Computer Simulations in Economics
On August 7th, Jay Hanson posted the hyperlinked paper “Blame the Economists” at http://www.ritholtz.com/blog/2013/08/blame-the-economists/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+TheBigPicture+%28The+Big+Picture%29
This is a very useful piece for those of us who wish to organize our objections to theoretical economic thinking. I say “theoretical economic” not because I think that economists have discovered a useful theory such as relativity or evolution but because I don’t wish to discourage the type of thought that answers questions like “What resources do I need to live?”, “How can I reduce my ecological footprint without diminishing the quality of my life?”, etc. In particular, it sheds some light on questions that have been bothering me. For example, “Why do economists employ fancier math than the physical mathematics I learned at Courant Institute, which is pretty much typified by the math in Courant and Hilbert, *Methods of Mathematical Physics, Vols. 1 and 2*?”
I think the principal reason the simulations done by economists don’t work is that they try to model the entire economy which is much too complex for them. It wasn’t necessary for me to use anything I could not have learned in high-school to do simple enough simulations that I can be certain that what I learned from them is absolutely true. That is not to say that what I did in “Energy in a Mark II Economy” is simple. I am not sure that I am looking forward to figuring it out once again if I want to use the Mark II spreadsheets to investigate a slightly more complex Mark III economy as per the post of July 26th at http://eroei.blogspot.com/ . In any case, though, if you do figure it out, you, too, can be reasonably certain that what you learned is absolutely true. It all depends on whether or not the rules of arithmetic are correct and whether or not I have made a mistake. How about some genuine peer review (as opposed to cronyism)?
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