Comments on: The limits of the scientific method in economics and the world Thu, 21 Jul 2016 07:57:19 +0000 hourly 1 By: psikeyhackr Mon, 22 Jun 2015 20:17:00 +0000 Yeah, ignoring the annual depreciation of all of the cars purchased by consumers in every country for the last 50 years. Running the planet on defective algebra is so scientific.

Consumer cars get added to GDP when purchased but their depreciation is not subtracted to computer NET Domestic Product. But then economists don’t mention NDP much.

By: psikeyhackr Tue, 22 Nov 2011 04:22:13 +0000 Physics doesn’t apply to the demand side because economists can ignore the depreciation of automobiles owned by consumers but the depreciation of identical cars owned by Hertz and Avis do depreciate.

So in economics the Laws of Physics are affected by semantics. So the depreciation of hundreds of millions of cars around the world do not affect the Net Domestic Product of any country. ml

By: Maiorana Tue, 15 Nov 2011 16:41:12 +0000 The limits of the scientific method are only limited by the person.

From what I’ve read from this article the author seems to argue that predicting the “future” of markets is impossible with logic.

Science encompasses logic in that the investigator will try to prove his/her hypothesis through experimentation of variables by using logic. Such as looking at why does water boil at a lower temperature at higher elevation? Logic would suggest that you try to boil water at varied elevations and take a temperature. The variables are few and easily controlled.

When we come to something complex like “economics” we are looking at a myriad of variables, but the majority of these variables seem to be human. The human condition has been the one thing we have been trying to figure out since the dawn of our existence and we still cannot figure it out.

I do believe in the scientific method and maybe it can work for economics, but the investigator needs to account for all of the variables. In my mind the reading Keynes and Hayek would be as important as reading the writings of Socrates, Faulkner, and J.K. Rowling for an economist.

By: RReyes Sat, 12 Nov 2011 22:03:09 +0000 Wow, you guys are so smart. Here’s one thing I know about economics. As long as the current administration continues with their Keynesian tinkering, my 401K will languish in the toilet. And I don’t need any economic models or the scientific hypothesis to prove it. Any one of you smart guys want to bet.

By: RandomName2nd Sat, 12 Nov 2011 06:42:36 +0000 This article is a joke.
The big banks not only have control over the money supply, they also have access to just about every piece of financial data on the planet.
They have super computers crunching the numbers and placing trades in all kinds of markets.
Just because the people in the know don’t share the information with you doesn’t mean they don’t have it.
Did Goldman Sachs and JP Morgan get caught unawares during the financial crisis? Hardly.

By: LEEDAP Sat, 12 Nov 2011 01:33:12 +0000 Economics as a science? That is laughable. If it were there’d be more of a consensus on fundamental theories like Keynes or Hayek.

Alan Greenspan is the poster child for failed economics. For nearly 10 years the housing bubble grew from Alan Greenspan’s proclamation that the derivatives markets had diversified risk, and the statistical evidence of a very recent look to the past. Narrow minded greed took down the protections provided by the Glass Steagal act. This wasn’t the scientific method, this was politics based on the weak assumption that the moral hazard was a deterrent.

I also laugh at the models that predict stock prices on the historical bumps in stock price curve as if price was more a reflection of symmetry and price psychology than events in reality like profits or deals.

Scenario planning is the best method for dealing with the futurer. Risks, costs, and benefits of multiple possible futures must be assessed with weighted values agreed upon by a team of experts from diverse disciplines. Then contingency plans must be devised. But that’s not all, constant monitoring with updates to the risks, costs, benefits, and weighted values are needed to keep the assumptions from going stale. This isn’t exactly science, it’s a practice like due diligence. Its an art form. It’s also a huge undertaking, so it is not done except in M&A and planning for large corporations. So, instead we make educated guesses and gamble on the future based on the two to three standard deviations of what has happened in the recent past. As long as it works until the next quarter, we’re golden. When it doesn’t we dust off our pants and move on.

The operative word here is gamble. We just apply mathematics to give it the appearance of science.

By: jrpardinas Sat, 12 Nov 2011 00:36:12 +0000 Nice set of articles!

But generally, don’t we have to wait till the current model fails before we embark on the creation of a new model?

Isn’t that, in essence, how all the Natural Sciences operate?

That is, even the sciences that deal with things that “cannot be other than what they are” normally push their models (i.e. theories) to their breaking point before there’s any attempt to frame replacement theories.

For example, Relativity was conceived when Classical Physics was found to be unable to explain the results of the Michelson-Morley Experiment.

By: majkmushrm Fri, 11 Nov 2011 22:51:41 +0000 Well, MisterMarket, I agree with you (I’m a physicist) but since I also have an MBA, I think some aspects of economics are amenable to a scientific approach but you first have to understand it to be able to effectively apply it. I question whether or not Mr. Martin does. The social “sciences” and economics typically fail for a couple of reasons. One, they haven’t identified all the factors that affect a given event and, two sometimes those factors are not constrained to follow a verifiable set of rules (like human behavior). The presence of the first factor will simply cause you to fail. The presence of the second factor will deny you the use of the scientific method and force you to use statistical methods. But I’m not the first to say that. A gentleman by the name of Asimov comma Isaac in his “Foundation” series talked about that long before me.

By: scythe Fri, 11 Nov 2011 20:55:33 +0000 Hi Roger, Albert Einstein came to a similar conclusion when he wrote an article on this topic in the ‘Monthly Review’, 1949.

Here’s the link, enjoy: socialism

(extract) “It might appear that there are no essential methodological differences between astronomy and economics … But in reality such methodological differences do exist.”

By: Gordon2352 Fri, 11 Nov 2011 19:51:30 +0000 You state “As the power of the scientific method has encroached further than its applicability warrants into fields such as economics and business, its predictions of the future become ever more erroneous. In this list, we can include virtually every economic prognostication from the first half of 2008, and countless market research studies that misjudge consumer interest in the new product concepts that they test.”

I submit that instead of “economics and business” you substitute “religious belief” and it will answer your quandary as to why the scientific method has seemingly failed.

It failed now, just as it always has in the past in the face of intractable religious dogma, especially when it began to present answers that refuted the basic tenets of that religion.

Capitalism is in many ways similar to a religion, and those who practice it do not want answers that tend to challenge their cherished beliefs.

Yes, it is really as simple as that.

There is nothing wrong with scientific method, but there is certainly something wrong with Capitalism.