charleshughsmith.blogspot.com / CHARLES HUGH SMITH / MONDAY, DECEMBER 23, 2013
“If we expect an economic theory to behave like a theory of physics, with non-trivial predictions about the future, we’re never going to get one.”
Back in August I explored Why Isn’t There a Demonstrably Correct Economic Theory?. Many commentators have noted the obvious, that economics is a pseudo-science rather than a real science: beneath the fancy quantification and math, economics is fundamentally the study of human behavior, and that complex mix of dynamics cannot be reduced to a tidy econometric model that spits out accurate predictions.
One key element of science is that the results must be reproducible, that is, the same experiment/conditions should yield the same results time and again. I suspect that economic models are not applicable across all times and situations; a model might “work” in one era and in a very specific set of circumstances, but fail in another era or in a similar set of circumstances.
Since human behavior is based in culture as well as in naturally selected (genetically driven) behavior, then cultural milieus and values obviously play critical roles in shaping economic behaviors.