Hacker News Reader

Comment by CraigJPerry | Hacker News Reader

The more research i do in economics the less impressed i am with the discipline.

Economics is defined as a social science. That point never really struck home with me until recently. I think the fancy models, the cutting edge statistics and clever use of logic blinded me to the fact that the entire discipline is built on top of stories.

There’s no gravity, there’s no absolute zero, there’s no kilogram. There’s no fundamental tangible truths underlying the concepts of free markets.

It’s stories we tell each other as a way to explain a system we don’t and possibly can’t understand.

I’ve never been so disappointed to realise all the arguments of economic theory are built on a foundation of sand. Shifting sand at that.

View on HN

All disciplines studying complex systems like societies down to something like the human body, simply do not have the luxury of absolute truths like in mathematics or even the ability to run experiments like in physics (often for ethical reasons, e.g., in medicine or economics).

But does that mean that it is not worth doing?

For these fundamental reasons economics is “hard”, but I argue that it is still worth doing because economic policies have a big impact on people’s lives, and partial understanding is better than nothing.

I feel the biggest problem with economics is that it's very infused with ideology, which makes it even harder to say what's true or not. There's a lot of what I would call "arm-chair economics" – entire government policies are based on nothing more than conjectures, guesses, and ideological preferences of so-called "economists". Okay, maybe guesses and conjecture is the best we have to go on, but at least be honest about what it is.

This is the case for some other social sciences as well, but I have the impression it's (much) worse for economics. The effects are certainly a lot more impactful.

>I feel the biggest problem with economics is that it's very infused with ideology, which makes it even harder to say what's true or not. There's a lot of what I would call "arm-chair economics" – entire government policies are based on nothing more than conjectures, guesses, and ideological preferences of so-called "economists".

Is it any better in fields other than math and the natural sciences? For medicine and nutrition we're constantly backtracking on our previous discoveries. First it was fat that's bad, then it was sugar.

Both are bad.

Nutrition is really complex and hard, and we learn more every day. But for the most part, it's not like complete bullshit is invented whole-cloth on a piece of napkin. It slowly builds and expands on prior knowledge; as far as I know it's not really "constantly backtracking".

Yeah, I’m persuaded that nutrition is evolved as we learn.

I’m not persuaded that economics has that quality. It seems to be infected by political interests too easily.

As evidence of that statement i submit the example of Austerity as a concept. It’s something that’s been applied hundreds of times, there was a resurgence in the 2010s but it was very popular after the First World War too.

One problem, despite all these applications of the concept, its only ever worked twice in documented history. Both instances occurred in a context that doesn’t apply today and, well it’s not impossible but almost impossible for that context to appear again.

The concept has no economic foundation, it’s a device born of a political belief. It even contradicts economic assessment.

And yet, It’s continually proposed. It’d be like suggesting sugar is a weightloss product if you consume enough. If you gained weight, you didn’t do it right, you just need to consume more sugar, then you’ll lose weight.

>> still worth doing

This is really the point I’m wrestling with.

For example, I’m persuaded by Taleb’s criticism of Value At Risk models, VAR.

Plenty of people still value the use of VAR although it’s common to concede Taleb’s point that VAR claims to do the impossible - characterise rare events. The justification is simply, well what else would we do? There is sufficiently advanced use of VAR that people are willing to ignore the broken foundation.

I just can’t accept that we should continue blindly because in many day to day cases the model seems sound, even though we’re aware it’s fundamentally broken and we can’t detect when it broke until after the event.

From my understanding, Taleb criticizes the native use of synthetic quantitative models with strong assumptions like VaR because they give a wrong picture of the real risks. But I don’t think that his point is that risk management is worthless.

VAR isn't the sum total of risk management strategy. It's just a faulty one that's still heavily relied upon today despite this knowledge.

The concept of money isn't a hard measurable fact of the universe, but when enough people believe in it, it starts to acquire some pretty consistent attributes across different cultures and times.

It's definitely not a physical science, but it's probably one of the more important social phenomena. (I almost wrote social science, but imo I can't really consider a discipline which isn't based on experimentation to be a science).

So I guess I agree. I would like to see more rigorous methodology.

You should read into Austrian economics and in particular the studies of Ludwig von Mises because it builds on fundamental "tangible" truths. Search for the term praxeology

Then stop reading The Economist and start reading NBER working papers instead.

Reply on news.ycombinator.com