If Max Planck really said that he found economics too difficult, what he may have meant is that economic phenomena have so many degrees of freedom that even particle physics is more predictable. Sir Isaac Newton agreed, after he lost $2.7 million in the London stock exchange: “I can calculate the motions of heavenly bodies, but not the madness of people.”
Sounds reasonable. One of the great serenities that came from my economics training is the knowledge of things that I cannot control or predict. In simplified form, the random-walk hypothesis says that the very best estimate of the price of a security is its present value. I know I cannot do better, so I have the pleasure of pursuing buy-and-hold strategies that do not require me to stare nervously at a screen hour-by-hour or day-by-day. As Yogi Berra is alleged to have said, it's tough to make predictions ... especially about the future. Essentially, particle physics tells you that you can know lots about averages, but not individual particles--kind of like investing in broad-based mutuals rather than individual stocks.
I don’t have a problem with economists (which I call myself) calling economics a science. I prefer to distinguish natural sciences from social sciences, but that’s just me. We used to get a lot of grad students from the engineering college because they preferred the mathematical rigor of economics, but I always cautioned people not to confuse the use of mathematics with truth, and pointed at the sociologists.
The point that David Kelly made, comparing economics to climatology, reminded me of the discussion around “complex” vs “complicated.” (It also reminded me of Asimov’s “psychohistory” in the FOUNDATION series, but I’m a sci-fi nerd).
HA! For a reason. I thought, “Maybe Lola has lost it and was being serious.” If so, I didn’t want to make fun of you in public. :) You picked a really obscure reference, so bravo for you.
Good stuff, though I’d rank Mises ahead of Keynes as far as 20th century economists go. Keynesianism is basically, “Government is your daddy,” which is why politicians like it so much.
If Max Planck really said that he found economics too difficult, what he may have meant is that economic phenomena have so many degrees of freedom that even particle physics is more predictable. Sir Isaac Newton agreed, after he lost $2.7 million in the London stock exchange: “I can calculate the motions of heavenly bodies, but not the madness of people.”
Sounds reasonable. One of the great serenities that came from my economics training is the knowledge of things that I cannot control or predict. In simplified form, the random-walk hypothesis says that the very best estimate of the price of a security is its present value. I know I cannot do better, so I have the pleasure of pursuing buy-and-hold strategies that do not require me to stare nervously at a screen hour-by-hour or day-by-day. As Yogi Berra is alleged to have said, it's tough to make predictions ... especially about the future. Essentially, particle physics tells you that you can know lots about averages, but not individual particles--kind of like investing in broad-based mutuals rather than individual stocks.
If “Jack” were to substitute “climatology” for “economics” in that first sentence, he wouldn’t be wrong.
Indeed. Lots of other fields are joining the fray, unfortunately.
I don’t have a problem with economists (which I call myself) calling economics a science. I prefer to distinguish natural sciences from social sciences, but that’s just me. We used to get a lot of grad students from the engineering college because they preferred the mathematical rigor of economics, but I always cautioned people not to confuse the use of mathematics with truth, and pointed at the sociologists.
The point that David Kelly made, comparing economics to climatology, reminded me of the discussion around “complex” vs “complicated.” (It also reminded me of Asimov’s “psychohistory” in the FOUNDATION series, but I’m a sci-fi nerd).
Great points! Well taken.
Max Planck. - Wasn’t he the Clown Prince of Baseball?
Lola
One of my funnier lines, and you didn’t even comment!
Lola
HA! For a reason. I thought, “Maybe Lola has lost it and was being serious.” If so, I didn’t want to make fun of you in public. :) You picked a really obscure reference, so bravo for you.
Good stuff, though I’d rank Mises ahead of Keynes as far as 20th century economists go. Keynesianism is basically, “Government is your daddy,” which is why politicians like it so much.
Indeed!