Wednesday, October 9, 2013

Degrees of knowledge

The recent announcement of the winners for the Nobel Prize in Physics reminded me of this post on the status of "junk" DNA where the author obliquely compares economics to genetics and physics:
Economists are sometimes chided for disagreeing about the importance of such basic questions as the relative role of aggregate demand and aggregate supply but physicists can’t even find most of the universe and microbiologists don’t agree on whether the human genome is 80% functional or 80% junk. Is disagreement a result of knaves and fools? Sometimes, but more often disagreement is just the way the invisible hand of science works.
In one of my more sensitive (i.e. irritable) moments I leaped to the conclusion that the author was tying to put economics on the same pedestal as genetics and physics. After all, if physics and genetics can only know 5% and 20% respectively of their fields are these fields any more scientific than economics?

Pshaw, and I am probably arguing against a straw man here - but since I'm getting old and grouchy I'll just go ahead and pile into the straw man. Economics is nowhere near physics and in physics the proof is in its ability to predict the existence and characteristics of particles at the quantum level. At a more aggregate level consider Einstein's prediction on the orbit of Mercury based on GR. There is NOTHING even close in economics that can make any statement with such quantitative accuracy. At the most economics can say that on one hand stock prices will go up or on the other it might go down and if he had three hands he might even through in unchanged as another option. Macroeconomics has vacillated from one fad to another (New Keynesian, classical revival, real business cycles -- you name it) without ever coming close to even having a decent understanding of the economy.* If you don't believe this statement then ask yourself whether an increase in government spending will increase aggregate demand and what are its quantitative effects.

The debate on junk DNA will continue as will the definition of its "function" but one measure of science is the amount of knowledge that is gained as scientists continue to peel back the layers. No doubt in physics, the question already being studied is "what generates this Higgs field" whereas in economics, the process is more like "er, er, er, hmm... on one hand...".

*One possible advancement in economics is in auctions and the evidence is in the success of the FTC auction of the spectrum. However, my reading of the implementation of the auctions in the US and UK lead me to conclude that at best it is still an inexact science. (After all, we aren't dealing with particles, we're dealing with people, which is the famous economists' excuse for knowing very little.)

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