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Comment by logicchains | Hacker News Reader

>[1] Much like the standard model of particle physics or of cosmology. Fairly dirty and complicated models with lots of tunable parameters.

Anyone capable of making models that can predict the future with a reasonable degree of accuracy is probably in finance, making 5-10x what they could in economics. The economy is an incredibly complex system, subject to emergent behaviour and chaotic effects, much more so than in physics. You'll see papers from the large hadron collider where they prove stuff to within p=0.000001; it's impossible to prove anything to that degree of confidence in economics. Especially because it's not possible to create true controlled experiments: you can't have two otherwise identical societies that differ by just one factor, rather there will always be other ways in which they differ to, and how these are accounted for can have a big effect on the output of models.

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Any model has some precision associated with it. I am not asking for 5 sigma level of precision. But if the economists are fighting about what will happen to a particular macroeconomic variable, they are making a prediction even if it is a log_2(3) bit prediction [1]. There must be some math that is backing that. I want to see it explicitly put into a computational model that runs on live data. Otherwise is there any real content to the arguments that economists are having?

> Especially because it's not possible to create true controlled experiments

Cosmology has zero-experiments. It is a completely observational science [2]. And in fact, has very bad data. Basically a time-frozen snapshot of the universe from a particular point in space. They can't even make predictions about the future, only about what some new dataset of that same time-frozen universe will say. Economics on the other hand has the benefit of lots data about interventions and their consequences. There is so much opportunity to develop models by making predictions and checking what happens.

[1] variable goes up or down or stays the same.

[2] The fact that the roots of modern science lie in a purely observational no-experiment discipline of astronomy is lost on many.

> But if the economists are fighting about what will happen to a particular macroeconomic variable, they are making a prediction even if it is a log_2(3) bit prediction [1]. There must be some math that is backing that. I want to see it explicitly put into a computational model that runs on live data

This is what (some) people in finance do: make models to predict things, because if something about the future can be predicted to a sufficient degree of accuracy, it's generally possible to make money from it. In economics, the incentives are slightly different; in academia, the incentives are to publish interesting/novel/topical papers, like with other social sciences, not necessarily to make repeatable predictions. In social science nobody gets punished for making an interesting model that hasn't been rigorously proven to make repeatable predictions, while in finance on average better models make more money and get rewarded more. But sharing an effective model means other people can use the predictions too, meaning you capture less value from the predictions yourself, so people with an effective model have an incentive not to share it

Few scientific hypothesis have been tested by so much money as that there is no alpha in the market. I mean, the amount of money that goes into proving that wrong is perhaps larger than what went into finding the Higgs boson.

Best you can get is some bounds for whatever effect you want to predict and those bounds will open wide very fast.

As for lots of data, doing proper econometric models requires really well gathered data. Data is published quarterly or yearly, so you do have comparable series for international country level macroeconomics, but those are actually short considering how many variables must interact.

> I want to see it explicitly put into a computational model that runs on live data.

I _also_ want to see it. But I do not want to build it, since it seems incredibly boring.

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