Topic: Economics
Is The ECONOMY Quantifiable? There are many people who seem confused by the differences between SCIENCE and ART. Is describing our ECONOMY a science or an art?by Master C
(liberal)
Wednesday, January 7, 2009
Math is a science; music is an art. And, surprisingly, they can't really do the same things. When you try to write up a formula for a hit song, somehow it just doesn't work. There's something more to it than just so many beats per measure, and so many chord changes here and there. It's even surprising that many of the people who are good at one discipline aren't very good at the other.
How about pitching a baseball? Do you think that's a science that can be taught, or do you think it's an art that starts with a certain natural ability that can only be improved upon through practice, training, and repetition?
Many think that our ECONOMY is all mathematics. The GDP is this, inflation is that, unemployment is this, interest rates are that, the national debt is this, our trade deficit is that. But, are these people even anywhere close to describing the economy?
What, really, is the economy? Is it a thing with shape and size and definable characteristics? Is it something we can see and touch? Is it a SHIP OF STATE, as many politicians like to suggest, that needs a strong hand at the tiller and someone on the lookout for trouble up ahead? Is it a PUMP that needs to be primed from time to time, or a motorcycle that needs to be kick-started? Or is it more like a song something we can sing along with and we know if we like it or not, but it's hard to say why. Oh, I like it because it has a good beat. I like it because you can dance to it.
When you get right down to trying to describe anything that's ART, it's as elusive and enigmatic as winning that lottery that only requires you to pick five numbers out of those that will be drawn from possibilities between zero and ninety-nine.
Do we do anyone a disservice by plastering numbers all over a house of cards that we call "the economy" when we know how inept and misleading these measurements are? Does anyone even know how many people there are in any one city the size of Houston, Dallas, Chicago, Boston, or San Francisco at any one time, let alone in a country the size of the United States? Does one immensely rounded-off number like 306 million people produce any veracity, or just give us an ILLUSION that we know something that we can never really know with any degree of accuracy or certainty?
As many might contend, we don't really need to be entirely, 100% accurate because these measurements just describe an APPROXIMATION of certain bundles of things so that we can speak more intelligently about them and make judgments about whether they are too large or too small. So, when we talk about things like how much POVERTY there is in a country, or how much HEALTHCARE costs, or the size of the GDP, the MONEY SUPPLY, or the rate of INFLATION, we are giving shape and substance to things that would otherwise be only smoke and speculation.
Yet, that is exactly my point. By describing these various concepts in MATHEMATICAL terms, we are giving the ILLUSION that we can quantify them so that we can project a sense of comfort and order to the world and our lives that doesn't really exist. What this does, more than anything else, is allow those who use this data to manipulate and manage our lives in ways that produce results that only they can confirm or deny.
If we have a college classroom of 26 ECONOMICS STUDENTS, for example, ranging in age from 20 to 52, 17 women and 9 men, having received 6 A's, 10 B's, 9 C's, and 1 D on the first test, what does this tell us about them? That some understood the material better than others, although WHAT material and WHAT type of understanding only reflects the type of questions that were asked and the type of answers that were expected. If we add in information about their annual income or their cumulative grade point averages, or even their performance in other classes ~ as if this data doesn't change and vacillate greatly and often unpredictably over time ~ does this tell us more about them as a group? What if we add information about their height, weight, eye color, and ~ if it could even be somehow described ~ the color and amount of hair they individually have, would this give us a more complete picture of the class? Could any MEANINGFUL assessment of the knowledge, abilities, skills, capabilities, potential, or talents of this group be concluded from this data?
The point I am making is that just by having reams of data doesn't mean that the data is accurate, true, or even meaningful. But, what it can do is give the ILLUSION that an assessment is being made and give the ILLUSION that truth and accuracy are contained in it when EXACTLY THE OPPOSITE might be true.
With all the historic and current data we have on WEATHER CONDITIONS ~ temperatures, barometric pressure, isobars, humidity, rainfall, wind speed, etc. ~ we still cannot predict what will happen in any particular region of the country more than a few days in advance. With all the historic and current data we have on BASEBALL TEAMS ~ strikeouts, batting averages, errors, wins and losses, etc. ~ we still cannot reliably predict who will win the World Series in a given year, let alone who will win a particular game.
Is "THE ECONOMY" that much more predictable and quantifiable than these events that it can be measured, sized, and fitted like a tuxedo? Or is our tendency toward anthropomorphism ~ giving human qualities to non-human things or, as I might elaborate and expand, giving descriptive qualities to things that cannot be described in a tangible, finite, and quantifiable manner ~ something that takes us away from a more insightful understanding of our world?
Philosophy ~ an art and a verbal skill ~ is the only way to make sense of the vastness of possibilities and the endless complexity of our world because measurement and specificity only belong where homogeneity, uniformity, consistency, and absolute knowledge of the possible outcomes prevails. For those who try to make us believe that the ECONOMY is a quantifiable "thing" not an endlessly elusive and amorphous "concept" they are as misguided as they are misinformed. Those who try to measure love, loyalty, prosperity, poverty, courage, intelligence, conviction, friendship, cooperation, success, leadership, truth, honesty, trust, respect, satisfaction, passion, and many, many other non-quantifiable concepts will fail to adequately measure them and will have to admit to many contradictions and exceptions to their conclusions.
In fact, when there are more exceptions to the rule than there are confirmations of it, then you don't really have a rule you have merely added another exception!
Surely there will be those who say that SOME information ~ if only a best estimate or a ballpark figure ~ is better than NO information. But, let me respond in this way: If someone asks you if it's going to rain outside today, and you reply that it isn't, but it SNOWS instead, is that information valuable to you in some way? And if someone asks you if the handle on a skillet is hot before they pick it up, and you reply that it isn't to YOU because you used a potholder but it burns them, will that information be valuable to them in some way? The idea that BAD information or MISLEADING information is better than NO INFORMATION is as helpful as someone telling you the power is off when you start to work on an electrical outlet, but it really isn't.
Anyone who claims to be able to QUANTIFY the "economy" ~ especially those who attempt to compare our historical performance with that of today ~ should be viewed with as much skepticism as we would a witch doctor or someone practicing voodoo. They are much more likely to do us harm than to help us heal our ailment.
Master C
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Posted By: Walt Thiessen
Date: 2009-01-07 06:01:24
Yes, by all means, let's treat the economy as nothing more than a vague artform that can't really be understood except in the most abstract terms. That should make it much more familiar and comprehensible for everyone. Not.
Economics is not an exact science, but that doesn't mean that we shouldn't be using mathematics in order to try to understand it. After all, even music has its mathematical side. The mathematics don't make the music more enjoyable, but the math does make it easier to understand how the musical notes are generated and linked together.
Economics, the “dismal science” is perhaps best characterized as a science of variable determinate choice. To attempt to provide a complete quantification of all aggregates involving individuals in their decision-making process as it relates to their desires, dreams, fears, etc. is not only virtually impossible, it is logically impossible to actually consider it possible.
Additionally, to think that the government can, even with all its resources, provide for the socially functional welfare and that they can, by various economic and monetary policies, maximize the ability of the economy to actually increase wealth, then all we need do is look at the results of the last nine decades or more to see that such rationale is far from rational. Economics is a mixture of sciences, both in terms of social and physical science however; the methods used by each of those sciences in application cannot completely describe what economics if isolated in the methodologies of each alone.
Quantitative sciences of statistical mathematics and analytical algorithms only provide results based solely upon input and cannot completely describe the social aspects that fuel economic forces in a society. While there is and has been an attempt to define and a measure aggregate effect on economic movement, the fact is that there are untold millions of economies occurring between individuals, groups and larger components within society on a moment by moment basis. It should be obvious that those who rely solely upon a mathematical methodology have not improved upon economic forecasting much over the last 70 or 80 years. They have encouraged and depended upon a very formal system of mathematical economic modeling and preoccupations of statistical game theories that have done little to either accurately forecast economic movement or provide any substantial solutions to the very problems that their previous econometric modeling created in the first place.
Eventually, when the economy continues through its current degradation process more economists will seek to find different approaches than are currently employed by the “accepted economists”. Of course, there are very few schools of economic thought that provide for economic realism like the School of Austrian Economics; eventually we will see, as we already are, more looking toward the theories of Austrian Economics than at any other time.
Posted By: Jake, the champion of the constitution
Date: 2009-01-09 06:36:02
thumbs up, MC!!! you raise a great point, since the economy is obviously more than a set of numbers, although I'd have to say that a lot of the measures like M1 velocity, M3, % unemployment, GDP split into % mfg, % services and % consumption, etc etc do give some type of sense where this boat is going.
economies are extremely intricate - reminds me of Leonard Read's essay "I Pencil" and the idea of central planning failed with the death of the USSR, and will eventually be eradicated with the end of the FED. In a nutshell, socialism is dead but no one realizes it yet.
another interesting item you might want to take a look at is Catherine Austin Fitts' "Popsicle Index". It sounds wacky, but in her articles and speeches ties it very well to economies (if one agree that ones based on endless war are not productive, that is!!) the idea is that a rating of 100 is given if a parent is completely unworried about their child going down the street to get a popsicle, a 0 is well, like Baghdad outside the Green Zone.
I once defined the ECONOMY in a paper I wrote in graduate school as: "billions of decisions being made simultaneously, consecutively, and independently by a widely-diverse, greatly-differentiated, conflictingly-motivated group of interested and uninterested people, institutions, and governments in one recognizable geographic area."
I'm not entirely sure, but I think that tightly sums up in about a hundred fewer words what you're getting at.
To a degree, you are correct. As I stated, it appears that you are much closer to an Austrian Economic view than I once imagined...perhaps that's one reason I was the first to give this article a thumbs up.
Why would the fact that economic factors are measured with a degree of uncertainty be cause to not use numbers at all? The can of peas I bought says how much fat, protein, carbs, etc. is in the can but not really because there is a level of uncertainty to those numbers. Under your logic since the grams of carbs can't be quantified exactly and with an absolute number it is meaningless, arbitrary and without value and under your conclusions should not be used at all.
If the unemployment rate is 7.3% plus or minus .2% and two years ago it was 5.1% plus or minus .2% I do not consider them useless and arbitrary and without merit merely because there is uncertainty. Similar to the 2 grams plus or minus .1 grams of carbohydrates in my can of peas is still usefull to me even without the exact absolute number. As a chemist I include uncertainties all the time in results, this should also throw out my data as useless if I can't pin down an absolute number?
You also claim quite directly that those who use, for example, unemployment statistics are using 'bad' or 'misleading' information and for them to use those statistics to compare to historical statistics are so removed from reality as to be compareable to witch doctors. Do you have any evidence for these statistics being so bad and misleading that users of it are akin to witch doctors? Your only claim seems to be that since there is uncertainty in economic statistics, that math is useless for economics.
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