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Comment by chewz | Hacker News Reader

I am still hoping that some day economy will find it's place where it belongs - next to astrology, numerology and alchemy.

This is with tongue in cheek but as a mathematician (financial math) I find economic equations and theorems laughable and it's scientific method just a thin veil over ideology.

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I see economics in the same place as psychology and sociology. There is real science, but the results are so impactful to politics that the science cannot withstand the political pressure generated by those who want to treat these as political tools instead of scientific fields of research.

Part of the problem is that whenever a clear-cut rule of economics is found, investors take advantage of it, changing its behavior. It's almost a quantum-mechanics-like problem in that the observer (scientists) changes the behavior of thing being observed (investors and consumers).

This is a problem math majors have with pretty much every other science out there. You can rank them if you like, and there are parts that are better and worse (in economics you have game theory, which I'm sure you're not going to find too ideological, and you have experimental economics ... which is little better than social sciences).

https://xkcd.com/435/

My experience of economics teaching is something like this:

- Here is a set of assumptions which are obviously wrong

- Given that set of assumptions, we can make this model, which has been shown not to hold true in reality due to the above

- Repeat ad nauseum

True, but consider utilitarianism. Have you ever tried modeling the economy using a more reasonable set of assumptions ?

Not so easy.

But yeah I get it. Obviously the basic economic assumptions ignore:

1) government in general, but especially tax law. It's WAY too complex to model, unfortunately (and I doubt that's a coincidence), nor is it even constant.

2) it ignores that the vast majority of markets are supply- or demand- constricted. In reality demand graphs flatten off at some point. Let's take bread. There is only demand for so much bread, and lowering the prices past a point no longer increases demand at all. So you can see it exists.

Supply bound is similar. We are just not going to produce more land than there is. That market is absolutely supply bound.

The weird thing economics glosses over is that nearly every market is either supply constricted or demand constricted, and the common equations just don't work there.

3) information. Economics assumes perfect information, when that obviously doesn't exist. Information spreads though, so over very long time frames perhaps there's a case to be made that perfect information does exist as long as the information is old enough.

The thing is, whilst I might agree that the first one is at least theoretically solvable, it's just too much work. The second and third are impossible to model. And I bet you could come up with 10 more.

Your general point that economics models greatly simplify the real economy is a good one. However, the field has made significant advances to introduce real-world constraints into the models.

Example of a subfield addressing your 3): https://en.m.wikipedia.org/wiki/Information_economics

I believe 2) is addressed as well but I am not a professional economist so maybe someone can help edify us.

Even if there are a few game theoretic games in advanced papers that have limited information it would be a rather large stretch to say that economics incorporates limited information at this point in time. Maybe it's coming, I don't know ... It's not going to be soon.

A similar problem exists for 2. Yes I can find a paper or two, or probably even more that talk about it, but they don't exactly have a wide following because it just makes things too hard.

Incorporating both ? Can't even find a paper on it.

>in economics you have game theory, which I'm sure you're not going to find too ideological

The part that's not ideological is pure math.

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