Economy And The Damned Economists

No, this essay by a friend on medium. com is not, thankfully, about Amartya Lecher Sen. It about undue role economists have usurped for themselves among appointee leaders and managers of people affairs. Economy modeling typically uses statistical methods to generate inputs for mathematical equations that are then presented as science. But are they ?

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The fundamental issue is highlighted by Tyler Durden. “As someone who rather enjoys voyages of the imagination, the use of mathematical models in economics is intriguing. The pretension that through using formal mathematical techniques and process we can not only accurately understand, but accurately predict the result of changes in the economy is highly seductive. After all, we can accurately predict the future, right ?

“Wrong. The wonderful and terrible and confounding thing about our world is that it is a deeply unpredictable place, at least in the economic sphere where each number (for instance “aggregate demand” or “aggregate supply”) in an equation may loosely refer to millions of huge, complex and dynamic events. When you’re using huge simplifications to describe reality, those simplifications may miss the important details, and your projections may go askew.”

Not all modelling is equal. Newton’s model of gravitation (since superseded by Einstein’s relativity) makes relatively accurate predictions about how gravitation works, and what would happen to an object dropped 500 metres above the Earth. NASA used Newton’s equations to fly to the Moon.

The key qualitative difference (from Physics, for example), though, is that mathematical economic theories don’t accurately predict the future. Ben Bernanke — the chairman of the Federal Reserve, and one of the most-cited academic economists in the world told the world that subprime housing was contained. That is the economic equivalent of Stephen Hawking telling the world that a meteorite is going to miss the Earth, when it is really going to hit. Physicists can very accurately model the trajectories of rocks in space. But economists cannot accurately model the trajectories of prices, employment and interest rates down on the rocky ground.

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Sociological goodness spells a good polity. A good polity has great and firm institutions; and good people-centred politics that enables good, responsive governments to emerge. And good governments establish a secure environment, manage resource mobilisation, its application and distribution, and allow citizen enterprise to flourish.

It takes great common sense to understand and helm this grand iteration that begins with people and ends at serving them. It’s a dynamic, mutating affair : blooming in a virtuous, well marshalled polity or shrivelling in an uncared, dog-eat-dog world.

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