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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."
Isn't this the same as having economists doing the work, just faster? You are still using past data to predict the future,
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.
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.
By which you mean un-knowable magic.
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.
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.
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.
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.
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.