Friday, April 16, 2010

Why economics is broken

I don't hate economics (which would suck if I did since it's, y'know, my career) in it's uncorrupted form I love it. It's like a direly ill friend, I can't just walk away. I want to save and it purify it from the people, who in their desire to understand it better or "harness its power" or just generally look like scholarly smarter-than-you people, have managed to convolute and obfuscate it to the point that no one agrees how anything works anymore. Now it's all about "reputations" and "science" rather than what it was at its core - the study of choice. It's a philosophy people! I'm not saying math has no place, it is very useful for determining how one thing affects another thing (among lots of other things). It's just they keep sticking math into everything where it doesn't belong like some sort of crazy math-panacea (like the people who think duct tape can fix EVERYTHING). I really do feel bad for all the math nerds a few decades ago who couldn't find jobs in their field, I just wish they would have stayed away from economics because they broke it and now it doesn't work right anymore.

These "models" we are continually creating are no more representative of reality than runway models are representative of the female stock in any given wal-mart. When basic assumptions are flawed and not connected to the real world, we can't expect any findings based on the model to actually apply to reality either. Economics can make models that are snapshots, they show a still image of how something works at that given second. Which would be great if nothing ever changed but life isn't static - it is dynamic. Everything changes constantly, and there are way too many forces at work to ever come back to some arbitrary-chosen equilibrium. Far too many models are so simplified that they leave out anything that can't be specifically quantified, which in the unfortunate area I've fallen into means that most of the things that have an effect are ignored in favor of effects that are negligible but measurable.

Why are economists so obsessed with equilibrium? Because it's easier to work with (or they all have OCD, with which I can totally sympathize). In that respect it follows a pattern set by life in general, that of balance (go Taoism!), and maybe that's what I love most about economics. A sine wave is a perfect "model" for life. Everything in life is in a dynamic state of being acted on by opposite forces - happy/sad, good/bad etc. Life is a rollercoaster, right, and in the long run it averages out (aka equilibrium). Too many economists seem to have forgotten that; equilibrium has become the destination, not the ride.
Remember what Keynes said, "in the long run, we're all dead."

BONUS QUOTE: To support my point that math is useful but tends hyper-focus so much on one tiny piece of a problem that it ends up missing the overall point, I relay what my younger son said to his older brother who would not shut up about various Pokemon stats when all I wanted to do was make a groudon sing "Reflections" and a rayquaza sing "Bang A Gong" - "SHUT UP! NOBODY CARES ABOUT YOUR SCIENCE!"

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