Quote:
Originally Posted by lostinacause
Do you really believe that strength of economic theory rests on the assumptions being true. There are theories of consumption that are commonly used by economists that assume that people live forever. They generally do a decent job predicating behavior. It is clearly not the case that people are rationally self-interested. Just talking to people should provide ample evidence against this. Yet the cases originally mentioned are clear examples where a neoclassical economic framework predicts behavior that is inefficient. Further regulation that uses solutions created under neoclassical assumptions generally work quite well as solutions to these types of problems.
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My already sceptic view of economics just plummeted even further. So it's not even necessary that the assumptions are valid ? The economists are thus really doing nothing more than tweaking simple polynomial functions until they fit the data? And when then the tweaked function diverges again from reality, here comes the meta-tweaked function, and when that one becomes obsolete, here comes the meta-meta-function. I've called it 'adding epicycles' before and this confirms my view.
Until the economists start using a solid framework, and with mathematical tools that fit the complexity of the subject, i.c. non linear equations -required by the feedback properties of the human system- there is not a shred of a chance that the meta(n) function will ever be the final one. The meta(n) function will simply perfectly describe yesterday's data but will have no predictive power for tomorrow's data.
Luckily, some seem to begin to realize this. I've plugged them before and here goes again:
Santa Fe Institute
and specifically:
SFI | Research | Publications | Working Papers