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Guest Post: Why Economics Will Never Be a Legitimate Science

Tyler Durden's picture


Submitted by Charles Hugh-Smith of OfTwoMinds blog,

"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.

So presenting an economic model as "scientific" and quantifiable is in effect claiming that the bubbling stew of human culture can be reduced to quantifiable models that will yield predictions that are accurate in the real world. This is clearly false, as culture is not a static set of objects, it is a constantly shifting interplay of feedback loops.

This helps explain why human behavior is so unpredictable. Virtually no one successfully predicted World War I in 1909, and no one predicted the collapse of the U.S.S.R. in 1985.

Another reason all economic theories fail as scientifically verifiable models is that economics boils down to a very simple dynamic: those in power issue financial claims on resources as a "shortcut" way of gaining control of the resources without actually having to produce the resources or earn the wealth via labor and innovation.

I think this is the one fundamental dynamic of economics, and it does not lend itself to reductionist models.

Longtime correspondent Chuck D. recently explained why economics will never be predictive (i.e. a real science) like physics:

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. If, on the other hand, we accept economic theories which explain why we'll never get the kind of economic theory we'd like to have, the kind that would support investment decisions and government policy formulation, we can formulate THAT kind of theory. (If you want a physicist to decide whether light is a stream of particles or a pattern of waves, you're not going to get an answer.)

Von Neumann and Morgenstern came pretty close when they applied mathematical game theory to economic behavior. In game theory terms, if there existed an economic theory which provided any kind of advantage to those who understood it, either it would be kept a secret (so as not to give up the advantage), or the "game" itself would adapt to invalidate the theory.

The reason for the failure of economics to produce "the theory we'd like to have" is not merely that people are complex, just as modern physics doesn't say that "electrons are really hard to locate;" the problem is that any conceivable process for observing the electron disturbs its position and/or momentum, invalidating the observation. A theory of economics cannot be both useful and well-known. (Can we call this a statement of "meta-theory"?)

So, the competitive (game-like) nature of economics means that the usual incremental accumulation of knowledge that applies in natural science is impossible. To succeed in the market, I need to have better information and/or interpretation than at least one other trading opponent (oops, I almost said "trading partner"!) There are two ways for me to have better knowledge than you do: either I think hard about the data I gather (and keep the results to myself), or I promulgate disinformation and misinterpretation (see "talking my book").

In other words, I don't need to be smart if I can make you stupid. It's just the opposite of science. It's not even necessary for everyone to proliferate misinformation, as long as there's enough of it around to create uncertainty about the truth. (You and I, for example, can see things quite clearly, and still not turn the tide of madness around us.)

Thank you, Chuck, for an insightful, thought-provoking commentary.


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Tue, 12/24/2013 - 12:11 | 4273357 Anglo Hondo
Anglo Hondo's picture

The pseudo-science of economics has a great deal in common with the "science" of climate change.  Far too many variables to be able to adequately predict, with any precision, future outcomes of more than a day or three.

Both should be downgraded from the title of "Science" to the new title of "Wild-ass Guess", or perhaps "Bullshit".


Tue, 12/24/2013 - 12:31 | 4273400 CognacAndMencken
CognacAndMencken's picture



So, if I understand your post, you're equating climate change with a weekend weather forecast?


Tue, 12/24/2013 - 14:13 | 4273610 boogerbently
boogerbently's picture

......Why science will never be a legitimate "science".


Too much money to be made in research grants.

We've gotten to a sad point in our history where simply applying the tag "science/scientifically" equates any statement with undeniable truth.

A lot of "science" is theory, based on supposition, supported by postulation. Unproven, mutually dependent.

The "Scientific Method" has been removed from science.

If you can't observe it, measure it, and repeat it, the theory doesn't qualify. 

Wed, 12/25/2013 - 16:24 | 4275507 Oracle 911
Oracle 911's picture

Not entirely, but quite close.

The question is which one he scolds (without doubt, our climate is changing): the human caused or Sun caused climate change?


IMO the anthropogenic climate change is BS, little evidence, but there is alternative theory, which basically says the main driving force behind the Earths climate is the Sun, because our star is variable star at least in the therms of IR, UV and X-ray of spectra.

Tue, 12/24/2013 - 12:52 | 4273434 Dick Buttkiss
Dick Buttkiss's picture

"Bullshit" wins, hands down:

And to understand how infinitesimal manmade CO2 emissions are relative to planetary CO2:


"Total human CO2 emissions primarily from use of coal, oil, and natural gas and the production of cement are currently about 5.5 GT C per year (giga tons of carbon per year). A recent update says 8.6 GT.


"To put these figures in perspective, it is estimated that the atmosphere contains 780 Gt C; the surface ocean contains 1,000 Gt C; vegetation, soils, and detritus contain 2,000 Gt C; and the intermediate and deep oceans contain 38,000 Gt C, as CO2 or CO2 hydration products. Each year, the surface ocean and atmosphere exchange an estimated 90 Gt C; vegetation and the atmosphere, 100 Gt C; marine biota and the surface ocean, 50 Gt C; and the surface ocean and the intermediate and deep oceans, 40 Gt C."

Notice that the oceans exchange ten times as much carbon with the atmosphere as humans produce (90GT vs. 8.6 GT). Exchange means regulation. And humans only add 1% as much CO2 to the atmosphere per year as already in it. If such a miniscule amount were as critical as propagandists claim, all life would have been destroyed long ago. Nature hasn't been sitting on a 1% knife edge for millions of years.

   Oregon Institute of Science and Medicine

Tue, 12/24/2013 - 14:16 | 4273619 boogerbently
boogerbently's picture

The same people who buy the global warming scare, bought obamas nonsense, twice.

Tue, 12/24/2013 - 15:17 | 4273726 James-Morrison
James-Morrison's picture

"pretend (verb)" : to act as if something is true when it is not true.  

We believed as children that a fat man in a red suit could come down your chimney, not be incinerated by the furnace and bring gifts. 

We are a nation of pretenders.

If life was science it would not be any fun.  Merry Christmas. 


Tue, 12/24/2013 - 16:56 | 4273928 boogerbently
boogerbently's picture

""pretend (verb)" : to act as if something is true when it is not true.  " abortion ISN'T killing babies.

Thu, 12/26/2013 - 00:20 | 4274083 MeelionDollerBogus
MeelionDollerBogus's picture

it's not: babies are what comes OUT of the womb when the fetus is ready.
ABORTION is removing a not-yet-baby that's merely a body part, a part of a woman. No more than an extension of the uterus, not yet a living independent life.

There is only one moral & logical purpose to pretend abortion is murder: it is to dominate the life & freedom of every woman no matter what, to remove all her free will & choice over her own body, using the combined demonic powers of the fascist state & the demonic church.

Mon, 12/30/2013 - 13:53 | 4285725 boogerbently
boogerbently's picture

You forgot to put the <sarc> tag !

Thu, 12/26/2013 - 00:46 | 4274081 MeelionDollerBogus
MeelionDollerBogus's picture

there's no scare: global warming is here & hitting us all. Every year it gets hotter & every year the reported hotter temperatures, measured by thousands of people per location, are denied by the idiot deniers.

nasa-2011-was-ninth-warmest-year-in-history : 2009 ends warmest year in history
and so on and so forth. A retard smashing his brain in with a hammer every day is smarter than a global warming denier.
It's a basic sense of survival to feel heat.
It's a basic premise in civilized society you can in fact read numbers to know higher from lower.
Fucking morons.

NASA - NASA Finds 2011 Ninth-Warmest Year on Record NASA: 2012 Was 9th Warmest Year on Record. The 9 Warmest Watch 131 Years of Global Warming in 26 Seconds | Climate Central

global warming under-estimated by half


Mon, 12/30/2013 - 14:01 | 4285749 boogerbently
boogerbently's picture

I assume you're aware of the MSM only broadcasting politicians that promote their agenda.

The same thing happens with "scientific" news.

It's all part of the tree hugging, save a whale, make the world a better place no matter what the cost.

All lies are OK if it's done for a good purpose.

If you're under 60, you're ENTIRE public school education was an exercise in brainwashing.

Most deranged people don't know that they're crazy.

Tue, 12/24/2013 - 18:06 | 4274077 MeelionDollerBogus
MeelionDollerBogus's picture

exchange does NOT mean regulation. Exchange has BALANCE. WE have NO BALANCE. We produce AN EXCESS of Co2 that has nowhere else to go. The oceans always BALANCE with the atmosphere in cycles. Completely opposite.

Until we can re-absorb all the Co2 emissions to MAKE NEW FUEL, equal to what we've burned, we are not in balance. The technology is NEARLY here, the photosynthesis hijacking will play a powerful role in it - but we need to keep trying before we kill ourselves.

The rate of Co2 dumping into the oceans is killing them. KILLING OUR FOOD AND OXYGEN SOURCE.

It's very likely that within 100 years we'll all suffocate & starve as a result.

Extinction-level event.

Wed, 12/25/2013 - 17:35 | 4275310 Dick Buttkiss
Dick Buttkiss's picture

As this graph makes clear — — both average global temperatures and average atmospheric CO2 are at a lows not equalled since the Permian Era some 300 million years ago, while CO2 levels during the Cambrian "Explosion" over 500 million years ago — — were orders of magnitude higher than today's.

Which is to say that the planet needs more CO2 production, not less, and that mounting a government-run war on human production of "the most important nutrient for all life on earth" is beyond insane.


Thu, 12/26/2013 - 00:58 | 4276102 MeelionDollerBogus
MeelionDollerBogus's picture

That's because your graph is incorrect not built from actual data. Actual data shows the opposite.

CARBON, not co2, is the most important.
IF we were inundated with all CO2 as if it were magically good food no matter what for all life,
all mammal life would die. Gone. For good. Never to return.

Thu, 12/26/2013 - 09:06 | 4276469 Dick Buttkiss
Dick Buttkiss's picture

"Actual data shows the opposite."

What data?

Thu, 12/26/2013 - 14:12 | 4277110 MeelionDollerBogus
MeelionDollerBogus's picture

Satellite data & ground-measured data showing a rise of 0.12 degree C per year.

Tue, 12/24/2013 - 13:30 | 4273503 CognacAndMencken
CognacAndMencken's picture



The problem with economics is that the Federal Reserve has actually done a magnificent job in mitigating black swan events, which limits the data for calculating risk models at the extreme end.  This was precisely the problem in 2008/9 when the banks' VaR models and David Li's Gaussian copula function failed; there had not been sufficient data when the extreme improbable occurred.  When that "once in a generation" financial crisis occurred, there was a dearth of data for the models to use to make their predictions. In other words, 99% of the time, risk was measurable and the models worked; 1% of the time, the entire financial system implodes.  

Before the Federal Reserve existed, a financial crisis was commonplace.... bank runs, bank panics, total wipe-outs, regional currency collapses, recessions, depressions, etc.... all of this happened with regularity; it was raining black swans, and there would have been ample data to measure risk from end to end.  However, after the creation of the Fed (btw, Happy 100th birthday!), data at the tail-end became rarer and rarer, which made David Li Wall Street's biggest hero.... until 2007.  Basically, the Fed had done its job too well for risk models to work with 100% accuracy.

Tue, 12/24/2013 - 18:03 | 4274072 MeelionDollerBogus
MeelionDollerBogus's picture

nutter insanity.
Financial "crisis" of the past before the Federal Reserve doesn't even come close to what we call a RECESSION in these times.
What we call a crisis now DWARFS all previous crisis by a long shot. The slam down from 2000 and from 2008 is far, far bigger than what happened in 1987 and if there was another dust-bowl like in the 1930's would make the 1930's look like the 1960's.

The Federal Reserve CAUSES the "black swan" events.

Tue, 12/24/2013 - 19:26 | 4274238 CognacAndMencken
CognacAndMencken's picture

Clearly you have no understanding of history if you think this past recession was anything close to the bank panics, bank runs, regional currency failures and wipe-outs of the Gilded Age.

My apologies for being blunt, but it's ignorance like this that gives the libertarian community its reputation for being lunatics.

Thu, 12/26/2013 - 00:49 | 4276157 MeelionDollerBogus
MeelionDollerBogus's picture

To be very blunt:
#1 I'm not a libertarian, I'm a computer scientist
#2 I do know how to read & to see the dynamic change & shift in society and money
#3 the crisis we have now is being under-reported using fraud and is not over. By the time we got this far the food lines are longer than in the Great Depression, far more work hours have been lost as wages stored in banks, far more assets have been confiscated by banks and corporations like Monsanto, and this easily dwarfs the previous pre-central-bank crises by a dozen-fold.

Tue, 12/24/2013 - 23:02 | 4274491 LibertarianMenace
LibertarianMenace's picture

That's a common, but misinformed opinion. It turns out, things weren't so bad before the Fed. Imagine, failures were actually permitted. Even here, however, these were a result of mandatory state government bond holdings in bank's portfolios doing what guv bonds do best: devalue.

In any event, failures in Indiana or Wisconsin are certainly preferable to the insufficient-data inspired, forever incompletely modeled "extreme improbables"!?, that have created GLOBAL havoc several times in the Fed's dubious first century. It seems black swans are still raining alright, only now they're grossly overweight.

Sheesh, the fatal conceit writ large in gaudy holiday lights.

Thu, 12/26/2013 - 07:04 | 4276409 SunRise
SunRise's picture

CandM:  Please see James-Morrison's Post immediately above yours "Pretend", then provide the data.  I've seen the data that you have omitted and have a song for you:

Tue, 12/24/2013 - 13:36 | 4273513 EscapingProgress
EscapingProgress's picture

Economics is much more akin to alchemy than to a true science with testable theories such as physics.

The grand pursuit of the alchemist was to discover the Philosopher's Stone which it was claimed could transform lead into gold.

The economist has discovered the Philosopher's Stone, but it does not transform lead into gold. It transforms electronic digits into gold. The Philosopher's Stone is legal tender fiat.

Tue, 12/24/2013 - 14:38 | 4273665 EscapingProgress
EscapingProgress's picture

"Pseudoscience is a claim, belief, or practice which is presented as scientific, but does not adhere to a valid scientific method, lacks supporting evidence or plausibility, cannot be reliably tested, or otherwise lacks scientific status. Pseudoscience is often characterized by the use of vague, contradictory, exaggerated or unprovable claims, an over-reliance on confirmation rather than rigorous attempts at refutation, a lack of openness to evaluation by other experts, and a general absence of systematic processes to rationally develop theories."

That sums up economics. I actually have a BS in Economic Sciences. It's embarrassing to me and insulting to those who acquired a real science degree.


Tue, 12/24/2013 - 18:01 | 4274062 MeelionDollerBogus
MeelionDollerBogus's picture

what a load of horseshit.
Theory #1 : greenhouse gases reflect infrared
proof: shine infrared INTO a transparent box of co2, methane, etc., and measure the reflection
proof: watch the emission OF those gases in industrialized areas and watch the infrared reflection & diffusion from satellites
theory #2: co2 is acidifying the oceans with carbonic acid
proof: the corals where all the little fish live are bleaching
proof: add carbonic acid YOURSELF to the same corals and watch the same effect happen
You'd be an idiot to deny climate change & the resulting damage as a direct result of global warming
The future of climate change PRECISELY as we have it now has been predicted for the last 30 years and has been correct, completely.

Tue, 12/24/2013 - 18:46 | 4274168 bh2
bh2's picture

...up until 17 years ago. Precisely.

Thu, 12/26/2013 - 00:48 | 4276160 MeelionDollerBogus
MeelionDollerBogus's picture

and happening every year in the last 17 as well. Every single one.

proof right there. No such thing as a "pause" in global warming. It's here, it's now, it's fast, it's been getting worse every year of my entire life and it won't be long before winter is just a myth in places we used to expect snowfall.

Wed, 12/25/2013 - 18:20 | 4275650 Dick Buttkiss
Dick Buttkiss's picture

See my reply to MeelionDollerBogus above.

Tue, 12/24/2013 - 18:39 | 4274142 bh2
bh2's picture

A theory which cannot be falsified also cannot be proven. Which is to say it is indistinguishable from any other superstition, no matter how widely believed or by whom.

Economics and climate change are two modern examples of such superstitions, conveniently malleable for enterprising academics (and newspapers) to shape to their own private benefit at public expense.

Tue, 12/24/2013 - 12:14 | 4273360 bugs_
bugs_'s picture

On the other hand they will give you a PhD and tenure as long as you support the proper theories that is.

Tue, 12/24/2013 - 12:21 | 4273364 Cognitive Dissonance
Cognitive Dissonance's picture

Ultimately 'Economics' as practiced today is the art of reaching a conclusion, then fitting the 'science' to sustain the conclusion already decided upon.

<You can lead a horse to water....>

Tue, 12/24/2013 - 12:25 | 4273382 Winston Churchill
Winston Churchill's picture

More like getting the camel to drink.

Nothing two bricks can't fix.Mind your fingers ,you may hurt yourself.

Tue, 12/24/2013 - 12:38 | 4273409 Cognitive Dissonance
Cognitive Dissonance's picture

I can vividly remember studying for my CFP exam and delving deeply into "Efficient Market Theory". After two days of intense study I took a hour long breather and suddenly thought to myself......."What a load of crap. This is NOT how real people act."

It was an epiphany for me, one in which I first began to embody the belief that I was actually practicing voodoo not unlike that performed in Haiti, only much more 'believable'. I've never been the same since, with this deeper understanding leading directly to where I am today.....essentially out of the bidness.

Tue, 12/24/2013 - 13:32 | 4273510 Skateboarder
Skateboarder's picture

One of my cuz who just graduated college wants to / works in the whole 'risk' area. He just started as a typical gruntworker. I saw a couple of his books, papers, test questions etc. for learning/certification in that area and could not believe how 'set in stone' everything was. Deterministic models founded entirely on the primary assumption of a stable non-exponentially-inflationary currency cannot assess how risky one's actions are any longer when the currency enters the exponential-inflation stage.

But you gotta pretend that the shit you learned still works, or you outta work nigga.

Tue, 12/24/2013 - 14:00 | 4273583 Cognitive Dissonance
Cognitive Dissonance's picture

One must never ever entertain any doubt what-so-ever or the voodoo don't work so good. :)

Tue, 12/24/2013 - 14:05 | 4273597 TheFourthStooge-ing
TheFourthStooge-ing's picture

You can't have "full faith and credit" without full faith.

Thou shalt suspend disbelief or suffer the consequences.

Tue, 12/24/2013 - 18:41 | 4274159 bh2
bh2's picture

Not only in Haiti, but in Sweden! Some Nobel Prizes are contrary indicators.

Tue, 12/24/2013 - 12:15 | 4273367 Ranger_Will
Ranger_Will's picture

Meh, who cares.

OT, but I just want to say Merry Christmas Bitchez to all my fellow ZHers out there.  And I want to wish you all a better year in 2014 (however unlikely).

Tue, 12/24/2013 - 12:44 | 4273415 Ranger_Will
Ranger_Will's picture

My gift to you this holiday season, for all those looking for the good in humanity, would be this EPIC French film (yes you heard me right).

Joyeux Noel is the story of the 1914 Christmas Armistace, an unofficial 2 days truce between the Central and Allied power along the Western Front, during the bloodiest conflict humanity had ever seen up to that point.

Enjoy, but leave your balls at the door men...there will be tears of joy and sorrow.

English Trailer:

Tue, 12/24/2013 - 13:52 | 4273565 Colonel Klink
Colonel Klink's picture

Epic French war film?  I don't get it, I give up!

Tue, 12/24/2013 - 15:45 | 4273782 Ranger_Will
Ranger_Will's picture

Well if it makes any more sense it's about the French giving up the fight for a couple of days.

Tue, 12/24/2013 - 16:11 | 4273851 logicalman
logicalman's picture

The French know way more about war than Americans - They've had more wars fought IN their country.

Americans THINK they won WW2 - they only played a walk on role - USSR actually won WW2 - did most of the fighting and lost the most soldiers and civilians.

I guess you know little about history, but then that's not unusual for Americans.


Tue, 12/24/2013 - 16:41 | 4273891 Ranger_Will
Ranger_Will's picture

You would be very wrong in that assumption. I full well know that the French were admirable fighters. Napolean was a genius and without the assistance of the Comte Dr Rouchambeau, Marque de la Fayette, Admiral de Grasse along with their formidable army and navy we would never have gained independence after the Yorktown campaign. Believe me I know that the French can fight.

And I certainly don't think the US won World War II in Europe although I would say it played its role very well especially with the most advanced artillery fielded in that conflict. But we were only members in a world wide coalition each making contributions.

So I'm just poking a little fun and seriously tell me the last conflict that they have contributed any significance to other than calling for aid. I.e. Vietnam, and now their getting us involved in their latest clusterfuxk in Africa. 

Tue, 12/24/2013 - 18:13 | 4274093 logicalman
logicalman's picture

I just find bigotted thoughtlessness hard to ignore.

There are approximately 7 Billion human beings on this planet, the vast majority of whom are decent people who just want to enjoy life, earn a decent living, and bring up their kids to do likewise.

Unfortunately we've let the minority of evil fucks take over and run the old 'divide and conquer' trick over and over, to their own advantage.

I fight TPTB in many ways and have done since I was about 14.

Don't fall for their tricks.

Tue, 12/24/2013 - 21:28 | 4274437 Ranger_Will
Ranger_Will's picture

Peace on Earth and Goodwill to All Men Indeed! I'll drink egg nog to that. 

Wed, 12/25/2013 - 16:53 | 4275544 aminorex
aminorex's picture

Given the current U.S. government, I think the fascists actually won the war in the long run.

Tue, 12/24/2013 - 12:16 | 4273369 cnmcdee
cnmcdee's picture

America has a Debt linked GDP.  Unfortunately the size of the debt in relation to the 'real economy' dwarfs it so immensely that the Federal Reserve is resulting to all kinds of monetary surgery just to keep the American economy on life support.  An artificial economy - we payed out XX Billion in Welfare, XX% of it went to Walmart and overseas jobs (money flight) and XX minimum wage jobs were created..

R U Fkin serious?  This is the economic model..?!

It does not work.

China has a Productivity linked GDP. They forcefully locked their dollar down against the US and have successfully won an export war against US for many years.  Meanwhile the corporations (and the glutonous public) gleefully went along with it so that the corporations could get cheap inputs, and the populance could buy those same inputs until it flooded their houses up to waist height.


The only solution is to cancel the national debt - immediately and all of it.  Cancel the consumer loans / mortgages as well - all of it. 

1. That is a fair payback to China for undercutting the US economy for the last two decades, building their super-economy off of their 1 Billion slaves.

2. It resets the system completely.


Tue, 12/24/2013 - 14:01 | 4273588 TheFourthStooge-ing
TheFourthStooge-ing's picture

cnmcdee suggested:

That is a fair payback to China for undercutting the US economy for the last two decades, building their super-economy off of their 1 Billion slaves.

Correct me if I'm wrong (wouldn't be the first time), but wasn't the US economy undercut by 'american' corporations which offshored their manufacturing to boost "shareholder value"?

Take GE, for example. They used to make things in the US. Nowadays their biggest (and most lucrative) American-made product is the US tax code, built by their Legislative Manufacturing Division (legal department), which results in GE paying negative hundreds of millions of dollars in US taxes annually.

Tue, 12/24/2013 - 17:35 | 4274001 MeelionDollerBogus
MeelionDollerBogus's picture

+1 ! finally 'getting' to the heart of the mattering.

Tue, 12/24/2013 - 12:22 | 4273376 sbenard
sbenard's picture

Crazy Krugman will be LIVID -- apoplectic -- at this article! I remember a post he made to this very forum in which he referred to the "science" of economics!

Tue, 12/24/2013 - 13:28 | 4273504 nickels
nickels's picture

"Science"  is using math to land a module on a particular spot on the moon. "Economics" is using math to obfuscate embezzelment schemes designed to enrich political cronies.

Tue, 12/24/2013 - 12:24 | 4273379 GeorgeHayduke
GeorgeHayduke's picture

Economics as a field of study today is used by the owners to keep the wage slaves in line. Perpetual growth capitalism is taught as gospel while anything that might contradict it is taught as evil.

In other words, economics as a field of study in the modern Western world must abide by the current political trend. So much for any "scientific" basis for any such field of study.

Tue, 12/24/2013 - 12:27 | 4273388 WhyDoesItHurtWh...
WhyDoesItHurtWhen iPee's picture

Thats why eCONomics and our eDUHcational system go so well together.

Tue, 12/24/2013 - 12:26 | 4273383 FieldingMellish
FieldingMellish's picture

The dismal science which is not science in any way, form or shape.

Tue, 12/24/2013 - 12:31 | 4273395 Flakmeister
Flakmeister's picture

Economics is the contiuation of Ideology by other means....

TM Flakmeister 2008

Tue, 12/24/2013 - 12:29 | 4273396 Atomizer
Atomizer's picture



A mathematician, an accountant and an economist apply for the same job.

The interviewer calls in the mathematician and asks "What do two plus two equal?" The mathematician replies "Four." The interviewer asks "Four, exactly?" The mathematician looks at the interviewer incredulously and says "Yes, four, exactly."

Then the interviewer calls in the accountant and asks the same question "What do two plus two equal?" The accountant says "On average, four - give or take ten percent, but on average, four."

Then the interviewer calls in the economist and poses the same question "What do two plus two equal?" The economist gets up, locks the door, closes the shade, sits down next to the interviewer and says, "What do you want it to equal"?


Tue, 12/24/2013 - 12:30 | 4273398 cnmcdee
cnmcdee's picture

Look at it!!!  They cannot even get through a Christmas right now without discounting Chinese slave made merchandise 70%.  People are not buying FUCK ALL!

The consumer is totally exhausted.  Wal-mart shelves are FULL to the brim of Christmas crap, that has to be cleared out - because the spring crap was already loaded onto the Chinese Ship haulers, and it's already on the way - fed into the input chain for another cycle of consumer binging.

Let it back up, let it back up all the fucking way back to China.  Let those ships turn around and take their SHIT back to where they made it.  Let THEM BUY IT ALL. Let them go infinitely in debt.

People are getting TIRED of having product shoved at them.  Of being mercilessly pelted with ads, of being mercilessly pelted with flyers. They are being tired of being treated like commodity cattle, stroked, prodded, inoculated, told what to eat, what to drink, how to think.

We've never had a more manipulated 'free' society in history EVER! 

But after decades of this merchandise flood abuse maybe people are going to start to wake up.  Their going to simply not buy the products, they will find meaning in the priceless things, like a good walk, a loving relationship, a good meal.





Tue, 12/24/2013 - 12:47 | 4273423 Ranger_Will
Ranger_Will's picture

What I've found, in those few moment I actually leave the house to decend into the maddness of the shopping areas, is that people are still "shopping" but that no one is actually buying anything.  Absolutely bizarre to see all those people out and about, hustling and bustling yet making no purchases. The only thing I can think of is that they are all suffering from "phantom economy" syndrome, like war vets that still feel a limb lost long ago on the battlefield.  Bizzaroland indeed.

Tue, 12/24/2013 - 13:23 | 4273440 El Vaquero
El Vaquero's picture

All that I have observed around the shopping areas is full fucking retarded clusterfuck traffic.  I had to go near a mall to get a car part for somebody on Saturday, and Holy Fuck!  It was faster for me to drive through parking lots than it was to drive on the road, and people were driving extra special stupid on top of it.


I just want to make some posole for Christmas and enjoy the company of relatives.  Watching what people do for this bullshit turns me into the fucking grinch. 

Tue, 12/24/2013 - 13:10 | 4273465 moneybots
moneybots's picture

"People are getting TIRED of having product shoved at them."


Not if they have the name Air Jordan attached.

Tue, 12/24/2013 - 13:55 | 4273570 Colonel Klink
Colonel Klink's picture

It says people, not animals.

Tue, 12/24/2013 - 13:51 | 4273545 Nostradumbass
Nostradumbass's picture

My wife and I do not really "do" Christmas anymore.

Our daughter will be receiving a very nice used car from us as we prepare to go traveling in a travel trailer rig... indefinately (no home base or house). What few things we did purchase were some solar lanterns with LED lamps for camping to give away to friends/family; some liquor and a Trader Joe's gift card.

It would be awesome to see those Chinese ships turning back due to low demand!


People would be better served by focusing on getting out of debt, providing healthy food and goods for their families and getting back to living closer with the land in my opinion.

Cheers and Merry Christmas all!

Tue, 12/24/2013 - 12:33 | 4273399 sbenard
sbenard's picture

"that complex mix of dynamics cannot be reduced to a tidy econometric model"

My thoughts precisely! There are simply too many variables to design an accurate model. And it often also dismisses that other infinitely-complex variable -- HUMANS -- as something entirely and consistently predictable!

Tue, 12/24/2013 - 14:13 | 4273609 AgShaman
AgShaman's picture

Here's the Princeton model. Just because it's not a science any of the serfs subscribe to...does not mean it has no base in science.

It makes perfect sense to those that wish to manipulate and manage their human capital.

Tue, 12/24/2013 - 14:51 | 4273690 boogerbently
boogerbently's picture

The "serfs", that would be anyone who does NOT bow down at the altar of science??

The, "only scientists are smart enough to understand or comment on science", stance?? 

Tue, 12/24/2013 - 15:13 | 4273730 AgShaman
AgShaman's picture


I'm guessing you didn't read the manual, or you don't understand it.

It's applied science they are using....whether you believe in it, are smart enough to grasp the theories, or are willing to admit these Ivy League state sponsored Economists don't care what anybody else's opinion has to say about "their science"

Tue, 12/24/2013 - 12:35 | 4273403 The Merovingian
The Merovingian's picture

And just think, every year the best economist gets a Nobel Prize .... I see no shortage of irony that it is awarded by a group founded by a man made famous (and rich) for figuring out how to blow shit up ...

Tue, 12/24/2013 - 17:00 | 4273937 boogerbently
boogerbently's picture


The best "blower up of shit" rules the world, right?

Tue, 12/24/2013 - 12:37 | 4273413 Walt D.
Walt D.'s picture

The real reason that mainstream economics is not a legitimate science is that it inextricably intertwined with politics, and therefore propaganda and lies.

Austrian Economics seems to do a much better job. They correctly forecast the dot com bubble and the housing bubble. The also predicted that quantitative easing would not work. They also view the current stock market bubble as unsustainable. They have also been right in predicting that none of Paul Krugman's predictions would come true.


Tue, 12/24/2013 - 12:44 | 4273418 pndr4495
pndr4495's picture

Economics will never be a legitimate science because one cannot observe , out in the open , the propensity of human behavior to know what one OUGHT to do , but not do it.  C. S. Lewis said something like that sometime during WW II.  He also said this , " Now another point.  There is one bit of advice given to us by the ancient heathen Greeks , and by the Jews in the Old Testament , and by the great Christian teachers of the Middle Ages , which the modern economic system ( remember this was said in the 1940s ) has completely DISOBEYED ( my emphasis ).  All these people told us not to lend money at interest; and lending money at interest - what we call investment - is the basis of our whole system."  There is a straw that will break this camel's back , but nobody can solve for that variable.

Tue, 12/24/2013 - 12:46 | 4273425 wisefool
wisefool's picture

Economics can be a legitimate science. It is just that Keynsianism requires an obtrusive mechanism with guns and things to enforce the tax code that Keynes himself was unnecessary. If not, why you do have the printing press?

100 years of econ based on war provisioning, to protect 300 years of colonialism. Everybody who knows objective methods is dust now.

Tue, 12/24/2013 - 12:49 | 4273427 Reaper
Reaper's picture

Economics could be a science. Working mathematical models could be applied. Man and his economic acts are confined in the natural world. The idea of limits and random unexpected events and behaviors is not present in most economic theories. That some humans learn from experience and change behavior is ignored in most all economic models. Most economists are shamans, selected because they legitimatize the ruler's choices.

Tue, 12/24/2013 - 13:07 | 4273454 Winston Smith 2009
Winston Smith 2009's picture

"Most economists are shamans, selected because they legitimatize the ruler's choices."

And that's exactly why Keynesianism and neo-classical economics is the constant dogma - it tells both pols and bankers what they want to hear - the prima facie ridiculous idea that you can borrow your way to prosperity.

To put economic predictions more into the scientific realm, at the very least they need to use math appropriate for complex, chaotic systems:

Minsky Computer Code Intro


Tue, 12/24/2013 - 17:09 | 4273948 MeelionDollerBogus
MeelionDollerBogus's picture

"That some humans learn from experience and change behavior is ignored in most all economic models"

That's because models need math & data and there is no definitive data, certainly no math, for learning reactive to new behaviour. Even genetic programming merely allows machines to adapt on their own as needed, not to describe a previous sentient creature's consciousness in mathematical terms.

Tue, 12/24/2013 - 13:00 | 4273448 MedicalQuack
MedicalQuack's picture

Agree, do we really need economists?  I think the #1 Quant in the world, Paul Wilmott in the documentary about Quants sums it up pretty well, "economists don't have laws"..and that's true as in today's world they can hours, weeks, etc. on some manifesto they conclude is based on the past history, but as we all know all its takes one one big ripping algorithm to come through and shoot it to hell, on the markets or otherwise. Great comment here from Emanu Derman who used to do write some black box code for Goldman and now teaches at Columbia...he was excited at first about quantitated math and the financial world and now he says it doesn't work that way as people don't work that way.  Anyway, most of the sophisticated tools that enomists use were probably created by a quant anyway. 

Quantitated Justification For Believing Things That Are Not True And Using Mathematical Processes To Fool Ourselves-The Journalistic Bot Functionality Debuts As Media Can’t Resist the Formulas…

Here's some more proof with Larry Summers in my opinion too with one of his latest silly statements about how Healthcare.Gov is just a big source of entertainment for all of us.  When I hear statements like this it even becomes clearer on how he and Greenspan were such an easy dupe target for Bob Rubin, there's the math guy and the politician.

Watch the entire Quant documentary...they say a lot there and I keep pitching it as one of the best sources of financial education out there for the layman as they make it simple to understand where so much else is way over the head of most with the financial world. It's one of the 4 videos in my footer that are there all the time for folks to take a look at and break through the crap we out there if they want to really get a look at how all this works, it's math.

Tue, 12/24/2013 - 13:04 | 4273450 moneybots
moneybots's picture

"Why Economics Will Never Be a Legitimate Science"


The law of cycles.

That which works in the up phase, doesn't work in the down phase.  if there was an economic theory which worked, it would have been in effect for thousands of years, already.

Tue, 12/24/2013 - 17:02 | 4273938 MeelionDollerBogus
MeelionDollerBogus's picture

that which has an up-phase and down-phase is cyclic & long-term.
"the" economy is actually a huge number of disparate economies which aren't all at the same time since start or same rate of evolution.
That evolution could see many down swings not like past ones, or an early death. Many such economies are not far past their initial start and initial conditions can be very unique, as can the endings be.

Tue, 12/24/2013 - 13:21 | 4273479 Sean7k
Sean7k's picture

I get so tired reading this kind of ignorance that attempts to create some type of "standard" for "science". I imagine we should throw out psychology and medicine as neither of these are predictive. Especially Pharmacology. Agricultural sciences should be kaput as well, gmo's and soil management make ths clear. All chemistry must be tossed, otherwise they would have predicted all the widespread pollution and contamination from various processes? Nuclear sciences have been in the news as of late, guess we should toss those as well. Should we be worried when Stephen Hawking admits he was WRONG about black holes? 

We are allowed to study part of the world around us, the part not clasified or censored or forbidden. We study what has been approved, because new ideas are verboten (just ask Tesla). 

What is worse here, is because we don't understand something well enough to have predictive, precise mathmatical models, we should just throw out what can be predictive? Because much ecnoomic theory does predict well. Further, not acknowledging the political influences is imbecilic. Just what statistics do you trust? Which reminds me, we should throw out statistics as well.

What the author should be asking is why do we put up with Keynsian monetarism, when all it produces is debt, tyranny and consumerism? Now, I admit, I have no mathmatical model to prove that, but I trust my eyes and mind in this matter.

Merry Xmas all and Tylers, for Xmas I would like to see this kind of crap flushed.

Tue, 12/24/2013 - 15:28 | 4273727 Variance Doc
Variance Doc's picture

Completely agree!  More BS from non-scientists about what consitutes science.  These idots completely miss the point.

Every mathematical or statistical model has some regularity conditons (technical conditions for the exisistance of said model).  In Random Fields, which subsume many popular econometric and statistical models, the usual object of interest is MEAN local behavior.  It really is pointless to worry about how individuals will behave, we look at average behavior - that's where the action is.  We can predict how the AVERAGE person will behave very well.  If we were worried about extreme values, i.e. market crashes, than we would have to switch to a different model.

Since we currently have to switch models for differenct kinds of predictions, does that mean something's wrong.  NO.  Understanding the world around us is a ongoing PROCESS that takes time (i.e. generations of human thought.)  We real scientists are working on these problems, instead of sitting around bitching about how this cannot be done because of illogical and misunderstood reasons X, Y, Z.

It remindes me of the slack jawed idiots standing around the Wright bros workshop:  Ye'all wanna do wut?  Fly lik eh bird? An't no way man can fly...Hey ma, O and W wanna fly like birds, hahaha....

Well Smith, you see those very big birds up in the sky.  Those are called airplaines, which have humans in them.  Yes, man can fly due to local mean analysis and smart people solving the various problems of aerodynamics; this is a set of humans that excludes you and your flunkies.

STFU Smith. 

Tue, 12/24/2013 - 16:59 | 4273929 MeelionDollerBogus
MeelionDollerBogus's picture

I think we'd be better off just having AI agents play an economics trade-war & normal business 'game' against each other. Forever. And log all the results and see what works and what doesn't.
This time "is different" : we now have the storage & computing power to run such a simulation.
Doesn't guarantee provable results but we never did it before so I think we should at least give it a go once.

"Yes, man can fly due to local mean analysis and smart people solving the various problems of aerodynamics"

and now thanks to understanding chaos as it applies to fluid-shearing and turbulence we can also make some much better adjustments that in the past probably would have killed the Wright brothers any number of times. I'm glad it didn't but if you really know the physics of fluid dynamics you can count them very lucky.

Check this out:!topic/rec.aviation.soaring/Xqaz353JxXQ


Tue, 12/24/2013 - 18:20 | 4274111 logicalman
logicalman's picture

If you haven't run across it (even if you have!), you may find chaos theory interesting.

Tue, 12/24/2013 - 22:49 | 4274527 LibertarianMenace
LibertarianMenace's picture

Yeah, population statistics seem to make it all so knowable. Fortunately at least, these are often useful in science. Unfortunately, there really are no random variables, just high order non-linearities that permanently isolate us from truly understanding the system under consideration.

Here's the rub: if a political economist is going to involve me, and by extension my property in policies he recommends, then I'm going to demand a stronger demonstration of method than mere population means and variances, because you see, I am an individual, and one that's taxed to pay the bills that follow from his recommendations.

BTW, model away, just know your limitations.

Tue, 12/24/2013 - 13:33 | 4273506 SKY85hawk
SKY85hawk's picture

Let's not forget Einstein's definition of Insanity.

-           The effectiveness of monetary policy was last discredited in the 1970s. The persistent attempts to revive growth with easy money led to stagflation.  The real world has turned to be opposite to the favored positions of the economics profession: the financial market is not only inefficient but systematically bubble-prone. 

Trying to bring back yesterday through monetary growth will eventually bring inflation, not growth.  This is what the Gov’t wants in order to ‘pay off the Debt’. 


Who remembers the 70's? 

It was a time of Stagflation.

The 'Bob Hope" generation entered their 'spend less-save more' life stage.  OUR Parents!

It should be clear that the baby-boom is in the same life-stage.

Not one Politician will admit they are helpless to restart Economic Growth! 

They will wait this thing out, just like before.

Even if it takes 11 to 15 years!


Tue, 12/24/2013 - 13:38 | 4273521 wisefool
wisefool's picture

Super simplistic answer, from an unelightened american. Base your tax code on consumption. That way we wont need banks to accomodate the arc of life.

Tue, 12/24/2013 - 14:12 | 4273611 FeralSerf
FeralSerf's picture

If it's true that the .01% own and control the means of production (and I believe it is), then it follows that their profits are a tax on consumption. This business model has been in existence for some time now in all economic systems, feudal, capitalistic and communist alike. Only the .01% has changed somewhat in composition. Banks are just another means that the .01% exert their control and ownership. The same is true of politics.

Tue, 12/24/2013 - 13:55 | 4273572 KingTut
KingTut's picture

Physics works exceedingly well in certain areas, but as soon as the system becomes complex it looses its predictive powers.  You don't have to get into obscure Quantum Mechanical paradoxes, a simple two piece pendulum exhibits complex behavior that defies prediction beyond a few oscillations. (It aplifies tiny variations in friction into macroscopic behavior).  Or trying to predict when a super saturated solution will precipitate is similar to predicting when financial players will cause eachother to panic.

Although the meta-theory behaviors described above are intersting, and are frighteningly close to what we have today, I can't help but think we could have a much better theory of economics than we do.  We should be able to predict where an economy will go, even if we can't predict when it will go there (like precipitation).

Was the collapse of the USSR really not anticipated? The timing of it; that is, the moment the realization would sweep through the Russian collective consciousness, was impossible to predict. But the fact that the change would occur someday was fairly obvious.  And as mind-bogglingly stupid as WW-I was, it was fueled by an inequality in colonial power that was not going to be resolved in any rational way.  That Eurpoeans hold eachother in total contempt is nothing new. 

Clearly today's theory of Macro Economics has been distorted exactly like Von Neumann and Morgenstern suggested, but I really like what Steve Keen has done byt coming at the math from the point of view of an engineer: using a system of linear differential equations to model the endogenous money system, which is a well understood framework for solve complex electrical and mechanical engineering problems.  Because he's an engineer and Austrailian he's an outsider, not subject to the influence of the Fed.

Tue, 12/24/2013 - 15:55 | 4273780 MeelionDollerBogus
MeelionDollerBogus's picture

not if you have a big enough simulator.
Make the environment detailed enough, in rules & size of units interacting & tracked, and you're good to go.
That's how even physics & circuit simulators (SPICE) are being connected to genetic programs to evolve machinery virtually, then make prototypes to test for final bugs, then mass manufacture. Right from simulation to patented invention to out the door.

"a simple two piece pendulum exhibits complex behavior that defies prediction beyond a few oscillations"

Not anymore: genetic programming to the rescue. I've seen the video myself, every step of the way, every combination of positions, momentum, etc. I'll try to find it on youtube. Fully explored & understood, put to an equation, understood by evolving program, not human intellect.

There's a chance I actually saw this on Through the Wormhole and can't recall for sure. If that's the case I'll link the .torrent so you can see it.

Yes, of course, chaos is always involved. Getting off topic-ish to the pendulum only rather than abstracting back to the chaos of the markets, "intelligent" human agents & free will...

(wikipedia, ,

The double pendulum undergoes chaotic motion, and shows a sensitive dependence on initial conditions. The image to the right shows the amount of elapsed time before the pendulum "flips over," as a function of initial conditions. Here, the initial value of ?1 ranges along the x-direction, from ?3 to 3. The initial value ?2 ranges along the y-direction, from ?3 to 3. The colour of each pixel indicates whether either pendulum flips within (green), within (red), (purple) or (blue). Initial conditions that don't lead to a flip within are plotted white.

The boundary of the central white region is defined in part by energy conservation with the following curve:

Within the region defined by this curve, that is if

then it is energetically impossible for either pendulum to flip. Outside this region, the pendulum can flip, but it is a complex question to determine when it will flip. Similar behavior is observed for a double pendulum composed of two point masses rather than two rods with distributed mass.[2]

The lack of a natural excitation frequency has led to the use of double pendulum systems in seismic resistance designs in buildings, where the building itself is the primary inverted pendulum, and a secondary mass is connected to complete the double pendulum.

... So ... I'd say what we really need to know is the amount of cheating, how people do or don't get away with it, why, the amount of necessities a person or agency / corporation / nation will seek and at what cost, and the amount of necessities the same parties may give up by accident, as these are all critical economic factors. The data is out there & once we have it, we can get the answers.

Tue, 12/24/2013 - 18:35 | 4274136 logicalman
logicalman's picture

I think you need to look at chaos theory.

(referred to in another post)

By the way, I've seen all kinds of videos about 'perpetual motion' machines - don't believe any of 'em.


Thu, 12/26/2013 - 00:59 | 4276184 MeelionDollerBogus
MeelionDollerBogus's picture

Jesus-fuck you are an idiot.
IS chaos - it's a map of initial conditions & outcomes.
I posted it prior, you replied to that post. You obviously didn't read a damn thing.
This is an experiment that's 100% repeatable by anyone.
It's not a perpetual motion machine. It's an evolving program which decodes the equations of motion you say can't be known FROM the data which IS KNOWN and can be produced ON THE SPOT any time by any person ANYWHERE. - machines that invent faster & better than humans
it's what's for dinner.

Tue, 12/24/2013 - 13:57 | 4273574 daemon
daemon's picture

"... the usual incremental accumulation of knowledge that applies in natural science ... "

Even in natural science, the idea of incremental accumulation of knowledge is questioned by some people.

T. Kuhn :  The structure of scientific revolutions

Tue, 12/24/2013 - 21:44 | 4274446 Radical Marijuana
Radical Marijuana's picture

Yeah, daemon, regarding Kuhn's ideas, see my comments below about how vast the revolutions would have to be to enable economics to become more scientific!

Tue, 12/24/2013 - 13:59 | 4273582 AgShaman
AgShaman's picture

I thought Economics had been modeled into electrical current theory via....

Silent Weapons for Quiet Wars

Tue, 12/24/2013 - 21:41 | 4274459 Radical Marijuana
Radical Marijuana's picture

Indeed, AgShaman, I especially point this passage out, in an old link to that thing you cited, which may seem superficially dubious, at first glance, but more compelling on a deeper level:

Silent Weapons for Quiet Wars

"Energy is recognized as the key to all activity on earth. Natural science is the study of the sources and control of natural energy, and social science, theoretically expressed as economics, is the study of the sources and control of social energy. Both are bookkeeping systems: mathematics. Therefore, mathematics is the primary energy science. And the bookkeeper can be king if the public can be kept ignorant of the methodology of the bookkeeping. ... In this structure, credit, presented as a pure element called "currency," has the appearance of capital, but is in effect negative capital. Hence, it has the appearance of service, but is in fact, indebtedness or debt. ... if balanced in no other way, will be balanced by the negation of population (war, genocide)... They must eventually resort to war to balance the account, because war ultimately is merely the act of destroying the creditor ... War is therefore the balancing of the system by killing the true creditors (the public ...) the economy has been transformed into a guided missile on target."

ECONOMICS IS A SCIENCE, IN THE SAME WAY AS WARFARE IS A SCIENCE.  Warfare is the oldest and best developed social science, whose success was based on deceits. Economics was built on top of the history of warfare, as a science whose success is based on frauds.

Guys like Hugh-Smith are only touching some parts of the elephant, and correctly describing those parts that they touch. However, I no longer believe that anyone fully perceives that enormous elephant anymore!

Tue, 12/24/2013 - 14:04 | 4273589 hookah
hookah's picture

Simplistic answer: Econmics will never be sciene, because the laws of the universe dont change, while in Economics the "laws" are under constant changes by government and social perceptions of what might be the Ecoomic law.

Tue, 12/24/2013 - 14:53 | 4273693 Catullus
Catullus's picture

Did someone disprove the Law of Diminishing Marginal Returns yet? I must have missed it.

The "laws" of physics are "laws" because they haven't been disproven yet. But we very well could be wrong about what we believe to be laws of physics. There's an embedded humility behind scientific discovery inherent within the scientific method. It is to say suggest that what you know may be true.

Tue, 12/24/2013 - 14:04 | 4273590 MeelionDollerBogus
MeelionDollerBogus's picture

if string theory can exist without a shred of physical evidence to test,
why not quantum chromoeconomics powered by bankson particles and queason forces?
why not?

oh pardon me, is this not the forum for bat-shit crazy ideas that would melt every country's economy?

Pardon me.

Tue, 12/24/2013 - 18:36 | 4274144 logicalman
logicalman's picture

I think quantum chromoeconomics and the strong nuclear force lead to asymptotic freedom for banksters to do whatever the fuck they want......

Hang on a minute, we may be on to something!

Tue, 12/24/2013 - 14:04 | 4273595 batterycharged
batterycharged's picture

I think Economics is akin to Behavioral Psychology, with obvious connections to human behavior. It's not a hard, exact science but it tries to understand the reason for events and tries to determine outcomes. In no way does it guarantee outcomes.

I also compare the use of Economics to the use of faith healing. Far too often people cite some economic "law" to justify stupid behavior. Often ignoring the glaring problems with such decisions. It's like someone praying for cancer to go away.

You set up ridiculous expectations because economics says so. See TRICKLE DOWN ECONOMICS.

Also people use economics to manipulate people. "It's an economic law that if we let rich people pay no taxes, everyone else benefits" -Says the rich person.


Tue, 12/24/2013 - 19:48 | 4274284 geewhiz
geewhiz's picture

I like Mises model of Praxeology. Mises acknowledged that some process went on inside the human individual that led him to an action which the human believed eased some discomfort/dissatisfaction. He left that internal machinery of decision making to psychologists and only concerned himself with the actual action that resulted from the decision and limited that to actions that involved exchanges or trades by barter or money. He confined economics to that scope and built his models on that. It is the Austrian libertarian economic model that zh and its readers lean towards.

Tue, 12/24/2013 - 15:09 | 4273719 Catullus
Catullus's picture

Game theory has an economic model? Seems a little fantastical to me. When in a game theory class, the model is set up by creating a decision tree for certain outcomes based on an action. The limitations are obvious, namely, you have an incredible number of options available for you in any given decision. You don't have two choices and two outcomes. And the probability assigned to those outcomes is not reliable in the slightest. The nature if decision-making in the real world is based on uncertainty and options. It's something that makes game theory interesting, but ultimately not applicable.

If you're going to hold the standard that you need a discipline to predict behavior or outcomes, then you're going to be disappointed by a lot of disciplines. But just play it out, even if you were to create a model for human behavior that predicts outcomes with accuracy, then someone would use the model to change their behavior to create a different outcome. It's like telling someone the exactly moment and cause of their death before it happens. Wouldn't you change something to alter the outcome? It's the limit of the discipline itself. The un-reachable star.

That doesn't mean there aren't truths to be recognized when making decisions with scarce resources. It just means that there should be no expectation that an economics degree confers upon someone a crystal ball.

Tue, 12/24/2013 - 16:16 | 4273862 logicalman
logicalman's picture

Let's turn the clock back to 2008 and re-run the economic experiment again without QE and see what the result is.......

Oh, sorry, can't do that.

So tell me again how economics is, in any way, scientific.

Tue, 12/24/2013 - 16:59 | 4273933 gallistic
gallistic's picture

The Nobel for economics was not one of the original prizes. It was added much, much, later under quirky circumstances.

On 27 November 1895, Alfred Nobel specified that his fortune be used to create a series of prizes for those who confer the "greatest benefit on mankind" in physics, chemistry, peace, physiology(or medicine), and literature.

In 1968, Sveriges Riksbank celebrated its 300th anniversary by donating a large sum of money to the Nobel Foundation to be used to set up a prize in honor of Nobel. The following year, the Nobel Memorial Prize in Economic Sciences was awarded for the first time.

Frankly I am surprised Gates, Slim, or Buffet haven't bought a pet prize to which they can attach the "prestige" of the Nobel award tradition.

Dismal indeed...

Tue, 12/24/2013 - 19:12 | 4274075 Wish Doctor
Wish Doctor's picture

While things may be dismal, that's no reason to throw out the baby with the bathwater. 

The word science comes from Latin scienter which means knowledge and lawyers use it in that exact sense when arguing about the common law element of crime being done knowingly and willingly.

There is no basic difference between the Truth sought by anthropologists, historians, sociologists or other purely observational sciences practiced by WRITERS ... versus the "hard sciences," despite what some of the latter practitioners may falsely claim.  It's to Alfred Nobel's great credit that he included literature with the others, because you really can't get more observational than that, can you?  Physics is a good example for the people who criticize the so-called soft sciences as being less scientific.  Is the cosmology seminar taught in college physics departments inherently any less "scientific" than their courses in say optics, just because it's usually very easy to do controlled experiments in optics, but very difficult or nay impossible to do the same in cosmology?  

And you can't get any more speculative than writing a great work of literature, or can you?  Shakespeare long predated the "science" of psychology, but he sure did a bang-up job of exploring "human nature" now, didn't he?

Having scientific rigor does not depend on whether there is a theory which can be tested by experiment.  Some theories can only be "proved" by the test of time.  See Karl Marx.  Or ask any good physicist and they should be able to explain this.  Some fields of knowledge are strictly observational, but that doesn't make them necessarily any less scientific than the ones where you have people in laboratories wearing white coats and using expensive equipment.

The most important tool of a scientist is their mind.

Tue, 12/24/2013 - 19:08 | 4274205 Radical Marijuana
Radical Marijuana's picture

Economics is potentially a science, because human civilization is an energy system. However, human problems do open up infinite tunnels of deceits. There is no doubt that real "economics" IS organized systems of lies, operating organized systems of robberies. However, since the dominant "economists" will not admit those social facts, therefore, their "economics" is mostly about hiding those facts under the biggest bullies' bullshit, which are ways to operate legalized lies, backed by legalized violence, as if those were somehow on the "good side" of false fundamental dichotomies.

Since money is measurement backed by murder, economics faces the irreducible problems of the LIMITS OF MEASUREMENT. That PROBLEM is profound, and mostly misunderstood. But nevertheless, other sciences manage to muddle through being relatively useful, as probabilistic statements, despite the correct theory that, due to the irreducible LIMITS TO MEASUREMENT, perfect prediction is always going to be absolutely impossible.

A lot of the statements made in this article above, as well in many of the comments upon it, set up what I regard as various degrees of straw-man arguments, by advancing an obsolete notion of what "science" is, or can do, and then knocking down that straw-man view of "economics as a science."

The scientific enterprises are about


and so,


Neither of those are diminished to nothing within the realm of economics, where both of those questions continue to be practically possible to ask, and to try to answer. Therefore, economics can be a "science," in those senses. However, it is clear that economics is in the midst of a profound paradigm shift, in the sense of Thomas Kuhn's structure of scientific revolutions, as more and more people are facing the fact that banksters making "money" out of nothing, as debts, is a fraud backed by the force of governments, and so, "economics" as the study of an energy system is a special case of the study of the principles and methods of organized crime. Energy systems are generally controlled by their most labile component, which in human systems are the most dishonest and violent people. Energy systems generally go on their path of least action, which in human systems is their path of least morality. Understanding that better might enable us to build better systems of resistance, than those failures which we have now, which continue to use false fundamental dichotomies, and related impossible ideals, rather than use unitary mechanisms, with the ideas of dynamic equilibria.

The study of organized crimes can be made relatively more scientific, especially when one eschews false fundamental dichotomies, and understands that government is merely the most successful form of organized crime, which is controlled by the best organized gang of criminals.

As this article above correct stated:

"... those in power issue financial claims on resources as a "shortcut" way of gaining control of the resources without actually having to produce the resources or earn the wealth via labor and innovation. I think this is the one fundamental dynamic of economics, and it does not lend itself to reductionist models. ..."

However, Hugh-Smith, as well as most of the previous comments, still want to believe in false fundamental dichotomies, which can sustain their impossible ideals. Rather, my view is that economics can only be a practical science to the degree that it is regarded as a general energy system, which is quite possible to do ... EXCEPT that the biggest bullies dominate civilization with their bullshit, and that domination includes the degree to which they were able to dominate the philosophy of science too!

The more deeply one studies postmodernizing science, the more of a creative convergence with ancient mysticism that makes. The infinite tunnels of deceits that deeper study of economics reveals are but tiny fractal aspects of those problems, to be found everywhere else one looks deeply enough ... However, we have barely begun to go through the possible processes of much deeper intellectual scientific revolutions, which apply to politics, and political economy.

Tue, 12/24/2013 - 19:41 | 4274240 Wish Doctor
Wish Doctor's picture

Just because most engineers would have no problem working on war materiel, most historians write war-mongering propaganda whether or not they realize it, and most economists justify the pillaging of everyone by the super-rich, etc. etc. doesn't mean that each and every one of them is evil.  Stupid, most probably, but not necessaril evil.

People can't help being stupid when everything they think they know is really false.  It takes a great deal of courage to deviate from the herd.   While many here think that their own herd is smarter than other herds, almost all the other herds have that same illusion.  What if everything that you believed was true was really in fact false?  Empire depends on fooling the populace into serving the needs of the true rulers, who, post-monarchy, stay hidden. 

Here's an original idea to ponder.  What if Buddhism was not theological in origin, but was rather a POLITICAL rebellion of free-thinking dissidents against the conformist autocracy of Confucianist China?  What is more subversive to authority than rejecting their authority by calling everything Illusion?  No wonder Buddhism had to be recast as theological and philosophical.  Buddhists are probably the oldest group of political dissidents still in existence.

Read the Fall issue of the journal Tricycle for a very interesting article about how the Dalai Lama and much of his family were long-time assets of the US CIA and its predecessors.

P.S.  @Radical Marijuana, Post-modernism is passe.  I may be one of the first to first to proffer the term "post-intellectualism" to describe the current age.  Why not be honest and call a spade a spade?  Hardly anyone knows what post-modernism means so let's put in understandable terms.

Tue, 12/24/2013 - 21:17 | 4274348 Radical Marijuana
Radical Marijuana's picture

Wish Doctor, I agreed with everything you wrote, except for your P.S. at the end.

By "postmodernizing" science, I mean science that becomes sufficiently aware of the history of science, and so, the evolution of its own ideas to be able to comprend precisely those kinds of points which you made in your reply.

That is, "postmodernizing" science is the kind of science that exists after it accepts the degree to which it is a social enterprise, which fits within the concept of the history of science presented by people such as Thomas Kuhn in his 1962 book on Structure of Scientific Revolutions.

More generally, "postmodernizing" science is the kind of science that emerges after the awesome transformative paradigm shifts in areas like the special theory of relativity, and quantum mechanics become socially significant, such are demonstrated by things like atomic bombs and cell phones! Furthermore, another epitomization of "postmodernizing" science is AFTER the understanding of the DNA code and the potential for genetic engineering is able to be understood as a technology that could be applied to human beings! In order words, "postmoderning" science is a science where it understands enough about its own evolution, and its potential to direct future evolution, that it has passed beyond the previously "modern" age, when those things first appeared, into the ages that potentially exist AFTER those breakthroughs.

In the case of economics, that is "postmodernized" AFTER we already have globalized electronic fiat money frauds, backed up by atomic bombs, being trillions of times BIGGER than anything that ever existed before in known human history.

The main way that I believe one can reconcile postmodernizing science with ancient mysticism is to appreciate that the concept of entropy found in thermodynamics and information theory had an arbitrary minus sign inserted into it, which reversed its meaning in profoundly mistaken ways, as an expression of the biggest bullies bullshit wanting to make them appear as the "good guys." They were merely the best at being deceitful, and backing that up with destruction, and that was the only real way in which they were the "good guys." Pretty well most of the human history that they have approved being taught was mostly the opposite of what really happened behind the scenes.

My basic ideas begin with the concept of SUBTRACTION. After we relatively subtract any living entity from its environment, then its must take energy (matter) from its environment, in order to live, which means that as soon as human beings name things, and assign them properties, and assembled those into narrative stories, ALL of that depends upon the basic concepts of SUBTRACTION and ROBBERY.

As soon as we perceive human civilizations, then they are necessarily organized systems of lies, operating organized robberies. Human beings live as robbers in their environment, IF we human beings are aware of ourselves as relatively separated from our environment at all.

I again refer to what Hugh-Smith said in his article, which reveals the kind of false fundamental dichotomies which he implicitly relies upon, due to the impossible ideals which he still wants to believe in:

"... those in power issue financial claims on resources as a "shortcut" way of gaining control of the resources without actually having to produce the resources or earn the wealth via labor and innovation ... "

Resources, as natural capital, just exists (or not) in the natural environment. Human beings stake claims upon those resources, and back those up with violence. There is nothing special about producing resources, or earning wealth via labor and innovation that is basically different than the banksters operating frauds, backed by force, in order to do that.

The banksters have evolved to become the "top carnivores," or predator/parasites, inside of the human ecology or political economy systems. The good sheeple have been brainwashed to believe that they are good, when all that actually does is enable the wolves, and their more domesticated dogs, to more easily prey upon them. In that context, people like Hugh-Smith, as well as most of the people who post articles or comments on Zero Hedge, tend to be black sheeple.

Anyway, Wish Doctor, I agreed most with your statements that:

"While many here think that their own herd is smarter than other herds, almost all the other herds have that same illusion.  What if everything that you believed was true was really in fact false?  Empire depends on fooling the populace into serving the needs of the true rulers, who, post-monarchy, stay hidden."

I DO think that the vast majority of people have been brainwashed to think BACKWARDS, as well as conditioned to not want to understand THAT.

I surely agree with you Wish Doctor that "Hardly anyone knows what post-modernism means ..." However, obviously, the same thing could be said about ancient mysticism. But nevertheless, I repeat my assertion that the possibly better resolutions to the chronic political problems require a creative synthesis of ancient mysticism within postmodernizing science.  While, of course, "hardly anyone knows what that means," but nevertheless, that is what is abstractly necessary.

I REPEAT my basic point that AFTER we already have globalized electronic fiat money frauds, backed by the force of atomic bombs, then the concepts found in quantum mechanics and the special theory of relativity become extremely important, and socially significant. Truly, nothing is more important to a technologically based civilization than the philosophy of science, and that is especially true when that philosophy of science itself provides the drive towards creative syntheses with ancient mysticism.

That we still have a bunch of urban barbarians, who do not understand any of that, and do not want to understand that, but rather, want to return to their own kind of preferred old-fashioned religions, or obsolete ideologies is obviously the case. From a practical political point of view, that means nothing I present appears to have any practical political purchasing power. But nevertheless, I continue to present my theories about what would be necessary to transform Neolithic Civilization to become a Translithic Civilization.

After all, I too WISH for some series of political miracles, Wish Doctor ... because the real path that our civilization is actually on is towards more genocidal wars, along with democidal martial law, because it is practically impossible for us to operate any better real death control systems than those kinds of social insanities, given the way that the social pyramid systems that have already been made actually work.

Operating better death controls would require profound paradigm shifts in the basic ways that we understand all energy systems, which would require we better understand the relative ways that we engage in subtraction and robbery processes. Nothing less than those kinds of transformations are theoretically sufficient to cope with the manifesting, socially significant technologies, that other sciences have already made possible, because they already went through some of their own profound paradigm shift breakthroughs!

The scientific ideas that made those technologies possible are the concepts that we should be attempting to apply to political economy! ... That almost nobody is willing or able to do that does not change the theoretical validity of that point, but rather, only actually emphasizes why "we" should!

Thu, 12/26/2013 - 16:08 | 4277401 flow5
flow5's picture

Moacro-economics is a science.  Both my models have worked for nearly 100 years.  It's just that no one else uses mine.

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