicting what will likely happen if we change a few inputs to a system. But we don't do so well at figuring out what will happen if we tweak a large number of inputs simultaneously.

      Think of this as nothing more than finally making batch hypothesis testing possible in an objective way, in a field where a persuasive argument matters more than facts and where a real experiment can take a few generations to fully show its outcome.

    7. Re:Same issues by Coisiche · · Score: 5, Insightful

      It takes no account of the irrational human animal.

      Quite the contrary; there are a few economic think tanks around that take plenty account of that and "tailor" (is "completely fabricate" too judgemental?) data to totally agree with the political stance of their primary benefactors.

    8. Re:Same issues by plover · · Score: 1

      > Isn't this the same as having economists doing the work, just faster?

      Of course not! A machine is a cold, emotionless, insensitive, empathy-deprived entity, while an economist...

      Hmm, it really is the same...

      In other words, instead of calling it "the dismal science", we should be calling them "the dismal scientists".

      --
      John
    9. Re:Same issues by Anonymous Coward · · Score: 0

      Only now the models start to take into consideration the hundreds of dimensions of the problems, and that's only on the macro level. The speeds depend on access to a supercomputer, of course, but surely it is much easier to create a model with a pen and paper in the 19th century style than to collect measurements and give a machine learning algorithm to chew those for a few months.

    10. Re:Same issues by the+phantom · · Score: 2

      *Mathematics* isn't science. It is more properly a branch of philosophy that happens to be really, really useful for the sciences. The difference is that sciences are empirical---ideally, scientists observe the world, form explanations of their observations, then test those explanations with further observations. Mathematics is not empirical---mathematicians start from a set of fundamental assumptions, then use logic to deduce the consequences of those assumptions.

      From the summary, it seems that the criticism is that economists are behaving more like mathematicians than like scientists---that is, they are making assumptions about how the world works, then using logic to determine the consequences of those assumptions. Instead, they should be making observations, then using the tools of mathematics analyze data taken from the real world and test their explanations.

    11. Re:Same issues by vlad30 · · Score: 1, Funny
      reminds me of the joke about the mathematician an engineer and an accountant are all asked to add 2+2

      The mathematician says 4

      The engineer after using his slide rule answers 4.00000 within acceptable margin of error

      the accountant says "what would you like it to be ?"

      economists are just accountants with bigger numbers

      --
      Your'e all thinking it, I just said it for you
    12. Re:Same issues by plover · · Score: 2

      What do you mean "most"? I put Economists in the same fraudster category as Psychics and Clergy and Life Coaches (and somewhat worse than Psychologists). Lets not do anything that might pretend to legitimize these can artists.

      Despite the examples set by the economists visible in government roles, private economists are actually proving to be valuable in certain sectors; specifically, MMORPGs. Bringing in an economist to help set up, monitor, and maintain the currencies, item prices, trade values, treasure drops, etc., can make the difference between a fun game and an endless grind.

      --
      John
    13. Re:Same issues by jafac · · Score: 1

      Couple this with the fact that as a rule, Economists do NOT cite employment relationships when publishing papers. In any other scientific field, this would be considered an ethical conflict of interest. In Economics, it's just standard practice.

      http://www.slate.com/articles/...

      The fact that Economists are actually taken seriously in guidance of national and world economic policy, should be of major concern, because it has had absolutely DIRE consequences for general economic prosperity and stability, and has DIRECTLY contributed to several economic recessions, crises, or crashes. Hundreds of millions of people are suffering extreme poverty that persists generation to generation, all because we have listened to their oh-so-convenient pronouncements.

      The profession, as a whole, needs to be discredited, wiped out, and replaced with a serious, rigorous academic discipline.

      --

      These are my friends, See how they glisten. See this one shine, how he smiles in the light.
    14. Re:Same issues by fustakrakich · · Score: 1

      Yes, this i understand. The bill of goods being sold is that "economics" is scientific. The biggest reason being is to sell and implement austerity/slavery without causing a riot. "Economics" is fraud, pure, unadulterated bullshit trying to figure out what to do what seven and a half billion people.

      --
      “He’s not deformed, he’s just drunk!”
    15. Re:Same issues by fustakrakich · · Score: 1

      "with"!

      --
      “He’s not deformed, he’s just drunk!”
  2. Better not look at the "social" sciences then... by xxxJonBoyxxx · · Score: 2, Funny

    >> the field of economics frequently uses math in an unhealthy way

    Yikes, if you think that's bad, you'd better not look at the "social" sciences then.

  3. Economics is not always logical by Anonymous Coward · · Score: 2, Insightful

    Many aspects of economics, at least "real world" economics, are not based on logic but on emotions like greed or fear. As a result, they are difficult to describe with rigorous mathematical models. Machine learning may in fact be a more accurate way to predict such things, but as the old saying goes past performance may not guarantee future results, and since all machine learning algorithms have to go on are past performance, they too will be prone to surprises and the quirks of human nature.

  4. Economy == Black Magic by Anonymous Coward · · Score: 1

    Putting that stuff near "science" or "maths" is an insult to those fields of endeeavour.

    Which economists predicted 2007/2008?

    1. Re:Economy == Black Magic by Anonymous Coward · · Score: 1

      the Austrian school of economics did.

    2. Re:Economy == Black Magic by GameboyRMH · · Score: 1

      And a broken clock is right twice a day.

      Economics really is just political debate using numbers, and much of the trouble in the world comes from people using economists' opinions for anything beyond entertainment value. People are going to look back on today's economists the way we look back at alchemists.

      --
      "When information is power, privacy is freedom" - Jah-Wren Ryel
    3. Re:Economy == Black Magic by Anonymous Coward · · Score: 0

      Broken clocks are right twice a day because they always tell the same time, and that time occurs twice a day. Predicting a crash would be comparable if a school predicted a crash every year. If they don't do that, your analogy has absolutely no bearing on the fact that they did indeed predict it.

      Alchemists actually followed something akin to scientific method, and the first actual chemists were just more evolved alchemists. So if economics does evolve into a useful science, you'd expect that to occur via something like only one school predicting some huge event like the 2007/2008 crash.

      I know nothing about this Austrian school, but you're being glib to the point of stupidity here.

    4. Re:Economy == Black Magic by Faust6 · · Score: 1

      I'd argue "much of the trouble" is due to politicians misquoting, misunderstanding and inappropriately applying outdated neo-classical Economic theories in their arguments. For the Right, namely. Economists namely debate amongst themselves. Few reach the stardom to regularly appear in media, and those that do are always leftists. It's true you can't separate politics from Economics but there's a wealth of influential work that isn't partisan, except perhaps in the sense that it's done in the spirit of protecting Capitalism from itself. E.g. the Solow Growth Model, Interest Rate Parity, etc.

    5. Re:Economy == Black Magic by GameboyRMH · · Score: 2

      Actually the broken clock is the correct analogy here. Austrian economics predicts a crash not quite constantly, but under a certain set of conditions which very commonly exists - including a lead-up to the '08 recession, and right now. Their predictions that economies are sure to melt down "any minute now" are rarely correct.

      --
      "When information is power, privacy is freedom" - Jah-Wren Ryel
    6. Re:Economy == Black Magic by Actually,+I+do+RTFA · · Score: 1

      Many economists predicted it. However, the exact timing for bubble bursting is... not well done.

      --
      Your ad here. Ask me how!
    7. Re:Economy == Black Magic by thinkwaitfast · · Score: 1

      A clock running at 4x normal speed will be right more than twice a day.

    8. Re:Economy == Black Magic by Anonymous Coward · · Score: 0

      Hyman Minsky, (post-)Keynesian school, did

  5. False Dichotomy? by Anonymous Coward · · Score: 1

    He says many economists don't use math as a tool to describe reality, but rather as an abstract foundation for whatever theory they've come up with.

    Surely these aren't mutually exclusive; don't physicists use mathematics as an abstract foundation for whatever theory they've come up with to describe reality? And just like in physics, assumptions are made. The difference seems to be that while physicists are aware that their models are incomplete, economists (or, more likely, journalists, politicians, and the people who actually apply these models) etc. disregard these caveats and claim that this model describes the entire financial system in a few differential equations. The model works fairly well for a while, then something comes along to invalidate the assumptions and everyone is shocked when the theory collapses.

  6. Re:Better not look at the "social" sciences then.. by dunkelfalke · · Score: 1

    ORLY? Linguistics uses math in a much healthier way than economics.

    --
    "It's such a fine line between stupid and clever" -- David St. Hubbins, Spinal Tap
  7. Making policy but not thinking of the future...? by snowsmann · · Score: 2

    who are usually more concerned about giving policy recommendations than in making forecasts

    What? Is this implying that they want to make suggestions about what to do in the present and future to change the future without being the least bit concerned with forecasting the future? I don't think I would listen to anyone who wants to make important changes/suggestions without them being very concerned with attempting to predict the future of the situation at hand.

    Also,

    the field of economics frequently uses math in an unhealthy way

    As an EE having taken many econ classes, I can wholeheartedly agree with this statement.

    --
    timeo Danaos, et dona ferentis
  8. Ideology not reality ... by gstoddart · · Score: 5, Interesting

    Let's be clear: how you think economics is defined by your ideology, and most economics is bad math with unfounded assumptions arriving at un-supportable conclusions.

    So, if you're the Chinese government and think you can manipulate markets to suit your beliefs, you'll be horribly mistaken. Likewise, if you subscribe to the ridiculous Austrian School of economics (which refuses to have empirical evidence), then you likewise believe your theory is so perfect it doesn't need to be validated.

    Nobody has ever had any proof for "trickle down economics" other than they think it should work and it suits their ideology, but 30 years of actual real world data mostly shows it's utterly failed to work as planned.

    Economics is useful to look at what came before, and understand some limited problems ... but in general many people believe once you try to use that to predict things, or influence outcomes you get into a level of complete bullshit and voodoo. Time and time again when people try to take action or set policy based on economics, it fails utterly.

    And until economics is based on anything other than sketchy math and ideology, it can never be a real science or have much more meaning than something people use to defend their ideology. But since people never look at economics separated from their ideology, it will never happen.

    Economics is mostly a tool to make it look like the things you believe should happen, based on how you want the system to behave, have any actual relationship with the outcomes you expect to achieve with policy. The problem is that is a lie.

    But it sure as hell can't be called an objective science. First you have to believe in the ideology and then you believe in the methodology.

    The problem is people like to believe that the ideology is objective reality, and that their observations are in fact rules. And that simply isn't true.

    --
    Lost at C:>. Found at C.
    1. Re:Ideology not reality ... by Anonymous Coward · · Score: 0

      Nobody can know exactly when a bubble will pop, but bubbles are created by malinvestments, and most malinvestments can be attributed to forced central bank interest rates, and central bank Open Market Operations.

    2. Re:Ideology not reality ... by Anonymous Coward · · Score: 0

      basically, attempting to guide the economy leads to bubbles and collapses.... and then the more interference, the more you can potentially prolong the collapse.

    3. Re:Ideology not reality ... by gstoddart · · Score: 5, Insightful

      Nobody can know exactly when a bubble will pop, but bubbles are created by malinvestments, and most malinvestments can be attributed to forced central bank interest rates, and central bank Open Market Operations.

      Oh, look .. ideology pulled out of your ass and passed off as facts.

      Blah blah blah.

      Sorry, this is exactly my point. Show us some empirical proof, or STFU. What's that? Don't have empirical proof? Then you don't have facts. You have ideology.

      --
      Lost at C:>. Found at C.
    4. Re:Ideology not reality ... by Firethorn · · Score: 0

      Sorry, this is exactly my point. Show us some empirical proof, or STFU. What's that? Don't have empirical proof? Then you don't have facts. You have ideology.

      I'm no economist, but thinking about it, 'forced central bank interest rates' are not the cause for most bubbles I can think of.

      Bubbles - Beanie baby type bubbles happen frequently, but are ultimately rather minor. Most people 'investing' in 'collectibles' are individuals limited to their own money. NOT caused by interest rates of any sort.
      Housing Bubble - perhaps encouraged by low interest rates, but I'd argue that it was far more caused by government policies other than interest rates, to wit the 'orders' from the administration to Fannie and Freddie to get more people into homes. .COM bubble - the fallout of a 'gold rush' into an entirely new industry field.

      --
      I don't read AC A human right
    5. Re:Ideology not reality ... by DigiShaman · · Score: 1

      I belive the parent was referring to a self fulfilling prophecy. Meaning, you have an ideology of proposals built out the results of a previous ideology that was the cause in the first place. Meaning, the human element of decision making can't be modeled based on the resultant actions of others, only the results.

      --
      Life is not for the lazy.
    6. Re:Ideology not reality ... by Anonymous Coward · · Score: 0

      The problem with this is that the Austrians (Peter Schiff, Ron Paul, etc.) predicted the housing crisis and 2008 bubble. They were laughed at, then the bubble popped. The Austrians realize that all the math by other schools of economic thought is nothing more than cargo cult science, so they didn't fall for the same trap.

    7. Re:Ideology not reality ... by Faust6 · · Score: 1

      Where's the Math, let alone the sketchy sort, in any of the examples provided above?

    8. Re:Ideology not reality ... by NecroPuppy · · Score: 1

      Oh yeah, this is just going to total Austrian econ. The idea that math has anything to do with economics (macro or micro) is heresy to them.

      I rather hope this takes off, and well, so that we can finally bury von Mises.

      There was an apocryphal story at my university that one of our Econ professors has been arrested once for urinating on the grave of von Mises. I may have to get in touch with him, and see if he's willing to give it another go.

      --
      I like you, Stuart. You're not like everyone else, here, at Slashdot.
    9. Re:Ideology not reality ... by Anonymous Coward · · Score: 0

      Housing Bubble - perhaps encouraged by low interest rates, but I'd argue that it was far more caused by government policies other than interest rates, to wit the 'orders' from the administration to Fannie and Freddie to get more people into homes. .COM bubble - the fallout of a 'gold rush' into an entirely new industry field.

      The .Com bubble was actually worse - investors got suckered into the new "paradigm" where businesses not only didn't need profits to be considered hugely successful, but didn't need revenues either.

    10. Re:Ideology not reality ... by phantomfive · · Score: 2

      Nobody has ever had any proof for "trickle down economics"

      Just an FYI, no economist has ever supported the idea of "trickle down economics." The concept was created by a comedian (Will Rogers, great guy), and is mainly used the same way Republicans use the word "socialist:" as an insult against people they don't like. And frankly, that's how you're using the term, too.

      --
      "First they came for the slanderers and i said nothing."
    11. Re:Ideology not reality ... by Rinikusu · · Score: 2

      I find it extremely weird that people whom otherwise demand empirical, scientifically validated (or at least, the potential for scientifically validated) proofs for everything in their lives latch on to the Religion of von Mises. "Proof! Proof! Proof! Except for my pet theory of economics..."

      --
      If you were me, you'd be good lookin'. - six string samurai
    12. Re:Ideology not reality ... by phantomfive · · Score: 2

      And until economics is based on anything other than sketchy math and ideology, it can never be a real science or have much more meaning than something people use to defend their ideology. But since people never look at economics separated from their ideology, it will never happen.

      It seems like you get most of your economics knowledge from MSNBC or The Daily Show.

      Back in the real world, economic concepts like MV = PQ is one of the most empirically tested ideas around.

      --
      "First they came for the slanderers and i said nothing."
    13. Re:Ideology not reality ... by Ramze · · Score: 1

      Spoken like someone who has never taken micro or macro economics.

      I can only imagine you get this idea from watching the news -- where political pundits have little grasp on what economics actually IS.

      Economics on the micro scale is actually just common sense. We're talking simple supply and demand curves. There's no ideology involved. If people want X and we restrict the supply of X, the price of X will go up as there is now a shortage. Shortages are a real thing that are well understood. Typically prices go up on things that are in demand and have a shortage -- take the iPhone for example. Surpluses are also well understood -- especially for perishables. Just take a look at any clearance sale as a great example of prices being slashed to get rid of inventory. Where economics is fuzzy is the "how much" area. As in -- how much will the price of X go up? There can be a million variables, and it would be a damned near impossible math problem to solve for them all, so one can do models and get decent predictions -- but, much like the weather, any forecast can be off if there's unforeseen influences.

      On the macro scale, economics is also well understood -- BUT, people have different ideologies about what's "best." If we have a recession, we can increase the money supply by lowering interest rates which will generally spur more spending and help us climb out of the recession faster... BUT, b/c we increased the money supply, the value of the dollar is now lower and inflation is higher... and the dollar is weaker vs foreign currency so that hurts the price of imports.... etc. etc. in a chain reaction of things.

      Any economy is a hugely complex system -- the USA's Economy being among the most complex in the world. You can spin a lot of things as "good" or "bad", but really most meddling with the free market is both good and bad. You can trade shortening a recession for worsening inflation. Often things that are good in the short term are bad for the long term. Often things that are good for the individual are terrible for the economy as a whole. (Saving money and being thrifty is great... everyone saving money and not spending much leads to a recession, though!)

      As for the crap that's tossed around on the news like "trickle down economics" and "voodoo economics" -- uh... I got news. Those are not economic theories taught in business schools. That's made up BS that rich people tell themselves is true, but real economists don't subscribe to that baloney.

      Real economists are like particle physicists -- they can tell you what's likely to happen based on historical data and what's known to be possible, but what will really happen is a matter of statistics, not absolutes. Also, anyone who thinks they understand economics hasn't had several semesters of MBA level macro-economics. If you aren't confused BEFORE you take that, you will definitely be confused after. lol. (actually, it's not all that confusing, it's just so counter-intuitive until you realize how the dominoes fall in such a massive system... and then the feedback loops that develop in the near short term, short term, long term, and extreme long term.)

    14. Re:Ideology not reality ... by Ramze · · Score: 1

      Bingo.

      Monetary and Fiscal policy (like controlling the interest rates) has actually lessened the boom/bust cycle since it was implemented. Before the fed controlled the interest rates, bubbles were far more common and much more disastrous when they popped. Just look at the USA's list of booms and busts... and how many "financial panics" there were long ago:

      https://en.wikipedia.org/wiki/...

      We used to have deep recessions every 10 years or so. Around the late 1930s, we started manipulating the rates and now the markets crash every 20 to 30 years, but when they do dip, we recover much faster -- except for this last recession. The housing market just touched every aspect of life -- banking, credit, home ownership, ability to move, investments... you name it.

      And spot on about the housing bubble -- policies let people buy homes that should not have purchased those particular homes. People signed up for ARM mortgages and just incredulously believed the rates would never go up. People purchased huge houses they could barely afford while working paycheck to paycheck. It was crazy. Banks traded mortgages as if they were stocks or bonds -- ones with perfect credit ratings that could never go down in value. Stupidity and insanity all around. It was a house of cards that only took a little bump to fall apart -- and many saw it coming long before it folded.

    15. Re:Ideology not reality ... by Anonymous Coward · · Score: 0

      No, the guy's right. Artificially low interest rates set by central banks caused bubbles in housing and stocks, to name just two. Those bubbles were further blown by lax lending standards, lax SEC enforcement, and general mania that sets in after the bubble starts. It's just common sense. You start giving out money, where do you think it's going to go?

      Every time the central banks start raising rates (or even talk about it), the stock market tanks and certain parties start screaming bloody murder until the rate is brought back down and QE starts up again. Stock bubble propped up by low rates and free money.

      The current system is a joke, a fraud that only benefits a select few at the expense of others. So when you get these economists that start talking about fighting debt problems with more debt, you have to assume they're either puppets of the corrupt, or they're insane. They say throwing money at the problem will work, but it's failed for the past 15 years and instead of learning from this and trying something different, their answer is that we didn't throw enough money down the toilet. MOAR is needed. Guess who's pockets that always comes from?

    16. Re:Ideology not reality ... by Anonymous Coward · · Score: 0

      Where do you clowns come from, really? You obviously know NOTHING about Austrian economics, yet you're all out here like ventriloquist dummies telling the world how bad it is. It's like the Red Scare with everybody talking about how bad commies were, but nobody knew anything about them other than what the establishment had told them.

      I'm sure you pray at the temple of Keynes, like all the other "Nobel prize" winning economists do. You know, those same ones whose policies have ruined the economies we have now. But we'll just ignore that, right?

    17. Re:Ideology not reality ... by Copid · · Score: 2

      Having predicted 300 out of the past 2 crashes is not something to be proud of. Especially if the follow on prediction of prices spiraling out of control completely failed to materialize.

      --
      An interesting anagram of "BANACH TARSKI" is "BANACH TARSKI BANACH TARSKI"
    18. Re:Ideology not reality ... by jbengt · · Score: 1

      basically, attempting to guide the economy leads to bubbles and collapses.... As if bubbles and collapses can't happen without guidance from some outside force.

    19. Re:Ideology not reality ... by jbengt · · Score: 1

      basically, attempting to guide the economy leads to bubbles and collapses....

      As if bubbles and collapses can't happen without guidance from some outside force.

      (Sorry, missed a "/" the first time.)

    20. Re:Ideology not reality ... by jbengt · · Score: 2

      You've got that wrong. The recovery from the Great Depression (measured by GDP) started in 1933 , when Roosevelt ended deflationary policies. The recovery peaked in 1936 or 37, when Congress got scared of deficits and cut spending. At that time the real GDP was already above the 1929 GDP, but it consequently dropped for a year or so, until spending increased again, mostly in preparation for war, helping the economy to improve again. Of course all of that led to inflation, and unemployment spiked briefly after the war, but hey, you can't win it all.

    21. Re:Ideology not reality ... by Anonymous Coward · · Score: 0

      Without the interference the bad investments are quickly liquidated and new prices can be found... trying to do otherwise only prolongs the pain.

    22. Re:Ideology not reality ... by NecroPuppy · · Score: 1, Interesting

      Where do you clowns come from, really? You obviously know NOTHING about Austrian economics, yet you're all out here like ventriloquist dummies telling the world how bad it is. It's like the Red Scare with everybody talking about how bad commies were, but nobody knew anything about them other than what the establishment had told them.

      I'm sure you pray at the temple of Keynes, like all the other "Nobel prize" winning economists do. You know, those same ones whose policies have ruined the economies we have now. But we'll just ignore that, right?

      Ok, little AC, I'll reply.

      Austrian economics is, at best, a pseudoscience, and at worst, fabulist storytelling by one charlatan to another, in an effort to explain things that they either don't understand, or actively refuse to understand, because they say "we don't need math or empirical testing".

      Austrian econ uses praxeology (application of deductive reasoning, applied to a set of "unquestionable" axioms) to generate its further generate implications, scenarios, and results. Of course, these unquestionable axioms are quite questionable - they take them as blind faith, "because we've said them, they must be true". Often in there, they reject formal logical analysis of their axioms, instead choosing to use verbal analysis, because it's easier to weasel word your way out of corners. (Fingers are often inserted in to the ears of young Austrian economists at this point, as they say, "la la la la, I can't hear you".)

      Then there's their use of the Austrian Business Cycle Theory, which uses many terms that they've mis-defined (they change the meanings of words to be whatever they want, so when they misuse them, they can say "You just don't understand"), such as "inflation" and "natural rate".

      ABCT ultimately is better at explaining why the Austrians and libertarians are such hardcore goldbugs and why they rail against the Fed so much than it is at explaining actual business cycles.

      The Austrians get around the problems of market failures, natural monopolies, morality, and rationality through the use of clever wordplay. They rely on an extreme form of methodological individualism based on the "action axiom" as described above. To wit: Because only individuals exist, only individuals can act. Societies cannot act because, to quote Margaret Thatcher, "there is no such thing as society." Therefore, all action can be described at the individual level. If an action is good or moral for one individual, then it must be good or moral in the aggregate because good + good = good. In reality, only basic game theory is needed in order to refute this. Austrians claim, for example, that savings represent money that will be invested in the future, and so money can never be "hoarded." They entirely reject the paradox of thrift.

      Even the hero/founder of the school admitted it was BS.

      Ludwig von Mises himself wrote of his theory: "Its statements and propositions are not derived from experience... They are not subject to verification or falsification on the ground of experience and facts."

      F.A. Hayek wrote that any theories in the social sciences can "never be verified or falsified by reference to facts." By the way, he won one of those Nobel prizes for Economics that you sneered at, for his "theory of money and economic fluctuations". That would be the last actual contribution by the Austrian school to economics as a whole, in the last 40 years.

      (Special thanks to RationalWiki for significant portions of this post.)

      --
      I like you, Stuart. You're not like everyone else, here, at Slashdot.
    23. Re:Ideology not reality ... by Sique · · Score: 1

      Even the first ever described bubble does not fit your description: The Tulip mania of 1637. So your thesis seem to be somewhat flawed. Yes, in most economic conditions, you also find some governmental regulation. And most of them do not turn into bubbles. Some of them do. But even something out of the reach of governmental regulation can turn into a bubble (see Exhibit A). Thus your argument is similar to the argument that because you find water in about any carcinoma, water causes cancer.

      --
      .sig: Sique *sigh*
    24. Re:Ideology not reality ... by Anonymous Coward · · Score: 0

      Let's be clear: how you think economics is defined by your ideology, and most economics is bad math with unfounded assumptions arriving at un-supportable conclusions...But it sure as hell can't be called an objective science.

      Can I presume that somebody has shot down one of your pet ideas about how the world does or should work, using an economic argument, and you've decided to reject the entire subject of economics as a result of this experience?

      Alternately, if you have based your understanding of these matters on the words of journalists, then you have been led astray. That happens a lot. Read a few good books on research design, or take a class, and spend some time discussing the issues with a few social scientists. Most journalists (like most Slashdot readers) don't have this background, which means they really don't understand the social sciences.

      Next, I recommend you go to the nearest college library, and browse through a variety of economic journals.

      Then do the same thing for the astro-physics and astronomy journals.

      Don't rush this process. Take the time to do it right.

      You'll find some interesting parallels.

      No astro-physicist can go to the corner store and buy a few stars to experiment with. They have to work with what they can observe in nature. But nobody accuses them of not being scientists.

      Economics is similar. There are lots and lots of studies that read very much like astronomy or astro-physics studies. The authors have made a variety of observations, and they attempt to model them, to see how close the models come. The measurements are a bit less precise in economics, and the methodology is less mature (given that human beings have been improving astronomy techniques for thousands of years, the comparative advantage should come as no surprise), but the basic technique is the same. People will spend years arguing about how to interpret the data in a single study. The expectation is that sooner or later enough data will accumulate to settle things. This is the nature of science: it takes time.

      We have similar issues with respect to a lot of medical science. We generally can't cut up living people to experiment on them, so the classic model for experimental science often isn't available. All we can do in many cases is observe, collect data, and try to interpret the results. The observations systems available for measuring living bodies (e.g. ultrasound, MRI, X-Rays, the stethoscope, the human eye/ear/hand, etc..) each have significant limitations, so there's a lot of room for argument about what we're really seeing. There's no magic here, no voodoo, but sometimes there are personalities and preconceptions in all these fields, and it can take a very long time to get enough data to clean up the mess that leaves.

      Reading a few good books on economic history might be another valuable action for you to take to better understand how this field really works.

  9. Just because you can doesn't mean you should by Anonymous Coward · · Score: 0

    Via the Efficient Market Hypothesis: I can see this quickly degenerating in to the same sort of GPU/FPGA/ASIC arms race as altcoin/Bitcoin mining.

    The equilibrium will settle in at the information advantage value vs the processing power required($$$) trending towards an asymptotic diminishing return(determined by the GFLOPS/Watt at X electricity cost).

    Pretty soon the entire world will be buying up GPUs in order to pay tribute to the Tulip gods.

    1. Re:Just because you can doesn't mean you should by PPH · · Score: 1

      So, the smart move is to go long on GPU/FPGA manufacturers. A manufacturer would be wise to name their new, high performance chip set Tulip*.

      *This appears to have been done already, albeit for Ethernet hardware.

      --
      Have gnu, will travel.
    2. Re:Just because you can doesn't mean you should by Anonymous Coward · · Score: 0

      Most financial organisations have been using machine intelligence for a few years now. See https://en.wikipedia.org/wiki/Renaissance_Technologies

  10. Forecasting by PPH · · Score: 3, Interesting

    machine learning is more about forecasting than about understanding the effects of policy

    And forecasting depends on some underlying behavioral model. Problem is, people keep changing the model. They try to anticipate or short markets to gain an advantage and very rapidly, this new response to market conditions replaces the previous behavior, invalidating previous relationships.

    --
    Have gnu, will travel.
    1. Re:Forecasting by Anonymous Coward · · Score: 0

      If everyone is using Neural Networks to make their decisions, you'll end up with a self fulfilling prophecy decoupled from human optimism or pessimism. Like a runaway train: at some point people will blindly follow the neural networks because the know everyone else is following the neural networks.

    2. Re:Forecasting by PPH · · Score: 1

      But given the amount of money at stake, my neural network is faster/better then yours. So mine can always out-guess what yours will do and I can get to the market ahead of you.

      High Frequency Trading.

      --
      Have gnu, will travel.
  11. Main street economists are charlatans by roman_mir · · Score: 1, Informative

    Charlatans, that the so called 'main street economists' are will not go away with their nonsensical ideas about the need to 'guide' the economy in any way and their ways of 'guiding' the economy is what leads to the economic collapse. Of-course the economists are just mouthpieces of the government and of the Federal reserve, whose entire job is to justify the actions that politicians want to take anyway, actions that promise re-election rather than actions that promise a sound economy and a sound society.

    A sound economy relies on the invisible hand of the market forces, directing scarce resources and re-allocating mis-allocated resources (and resources do get mis-allocated all the time, but in a free market economy the mis-allocation leads to lack of profits that eventually leads to ceasing of that particular activity and for a great reason n - resources that are mis-allocated hurt the economy).

    Government routinely pushes policy designed to help politicians to get votes and not policy that makes any economic sense at all.

    Money cannot be printed by government or pseudo-government agencies on the whim of a politician, who is promising 'free stuff'. Taxes on income and wealth are destructive to the economy because they reduce scarce savings and prevent economic activity from taking place. Government doesn't actually have anything of any value on its own, everything it doles out it has to take away first, and government doesn't "ask" for your taxes, government has guns.

    Government economic policy is economic policy of a highway robber and the main stream economists are active cheerleaders to this highway robbery.

    If actual empirical math model is created and it is used to forecast what will happen based on the money allocation, it may lead to a huge clash between the forces of evil (governments) and forces of science, and I don't think in that battle forces of science will win, because the mob chooses the evil, since the evil promises something for nothing.

    Bernie Sanders is a force for evil, but so is Clinton, so is any politician who promises to do something for nothing, to take away from somebody to give to somebody else.

    1. Re:Main street economists are charlatans by Anonymous Coward · · Score: 4, Insightful

      A sound economy relies on the invisible hand of the market forces

      By which you mean un-knowable magic.

      but in a free market economy

      There is no such thing, never has been. Someone is always lying and cheating, cartels will form, consumers do not have perfect information and make irrational choices. A free market is a complete lie, never has existed and never will.

      Taxes on income and wealth are destructive to the economy because

      Because you say so without proof or evidence. Society cannot exist without maintaining the structures which allow society to exist, and you can't pretend there is a self-regulating human condition which exists independent of society without being delusional.

      As usual, Roman, you've brought your own brand of crazy to this conversation. You spout things as if they are objective natural facts, instead of bullshit premises you take to be true and expect the world to accept because you say it loudly and with bluster.

      And as usual you utterly fail to introduce facts or evidence. Because you believe your magic bullshit is so self evident as to not need facts or evidence.

      It's still not true.

    2. Re:Main street economists are charlatans by gstoddart · · Score: 4, Insightful

      directing scarce resources and re-allocating mis-allocated resources (and resources do get mis-allocated all the time, but in a free market economy the mis-allocation leads to lack of profits that eventually leads to ceasing of that particular activity and for a great reason n - resources that are mis-allocated hurt the economy).

      And this is the fundamental flaw in your argument.

      Nothing is "mis" allocated, it is allocated where the people who control them put them.

      That this fails to match up with your perfect theory isn't a problem with the random, selfish, and stupid shit people do. It's a problem with your model which says people will achieve the perfect outcome your flawed model predicts.

      What you're saying is, if people will only behave according to how you believe they should, there would be perfect outcomes. And I hate to tell you, but that will never happen.

      I say there is no such thing as perfect outcomes, there is no such thing as rational actors, and there is no collective goal or "proper" allocation of anything. Merely a bunch of greedy, selfish, irrational actors doing whatever the hell makes sense at the time, or what they've been hoodwinked into believing will yield perfect outcomes. Many of whom will utterly fail to play by any rules or with anything other than pure, shortsighted greed.

      If your theory can't account for the randomness of the human animal, it's your theory which is defective. Because the human animal will simply NEVER do anything according to someone's theory which has perfect outcomes.

      The notion of "they're doing it wrong because it doesn't match my ideology" is the problem here.

      --
      Lost at C:>. Found at C.
    3. Re:Main street economists are charlatans by Anonymous Coward · · Score: 0

      And nothing you said was backed up by "facts", "proof", or "evidence", so GTFO, hypocrite.

    4. Re:Main street economists are charlatans by Anonymous Coward · · Score: 0

      In other words there can be no empirical maths model to properly describe/predict economics and the whole point of this article/summary is idiotic... and the Austrians are right.

    5. Re:Main street economists are charlatans by tehcyder · · Score: 1

      A sound economy relies on the invisible hand of the market forces

      A concept like The Invisible Hand belongs alongside alchemy, astrology and leeching. It is not just non-scientific, it's anti-scientific.

      --
      To have a right to do a thing is not at all the same as to be right in doing it
  12. Re:Better not look at the "social" sciences then.. by Anonymous Coward · · Score: 0

    I'll fixed that for you:
    Yikes, if you think that's bad, you'd better not look at the social "sciences" then.

  13. Sure by Anonymous Coward · · Score: 0

    Tweek a formula to make crappy Technical Analysis look like the holy grail to wheel in the suckers. A.I. trading today is about frontrunning your customers, why would traders expose themselves with a scientifically based tool?

  14. Something else economists could do... by Jesrad · · Score: 1

    ... would be for them to establish sound and sane epistemological foundations for their works. For example they could stop trying to assert they can model human behavior, and instead limit themselves to observations of economical choices made by real, live humans only.

    --
    Maybe we deserve this world ?
    1. Re:Something else economists could do... by Firethorn · · Score: 1

      That's a bit like trying to predict the weather by looking outside right this moment and forecasting it'll be the same tomorrow though. You observe the people, develop a model that attempts to predict their actions, then use the model to attempt to predict future actions, thus allowing you to make accurate forecasts.

      Besides that, to misuse Asimov, predicting a human is hard. Predicting a group of humans is substantially easier.

      --
      I don't read AC A human right
  15. results, not theories by raymorris · · Score: 5, Interesting

    My understanding of the difference is that this produces somewhat testable results WITHOUT requiring a theory of how and why those effects occur.

    To give an extremely simplified example, assume that a certain coin is flipped every day. For the past 20,000 days, it has always come up heads. (Obviously not a fair coin). The machine will predict that it will probably come up heads tomorrow. Traditional economic theory will try to understand WHY it keeps coming up heads before making predictions. That's the first difference.

    The requirement for a theory that explains how and why economic effects occur also means that the theory is subject to subject to be supported or decried based on political considerations or other irrelevant factors. A system which accurately predicts what will happen without comment on politically sensitive policy questions may be useful.

    1. Re:results, not theories by plover · · Score: 1

      You're right. Neural networks are trained to spot only outcomes, and don't understand the inputs. Economists try to put human behaviors and motivations into selecting their equations, and when they find an equation that matches reality, they claim to have modeled the behavior. But the "math problem" isn't the real problem here.

      Regardless of how these equations are arrived at, whether it be from some economist or from some neural network, the next step is for someone to exploit them for gain. "Hey, if we buy and sell X really rapidly, we'll trigger their logic into reacting on Y, at which point Z will drop and we can buy it for profit." This directly alters the system they were modeling.

      This equation may work for a few trades, and some quants will get richer, but then the secret is out. As more people attempt to exploit the new algorithm, the activity that was keeping the market in check modifies itself to chase the new source of profits, and the entire system returns to the prior state of equilibrium.

      The real trick, then, is to produce market-unbalancing models on a daily basis. Maybe machine learning is faster than the quants, and can solve that problem.

      --
      John
    2. Re:results, not theories by Anonymous Coward · · Score: 0

      FYI - Economics is not the same thing as high frequency stock trading.

  16. Re:Making policy but not thinking of the future... by Anonymous Coward · · Score: 0

    I agreee 100%. The whole POINT of making policy recommendations is to choose the policy that provides the most benefit. Whether that benefit is to stabilize markets or reduce unemployment you have to PREDICT THE EFFECT of the policy. Say your policy recommendation is based on a specific philosophy of economics, the assumption is that philosophy best models and can best predict future behavior. If you aren't interested in how those policies affect outcome then you just have your head up your ass like a libertarian.

  17. Policy recommendations aren't predictive? by swb · · Score: 1

    That would make the techniques less interesting to many economists, who are usually more concerned about giving policy recommendations than in making forecasts.

    Decision Maker: The opposition and the polls are beating me up over the jobs numbers. Give me some policy advice, economist.

    Economist: I think you should implement this policy.

    Decision Maker: Will it improve the jobs numbers?

    Economist: I have no idea what the outcome of the policy will be, I just made some stuff up.

    Isn't the entire point of policy recommendations to achieve some kind of desired goal? Even if the policy recommendation is based on pure ideology, usually the alignment with the ideology is based on some notion that the ideology produces the best outcomes. There may not be data to prove any of it, but it's not like the policy was selected because it has a cool logo or you like Hayek's suits or something.

    1. Re:Policy recommendations aren't predictive? by Anonymous Coward · · Score: 0

      The point of the policy recommendation is to support the ideology. If the ideology ignores human behavior then the policy recommendation will produce a different outcome than projected.
      Predicting human behavior is actually not that hard. It is certainly not as hard as some here would have you believe. Certainly projecting A human's behavior is impossible, but that's not what needs to be done here. Groups of humans generally behave quite predictably. The problem comes when ideology refuses to recognizes that because it clashes with the ideology.
      Central economic planning ala the old Soviet Union is a prime example. If everybody gets the same benefits regardless of effort the vast majority of human beings are going to produce minimum effort.
      Welfare state economics are the same. Pay someone more to stay home than they will get paid to work and they'll stay home. Give them a never ending stream of stuff; free or cheap housing, free phones, free or cheap internet and they stay home and watch porn all day rather than go out an work.

    2. Re:Policy recommendations aren't predictive? by jbengt · · Score: 1

      Pay someone more to stay home than they will get paid to work and they'll stay home.

      The only place I've maybe seen that is in a photo processing plant, where they wouldn't (they claimed they couldn't) recruit blind people to work in the darkroom, but paid teenagers minimum wage (about $1.65 an hour) to do it. It was OK for me, since it was only a summer job, and I wasn't in the darkroom, anyway, but I doubt any adult could have lived on that even back then.

  18. Re:Better not look at the "social" sciences then.. by Zeromous · · Score: 1

    Well liguistics being just another form of math, this is unsurprising. It's barely a social science- only because without language social constructs cease to exist.

    Linguistics is just assembly math for higher level communication.

    --
    ---Up Up Down Down Left Right Left Right B A START
  19. Economics isnt science. by nimbius · · Score: 4, Interesting
    Sorry for the economics majors in the room, but you're not dealing with scientific constraints in the concept of modern hyperconsumer capitalism.

    economists don't use math as a tool to describe reality

    They can't. economic realities predicated upon hysteresis or long term analytical trends are constructed with touchstones of bogus equations founded on wild conjecture. a sizeable component of many modern economies are unquantifiable, having been intentionally obscured by human interest. Why did the fed hold reserve rates? what is the nature of a cyclical economy when infused with more than one trillion dollars of emergency funding to prevent an uncodifiable collapse? what factor or theorem transmogrifies and determines the value of liabilites as assets? So much of what economics seeks to do is undermined by the fact that most economies work by the rules of human nature. the Federal reserve practically has its own language to communicate change or lack thereof, and it is intentionally designed to avoid concrete resolution or effable transmission of meaningful information.

    Marx as an economist is one of the few to provide a very broad overview of the concept as it applies to modern capitalism. he describes the capitalist economy as a cycle similar to a bird with a broken wing. it builds, booms, collapses and in turn affords a widely acceptable cycle of observed failure. From the great depression to the lincoln savings and loan scandal to the United States Failed leveraged buyout of United Airlines to the dotcom bubble and finally the great recession of 2007 we've all grown to accept this cycle as normative.

    --
    Good people go to bed earlier.
    1. Re:Economics isnt science. by Anonymous Coward · · Score: 0

      economic realities predicated upon hysteresis or long term analytical trends are constructed with touchstones of bogus equations founded on wild conjecture. a sizeable component of many modern economies are unquantifiable, having been intentionally obscured by human interest. Why did the fed hold reserve rates? what is the nature of a cyclical economy when infused with more than one trillion dollars of emergency funding to prevent an uncodifiable collapse? what factor or theorem transmogrifies and determines the value of liabilites as assets?

      where is my shift key?

      [ducking and running]

    2. Re:Economics isnt science. by Intrepid+imaginaut · · Score: 4, Interesting

      Marx as an economist is one of the few to provide a very broad overview of the concept as it applies to modern capitalism.

      Marx was a drunken idiot whose economic "theories" didn't have so much as a means to correctly communicate value. Booms and busts happen when powerful players in the market spot a way to sidestep regulation, whether because the phenomenon was new as with the dot bomb, or because regulation was deliberately removed as with Glass-Steagall which led directly to the most recent recession.

      Still though, the fact that every country which embraces regulated capitalism has experienced a steady improvement in standards of living and wealth would have stuck in old Karl's craw.

    3. Re:Economics isnt science. by johnjaydk · · Score: 3, Informative

      Marx was a drunken idiot whose economic "theories" didn't have so much as a means to correctly communicate value.

      His value theory is totally bonkers but much of his diagnosis of the ils of the capitalistic system is fairly good. Where people go wrong, is in looking for the solution in his works. There is a lot arm waving but hardly any coherent solutions.

      --
      TCAP-Abort
    4. Re:Economics isnt science. by gstoddart · · Score: 1

      There is a lot arm waving but hardly any coherent solutions.

      Which, in fairness to Marx, is no different than any other economic worldview. They're all incomplete or flawed in their own ways by their very nature.

      They all try to force the world to behave according to arbitrary "rules", which are mostly observations which don't account for nearly as much as they claim to.

      Anybody who claims to have "coherent solutions" in any field of economics is mostly full of shit. I remain unconvinced it is possible to have "coherent solutions" ... merely a bunch of incoherent ideas which are so idealized as to be mostly wrong.

      They all hand wave around everything, pretend it all works out in the end ... and they all utterly fail to do anything of substance. Because no matter how you try, the world doesn't give a crap about how elegant your theory is.

      --
      Lost at C:>. Found at C.
    5. Re:Economics isnt science. by Anonymous Coward · · Score: 0

      Most of his "ils of the capitalistic system" were lifted from Adam Smith... the back of the book... the part that nobody seems to read. And Friedrich Engels had a lot more to do with the book than most give credit for... if at all...

      Capitalism, Communism... all are ways to take productivity from the people who created it and do things... "for the children"... because we all hate the children and don't do anything for them on our own.

    6. Re:Economics isnt science. by Anonymous Coward · · Score: 0

      what factor or theorem transmogrifies and determines the value of liabilites as assets?

      Um, basic accounting? If you owe me £5K, I have an asset on my book worth £5K, possibly transformed using some discounted cashflow and risk analysis. Your liability is my asset. It's not rocket science. Where it falls down is when you aggregate a thousand such assets and do the joint risk analysis wrong, because it turns out that the likelihood of you defaulting given your neighbour defaulted is actually higher than it was if he hadn't, because defaults are sometimes caused by factors in the shared environment. Thus, the likelihood of half of these guys defaulting is way, way higher than you would predict by assuming defaults are independent random variables. This massively changes the risk curve and hence the value of the aggregated asset. Fortunately, as long as the regulatory system is no smarter than you are, you can get away with this.

    7. Re:Economics isnt science. by DigiShaman · · Score: 3, Interesting

      Well yes, as someone else once put it, Marx was astute diagnostician, but an absolute horrible clinician. Meaning that Marx did well to point out the problem, but his proposed cure was far worse than the ailment he tried to treat in the first place.

      --
      Life is not for the lazy.
    8. Re:Economics isnt science. by DNS-and-BIND · · Score: 1

      Ah, yes, Karl Marx, beloved of the Left, the man whose economic theories led to the deaths of 10^8 innocent people. Let's all pay attention to him instead of throwing his thought in the dustbin of history, like all the Marxist countries have already done decades ago. Surely, his ideas will work THIS time.

      --
      Shutting down free speech with violence isn't fighting fascism. It IS fascism!
    9. Re:Economics isnt science. by Anonymous Coward · · Score: 0

      Maybe the heat equation is a more appropriate model for assessing the risk of an asset?

      https://en.wikipedia.org/wiki/Redlining

    10. Re:Economics isnt science. by Anonymous Coward · · Score: 1

      Still though, the fact that every country which embraces regulated capitalism has experienced a steady improvement in standards of living and wealth would have stuck in old Karl's craw.

      No, that was his point. Eventually some of the wealthier capitalists will be that wealthy, that they can buy out every gouvernment and the regulations will be dropped.

    11. Re:Economics isnt science. by roman_mir · · Score: 0

      Are you for real? First you are talking about the Fed fucking up the economy, (which is correct), then you bring up Marx, who had 0 understanding of economics but had a pretty good jealousy complex, using him to bash CAPITALISM? Maybe Free Market even?

      Ha! Government creating the Federal reserve bank, the ability to print fiat money, ability to manipulate interest rates is the exact opposite of free market capitalism, so how the heck in 2 paragraphs you create such a gigantic dichotomy and try to pass it as a coherent whole?

      Great Depression was started by the Federal reserve printing fiat to help UK to get rid of its bad debt to France. The market used the fake money to blow up huge bubbles in farming stock, then the market corrected itself, the bubble imploded. Then Hoover and then FDR took that recession and turned it into the Great Depression by printing much more money, by creating government programs and policies that should have never existed in the first place. The only thing that took USA economy OUT of depression was the END of the WWII, when government consumption fell by 60% and taxes fell by 30%.

      The 1971 default on the gold dollar by Nixon happened as a result of the bubble that was inflated by the government spending of the 50s and 60s. The following stagflation pushed women into the workforce, so that they could supplement the income that was lost due to the men paying higher taxes. The falling currency value (inflation due to money printing) pushed production out of the USA from 1970s, this in turn pushed for more money printing by the government and market manipulation.

      The Fed holds 0% interest rates for the last 7 years, this is the only thing that keeps the FAKE economy sort of spinning. USA cannot actually afford 1% interest rate, never mind 10% or near 22% that Paul Volcker had to push towards in 1981 to stabilise the economy.

      The payments debt at 0.13% are a staggering what, 350 Billion a year? What about 1% interest payment? At 18.37 TRILLION USD 1% interest rate is almost as unmanageable, forget 10%, 21%??? You can shut down the country.

      You are looking at all of this and you are talking about Marx? MARX?

      Well, the only thing I may ever agree with Marx is the need to abolish State in the first place, but that means no taxes, no Federal, no State taxes, no Federal, no State departments, no services, no Federal, no State checks either. I can agree with that.

    12. Re:Economics isnt science. by Anonymous Coward · · Score: 0

      Put down the thesaurus and step back. The flowery speech does not make you look better. In fact it makes you look like an ass.

      Marx as an economist
      Ah now I see why you bash on it. Not because of any particular reason but because economics does not fit your world view. In fact if you look at the very examples you rattle off you can point the finger right at central gov not doing its job. In fact many times they encouraged exactly those problems. One of the fed chairmen called it 'irrational exuberance'. I will not trot out the reasons for failure and the fall out on his theories. History has done a pretty good job of what and why it went wrong.

      Most arm chair theorists (much like your own ideas) boil down to thinking everyone will act exactly the same. They all fail to take into account what I call 'the dick'. The dick is the guy who games the system. In pure communism (which marx described) it fails to take into account that if you do nothing you gain something. Meaning you can be a lazy bum and get as much as the guy who works his ass off. Which means you need a way to motivate people, which means it is no longer communism but totalitarianism. In pure capitalism (which you somehow have conflated with economics) it fails to take into account that you can use money to buy influence. Meaning you can force competitors out of the market by just using the right bribes or even better laws bought and paid for.

      Economics actually very precisely predicts what will happen if you do particular things. It is also a very hand wavy science that has at the core of its formulas something called 'happiness and utility'. Neither of which are measureable. It has scads of 'good math' built upon interesting assumptions in a steady state. But if any actor changes the state the formulas fail because many times they do not use calculus but algebra.

      People like you like to point out it failed. Then point out how capitalism is not working. When it is the ONLY one working at this time. For a contemporary example of failed communism look at North Korea. For a semi successful view of capitalism and socialism look at China. In many ways China has taken on capitalistic views on goods and jobs and communistic views on infrastructure and people. Yet in many ways both are failing in massive ways for China with rampant joblessness and poverty.

    13. Re:Economics isnt science. by HornWumpus · · Score: 0

      Yet another marxist prognostication that has failed to happen. He is batting 0.

      --
      John McAfee 'It was like that time I hired that Bangkok prostitute; to do my taxes, while I fucked my accountant'
    14. Re:Economics isnt science. by Anonymous Coward · · Score: 1

      So you're saying Clinton didn't repeal the Glass-Steagall act?

    15. Re:Economics isnt science. by Firethorn · · Score: 1

      Personally, I think that people are incorrect when they think of Marx as an economist. He wasn't. He was more of a socialogist. His economics were a side-note compared to the class struggle portion. It's just that you can't build a utopian social theory, like many philosophers have before, without touching upon economics. He was right that the social structures of the time were unsustainable though.

      --
      I don't read AC A human right
    16. Re:Economics isnt science. by Actually,+I+do+RTFA · · Score: 2

      every country which embraces regulated capitalism has experienced a steady improvement in standards of living and wealth would have stuck in old Karl's craw.

      Marx advocated most of the things that regulated capitalism did. Remember, the Communist Manifesto was really advocating Socialism, not what is now called Communism.

      There were ten areas he wanted to change. Some of them are now considered to be such "duh" ideas they will remain forever: Progressive taxation and universal education. Some are definitely implemented (partially) through things like (real estate) property taxes and estate taxes. Some were kinda stupid, in that he wanted a lot more agricultural workers and for everyone to have to take a turn farming. But keep in mind, the massive agricultural revolution is pretty recent, and both Marx and Smith were tripped up by the idea that we could genetically engineer crops or build giant combines.

      --
      Your ad here. Ask me how!
    17. Re:Economics isnt science. by Intrepid+imaginaut · · Score: 1

      Brilliant, criminals exist so we must all become mafioso.

  20. Psychology by Mycroft-X · · Score: 4, Insightful

    That's because economics is a blend of math and psychology. The math assumes a rational actor with all the necessary information. The psychology is rarely rational and involved decision making influenced by the decisions of others, highly varied interpretations of historical events which preclude deterministic mechanisms, and imperfect information viewed through personal biases and strengths. Inaccuracy results from improperly weighting the relative value of these two in economic outcomes and from difficulty in modeling the psychological elements. Bad math is the least of the challenges facing economics.

    1. Re:Psychology by Faust6 · · Score: 1

      The psychological aspect is mostly tied to the concept of utility. It's rather dubious but only a subset of what's taught of traditional Microeconomic theory. The rest leans towards Philosophy.

    2. Re:Psychology by trout007 · · Score: 1

      It depends on the school of economics. The Austrian school makes no such assumption which is why it lacks specific predictive ability. It is based on how humans act which is basically they pick from what they perceive as the best choice of those they see as available at the time. What this doesn't allow is your judgement as to what is rational. If someone decides at a certain time smoking a bowl is preferable to going to work at that moment than that is what they do otherwise they would do something else. The problem with this is all choices are ordinal. Basically you can rank the choices based on what they did but you can't compare them to a non choice.

      For example if someone went to the store and bought 4 apples for $2 all you can say is they preferred the apples to the $4 and time end effort to go to the store. You can draw no other conclusions.

      But most economists hate this because it eliminates specific predictive power. For example you can predict that if the Fed creates a $1T and gives it to the banks there will be a bubble somewhere and a misallocation of resources into that bubble. But you have no clue where the bubble will be or when it will pop. The only conclusion you can reach is not to artificially create money in the first place and let the markets set interest rates and money supply.

      --
      I love Jesus, except for his foreign policy.
    3. Re:Psychology by Anonymous Coward · · Score: 0

      EXACTLY! the only way you could ever accurately predict the economic future is if your magic learning computer was able to accurately simulate the minds of every human on earth, as well as the weather/environment of the earth and solar system. This whole article is basically rubbish.

    4. Re:Psychology by FreedomFirstThenPeac · · Score: 2

      Wrong. We can quite accurately predict the behavior of a gas under pressure without knowing the individual "choices" the molecules make. Every reader of the Foundation Series (Asimov) knows this. Economics uses the same sort of aggregation.

      --
      "There is no god but allah" - well, they got it half right.
  21. Replace one bad method with another? by rockmuelle · · Score: 2

    To illustrate, the summary could easily be restated this way:

    "...field of [data science] frequently uses [machine learning] in an unhealthy way. Many [data scientists] don't use [machine learning] as a tool to describe reality, but rather as an abstract foundation for whatever theory they've come up with."

    Replacing "math" with "machine learning" isn't going to make a difference if the practitioners don't understand how to use it properly. Machine learning models are much more subtle and complex than simple mathematical models and very easy to misuse. To use them properly, you really need a much stronger understanding of the math behind them than most people have.

    See the entire field of psychology and most GWAS studies for an example of where over reliance on (simple) models can get you into a lot of trouble.

    -Chris

    1. Re:Replace one bad method with another? by Anonymous Coward · · Score: 0

      I prefer reliance on simple models rather than complex and chaotic ones..

      Basically, we're rooting for a system that can do the thinking for us, without understanding the unintended consequences of that reliance or where the pitfalls are.

      Sounds cool, but will not replace sound and simple logic.

    2. Re:Replace one bad method with another? by rockmuelle · · Score: 1

      That's pretty much my point: most people can't even get it right with simple statistical models. I advocate sticking with the simple mathematical models and dumping the "turn-key", simple statistical models that keep getting people in trouble. p value .05, publish!

      Those that truly grok the statistics behind the more complex models can still use them, but the bar for acceptance by the community needs to be much higher. (which goes into fixing peer review and down that whole rabbit hole...)

      -Chris

  22. Re:Better not look at the "social" sciences then.. by Faust6 · · Score: 2

    I think you mean the other Social Sciences since Economics is one. It's the main reason the Left likes to trash the discipline as unscientific (whilst championing popular figures like Stiglitz, Krugman and Piketty). In truth they're all scientific: in part. They're equally comprised of philosophy.

  23. Austrian Machine by tmosley · · Score: 0

    Austrian economists have always discounted the use of math in economics because it is too complex and self referential, ie the things you are modelling can read your theories and adjust their behavior. Sounds like machine learning may finally bridge that gap, and take us out of the era of Voodoo Economics and into one where human action in aggregate is accurately modeled beyond the most basic "this policy will increase/decrease capital investment" used by the Austrians. Ever since I learned about AI and the potential upcoming technological Singularity, I have suspected that this will be the most important application of an ASI, because once you can accurately model human behavior on a massive scale, you can devise non-intrusive interventions a la the Butterfly Effect to maximize freedom and prosperity for everyone. Sort of like when something bad happens to you, like your family dies in a fiery car crash, or when a baby gets cancer, and some idiot tells you that "God has a plan". Well, now there is actually a real plan, and one that's actually GOOD for everyone involved.

    Even if it doesn't run that far, hopefully this will finally bury the idiot Keynesian school. A school, I might add, that couldn't even COMPREHEND THE EXISTENCE of stagflation, nevermind model/predict it and hence should have been thrown into the dustbin of history in the 70's when it first appeared. Too bad it is so useful for justifying the government's eternal urge to spend more of the people's money buying votes.

    1. Re:Austrian Machine by Red+Flayer · · Score: 4, Informative

      A school, I might add, that couldn't even COMPREHEND THE EXISTENCE of stagflation

      What do you mean? Keynes modeled stagflation; he didn't use that term, but it's clear that Keynes, and those who studied his work, were aware of the effect of a supply shock on an economy.

      The issue with Keynesian policy and stagflation is, given two problems with conflicting resolutions, how do you address both of them?

      We now know that tackling them one at a time works. First you address inflation, then you address stagnation. This isn't a weakness of Keynesian theory -- it's validation.

      --
      "Trolls they were, but filled with the evil will of their master: a fell race..." -- J.R.R. Tolkien on Olog-hai
    2. Re:Austrian Machine by tehcyder · · Score: 1

      Ever since I learned about AI and the potential upcoming technological Singularity, I have suspected that this will be the most important application of an ASI, because once you can accurately model human behavior on a massive scale, you can devise non-intrusive interventions a la the Butterfly Effect to maximize freedom and prosperity for everyone.

      Er, the point about chaotic systems and the Butterfly Effect is that you cannot predict what the result of your intervention will be.

      Your level of computing power is irrelevant.

      --
      To have a right to do a thing is not at all the same as to be right in doing it
    3. Re:Austrian Machine by tmosley · · Score: 1

      "you cannot"

      Correct. You and I are completely incapable of such calculations. We can only model the consequences of our actions in the broadest of strokes. But a machine with a human equivalent IQ of, say, 400,000,000? It most certainly could, and with high accuracy.

      You can SAY that your level of computing power is irrelevant, but you will always be wrong when you say it. The universe is a computer, and thus everything inside of it can be emulated, given enough processing power, just like you can run a game of Super Mario Brothers in your web browser.

    4. Re:Austrian Machine by tmosley · · Score: 1

      Funny, then, that they keep creating it at every opportunity. Almost all government economists are Keynesians. The government has followed policies suggested by Keynesians, including Krugman's infamous suggestion that we "fix" the bursting internet bubble by creating a housing bubble. In fact, looking back through history, I can't think of a single instance of stagflation that didn't occur under any but a Keynesian administration.

      Of course, we don't have stagflation now, because the idiots in charge keep changing the rules about how things are calculated. But hey, who's counting? No-one "important"!

      http://www.shadowstats.com/
      http://www.financialsense.com/...

  24. Unhealthy Math? by Anonymous Coward · · Score: 0

    Don't drink and derive!

  25. Re:Better not look at the "social" sciences then.. by bluefoxlucid · · Score: 1

    Sounds like Michael Chrichton's ranting about aliens and global warming, pointing out that a lot of our mathematical equations are [Unknowable] = [Bunch of unknowable variables multiplied together]. The Drake Equation, for example, says there's as much a chance of us finding aliens or aliens existing or whatever based on how many planets there are, how many are inhabited by aliens, etc., just a pile of quantities we can't know.

    I actually considered hanging lampshades on this when I described wealth and buying power--pointing out that certain relationships exist, but that they don't imply any ability to calculate any sort of meaningful metric.

  26. This is silly. by WSOGMM · · Score: 1

    Machine learning won't 'solve' the economics problem (a problem which the TFA doesn't really define). The problem with math in economics is that economic time-series is extremely chaotic -- a practically infinitesimal change in initial conditions vastly changes the outcome of the system. Hey, remember how we can only predict the weather out 15 days *max* (using big ass supercomputers along with lots of soil moisture content, temperature, wind and other seasonal data)?... well the weather is just one of the tiny effects that propagate through economic time-series. Don't forget about psychology, trading strategies, oh yeah, and the fact that people are actively trying to trick your trading strategies into losing money.

    No, machine learning is only natural to takeover a human's limited computational ability, but it doesn't solve the problem of unpredictability. In fact, it will make the market harder to predict for joe blow.

    That said, TFA did rightly point out that economics is filled with lots of bullshit conjecture and over-rigorized high-brow nonsense.

  27. Economics IS a science by sjbe · · Score: 4, Informative

    Economics is not scientific in the mathematical sense. It takes no account of the irrational human animal.

    That's entirely and demonstrably untrue. In 2002 the Nobel prize was awarded to Daniel Kahneman "for having integrated insights from psychological research into economic science, especially concerning human judgment and decision-making under uncertainty". Much recent economic study has been explicitly examining the irrationality of people and their economic decisions. Economics is a science but it is one where it is challenging to design experiments and so much of the data comes from empirical analysis.

    That is why it is more like the weather than mathematics.

    Mathematics is a language to describe things. Economics isn't a branch of mathematics any more or less than any other science. It is however a bit like studying the weather in that the forecasting models are trying to make predictions about a very complex and chaotic system. The models get their data from historical real world events but perfect accuracy in the models is nigh unacheivable.

    1. Re:Economics IS a science by Anonymous Coward · · Score: 0, Interesting

      Economics is not a science, no matter how many times you and your finance buddies tell yourselves that it is. That's not a real Nobel prize either, it's a self-aggrandizing fraud that was purchased by the banking industry in an attempt to convince the public that their twisted methods were legitimate and not just common crime.

    2. Re:Economics IS a science by khallow · · Score: 2

      Economics is not a science, no matter how many times you and your finance buddies tell yourselves that it is.

      But neither are physics, chemistry, etc, sciences because of how many times you and your finance buddies tell yourselves they are. They are all sciences because they are systematic empirical studies of some part of the real world. The difference with economics is that there are far stronger incentives to corrupt observations and models than with most other sciences.

    3. Re:Economics IS a science by chipschap · · Score: 1

      The difference with economics is that there are far stronger incentives to corrupt observations and models than with most other sciences.

      Unfortunately, this isn't the case. Look at historical debates such as "does smoking cause cancer" and current debates on climate change .... many sciences are subject to the influence of politics and agendas, and tragically, there are scientists who allow themselves to be so influenced.

    4. Re:Economics IS a science by Anonymous Coward · · Score: 0

      If economics is so scientific, then why was taking irrationality into account was such a novel idea that it earned a Nobel prize in 2002? Meaning, nobody was doing this in economics for the past 250 years

    5. Re:Economics IS a science by khallow · · Score: 1

      Look at historical debates such as "does smoking cause cancer" and current debates on climate change .... many sciences are subject to the influence of politics and agendas, and tragically, there are scientists who allow themselves to be so influenced.

      Sure, there are many subjects with significant financial or ideological value, but there's more than that where the only things at stake are the egos of the researchers involved.

    6. Re:Economics IS a science by Anonymous Coward · · Score: 0

      The difference with economics is that there are far stronger incentives to corrupt observations and models than with most other sciences

      Scientific justification is the product the employer is paying for. Justification, in this context, requires a conclusion that is supported (justified) by the evidence. It's simple to hide or ignore data that doesn't support the conclusion and concentrate on data that does. Making it look like a scientific experiment on paper is just an academic exercise.

  28. economics aint science by johnwerneken · · Score: 0

    Once upon a time it was 'political economy'. That means policies to benefit one's values and interests, which is what we get from economists. That's not really useful. Fools can figure out which policy of several supports their own beliefs and vested interests, that's what voters do in elections.

    Forecasting and explanatory models that actually tended to fit reality, going both backwards and forwards, would be very useful. High time.

  29. Re:Better not look at the "social" sciences then.. by diamondmagic · · Score: 1

    Economics could only be considered a social science to the extent it deals with the interactions of trade between people, and the objective results of people with different subjective desires.

    Economics can also be one of the hardest sciences there is, on par with kinematics: Economics invented game theory, and has many mathematical theorems, like the Law of Supply and Demand, the Law of Comparative Advantage, and the Black-Scholes model.

  30. It's about time! by meburke · · Score: 2

    Yeah, Economists (and I'm an avid amateur) use a language that is not precise to describe behavior that is not able to be precisely measured. Take the word "rational" for instance: Rationality in psychological terms implies something on the order of optimization in general, while rational in economic terms is optimization for individual behavior. Yes, an individual may change to the faster moving line or lane, but that only has a cumulative effect on the mass of behavior, and does not add to strategy as a whole. Individual behavior does not advance knowledge of the subject; it is only the accumulated effects of individual behaviors that reveal Economic behavior and may reveal Economic principles.

    The closest thing we have in in tech terms is "emergent systems" and economics actually closely resembles an experiment in complex systems.

    The other imprecision is to generalize about Economists. Some Economists are idealists or philosophers and deal in theory only, trying to determine "the way things should be." Some Economists are technologists and are mostly concerned about using the information to manipulate outcomes. (Many negative effects are a result of Economists who do both of these!) Somewhere in between these two types is the Economic Scientist whose main concern is finding out what is going on, proving that it is valid, and who can use the information to actually predict Economic behavior. It seems to me that machine learning actually serves the Economic Scientist.

    --
    "The mind works quicker than you think!"
  31. Empirical analysis of chaotic systems by sjbe · · Score: 4, Informative

    Putting that stuff near "science" or "maths" is an insult to those fields of endeeavour.

    Not any more than meteorology or ecology or geology or any other field that gets its data from complex and chaotic empirical sources.

    Which economists predicted 2007/2008?

    Quite a few of them. Some didn't get their timing right but I can introduce you to economists and financial analysts that I know personally that were warning about a likely crash in the housing market and knock on effects as far back as 2003. They obviously couldn't predict the exact outcome because that is basically impossible in a large chaotic system. (especially when you cannot perfectly model the initial state)

    People have this naive idea that economists ought to be able to predict the future perfectly or it isn't a science. Predicting the recession of 2008 was something akin to a geologist trying to predict exactly when and where an earthquake will hit. There are too many unknowns to make anything better than a probabilistic analysis. They can tell you there is an X% chance of an event happening within time period Y. Asking for something more accurate than that is simply unrealistic expectations.

    1. Re:Empirical analysis of chaotic systems by jbengt · · Score: 2

      Which economists predicted 2007/2008?

      Quite a few of them. Some didn't get their timing right but I can introduce you to economists and financial analysts that I know personally that were warning about a likely crash in the housing market and knock on effects as far back as 2003.

      Hell, I predicted that the housing market would crash well before that (after a hi-rise condo developer I knew told me that 20% of their sales were to speculators who never had any intention of moving in). Does that make me right when the prices kept going up for years before crashing to levels still above the prices that were typical when I first thought it was going to crash?

      Putting that stuff near "science" or "maths" is an insult to those fields of endeeavour.

      Not any more than meteorology or ecology or geology or any other field that gets its data from complex and chaotic empirical sources.

      The thing is, when scientists publish theories and mathematical models about meteorology or ecology or geology, people using those models and theories to make predictions don't affect the meteorology or ecology or geology. When economists publish theories and mathematical models of the economy, people acting on those models can change the behavior being modeled.

    2. Re:Empirical analysis of chaotic systems by Anonymous Coward · · Score: 0

      The thing is, when scientists publish theories and mathematical models about meteorology or ecology or geology, people using those models and theories to make predictions don't affect the meteorology or ecology or geology. When economists publish theories and mathematical models of the economy, people acting on those models can change the behavior being modeled.

      Where did you get that idea?

      Do you think geological models are not relevant to how people do fracking? Fracking in turn potentially affects geology, especially if removing stuff causes sinkholes! There's also the issue of ecological effects of fracking.

      Even old-fashioned mining has geological effects: do some research into the issue of buying a home in places like Colorado which are riddled with old mines. Those old mine tunnels might collapse, depending upon a variety of factors including the geology of the area. There are different strategies to mitigate this, which depend upon models that predict the likely effects resulting from the exact geological factors in play. The implementation of these strategies can in turn modify the geology and/or ecology of the area.

      Do you think climate or ecological models have no effect on our willingness to dam rivers, create reservoirs, divert water, or irrigate farms, and thus alter local or even regional climate and ecology?

      Ecological models are one of the major reasons we now attempt to use wetlands to absorb storm surge. We now actually have more wetlands than we used to in some places, fundamentally changing the ecology in those places.

      Do you think meteorology theories have no relevance to our understanding of smog, it's effects, and how we might mitigate it (thus potentially getting rid of the very thing we started out modeling)?

      I could go on, but perhaps it's time for you to read a few textbooks...

  32. Economists are well aware of limitations of models by sjbe · · Score: 3, Informative

    The difference seems to be that while physicists are aware that their models are incomplete, economists (or, more likely, journalists, politicians, and the people who actually apply these models) etc. disregard these caveats and claim that this model describes the entire financial system in a few differential equations.

    Economists don't disregard the limitations of their models at all. If you would spend some time speaking with actual economists (I have) you'd quickly find out that they are exquisitely aware of the limitations of their models.

    Where things tend to go off the rails is when financial analysts with a profit motive try to stretch the economists models beyond what they can actually explain. A great example of this is Long Term Capital Management which was described in the book When Genius Failed. They took some models with a long list of assumptions and limitations and tried to apply the models to areas well beyond the limitations of the model. Early success begat hubris which led to greed and ultimately their downfall.

  33. Re:Better not look at the "social" sciences then.. by Faust6 · · Score: 1

    I agree. But the basis or driver of these theorems is still social/psychological given the need for narrowly defined rational self-interest.

  34. Economics is a social science. by Anonymous Coward · · Score: 1

    And all the breakthroughs are being done by psycholgists like Dan Kahneman who are showing that people and markets are anything but rational. The Austrian and Chicago schools are turning out to be mostly wrong.

  35. cet par by ThatsNotPudding · · Score: 1

    It seems most economists have 'cet par' on the tips of their forked tongues. Ceteris Paribus meaning 'other things being equal', which is rarely ever true in meat space.

    However, to truly model economist behavior, I think quantum machines should be used, so they can offer two conflicting opinions at the exact same time.

  36. man ML algorithms are black box by peter303 · · Score: 1

    That is they appear to work without giving you a deep understanding of they work. I am talking about neural networks and their most recent incarnation in deep learning. I would consider this approach to be engineering rather than science.

  37. Economics follows the scientific method by sjbe · · Score: 4, Insightful

    Economics is not a science, no matter how many times you and your finance buddies tell yourselves that it is.

    A science is a formal method of examining and describing the world around us. This method requires hypothesis regarding empirical data which are testable and repeatable. This process is called the scientific method. Economics follows the scientific method and any field of study that follows the scientific method can accurately be called a science. Ergo economics is a science by definition. Some sciences are easier to study than others but that has no bearing on their validity as a science.

    That's not a real Nobel prize either, it's a self-aggrandizing fraud that was purchased by the banking industry in an attempt to convince the public that their twisted methods were legitimate and not just common crime.

    Since the Nobel organization recognizes the Economics prize it is as real as any other Nobel prize. Your opinion on the matter is meaningless.

  38. Re:Better not look at the "social" sciences then.. by Anonymous Coward · · Score: 0

    Faced Painting Homer Alarmists Mods at it again.

    What's the matter? You pussies can't stand for you errors to be pointed out?

    You must be a Climate Scientist.

  39. Housing bubble. by Firethorn · · Score: 1

    and many saw it coming long before it folded.

    Hell, I saw it coming. Like I said, not an economist and thus I wasn't about to try to peg when it'd happen. For that matter, I didn't even know how bad it was underneath.

    My metric was incredibly simple: comparing median salary of home purchasers with median home price. When that started getting out of whack, combined with news like how the average home purchaser was in more debt than ever(student loans), my realization was that the prices were unsustainable.

    I ended up buying a $15k house and living through the bursting in it. Then sold it for $15k.

    I knew it was in beanie-baby territory when banks were handing out loans because they were counting on things like even if they didn't get ONE payment from the borrower they'd still get their money back in appreciation by the time they repossessed it and sold it. Even as the incomes of those that would like to move into said homes was stagnant.

    --
    I don't read AC A human right
  40. Forgive Me by JimSadler · · Score: 1

    If economics involves a method for the distribution of wealth I simply do not believe that the US or many other nations actually have an economy at all. In essence in the US the economy is a dog pile of nonsense. There is no system of logic behind it at all. We can compare it to our justice system. Supposedly justice has to do with a code of behavior and the application of judgement and remedies to various situations designed to support that code. But that is not the truth. Our laws are nothing more than a ritual that in reality does nothing more than support the combined prejudices of the public. Economics seems to act as some sort of justification for a totally irrational system in which people rarely get what they deserve out of a system. Economics can allow either the public, the government or both to act in totally immoral ways. For example if the nation needed a railroad then it became ok to apply starvation wages and brutal working conditions because supposedly economic demanded cheap labor.

  41. Hayek by jason.sherry · · Score: 1

    The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design. - Friedrich August von Hayek

  42. Not prediction at all... more like guessing. by denzacar · · Score: 1

    Instead of A coin flipped for 20000 days, they take data on... say... 100 coins.
    VARIOUS data. Weight, color, date on coin, number of scratches, source of coin, air temperature, does flipper of coins like dogs or cats...
    Then they flip those coins for some number of times and write all that data down too.
    Including the sequence of results - heads, heads, heads, tails, tails, heads...
    They get a BIG pile of data to mine.

    Then, and this is a clincher, they "Distinguish between causal effects and attributes".
    In other words - they come up with a theory of "what" influences the results and "how".
    They don't go into why just yet - they only look for nice regressions between their independent variables and their dependent ones.

    Anyway, now they have all that data and outcomes based on various attributes.
    They can cherry pick those results they like and build their coin-flipping models based on attributes which fit to desired results.
    Post hoc ergo propter hoc + confirmation bias? Nah man... Regression analysis.
    Then, based on that, they build a model and plug into it new data from a new sample of coins.
    Then they dump all that into regression trees and go looking for "predictions" of results they would like to see - thus providing the "why".
    http://www.nasonline.org/progr...

    I.e. Make a lot of guesses "based on" previous "maybes" - then pick ones you like.
    Now... someone get me a 20-something blonde female, dog lover with a degree in flower arrangement and a 1956 Australian penny with a bluish-greenish tint.
    My model predicts a 50% chance of getting either head or tail under those conditions.

    --
    Mit der Dummheit kämpfen Götter selbst vergebens
  43. Serious, rigorous, academic discipline based on ? by Anonymous Coward · · Score: 0

    Economics is a subset of history, data from the past, and therefore it is based entirely on correlations. There can be no cause and effect derived from correlations, so 'science' is not possible. Science requires experiments, controlled for 1 variable at a time.

    History has worked very far toward understanding dealing with real-world historical data, read "Historian's Fallacies" by David Hackett Fischer. Economics is not even close in its rigor.

    Big data is just 'big correlations'. Not science.

  44. System Dynamics by smugfunt · · Score: 1

    I've been reading a lot of economics the last few years, trying to figure out why it's so full of shit.
    It seems mainstream (neoclassical/keynesian synthesis) economists believe in mathematics but don't believe in reality.
    Their close kin the Austrians don't believe in mathematics either.
    They both believe economies are in equilibrium, this is a fundamental assumption, and other nonsense like 'people behave rationally', 'people have perfect information' etc.
    These are not a priori assumptions like a physicist might make but come out of their theories and without which they do not work. This does not phase them.

    Along the way I have discovered System Dynamics, a way of modeling complex dynamic systems which seems well suited to studying economics. There is an economist using this, he has designed his own System Dynamics software called Minsky, and unlike Krugman, Rogoff et al. he makes a lot of sense.
    His name is Steve Keen and you can get Minsky from here: Windows, Mac or here: Linux.
    He has an excellent book: Debunking Economics and you will find him on YouTube too.

  45. Re:Better not look at the "social" sciences then.. by diamondmagic · · Score: 1

    Hmmm. Not necessarily. You can apply economics to any situation where multiple, scarce resources must be allocated to autonomous consumers based on some criteria.

    Suppose I have resources A and B. To accomplish task Y I'd need 2 A or 3 B; and to accomplish task Z I'd need 3 A and 5 B.

    It doesn't matter if A/B is RAM/HDD or doctors/nurses. Economics says that, even though A is better at both tasks than B, it'll actually be cheapest to deploy B to task Y if and deploy A to task Z.

    It's really no different than saying to get from point M to N, I'd need 10 Joules of energy based on some physics calculations.

    Human economics happens to be the hardest because because there's no rational basis for our wants, they're completely arbitrary and can't be measured. I'm not sure if there's a name that makes a distinction between human wants and other wants, though.

  46. Economics a "hard science"? by Anonymous Coward · · Score: 1

    Black-Scholes is a perfect example of the problem discussed in the article: mathematically it is a nice model, but it fails to describe the economy correctly. Search for "Long-Term Capital Management" if you want to know how well Scholes and Merton did in the real world. I bet that neural networks can do a better job.

    1. Re:Economics a "hard science"? by diamondmagic · · Score: 1

      I'm not quite sure what you're referring to, Black-Scholes describes how to price futures contracts, and it does remarkably well at doing that. It's just based on the rate of interest, which should seem obvious.

      Generally when it fails, it's because of a faulty assumption, same as assuming zero air resistance and zero friction at low speeds in physics, right. Usually it's good enough, many times it's not.

      The difference is in economics we can actually mathematically prove the theorem when the initial assumptions are true. Air resistance and such is experimentally tested, not proven.

    2. Re:Economics a "hard science"? by metrix007 · · Score: 1

      You are trying to claim economics is better at providing proof than physics? Really?

      --
      If you ignore ACs because they are anonymous - you're an idiot.
    3. Re:Economics a "hard science"? by diamondmagic · · Score: 1

      What's the last thing physics ever proved as a matter of mathematical theorem?

      Go on, I'm waiting

  47. Re:Better not look at the "social" sciences then.. by Anonymous Coward · · Score: 0

    And came up with Noam Chomsky, whose math is as sophisticated, as consistent, and as relevant to any experimental results as his politics..

  48. Re:Serious, rigorous, academic discipline based on by yndrd1984 · · Score: 1

    Economics is a subset of history, data from the past, and therefore it is based entirely on correlations. There can be no cause and effect derived from correlations, so 'science' is not possible. Science requires experiments, controlled for 1 variable at a time.

    So there's a big difference between "observational science" and "historical science"...

    Ken Ham, is that you?

  49. Re:Better not look at the "social" sciences then.. by metrix007 · · Score: 1

    How are human wants arbitrary? We want sex with attractive people, good food, luxury, entertainment etc..., all defined by our biology...not arbitrary at all.

    --
    If you ignore ACs because they are anonymous - you're an idiot.
  50. Re:Better not look at the "social" sciences then.. by diamondmagic · · Score: 1

    The reasons why we have certain desires don't have any impact the actual laws of economics.

    Also, none of those are necessarily true. They might be true for 90-99.99% of the population, but not as a matter of definite fact.