Why Economic Models Are Always Wrong

mayberry42 writes "Did you ever wonder how and why professional economists often seem to get it wrong in terms of predicting consequences or policies accurately (or even at all)? Or how very few even saw the current economic collapse? This article provides an interesting, if obvious, reason as to why economic models are effectively always wrong."

Wow

[Hognoxious]

So small changes in inputs can produce big, unpredictable changes in the output of complex systems? It's almost as if a butterfly flapping its wings could affect the weather!

They should find a snappy name for this marvelous discovery. Something like "chaos theory".

Adjusting gravitational constant

[maxwell demon]

From the article:

"If you had to readjust the constant in Newton's law of gravity every time you got out of bed in the morning in order for it to agree with your scale, it wouldn't be much of a law But in finance they just keep on recalibrating and pretending that the models work."

Wait ... you are saying the growing number on my bath scale isn't because the constant of gravity is growing? :-)

Re:Obvious really

[khr]

The way I'd heard it phrased is "to an economist, the real world is a special case."