Comments on: Recovery Is Around the Corner. No, It’s Not!

By: sam

sam — Mon, 09 Mar 2009 18:26:16 +0000

@Dave

As I've said before economics is a descriptive science like paleontology rather than a predictive one like physics.

Luis W. Alvarez (not to be confused with Luis J. vide infra) once described palentologists as more akin to stamp collectors...wonder what he'd have said about economists.

By: odograph

odograph — Mon, 09 Mar 2009 17:06:33 +0000

Hoodlumman, the difference between a physical model and a social one is that the later ones must include volition. The actors are ... actors. A physicist's weight dropped off a build cannot decide to fall or not (well neither can an actor dropped ... but it is a human question whether or not to base-jump).

AGW is actually interesting because it spans the two types of domain. CO2 molecules can't decide how to behave in an atmosphere, but we humans can certainly decide how much to insulate our homes.

Far future models of AGW are actually economic models in good part. They have to know how large the economy will be, and how much energy it will consume, at what efficiency, etc

(I think we know enough about AGW to do the simple and inexpensive things now. That is the rational moderate course, to my thinking. The people who want to spend zero, or want to spend a trillion, in 2009 or 2010 ... are not being so moderate or so rational.)

By: odograph

odograph — Mon, 09 Mar 2009 16:52:07 +0000

Alex and Dave, have you read either of Taleb's books? Fooled by Randomness is a lighter read, and more focussed on these sorts of economic problems. To give one reduction: Avoid predictions, but if you can't bear it and have to make them, at least be fickle. Discard ideas as soon as they fail.

By: Dave Schuler

Dave Schuler — Mon, 09 Mar 2009 16:02:26 +0000

Maybe economics needs its own computer model

Needs a model?! They've got dozens of them. The problem is that basic questions in macroeconomics are not settled.

By: Hoodlumman

Hoodlumman — Mon, 09 Mar 2009 15:40:25 +0000

Maybe economics needs its own computer model so "the science can be settled" a la AGW.

By: Dave Schuler

Dave Schuler — Mon, 09 Mar 2009 15:23:52 +0000

Ask any economist to predict the closing value of a particular stock tomorrow. There is no timeframe short enough to describe the prediction horizon in the current state of economics.

By: legion

legion — Mon, 09 Mar 2009 15:13:04 +0000

Dave,
I see it more like predicting the weather. It's pretty easy in the short term, if you know what you're looking at (I think it'll rain today). But the larger the timeframe (and more specific your predictions), the farther off-base you're likely to be (2011 will have an average winter temp of 30.6 degrees).

By: legion

legion — Mon, 09 Mar 2009 15:10:29 +0000

Well, my personal prediction on this is fed by three factors:
a) The US economy has not yet 'hit bottom' - it will get worse before it gets better
b) China's economy is still going down as well, regardless of what info the central gov't releases
c) Most other economies around the world have yet to be really hit by the ripples of the US' and China's problems

Therefore, I would not expect to see any significant sort of recovery, here or elsewhere, during 2009 at all. Call me in 6 months, and we'll see where we are for 2010.

By: Dave Schuler

Dave Schuler — Mon, 09 Mar 2009 15:06:39 +0000

As I've said before economics is a descriptive science like paleontology rather than a predictive one like physics.