Machine Learning Could Solve Economists' Math Problem 157
An anonymous reader writes: Noah Smith argues that the field of economics frequently uses math in an unhealthy way. He says many economists don't use math as a tool to describe reality, but rather as an abstract foundation for whatever theory they've come up with. A possible solution to this, he says, is machine learning: "In other words, econ is now a rogue branch of applied math. Developed without access to good data, it evolved different scientific values and conventions. But this is changing fast, as information technology and the computer revolution have furnished economists with mountains of data. As a result, empirical analysis is coming to dominate econ. ... [Two economists pushing this change] stated that machine learning techniques emphasized causality less than traditional economic statistical techniques, or what's usually known as econometrics. In other words, machine learning is more about forecasting than about understanding the effects of policy. That would make the techniques less interesting to many economists, who are usually more concerned about giving policy recommendations than in making forecasts."
Same issues (Score:2, Insightful)
Isn't this the same as having economists doing the work, just faster? You are still using past data to predict the future,
Re: (Score:3, Insightful)
No, because most of economics was not scientific. Economists would get a "feeling" of how it should be, then fudge the numbers to prove their theories.
Re: (Score:1, Insightful)
Economics is not scientific in the mathematical sense. It takes no account of the irrational human animal. That is why it is more like the weather than mathematics. You will learn more about real economics from Freud than from Friedman.
Re:Same issues (Score:5, Insightful)
It takes no account of the irrational human animal.
Quite the contrary; there are a few economic think tanks around that take plenty account of that and "tailor" (is "completely fabricate" too judgemental?) data to totally agree with the political stance of their primary benefactors.
Re: (Score:2)
Couple this with the fact that as a rule, Economists do NOT cite employment relationships when publishing papers. In any other scientific field, this would be considered an ethical conflict of interest. In Economics, it's just standard practice.
http://www.slate.com/articles/... [slate.com]
The fact that Economists are actually taken seriously in guidance of national and world economic policy, should be of major concern, because it has had absolutely DIRE consequences for general economic prosperity and stability, and h
Re: (Score:2)
Economics is a subset of history, data from the past, and therefore it is based entirely on correlations. There can be no cause and effect derived from correlations, so 'science' is not possible. Science requires experiments, controlled for 1 variable at a time.
So there's a big difference between "observational science" and "historical science"...
Ken Ham, is that you?
Economics IS a science (Score:5, Informative)
Economics is not scientific in the mathematical sense. It takes no account of the irrational human animal.
That's entirely and demonstrably untrue. In 2002 the Nobel prize was awarded to Daniel Kahneman "for having integrated insights from psychological research into economic science, especially concerning human judgment and decision-making under uncertainty". Much recent economic study has been explicitly examining the irrationality of people and their economic decisions. Economics is a science but it is one where it is challenging to design experiments and so much of the data comes from empirical analysis.
That is why it is more like the weather than mathematics.
Mathematics is a language to describe things. Economics isn't a branch of mathematics any more or less than any other science. It is however a bit like studying the weather in that the forecasting models are trying to make predictions about a very complex and chaotic [wikipedia.org] system. The models get their data from historical real world events but perfect accuracy in the models is nigh unacheivable.
Re: (Score:3)
Economics is not a science, no matter how many times you and your finance buddies tell yourselves that it is.
But neither are physics, chemistry, etc, sciences because of how many times you and your finance buddies tell yourselves they are. They are all sciences because they are systematic empirical studies of some part of the real world. The difference with economics is that there are far stronger incentives to corrupt observations and models than with most other sciences.
Re: (Score:2)
The difference with economics is that there are far stronger incentives to corrupt observations and models than with most other sciences.
Unfortunately, this isn't the case. Look at historical debates such as "does smoking cause cancer" and current debates on climate change .... many sciences are subject to the influence of politics and agendas, and tragically, there are scientists who allow themselves to be so influenced.
Re: (Score:2)
Look at historical debates such as "does smoking cause cancer" and current debates on climate change .... many sciences are subject to the influence of politics and agendas, and tragically, there are scientists who allow themselves to be so influenced.
Sure, there are many subjects with significant financial or ideological value, but there's more than that where the only things at stake are the egos of the researchers involved.
Economics follows the scientific method (Score:5, Insightful)
Economics is not a science, no matter how many times you and your finance buddies tell yourselves that it is.
A science is a formal method of examining and describing the world around us. This method requires hypothesis regarding empirical data which are testable and repeatable. This process is called the scientific method. Economics follows the scientific method and any field of study that follows the scientific method can accurately be called a science. Ergo economics is a science by definition. Some sciences are easier to study than others but that has no bearing on their validity as a science.
That's not a real Nobel prize either, it's a self-aggrandizing fraud that was purchased by the banking industry in an attempt to convince the public that their twisted methods were legitimate and not just common crime.
Since the Nobel organization recognizes the Economics prize it is as real as any other Nobel prize. Your opinion on the matter is meaningless.
Re: (Score:3)
*Mathematics* isn't science. It is more properly a branch of philosophy that happens to be really, really useful for the sciences. The difference is that sciences are empirical---ideally, scientists observe the world, form explanations of their observations, then test those explanations with further observations. Mathematics is not empirical---mathematicians start from a set of fundamental assumptions, then use logic to deduce the consequences of those assumptions.
From the summary, it seems that the crit
Re: (Score:2, Funny)
The mathematician says 4
The engineer after using his slide rule answers 4.00000 within acceptable margin of error
the accountant says "what would you like it to be ?"
economists are just accountants with bigger numbers
Re: (Score:3)
What do you mean "most"? I put Economists in the same fraudster category as Psychics and Clergy and Life Coaches (and somewhat worse than Psychologists). Lets not do anything that might pretend to legitimize these can artists.
Despite the examples set by the economists visible in government roles, private economists are actually proving to be valuable in certain sectors; specifically, MMORPGs. Bringing in an economist to help set up, monitor, and maintain the currencies, item prices, trade values, treasure drops, etc., can make the difference between a fun game and an endless grind.
results, not theories (Score:5, Interesting)
My understanding of the difference is that this produces somewhat testable results WITHOUT requiring a theory of how and why those effects occur.
To give an extremely simplified example, assume that a certain coin is flipped every day. For the past 20,000 days, it has always come up heads. (Obviously not a fair coin). The machine will predict that it will probably come up heads tomorrow. Traditional economic theory will try to understand WHY it keeps coming up heads before making predictions. That's the first difference.
The requirement for a theory that explains how and why economic effects occur also means that the theory is subject to subject to be supported or decried based on political considerations or other irrelevant factors. A system which accurately predicts what will happen without comment on politically sensitive policy questions may be useful.
Re: (Score:2)
You're right. Neural networks are trained to spot only outcomes, and don't understand the inputs. Economists try to put human behaviors and motivations into selecting their equations, and when they find an equation that matches reality, they claim to have modeled the behavior. But the "math problem" isn't the real problem here.
Regardless of how these equations are arrived at, whether it be from some economist or from some neural network, the next step is for someone to exploit them for gain. "Hey, if we
Not prediction at all... more like guessing. (Score:2)
Instead of A coin flipped for 20000 days, they take data on... say... 100 coins.
VARIOUS data. Weight, color, date on coin, number of scratches, source of coin, air temperature, does flipper of coins like dogs or cats...
Then they flip those coins for some number of times and write all that data down too.
Including the sequence of results - heads, heads, heads, tails, tails, heads...
They get a BIG pile of data to mine.
Then, and this is a clincher, they "Distinguish between causal effects and attributes".
In oth
Re: (Score:2, Funny)
> Isn't this the same as having economists doing the work, just faster?
Of course not! A machine is a cold, emotionless, insensitive, empathy-deprived entity, while an economist...
Hmm, it really is the same...
Re: (Score:2)
> Isn't this the same as having economists doing the work, just faster?
Of course not! A machine is a cold, emotionless, insensitive, empathy-deprived entity, while an economist...
Hmm, it really is the same...
In other words, instead of calling it "the dismal science", we should be calling them "the dismal scientists".
Re:Same issues (Score:5, Insightful)
Yes and no. In a sense, letting AI learn the salient traits of the available data just saves a human from needing to do it; but, you can do something with an algorithm that you can't reliably do with a human - You can model the existing system, then test billions of hypothetical situations to see how they respond.
Humans work amazingly well at pattern matching, even in the absence of understanding of "why". We can even get good at predicting what will likely happen if we change a few inputs to a system. But we don't do so well at figuring out what will happen if we tweak a large number of inputs simultaneously.
Think of this as nothing more than finally making batch hypothesis testing possible in an objective way, in a field where a persuasive argument matters more than facts and where a real experiment can take a few generations to fully show its outcome.
Better not look at the "social" sciences then... (Score:3, Funny)
>> the field of economics frequently uses math in an unhealthy way
Yikes, if you think that's bad, you'd better not look at the "social" sciences then.
Re: (Score:2)
ORLY? Linguistics uses math in a much healthier way than economics.
Re: (Score:2)
Well liguistics being just another form of math, this is unsurprising. It's barely a social science- only because without language social constructs cease to exist.
Linguistics is just assembly math for higher level communication.
Re: (Score:2)
Re: (Score:2)
Economics could only be considered a social science to the extent it deals with the interactions of trade between people, and the objective results of people with different subjective desires.
Economics can also be one of the hardest sciences there is, on par with kinematics: Economics invented game theory, and has many mathematical theorems, like the Law of Supply and Demand, the Law of Comparative Advantage, and the Black-Scholes model.
Re: (Score:1)
Re: (Score:2)
Hmmm. Not necessarily. You can apply economics to any situation where multiple, scarce resources must be allocated to autonomous consumers based on some criteria.
Suppose I have resources A and B. To accomplish task Y I'd need 2 A or 3 B; and to accomplish task Z I'd need 3 A and 5 B.
It doesn't matter if A/B is RAM/HDD or doctors/nurses. Economics says that, even though A is better at both tasks than B, it'll actually be cheapest to deploy B to task Y if and deploy A to task Z.
It's really no different than s
Re: (Score:2)
How are human wants arbitrary? We want sex with attractive people, good food, luxury, entertainment etc..., all defined by our biology...not arbitrary at all.
Re: (Score:2)
The reasons why we have certain desires don't have any impact the actual laws of economics.
Also, none of those are necessarily true. They might be true for 90-99.99% of the population, but not as a matter of definite fact.
Re: (Score:2)
I'm not quite sure what you're referring to, Black-Scholes describes how to price futures contracts, and it does remarkably well at doing that. It's just based on the rate of interest, which should seem obvious.
Generally when it fails, it's because of a faulty assumption, same as assuming zero air resistance and zero friction at low speeds in physics, right. Usually it's good enough, many times it's not.
The difference is in economics we can actually mathematically prove the theorem when the initial assumpti
Re: (Score:2)
You are trying to claim economics is better at providing proof than physics? Really?
Re: (Score:2)
What's the last thing physics ever proved as a matter of mathematical theorem?
Go on, I'm waiting
Re: (Score:2)
Sounds like Michael Chrichton's ranting about aliens and global warming, pointing out that a lot of our mathematical equations are [Unknowable] = [Bunch of unknowable variables multiplied together]. The Drake Equation, for example, says there's as much a chance of us finding aliens or aliens existing or whatever based on how many planets there are, how many are inhabited by aliens, etc., just a pile of quantities we can't know.
I actually considered hanging lampshades on this when I described wealth and
Economics is a social science. (Score:1)
And all the breakthroughs are being done by psycholgists like Dan Kahneman who are showing that people and markets are anything but rational. The Austrian and Chicago schools are turning out to be mostly wrong.
Economics is not always logical (Score:2, Insightful)
Economy == Black Magic (Score:1)
Putting that stuff near "science" or "maths" is an insult to those fields of endeeavour.
Which economists predicted 2007/2008?
Re: (Score:1)
the Austrian school of economics did.
Re: (Score:2)
And a broken clock is right twice a day.
Economics really is just political debate using numbers, and much of the trouble in the world comes from people using economists' opinions for anything beyond entertainment value. People are going to look back on today's economists the way we look back at alchemists.
Re: (Score:1)
Re: (Score:2)
Re: (Score:3)
Actually the broken clock is the correct analogy here. Austrian economics predicts a crash not quite constantly, but under a certain set of conditions which very commonly exists - including a lead-up to the '08 recession, and right now. Their predictions that economies are sure to melt down "any minute now" are rarely correct.
Empirical analysis of chaotic systems (Score:5, Informative)
Putting that stuff near "science" or "maths" is an insult to those fields of endeeavour.
Not any more than meteorology or ecology or geology or any other field that gets its data from complex and chaotic empirical sources.
Which economists predicted 2007/2008?
Quite a few of them. Some didn't get their timing right but I can introduce you to economists and financial analysts that I know personally that were warning about a likely crash in the housing market and knock on effects as far back as 2003. They obviously couldn't predict the exact outcome because that is basically impossible in a large chaotic system. (especially when you cannot perfectly model the initial state)
People have this naive idea that economists ought to be able to predict the future perfectly or it isn't a science. Predicting the recession of 2008 was something akin to a geologist trying to predict exactly when and where an earthquake will hit. There are too many unknowns to make anything better than a probabilistic analysis. They can tell you there is an X% chance of an event happening within time period Y. Asking for something more accurate than that is simply unrealistic expectations.
Re: (Score:3)
Hell, I predicted that the housing market would crash well before that (after a hi-rise condo developer I knew told me that 20% of their sales were to speculators who never had any intention of moving in). Does that make me right when the prices kept going up for years before crashing to levels still above the prices that were typical when I first thought it was going to crash?
The
Re: (Score:2)
Many economists predicted it. However, the exact timing for bubble bursting is... not well done.
False Dichotomy? (Score:1)
He says many economists don't use math as a tool to describe reality, but rather as an abstract foundation for whatever theory they've come up with.
Surely these aren't mutually exclusive; don't physicists use mathematics as an abstract foundation for whatever theory they've come up with to describe reality? And just like in physics, assumptions are made. The difference seems to be that while physicists are aware that their models are incomplete, economists (or, more likely, journalists, politicians, and the people who actually apply these models) etc. disregard these caveats and claim that this model describes the entire financial system in a few dif
Economists are well aware of limitations of models (Score:4, Informative)
The difference seems to be that while physicists are aware that their models are incomplete, economists (or, more likely, journalists, politicians, and the people who actually apply these models) etc. disregard these caveats and claim that this model describes the entire financial system in a few differential equations.
Economists don't disregard the limitations of their models at all. If you would spend some time speaking with actual economists (I have) you'd quickly find out that they are exquisitely aware of the limitations of their models.
Where things tend to go off the rails is when financial analysts with a profit motive try to stretch the economists models beyond what they can actually explain. A great example of this is Long Term Capital Management [wikipedia.org] which was described in the book When Genius Failed. They took some models with a long list of assumptions and limitations and tried to apply the models to areas well beyond the limitations of the model. Early success begat hubris which led to greed and ultimately their downfall.
Making policy but not thinking of the future...? (Score:2)
who are usually more concerned about giving policy recommendations than in making forecasts
What? Is this implying that they want to make suggestions about what to do in the present and future to change the future without being the least bit concerned with forecasting the future? I don't think I would listen to anyone who wants to make important changes/suggestions without them being very concerned with attempting to predict the future of the situation at hand.
Also,
the field of economics frequently uses math in an unhealthy way
As an EE having taken many econ classes, I can wholeheartedly agree with this statement.
Ideology not reality ... (Score:5, Interesting)
Let's be clear: how you think economics is defined by your ideology, and most economics is bad math with unfounded assumptions arriving at un-supportable conclusions.
So, if you're the Chinese government and think you can manipulate markets to suit your beliefs, you'll be horribly mistaken. Likewise, if you subscribe to the ridiculous Austrian School of economics (which refuses to have empirical evidence), then you likewise believe your theory is so perfect it doesn't need to be validated.
Nobody has ever had any proof for "trickle down economics" other than they think it should work and it suits their ideology, but 30 years of actual real world data mostly shows it's utterly failed to work as planned.
Economics is useful to look at what came before, and understand some limited problems ... but in general many people believe once you try to use that to predict things, or influence outcomes you get into a level of complete bullshit and voodoo. Time and time again when people try to take action or set policy based on economics, it fails utterly.
And until economics is based on anything other than sketchy math and ideology, it can never be a real science or have much more meaning than something people use to defend their ideology. But since people never look at economics separated from their ideology, it will never happen.
Economics is mostly a tool to make it look like the things you believe should happen, based on how you want the system to behave, have any actual relationship with the outcomes you expect to achieve with policy. The problem is that is a lie.
But it sure as hell can't be called an objective science. First you have to believe in the ideology and then you believe in the methodology.
The problem is people like to believe that the ideology is objective reality, and that their observations are in fact rules. And that simply isn't true.
Re: (Score:1)
Re: (Score:2)
Oh yeah, this is just going to total Austrian econ. The idea that math has anything to do with economics (macro or micro) is heresy to them.
I rather hope this takes off, and well, so that we can finally bury von Mises.
There was an apocryphal story at my university that one of our Econ professors has been arrested once for urinating on the grave of von Mises. I may have to get in touch with him, and see if he's willing to give it another go.
Re: (Score:2, Interesting)
Where do you clowns come from, really? You obviously know NOTHING about Austrian economics, yet you're all out here like ventriloquist dummies telling the world how bad it is. It's like the Red Scare with everybody talking about how bad commies were, but nobody knew anything about them other than what the establishment had told them.
I'm sure you pray at the temple of Keynes, like all the other "Nobel prize" winning economists do. You know, those same ones whose policies have ruined the economies we have now. But we'll just ignore that, right?
Ok, little AC, I'll reply.
Austrian economics is, at best, a pseudoscience, and at worst, fabulist storytelling by one charlatan to another, in an effort to explain things that they either don't understand, or actively refuse to understand, because they say "we don't need math or empirical testing".
Austrian econ uses praxeology (application of deductive reasoning, applied to a set of "unquestionable" axioms) to generate its further generate implications, scenarios, and results. Of course, these unquestionab
Re: (Score:3)
Nobody has ever had any proof for "trickle down economics"
Just an FYI, no economist has ever supported the idea of "trickle down economics." The concept was created by a comedian (Will Rogers, great guy), and is mainly used the same way Republicans use the word "socialist:" as an insult against people they don't like. And frankly, that's how you're using the term, too.
Re: (Score:3)
And until economics is based on anything other than sketchy math and ideology, it can never be a real science or have much more meaning than something people use to defend their ideology. But since people never look at economics separated from their ideology, it will never happen.
It seems like you get most of your economics knowledge from MSNBC or The Daily Show.
Back in the real world, economic concepts like MV = PQ is one of the most empirically tested ideas around.
Re: (Score:2)
Spoken like someone who has never taken micro or macro economics.
I can only imagine you get this idea from watching the news -- where political pundits have little grasp on what economics actually IS.
Economics on the micro scale is actually just common sense. We're talking simple supply and demand curves. There's no ideology involved. If people want X and we restrict the supply of X, the price of X will go up as there is now a shortage. Shortages are a real thing that are well understood. Typically
Re:Ideology not reality ... (Score:5, Insightful)
Oh, look .. ideology pulled out of your ass and passed off as facts.
Blah blah blah.
Sorry, this is exactly my point. Show us some empirical proof, or STFU. What's that? Don't have empirical proof? Then you don't have facts. You have ideology.
Re: (Score:1)
Sorry, this is exactly my point. Show us some empirical proof, or STFU. What's that? Don't have empirical proof? Then you don't have facts. You have ideology.
I'm no economist, but thinking about it, 'forced central bank interest rates' are not the cause for most bubbles I can think of.
Bubbles - Beanie baby type bubbles happen frequently, but are ultimately rather minor. Most people 'investing' in 'collectibles' are individuals limited to their own money. NOT caused by interest rates of any sort.
Housing Bubble - perhaps encouraged by low interest rates, but I'd argue that it was far more caused by government policies other than interest rates, to wit the 'order
Re: (Score:2)
Bingo.
Monetary and Fiscal policy (like controlling the interest rates) has actually lessened the boom/bust cycle since it was implemented. Before the fed controlled the interest rates, bubbles were far more common and much more disastrous when they popped. Just look at the USA's list of booms and busts... and how many "financial panics" there were long ago:
https://en.wikipedia.org/wiki/... [wikipedia.org]
We used to have deep recessions every 10 years or so. Around the late 1930s, we started manipulating the rates and n
Housing bubble. (Score:2)
and many saw it coming long before it folded.
Hell, I saw it coming. Like I said, not an economist and thus I wasn't about to try to peg when it'd happen. For that matter, I didn't even know how bad it was underneath.
My metric was incredibly simple: comparing median salary of home purchasers with median home price. When that started getting out of whack, combined with news like how the average home purchaser was in more debt than ever(student loans), my realization was that the prices were unsustainable.
I ended up buying a $15k house and living thr
Re: (Score:2)
Re: (Score:3)
I find it extremely weird that people whom otherwise demand empirical, scientifically validated (or at least, the potential for scientifically validated) proofs for everything in their lives latch on to the Religion of von Mises. "Proof! Proof! Proof! Except for my pet theory of economics..."
Re: (Score:3)
Re: (Score:2)
Re: (Score:2)
Re: (Score:2)
As if bubbles and collapses can't happen without guidance from some outside force.
(Sorry, missed a "/" the first time.)
Re: (Score:3)
Forecasting (Score:4, Interesting)
machine learning is more about forecasting than about understanding the effects of policy
And forecasting depends on some underlying behavioral model. Problem is, people keep changing the model. They try to anticipate or short markets to gain an advantage and very rapidly, this new response to market conditions replaces the previous behavior, invalidating previous relationships.
Re: (Score:2)
But given the amount of money at stake, my neural network is faster/better then yours. So mine can always out-guess what yours will do and I can get to the market ahead of you.
High Frequency Trading.
Main street economists are charlatans (Score:1, Informative)
Charlatans, that the so called 'main street economists' are will not go away with their nonsensical ideas about the need to 'guide' the economy in any way and their ways of 'guiding' the economy is what leads to the economic collapse. Of-course the economists are just mouthpieces of the government and of the Federal reserve, whose entire job is to justify the actions that politicians want to take anyway, actions that promise re-election rather than actions that promise a sound economy and a sound society.
A
Re:Main street economists are charlatans (Score:4, Insightful)
By which you mean un-knowable magic.
There is no such thing, never has been. Someone is always lying and cheating, cartels will form, consumers do not have perfect information and make irrational choices. A free market is a complete lie, never has existed and never will.
Because you say so without proof or evidence. Society cannot exist without maintaining the structures which allow society to exist, and you can't pretend there is a self-regulating human condition which exists independent of society without being delusional.
As usual, Roman, you've brought your own brand of crazy to this conversation. You spout things as if they are objective natural facts, instead of bullshit premises you take to be true and expect the world to accept because you say it loudly and with bluster.
And as usual you utterly fail to introduce facts or evidence. Because you believe your magic bullshit is so self evident as to not need facts or evidence.
It's still not true.
Re:Main street economists are charlatans (Score:5, Insightful)
And this is the fundamental flaw in your argument.
Nothing is "mis" allocated, it is allocated where the people who control them put them.
That this fails to match up with your perfect theory isn't a problem with the random, selfish, and stupid shit people do. It's a problem with your model which says people will achieve the perfect outcome your flawed model predicts.
What you're saying is, if people will only behave according to how you believe they should, there would be perfect outcomes. And I hate to tell you, but that will never happen.
I say there is no such thing as perfect outcomes, there is no such thing as rational actors, and there is no collective goal or "proper" allocation of anything. Merely a bunch of greedy, selfish, irrational actors doing whatever the hell makes sense at the time, or what they've been hoodwinked into believing will yield perfect outcomes. Many of whom will utterly fail to play by any rules or with anything other than pure, shortsighted greed.
If your theory can't account for the randomness of the human animal, it's your theory which is defective. Because the human animal will simply NEVER do anything according to someone's theory which has perfect outcomes.
The notion of "they're doing it wrong because it doesn't match my ideology" is the problem here.
Re: (Score:2)
A sound economy relies on the invisible hand of the market forces
A concept like The Invisible Hand belongs alongside alchemy, astrology and leeching. It is not just non-scientific, it's anti-scientific.
Something else economists could do... (Score:2)
... would be for them to establish sound and sane epistemological foundations for their works. For example they could stop trying to assert they can model human behavior, and instead limit themselves to observations of economical choices made by real, live humans only.
Re: (Score:2)
That's a bit like trying to predict the weather by looking outside right this moment and forecasting it'll be the same tomorrow though. You observe the people, develop a model that attempts to predict their actions, then use the model to attempt to predict future actions, thus allowing you to make accurate forecasts.
Besides that, to misuse Asimov, predicting a human is hard. Predicting a group of humans is substantially easier.
Policy recommendations aren't predictive? (Score:2)
That would make the techniques less interesting to many economists, who are usually more concerned about giving policy recommendations than in making forecasts.
Decision Maker: The opposition and the polls are beating me up over the jobs numbers. Give me some policy advice, economist.
Economist: I think you should implement this policy.
Decision Maker: Will it improve the jobs numbers?
Economist: I have no idea what the outcome of the policy will be, I just made some stuff up.
Isn't the entire point of policy recommendations to achieve some kind of desired goal? Even if the policy recommendation is based on pure ideology, usually the alignment with the ideology i
Re: (Score:2)
The only place I've maybe seen that is in a photo processing plant, where they wouldn't (they claimed they couldn't) recruit blind people to work in the darkroom, but paid teenagers minimum wage (about $1.65 an hour) to do it. It was OK for me, since it was only a summer job, and I wasn't in the darkroom, anyway, but I doubt any adult could have lived on that even back then.
Comment removed (Score:5, Interesting)
Re:Economics isnt science. (Score:5, Interesting)
Marx as an economist is one of the few to provide a very broad overview of the concept as it applies to modern capitalism.
Marx was a drunken idiot whose economic "theories" didn't have so much as a means to correctly communicate value. Booms and busts happen when powerful players in the market spot a way to sidestep regulation, whether because the phenomenon was new as with the dot bomb, or because regulation was deliberately removed as with Glass-Steagall which led directly to the most recent recession.
Still though, the fact that every country which embraces regulated capitalism has experienced a steady improvement in standards of living and wealth would have stuck in old Karl's craw.
Re:Economics isnt science. (Score:4, Informative)
Marx was a drunken idiot whose economic "theories" didn't have so much as a means to correctly communicate value.
His value theory is totally bonkers but much of his diagnosis of the ils of the capitalistic system is fairly good. Where people go wrong, is in looking for the solution in his works. There is a lot arm waving but hardly any coherent solutions.
Re: (Score:2)
Which, in fairness to Marx, is no different than any other economic worldview. They're all incomplete or flawed in their own ways by their very nature.
They all try to force the world to behave according to arbitrary "rules", which are mostly observations which don't account for nearly as much as they claim to.
Anybody who claims to have "coherent solutions" in any field of economics is mostly full of shit. I remain unconvinced it is possible to ha
Comment removed (Score:4, Interesting)
Re: (Score:1)
Still though, the fact that every country which embraces regulated capitalism has experienced a steady improvement in standards of living and wealth would have stuck in old Karl's craw.
No, that was his point. Eventually some of the wealthier capitalists will be that wealthy, that they can buy out every gouvernment and the regulations will be dropped.
Re: (Score:2)
Brilliant, criminals exist so we must all become mafioso.
Re: (Score:3)
Marx advocated most of the things that regulated capitalism did. Remember, the Communist Manifesto was really advocating Socialism, not what is now called Communism.
There were ten areas he wanted to change. Some of them are now considered to be such "duh" ideas they will remain forever: Progressive taxation and universal education. Some are definite
Re: (Score:2)
Re: (Score:2)
Personally, I think that people are incorrect when they think of Marx as an economist. He wasn't. He was more of a socialogist. His economics were a side-note compared to the class struggle portion. It's just that you can't build a utopian social theory, like many philosophers have before, without touching upon economics. He was right that the social structures of the time were unsustainable though.
Psychology (Score:5, Insightful)
That's because economics is a blend of math and psychology. The math assumes a rational actor with all the necessary information. The psychology is rarely rational and involved decision making influenced by the decisions of others, highly varied interpretations of historical events which preclude deterministic mechanisms, and imperfect information viewed through personal biases and strengths. Inaccuracy results from improperly weighting the relative value of these two in economic outcomes and from difficulty in modeling the psychological elements. Bad math is the least of the challenges facing economics.
Re: (Score:1)
Re: (Score:2)
It depends on the school of economics. The Austrian school makes no such assumption which is why it lacks specific predictive ability. It is based on how humans act which is basically they pick from what they perceive as the best choice of those they see as available at the time. What this doesn't allow is your judgement as to what is rational. If someone decides at a certain time smoking a bowl is preferable to going to work at that moment than that is what they do otherwise they would do something else.
Re: (Score:2)
Replace one bad method with another? (Score:3)
To illustrate, the summary could easily be restated this way:
"...field of [data science] frequently uses [machine learning] in an unhealthy way. Many [data scientists] don't use [machine learning] as a tool to describe reality, but rather as an abstract foundation for whatever theory they've come up with."
Replacing "math" with "machine learning" isn't going to make a difference if the practitioners don't understand how to use it properly. Machine learning models are much more subtle and complex than simple mathematical models and very easy to misuse. To use them properly, you really need a much stronger understanding of the math behind them than most people have.
See the entire field of psychology and most GWAS studies for an example of where over reliance on (simple) models can get you into a lot of trouble.
-Chris
Re: (Score:2)
That's pretty much my point: most people can't even get it right with simple statistical models. I advocate sticking with the simple mathematical models and dumping the "turn-key", simple statistical models that keep getting people in trouble. p value .05, publish!
Those that truly grok the statistics behind the more complex models can still use them, but the bar for acceptance by the community needs to be much higher. (which goes into fixing peer review and down that whole rabbit hole...)
-Chris
This is silly. (Score:2)
Machine learning won't 'solve' the economics problem (a problem which the TFA doesn't really define). The problem with math in economics is that economic time-series is extremely chaotic -- a practically infinitesimal change in initial conditions vastly changes the outcome of the system. Hey, remember how we can only predict the weather out 15 days *max* (using big ass supercomputers along with lots of soil moisture content, temperature, wind and other seasonal data)?... well the weather is just one of the
It's about time! (Score:3)
Yeah, Economists (and I'm an avid amateur) use a language that is not precise to describe behavior that is not able to be precisely measured. Take the word "rational" for instance: Rationality in psychological terms implies something on the order of optimization in general, while rational in economic terms is optimization for individual behavior. Yes, an individual may change to the faster moving line or lane, but that only has a cumulative effect on the mass of behavior, and does not add to strategy as a whole. Individual behavior does not advance knowledge of the subject; it is only the accumulated effects of individual behaviors that reveal Economic behavior and may reveal Economic principles.
The closest thing we have in in tech terms is "emergent systems" and economics actually closely resembles an experiment in complex systems.
The other imprecision is to generalize about Economists. Some Economists are idealists or philosophers and deal in theory only, trying to determine "the way things should be." Some Economists are technologists and are mostly concerned about using the information to manipulate outcomes. (Many negative effects are a result of Economists who do both of these!) Somewhere in between these two types is the Economic Scientist whose main concern is finding out what is going on, proving that it is valid, and who can use the information to actually predict Economic behavior. It seems to me that machine learning actually serves the Economic Scientist.
cet par (Score:2)
However, to truly model economist behavior, I think quantum machines should be used, so they can offer two conflicting opinions at the exact same time.
man ML algorithms are black box (Score:2)
Forgive Me (Score:2)
System Dynamics (Score:2)
I've been reading a lot of economics the last few years, trying to figure out why it's so full of shit.
It seems mainstream (neoclassical/keynesian synthesis) economists believe in mathematics but don't believe in reality.
Their close kin the Austrians don't believe in mathematics either.
They both believe economies are in equilibrium, this is a fundamental assumption, and other nonsense like 'people behave rationally', 'people have perfect information' etc.
These are not a priori assumptions like a physicist m
Re: (Score:2)
So, the smart move is to go long on GPU/FPGA manufacturers. A manufacturer would be wise to name their new, high performance chip set Tulip*.
*This appears to have been done already, albeit for Ethernet hardware.
Re:Austrian Machine (Score:5, Informative)
What do you mean? Keynes modeled stagflation; he didn't use that term, but it's clear that Keynes, and those who studied his work, were aware of the effect of a supply shock on an economy.
The issue with Keynesian policy and stagflation is, given two problems with conflicting resolutions, how do you address both of them?
We now know that tackling them one at a time works. First you address inflation, then you address stagnation. This isn't a weakness of Keynesian theory -- it's validation.
Re: (Score:2)
Ever since I learned about AI and the potential upcoming technological Singularity, I have suspected that this will be the most important application of an ASI, because once you can accurately model human behavior on a massive scale, you can devise non-intrusive interventions a la the Butterfly Effect to maximize freedom and prosperity for everyone.
Er, the point about chaotic systems and the Butterfly Effect is that you cannot predict what the result of your intervention will be.
Your level of computing power is irrelevant.