Is economics a science, or just a dinner-party? ....

IronWolf

Conrad wrote: »

And this Sir is why economics and the business of prediction will never be a science.

One Human mind has more possible connections than all the atoms in the Universe.

Each of the billions of Human minds in a chaotic manner will input all sorts of new events onto tomorrow, meaning prediction much beyond a few months becomes toss of the coin stuff.

Sure every now and then someone will get a prediction partly on the nose, but in any large chaotic system, on chance alone this will happen.


Most leading economists predicted world famine that would devastate the west by the early 1980's. ALL THIER TRENDS POINTED TO THIS.

So what happened?

What had they missed?

Human ingenuity in the form of the green revolution. Countless books and theories from the 60's 70's and 80's argued 'anyone not believing this is inevitable, is going against all evidence'. They predicted America would fall into a land of rich and poor in civil war by 1980.

Time and again predictions fail (99% fail according to studies by people like Tetlock), because expert economists cannot predict Human ingenuity and interactions.

Thats why these expert predictions portending Chinas dominance over America must be taken with a bucket of salt.

Most experts were CERTAIN that Japan would usurp America by 1990 / 1995. They were just as certain as some of your are that America will once again decline.

These predictions of Americas 'inevitable' decline have been with us for 200 years!

Over and again people make the mistake of trying to predict from CURRENT TRENDS.


NOT CONVINCED?

Did you know there have been more than 100 expert separate consensus predictions we had reached peak oil, going right back to 1897?

Did you know there have been over 5000 articles in the NY Times alone that outlined Americas near term decline going right back to 1924? Even in times of plenty such as the late 50's these articles appeared.

Fools follow expert predictions.

Actually, an interesting thing to note is that many economics models actually treat things with a certain randomness, and it's this assumption that usually falls down. There are times when the markets are not random and certain arbitrage models fail and funds get wiped out.

Anyone thinking economics has reliable real world applications only needs to look as far as Long-Term Capital Management. 2 Nobel prize winners running a hedge fund using economic models. Result...going under they had to go to the likes of Goldman Sachs, AIG and Berkshire Hathaway to buy them out and put their own money into covering their losses. Warren Buffet offered them a deal and gave them an hour to say yes. They stalled and the deal went off the table, in the end the Fed had to organise a bail out.

thor

antrobus wrote: »

A more pertinent question would be; why to people expect economists to be able to predict the future?

Well what's the point of them then? Economists themselves seem to have a lot to say(usually wrongly) about what will happen if economic factors are changed. I agree completely that they are as useful as a bunch of weather forecasters and if they were forced to get a 'real' job they would not last long to long methinks.

thor

pqrdef wrote: »

Economists know that these things go in cycles.

Only up until now. Is there any reason for economic cycles? Just saying that things will improves because it always has done before does not mean it is inevitable.

[Deleted User]

Definately not a science. The extent to which sentiment impacts the markets stops it from being a science.

This is actually good news for economists though as most of them would be redundant if it were.