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Comment by std_throwaway | Hacker News Reader

It's hard to test theories when the underlying system constantly changes like it does in economics. Something that works today might not work tomorrow. A theory that looks sound when applied to yesteryears data might stop working before the sun rises. When many others try to apply the same tricks that made you successful the cake on that table might suddenly be divided into so many pieces that everybody will go home hungry. You must find a new table with a new cake but old data and old theory doesn't help much with that because someone else is already there. You need to think fresh and unconventional or you need to squeeze blood out of stones harder than anybody else.

Physicists have it easy in comparison. One of the basic truths of natural science is that the laws of nature are independent of the observer and time and experiments can be repeated as many times as you like with the same results.

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>experiments can be repeated as many times as you like with the same results

That is not actually true, there is a lot of randomness, and in quantum mechanics the randomness is fundamental. The real secret of the natural sciences is that good physicists never publish if they know they don't know the answer. It took hundreds of years of that policy before the narrowly applicable theories blossomed into the general laws of the universe. If the focus was determining the general laws of the universe from the start no progress could have been made: Newton could have guessed at the laws of motion, but without the specific and painstaking celestial observations preceding him nobody would have known he was right. Economists could enjoy a similar success, but it would be at the expense of 400 years of saying only things that policymakers thought were obvious, while refusing to answer useful questions.

There are plenty of "very true" theories in economics, but they often aren't broad enough to answer the questions about economics that the fate of nations ride on. However 400 years from now those narrow but well-tested theories will be the foundation of the true general economics and all the rest will be forgotten.

Sure, there is randomness but in normal cases you can apply statistics to describe it reasonably well. The results are not 100% sure but 99% or 99.99999% or whatever you need. It's not that the laws of gravity stop working entirely over night. Newtons theory wasn't perfect and Einsteins theory isn't perfect but it describes what happens in nature very very well for billions of years.

You could find physical places where things seemed to change drastically one hour to the next, for example my dog. You can also find things in economics that don't change, like the laws of supply and demand in a true commodity market. Supply and demand in a true commodity market is a pretty narrow situation, but the early history of physics is full of narrow theories like Kepler's laws and the precursors to PV=nRT.

If you went back 400 years and demanded that physicists explain my dog's behaviors, you would probably get some answers that sounded OK (kind of like Aristotle's attempts at physics) and maybe even were convincing to people of the time, but they wouldn't have much truth value. Present day economics has a few equivalents to Boyle's gas law, many equivalents to ancient Greek physics, and no equivalents to atomic theory.

The emotions of your dog are not laws of nature.

The "true market" is like "no true Scotsman" or "a closed system" or "a spherical cow on a frictionless plane". It assumes something that doesn't exist. In economics the influence of the things it assumes wrongly can be very significant. In physics wrong assumptions can also make the results wrong and a lot of work (or rather most work) is done on checking if all the assumptions are sound and ensuring that the influence of the remaining gaps are negligible. That is something that is hard to do in economics when it involves interactions with the global market.

Yes, special theories can be precursors for more general theories.

>The "true market" is like "no true Scotsman" or "a closed system" or "a spherical cow on a frictionless plane".

Come on, what is physics about then? ;)

Even today, systems like my dog are computationally infeasible to predict from the fundamentals, even though everything my dog does is a logical consequence of QED. That's why it is impossible to make progress without assuming a spherical cow and then traveling to every dairy farm in the world in search of the roundest heifer available.

In 400 years economists might still be unable to predict recessions, but I think by then the specific and very true theories of today will have had enough time to evolve into general laws that could predict recessions in principle.

With regards to your dog, you should look into chaotic systems and the butterfly effect. Chaos here doesn't mean that anything is possible or that each outcome is equally likely. It refers to that the outcome changes greatly for even minimal changes of the inputs. Since we don't know everything at one point in time, we can only make limited predictions about a future state. No matter how precise we measure the system it will still behave chaotically.

To some extent this is also true for the economy which contains many feedback loops and meta-stable states. Even if we have the perfect theory it might still behave chaotically and might be as unpredictable as the weather.

"Ceteris paribus" is the magic assumption under which it works.

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