[
I would NOT say "entirelly worthless".
But the problem described DOES make economics an ART rather than a science.
Macro vs. Micro has to be considered in the discussion. Micro does a pretty good job in places where you have a limited set of variables. I would say the world of gasoline and diesel is a good case. Sulfuric Acid is also a commodity that responds to supply and demand.
But Macro models of complex economy are very difficult to assemble. So far, it seems that nobody has created one that will give an answer that anyone trusts or have proven worthy of trust.
That's a good point, Listening and one I should have thought to point out.
Yes I do think that one can do rathr good studies in MICRO that will isolate variables to determine things like price elasticity.
But MACRO seeks to describe an entire economy with the plethoria of varibles that we know of, and the variables that we might not even recognize, too.
Basically we could probably do a better job of creating macro-economic models if:
1. All people were actaully identical Homo economicus that is the underpinning of all schools of thought in economic theory; and
2. If nothing ELSE changed in the world, no wars, no famines, no weather, no new technologies, no changes at all actually ever happened.
3. IF nobody ever REACTED to changes in the economy regardless of those changes.
Sadly for the student and Masters of economic theory, that is not the way world works.
Every day the economy is a different thing than it was yesterday.
And worse, we often don't even recognize the changes until long after they've occurred or are occurring.
To get a truly perfect model of the current state of the economy is, of course, not possible.
And predicting and dealing with things like BUBBLES?
Hell even today economists are debating how to even determine IF an asset type is bubbling.
There does not appear to be any formula that one can apply to asset pricing that describes or warns that that particualr asset type is a bubble.
Take real estate for an example.
We could probably all sense that the price of real estate was too high, right?
But we could have sensed THAT for damned near 30 years and not have predicted WHEN the market would finally correct.
You know when I started thinking that the price of RE was too high compared to incomes?
In 1978.
I was right, more or less for nearly 30 years before the collapse I'd expected to happen ANY DAY finally happened.
And FWIW, I still think the price of RE is too damned high.
My economic modeling of the RE market obviously leaves something to be desired, doesn't it?
No, economic modeling, despite all its metric analysis is always going to be an ART, rather than a science, folks.
And the ISOLATING of factors problem that economic has is the same problem every social science problem has.
We can make educated guesses of course, but as to expecting any social science to get it exact?
NEVER gonna happen.
Last edited: