flailing

Not Li'l solipsist

I read an interesting article over at The Republic relating to forecasts of economy, human behaviour, triggers to calamities, etc. It is redacted below.

The conclusion that I drew was: don't listen to the boffins! They are just flailing like little babies.

Theoretical physicist Mark Buchanan’s Ubiquity: The Science Of History . . . Or Why The World Is Simpler Than We Think (Phoenix, 2000), is a book whose implications are so powerful they’ve given me vertigo. Buchanan makes a very strong argument that, despite all appearances to the contrary, human history may be governed by very simple mathematical laws. Unfortunately, those laws would guarantee history’s complete unpredictability, and they would also fundamentally contradict the economic and political theories informing our decision-makers.

The study of non-equilibrium statistical physics shows that critical states seem to emerge whenever systems are kept far from equilibrium in conditions where the forces of chaos and order are in constant flux, and where the components of the system exert some influence on each other’s behaviour. It seems that at least some features of our collective behaviour can be reasonably explained by these concepts.

Might as well just guess

Research suggests that both stock market fluctuations and the distribution of global wealth follow power laws. This is an unnerving finding, as it flies in the face of traditional economic theory,...the effects of a relatively minor economic variable may produce anything from unnoticeable effects to such calamities as the 1929 stock market crash and the collapse of the “tiger” economies of Southeast Asia in 1997.

This helps explain why economic forecasts are so consistently proven wrong. Buchanan writes that in 1993 the OECD “analyzed forecasts made between 1987 and 1992 by the governments of the USA, Japan, Germany, France, Italy, and Canada, as well as those of the International Monetary Fund and the OECD itself. Their conclusions? Not only were each of these organizations’ predictions abysmally inaccurate, but they would have made better predictions for inflation and gross domestic product if they had scrapped all their sophisticated economic models and simply guessed that the numbers in each year would be unchanged from the last.” Similar studies have produced the same results. This has grave implications. Given that the study of economics presupposes equilibrium, and given that our nations’ powerbrokers rely upon economists for their understanding of the world, it seems that our leaders’ most basic assumptions about the economy are dangerously wrong-headed.

Indeed.