Via Mark Thoma, I learn that the “Perimeter Institute conference on economics is being organized in an effort to better evaluate the state of economics as a predictive and descriptive science in light of the current market crisis.”
A couple abstracts stick out in particular:
A Science Less Dismal: Welcome to the Economic Manhattan Project (pdf)Speaker(s): Eric WeinsteinAbstract: An unexpected economic crisis provides an excellent opportunity to better understand the state of Economic theory as a science. While there appears to have been a broad systemic failure within the community of professional economists to predict the current collapse, it must be noted that there have been scattered successes which appear striking and demand our attention. The goal of this conference is to bring together economists, biologists, mathematicians, physicists, programmers, and financial professionals to explore the opportunities for bringing economic theory into closer contact with the more traditional sciences as the basis for ongoing work, partnership, and collaboration.
Scientists, Scienster, Anti-Scientists & Economists (pdf)Speaker(s): Emanuel DermanAbstract: The syntax of economic theory closely resembles the syntax of physics. But physics deals with what seems to be the objective world. In contrast, the essence of economics is subjectivity and moral choice. What can you reasonably expect from treating economics as a branch of science? This talk compares the nature and efficacy of models in both physics and finance, and tries to reach a sane answer to the question above.
The first presentation, aiming towards this Economic Manhattan Project (which is actually a real initiative) seems aimed at developing a model of Homo selectus, a more refined Homo economicus. The idea is that by bringing together great minds from all disciplines, a model can be made and then expressed in programming. I’m somewhat skeptical, but it is what it is.
The second presentation seems much more skeptical, just looking at the slides. “Optimization is pointless”; “The dangers of idolatry”; and “Every axiom is wrong” are the points on the conclusion slide. So, it seems like Weinstein and Derman are at odds over the possibilities for a more scientific economics. I tend to side with Derman, because of the complexity and un-quantifiability of so many economic relationships.
Weinstein makes some good points though, as he at least questions some basic neoclassical assumptions (but still strives for max U). Also, he makes a good point early that the crisis involves an argument between a small group of elites controlling the crisis and information about it and another small group, Taleb and Roubini included, that predicted the crisis. Conspiratorial, yes; accurate; also yes. This doesn’t mean that more scientific is the correct direction, though. If anything, it’s time for academic journals to open up to other perspectives that have been long silenced. Not all of these will be quantitative, but they have a lot to offer.
