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On February 21 2013 05:07 corumjhaelen wrote:
There is a huge difference between economics and physics. In physics you can take the law of a folling corpse and check it against an experiment over over and over, which means that our model has something to do with reality. Once we have checked those laws on simple models, making predictions on more complicated stuff makes sense.
In economics, there is no simple experiment that I know of, capable of testing small hypothesis. You have to directly test your model against a very complicated reality.
And given that the bridge seems to fall down over over and over, I'm tempted to say that the hypothesis might suck, not the calculations.
In economics, the simple stuff is done through micro. It doesn't translate 1:1 to macro, in the same way quantum and atomic physics doesn't translate 1:1 to Newtonian physics, but they do have general correlations. This is why most academic macro work has to have micro fundamentals applied to be considered legitimate, unless we have extremely good macro examples (like that of austerity vs stimulus in the case of near 0% interest rates right now).
On February 21 2013 05:14 sam!zdat wrote:
it is not at all equivalent to an assumption in physics, it is a ludicrously fallacious assumption which exists only to allow us to build 'complicated' air castles that have nothing to do with reality, so we can go on pretending capitalism makes sense
The issues with complication we have in finance is the lack of regulation and strict standards that are applied in other fields. That can be blamed on a lot of people and organizations, but can't really be blamed on some idolization of capitalism.
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I think the problem is that the regulators and the regulated are the same people
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On February 21 2013 07:23 sam!zdat wrote:
I think the problem is that the regulators and the regulated are the same people
Well, kinda. They're not the same people, but they are buddies. I personally see most of the problems coming from the TBTF issue, directly and indirectly. Everybody who understands the industry is, or has been, employed by a major financial institution, of which there are only a handful. There is no current structure for any other firms to become a major financial institution, and the ones that exist mostly insource every single instrument and product they offer. It's a massive orgy of incest, which we know is bad.
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I think in political philosophy, 'buddies' is equivalent to 'same people.' it's one big faction, bamboozling all of the rest of us because we're not sufficiently complicated to understand.
as far as assuming micro principles when studying macro systems, this is the first lesson of complexity theory: don't do that
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+ Show Spoiler + in the same way quantum and atomic physics doesn't translate 1:1 to Newtonian physics
That's like, not a very good example.
Suprisingly I'm going to go with sam!zdat and add that statistical physics would be a better example.
But still, the comparison to physics doesn't convince me at all. Even biology and chemistry do things differently than they do in physics. Even within physics, the way reasonning goes can be pretty different from an area to another.
I wish I was better at epistemology than I am, but my opinion is that the parallelism between physics and economics should be handled with a lot of care, and are usually very politically loaded.
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On February 21 2013 07:46 sam!zdat wrote:
I think in political philosophy, 'buddies' is equivalent to 'same people.' it's one big faction, bamboozling all of the rest of us because we're not sufficiently complicated to understand.
as far as assuming micro principles when studying macro systems, this is the first lesson of complexity theory: don't do that
You don't take them at face value, but you reference them in your argument. To throw them out entirely would be stupid and leave us no better than where we were 100 years ago.
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On February 21 2013 07:55 corumjhaelen wrote:+ Show Spoiler + in the same way quantum and atomic physics doesn't translate 1:1 to Newtonian physics That's like, not a very good example. Suprisingly I'm going to go with sam!zdat and add that statistical physics would be a better example. But still, the comparison to physics doesn't convince me at all. Even biology and chemistry do things differently than they do in physics. Even within physics, the way reasonning goes can be pretty different from an area to another. I wish I was better at epistemology than I am, but my opinion is that the parallelism between physics and economics should be handled with a lot of care, and are usually very politically loaded.
What exactly do you mean by "statistical physics"? If you mean the physical laws exhibit statistical behavior, then that's what quantum and atomic physics are.
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On February 21 2013 08:00 aksfjh wrote:Show nested quote +On February 21 2013 07:55 corumjhaelen wrote:+ Show Spoiler + in the same way quantum and atomic physics doesn't translate 1:1 to Newtonian physics That's like, not a very good example. Suprisingly I'm going to go with sam!zdat and add that statistical physics would be a better example. But still, the comparison to physics doesn't convince me at all. Even biology and chemistry do things differently than they do in physics. Even within physics, the way reasonning goes can be pretty different from an area to another. I wish I was better at epistemology than I am, but my opinion is that the parallelism between physics and economics should be handled with a lot of care, and are usually very politically loaded. What exactly do you mean by "statistical physics"? If you mean the physical laws exhibit statistical behavior, then that's what quantum and atomic physics are.
I checked, that's indeed called statistical physics in English; but it seems that the usual divisions are different from those in France. Think Boltzmann.
Edit : and saying that physical laws exhibit statistical behavior is a very unclear statement to me...
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On February 21 2013 08:10 corumjhaelen wrote:Show nested quote +On February 21 2013 08:00 aksfjh wrote:On February 21 2013 07:55 corumjhaelen wrote:+ Show Spoiler + in the same way quantum and atomic physics doesn't translate 1:1 to Newtonian physics That's like, not a very good example. Suprisingly I'm going to go with sam!zdat and add that statistical physics would be a better example. But still, the comparison to physics doesn't convince me at all. Even biology and chemistry do things differently than they do in physics. Even within physics, the way reasonning goes can be pretty different from an area to another. I wish I was better at epistemology than I am, but my opinion is that the parallelism between physics and economics should be handled with a lot of care, and are usually very politically loaded. What exactly do you mean by "statistical physics"? If you mean the physical laws exhibit statistical behavior, then that's what quantum and atomic physics are. I checked, that's indeed called statistical physics in English; but it seems that the usual divisions are different from those in France. Think Boltzmann. Edit : and saying that physical laws exhibit statistical behavior is a very unclear statement to me...
All of the physics I've used that involved statistics were quantum and atomic in nature. Things like the movement of electrons through materials, energy levels, and element diffusion through a medium. You have general rules that you use that follow a specific, traditional formula (usually polynomial or exponential), but you also have the specific case to use when you want to be exact, and you get a number in the 95% confidence range. Stuff like currents flowing through 12 nm of a conductor next to another conductor divided by 5 nm dielectric and figuring out the probability that the electron is going to tunnel through the dielectric. That would be physical law that exhibits statistical behavior, since you can't say with 100% certainty when and where the phenomenon will occur.
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On February 21 2013 07:57 aksfjh wrote:Show nested quote +On February 21 2013 07:46 sam!zdat wrote:
I think in political philosophy, 'buddies' is equivalent to 'same people.' it's one big faction, bamboozling all of the rest of us because we're not sufficiently complicated to understand.
as far as assuming micro principles when studying macro systems, this is the first lesson of complexity theory: don't do that You don't take them at face value, but you reference them in your argument. To throw them out entirely would be stupid and leave us no better than where we were 100 years ago.
I think where you were 100 years ago had some advantages that you have since misplaced. I'm sure it's not entirely useless, but I think there are some serious flaws at the very foundations of modern economics.
It's obvious that people can't be rational actors in economics. Here's a proof
1) I am an intelligent, well-educated, but relatively financially uninformed person. If any ordinary person is a rational actor, it's me.
2) If I'm going to act rationally, I have to understand the world in which I am acting.
3) As paralleluniverse says, and as should be clear from my lack of ability to express myself on the topic, finance is too complicated for me to understand.
4) The world in which I am acting is a world dominated by finance.
5) I cannot be a be a rational actor, because I do not understand finance, and the world in which I am supposed to be acting is dominated by finance.
6) the field is a joke, QED
Of all academic fields, economics is the one that cites least outside of itself. Economists literally do not care that there is a world out there, full of people and history and shit they simply do not understand. They do not understand why people do things, but they think they do, because they just assume people are robots with perfect information who only care about money. Any real study of economics will have to consider ecology, psychology, political theory, social theory, and any number of other things, if it is to actually talk about the real world. Imagining a world populated with game-theoretical robots is not going to get you anywhere.
Economists should not be thinking about their field as analogous to physics, that's an obvious fallacy. They should be thinking about their field more like climate science or evolutionary biology - as a dynamical system, which exhibits emergent macro behavior that cannot be usefully epistemically reduced to the iterated actions of individual actors.
On February 21 2013 04:57 aksfjh wrote:The financial system works the same, and the sad part is that, in both areas, we've had trusted people screw up BIG and ruin thousands or millions of lives in both fields while KNOWING what was the right thing to do as a whole.
NO, they don't know what the right thing to do as a whole is, because they think that is to keep the GDP tumor expanding until we all choke on our own excrement. they don't have a clue
edit: according to those people's philosophies, the right thing to do is for each of them to pursue their own selfish interests, and that is EXACTLY what they did
On February 21 2013 04:32 corumjhaelen wrote:
I also that finance as models far more complicated than that, but I'm not convinced that using more complicated maths can even begin to close the gap between the models and reality.
As anybody who's spent two minutes thinking about complexity or computational irreducibility knows to be a totally obvious thing
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On February 21 2013 09:03 sam!zdat wrote:Show nested quote +On February 21 2013 07:57 aksfjh wrote:On February 21 2013 07:46 sam!zdat wrote:
I think in political philosophy, 'buddies' is equivalent to 'same people.' it's one big faction, bamboozling all of the rest of us because we're not sufficiently complicated to understand.
as far as assuming micro principles when studying macro systems, this is the first lesson of complexity theory: don't do that You don't take them at face value, but you reference them in your argument. To throw them out entirely would be stupid and leave us no better than where we were 100 years ago. I think where you were 100 years ago had some advantages that you have since misplaced. I'm sure it's not entirely useless, but I think there are some serious flaws at the very foundations of modern economics. It's obvious that people can't be rational actors in economics.
Just want to respond to this part right now. Rational and smart economists don't believe people are "rational actors." It is a gross oversimplification. In real economics, people have aspects of "rational actors" that are then modified. That's the reference, the starting point. From there, you tack on some uncertainty, some emotional responses, and some dice rolling based on other evidence that we have (as well as other factors). The ONLY people I know that actually think the economy works with true "rational actors" are part of the Cult of Austrian Economics.
I'll get to the other points in just a moment.
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I don't think you can "tack on some uncertainty and emotional responses" and consider yourself to have done an adequate job of studying anything
edit: I want somebody to explain to me how anyone can get off telling me "it's all too complicated for you to understand, but don't worry, you're basically rational, we'll just tack on some emotions"
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A mere poor choice of words to assuage somebody as skeptical as you.
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I think it's a telling slip
edit: I mean, do I SOUND like a rational person to any of you?? 
edit: and as far as I can tell, the only rational thing to do would be to distrust all mainstream economists, because the last time they told me they understood stuff, look what happened, and now they're telling me the same thing again.
edit: do mainstream economists spend any time at all thinking about the way that capital flows over geography (including the built environment)? an honest question. how about cliques, extended families, and other affective networks as market distortions? asymmetries in geographical mobility of labor vs. capital?
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Cayman Islands24199 Posts
On February 21 2013 06:55 aksfjh wrote:Show nested quote +On February 21 2013 05:07 corumjhaelen wrote:
There is a huge difference between economics and physics. In physics you can take the law of a folling corpse and check it against an experiment over over and over, which means that our model has something to do with reality. Once we have checked those laws on simple models, making predictions on more complicated stuff makes sense.
In economics, there is no simple experiment that I know of, capable of testing small hypothesis. You have to directly test your model against a very complicated reality.
And given that the bridge seems to fall down over over and over, I'm tempted to say that the hypothesis might suck, not the calculations. In economics, the simple stuff is done through micro. It doesn't translate 1:1 to macro, in the same way quantum and atomic physics doesn't translate 1:1 to Newtonian physics, but they do have general correlations. This is why most academic macro work has to have micro fundamentals applied to be considered legitimate, unless we have extremely good macro examples (like that of austerity vs stimulus in the case of near 0% interest rates right now). Show nested quote +On February 21 2013 05:14 sam!zdat wrote:
it is not at all equivalent to an assumption in physics, it is a ludicrously fallacious assumption which exists only to allow us to build 'complicated' air castles that have nothing to do with reality, so we can go on pretending capitalism makes sense The issues with complication we have in finance is the lack of regulation and strict standards that are applied in other fields. That can be blamed on a lot of people and organizations, but can't really be blamed on some idolization of capitalism.
this micro to macro translation is precisely the problem, when you have a far too simple conception of the sort of agents you are dealing with and their problems. aggregation problem
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See, this is why I have such ambivalent feelings about the Foundation trilogy. I think every mainstream economist must have read that growing up and now they think they Hari Seldon
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On February 21 2013 10:19 oneofthem wrote:Show nested quote +On February 21 2013 06:55 aksfjh wrote:On February 21 2013 05:07 corumjhaelen wrote:
There is a huge difference between economics and physics. In physics you can take the law of a folling corpse and check it against an experiment over over and over, which means that our model has something to do with reality. Once we have checked those laws on simple models, making predictions on more complicated stuff makes sense.
In economics, there is no simple experiment that I know of, capable of testing small hypothesis. You have to directly test your model against a very complicated reality.
And given that the bridge seems to fall down over over and over, I'm tempted to say that the hypothesis might suck, not the calculations. In economics, the simple stuff is done through micro. It doesn't translate 1:1 to macro, in the same way quantum and atomic physics doesn't translate 1:1 to Newtonian physics, but they do have general correlations. This is why most academic macro work has to have micro fundamentals applied to be considered legitimate, unless we have extremely good macro examples (like that of austerity vs stimulus in the case of near 0% interest rates right now). On February 21 2013 05:14 sam!zdat wrote:
it is not at all equivalent to an assumption in physics, it is a ludicrously fallacious assumption which exists only to allow us to build 'complicated' air castles that have nothing to do with reality, so we can go on pretending capitalism makes sense The issues with complication we have in finance is the lack of regulation and strict standards that are applied in other fields. That can be blamed on a lot of people and organizations, but can't really be blamed on some idolization of capitalism. this micro to macro translation is precisely the problem, when you have a far too simple conception of the sort of agents you are dealing with and their problems. aggregation problem
Don't take my word as an economist. I'm an engineer, so I only specifically know about the general and complex transformations in that context. I am aware of the transformations in other fields, but not intimately. At the very least, I can guarantee that they have the tools and experience to analyze situations we've seen over the past 5 years (and 100 years for that matter), it's just a matter of consolidation and competition of interests. Science and technology have the distinct advantage (or disadvantage?) of not being directly related to profit motive in areas of R&D, and thus don't suffer as much from misdirection. I mean, at worst, scientists are accused of "selling" climate change for grants, but economists can be given huge cash incentives to tote a line which is intellectually dishonest because that line can be sold for millions or billions of dollars in just 1 year.
That's what I see anyways.
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On February 21 2013 10:40 aksfjh wrote:
tote a line which is intellectually dishonest
we call that line "the Chicago school"
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On February 21 2013 09:40 sam!zdat wrote:
edit: do mainstream economists spend any time at all thinking about the way that capital flows over geography (including the built environment)? an honest question. how about cliques, extended families, and other affective networks as market distortions? asymmetries in geographical mobility of labor vs. capital?
Absolutely... unless by "mainstream economists" you mean the derpy talking heads on TV. They're just selling generalizations that place the emphasis here or there.
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would be interested in any recommendations of texts, esp. pertaining to relationship between geography and flow of capital. preferably books, not articles. especially, further, dealing with problems of urban form, i.e. ghetto-formation, suburbanization, decay of inner cities, rust-belt formation... things like that
edit: also, in general, good books about economic history of the 19th and 20th centuries. pm me
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EPT
