Philosophically correct, but contextually misplaced. A human's (singular) behavior can be unpredictable, but human (plural inclusive, as in population) consumer behavior has distinctive patterns that can be accurately modeled within reasonable parameters. Corporations don't spend hundred of millions on consumer models because they like the pretty charts and graphs, they do it because it's a good business investment with a proven return.
Brad
Yep, which is why econometrics has eliminated economic bubbles, recessions, and the Clearance Rack at the back of the store.
[Who are you going to believe? Your economics text or your lying eyes? When reality diverges from theory, run with theory, I guess.]
Brad, you have more faith in modeling than the modelers I know. I use and develop models to generate requirements, assess alternatives, and suchlike for my industry. My tool set is mostly physics-based, which is the "easy(1)" part. Less easy are the bits that normally would rely on horrifically complex, hard to grasp, and expensive to calculate chaos & complexity theory. By making some assumptions(2), we can get close enough for our objectives. Then there is human behavior modeling, which is the least sound portion, despite there existing voluminous literature on concepts of operations, doctrine, etc. (Quick: what are the CONOPS for an entirely new widgit or functionality on an existing widgit?) Those and other assumptions & limitations are up-front on any analysis product or model delivered. It is why the approach of a baseline & alternatives that perform relative to the baseline is used, rather than (in most cases) explicit outcomes.
In many ways, economists and their models are similar to the global warmist crowd. Both have an imperfect understanding of their field of study and their field of study is dreadfully complex. Both also get prickly when folk point that out and they get REALLY cranky when the delta between their models and reality is shoved in their faces.
I am not saying all economists are stupid, just the ones who do not understand how their models are lacking and how their assumptions can undermine their model's validity.
I am not saying all economists are dishonest, just the smart ones who are not upfront regarding the assumptions & limitations of their toolset.
I also am not saying that such models do not have their uses. Take Wal-Mart. My dad was in logistics for decades and admired Wal-mart's approach. He knew he could not replicate it or compete against it given the resources he had to work with. So, he exploited means & phenomena not taken into account by WM's logistical model & implementation. He did not "beat" WM, but he made his clients a lot of money and retired comfortably.
(1) In actuality, difficult, but amenable to mathematical models of reality using physics, statistics, and ancillary fields of study.
(2)
" A physicist, a chemist and an economist are stranded on an island, with nothing to eat. A can of soup washes ashore. The physicist says, "Let's smash the can open with a rock." The chemist says, "Let's build a fire and heat the can first." The economist says, "Let's assume that we have a can-opener..." "
The reference comes from the stereotype that many economic models require unrealistic or absurd assumptions in order to obtain results. The phrase is often used by economists to describe research that has particularly unusual or unrealistic assumptions (by the standards of modern economic research).
Today's news from the world of physics is both exciting, disturbing and potentially highly-disruptive. Even a low-level science buff like myself can get excited about the fact that the Standard Model -- long the mainstay of theoretical physics -- has been shown to have a major potential flaw.
But even amongst physicists whose work is inherently tied to the existing model, there are no put-downs, no dismissal of the work, no personal criticism of the scientists who claim the conflicting discovery. Rather, there is a true sense of inquisitiveness, a desire for greater proof and a recognition that if the discovery proves to be true, it will force the dismissal of formerly-held beliefs, but will in the end advance the field, not retard it.
Try presenting a similar type of observations to a bunch of economists. Bring a flak jacket if you do.
Unlike physicists, economists are not in the business of observing the world and building theories to model it, even if imperfectly. Economists have decided that they are in the business of creating perfect models, even if doing so requires shortcuts that defy reality. To this end they've made some grossly simplistic assumptions (that all markets are efficient and all people are rational) and built on those two very shaky assumptions a magnificent edifice which they feel compelled to defend. Take away the perfectly simple assumptions and economics gets very messy. Economists would have to admit that their models are imperfect, that the physics-like perfection they've developed in their models is just a lie, and that any pretense they have to being a science at all is nothing but hubris. They might decide to attack you as being uninformed or unsuited to comment on the complexity of their work.
This guy is a bit blind to the human side of physics, but his overall point is sound. He just does not take into account the messy nature of the men doing physics.
