The Economic Crisis and its Implications for The Science of Economics

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Spectrum Spectrum's picture
The Economic Crisis and its Implications for The Science of Economics

May 1 - 4, 2009
Perimeter Institute

The Perimeter Institute conference on economics is being organized in an effort to better evaluate the state of economics as a predictive and descriptive science in light of the current market crisis. We believe that this requires careful, dispassionate discussion, in an atmosphere governed by the modesty and open mindedness that characterizes the scientific community.   To do this we aim to bring leading economists and theorists of finance together with physicists, mathematicians, biologists and computer scientists to evaluate current theories of markets, and  identify key issues that can motivate new directions for research. 

The conference will begin on May 1, 2009, with a day of invited talks by leading experts to a public audience of around 200 on the status of economic and financial theory in light of the crisis.  We will then continue for three days of focused discussion and workshops with an invited group of around 30, aimed at defining research agendas that address that question and beginning work on them. 

To register for this conference, please click here

International Organizing Committee:

Mike Brown, ex CFO Microsoft, ex Chair NASDAQ
Richard Freeman, Harvard University
Bill Janeway, Senior Advisor and Partner at Warburg Pincus LLC and Cambridge University
Stuart Kauffman, University of Calgary
Zoe-Vonna Palmrose, University of Southern California
Lee Smolin, Perimeter Institute
Eric Weinstein, Natron Group

Spectrum Spectrum's picture

The Economic Crisis and its Implications for The Science of Economics

 

I thought this perspective should be brought forward outside of the usual current politico and economic commentators who are speaking about what shall be done, and what remedies should be instituted. Some insight other then  those who speak for, who have been elected or hire by our federal and provincial pundits.

 

Spectrum Spectrum's picture

Time and symmetry in models of economic markets

 

 These notes discuss several topics in neoclassical economics and alternatives, with an aim of reviewing fundamental issues in modeling economic markets. I start with a brief, non-rigorous summary of the basic Arrow-Debreu model of general equilibrium, as well as its extensions to include time and contingency. I then argue that symmetries due to similarly endowed individuals and similar products are generically broken by the constraints of scarcity, leading to the existence of multiple equilibria.

This is followed by an evaluation of the strengths and weaknesses of the model generally. Several of the weaknesses are concerned with the treatments of time and contingency. To address these we discuss a class of agent based models.

Another set of issues has to do with the fundamental meaning of prices and the related question of what the observables of a non-equilibrium, dynamic model of an economic market should be. We argue that these issues are addressed by formulating economics in the language of a gauge theory, as proposed originally by Malaney and Weinstein. We review some of their work and provide a sketch of how gauge invariance can be incorporated into the formulation of agent based models.

 

Unionist

I give up.

Would one of the above posters please explain to me what this thread is about?

Small words, please.

Spectrum Spectrum's picture

Eric Weinstein's talk on “Gauge Theory and Inflation(link)

Abstract: The close relationship between geometry and fundamental physics can be seen from surveying the basic equations underlying the known forces of nature. What has made these repeated appearances of gauge fields and curvature tensors particularly striking in recent years is lack of any comparable applications outside of the Standard Model and General Relativity. In this talk we will pose the question of whether Yang-Mills theory is simply a unifying principle with application well beyond its current use by exhibiting unreasonably effective applications of Gauge Theory beyond those familiar in the Natural Sciences. Armed with these examples, we will then revisit the question about what is most truly special about the Standard Model and Relativity.

Fidel

Symmetry in economics is synonymous with self regulating free market voodoo and invisible hand baloney, or what's falling down around our ears today. Those economists are no longer referred to as neoliberal witch doctors. Now theyre called "neoclassical" economists. It's more dignified. 

Spectrum Spectrum's picture

Work that is "outside the box" currently being done by scientists to offer solutions for how the economy can/should be interpreted and dealt with. It will be way above your head UNionist(union leaders with science degrees?), yet, I would say that the future of people should be directed here,  so that they understand that new models need to be developed,  that are not in context of the curreent understandings and applications.

 The event displayed here should be considered by those union leaders who want to stay advance and are willing to partcipate in the refomations needed in society. These aplications here are done withoiut regard to compassionate pleas for understanding, yet, as cold and austere as it may seem,  it is relvant that we can find the most simplistic interpretation that is applicable across society,  that are "just" in relation to what ever garb these scientists equalitatively clothe the answers in those new model applications.

How many scientists do you know that are currenty not practising their trades, but are contribuitng to the work force under different titles?

 

Best,

Spectrum Spectrum's picture

Hi Fidel,

Fidel wrote:

Symmetry in economics is synonymous with self regulating free market voodoo and invisible hand baloney, or what's falling down around our ears today. Those economists are no longer referred to as neoliberal witch doctors. Now theyre called "neoclassical" economists. It's more dignified. 

 

A knee jerk reaction?:) I'm no different and ready to pounce, yet try to stay in tune with what happening on the frontiers. I'll have to dig deeper myself to under these applications. I do not think as a "science hobbiest" that I qualify.

 I think if you take the time you might agree that something had to be done.

Best,

Beware of Fat Cats in Government Suits (link)

 

Fidel

Oh probably. My knee has jerked before. I wonder if their Richard Freeman of Harvard is this one?

George Victor

 

I believe the late Kenneth Galbraith would have called this a display of "conventional wisdom", implying that we should take the language and the expectations of the mathematical models with a ton of salt. bbb

Spectrum Spectrum's picture

Fidel wrote:

Oh probably. My knee has jerked before. I wonder if their Richard Freeman of Harvard is this one?

I am not sure Fidel.

Knowing that Larry Summers is up there in positon with Obama, as past previous president of Harvard, is this some relation that we should worry about? 

I'll have to find out about that Richhard Freeman.

Best

George Victor

I thought that Fidel's finding cast light on the real world of economic thought, spec.

Buy low, sell high! And lie like a trooper.

I just don't understand how much the academic economist has to be paid to stay silent on it - and be creative for public edification.  b b  b

Spectrum Spectrum's picture

George Victor wrote:

I thought that Fidel's finding cast light on the real world of economic thought, spec.

Buy low, sell high! And lie like a trooper.

I just don't understand how much the academic economist has to be paid to stay silent on it - and be creative for public edification.  b b  b

I am not sure George. I am of the ilk too, that is not very trusting.

The Money Trust

TO THE JOKER:

HERE I HOLD A GOLD COIN

What a false illusion thou art to human mind ! How cruelly thou deceivest thy possessor and those who covet thee ! Thou buyest for me by thy betrayal of mankind. Thou didst tax my energy to gain thee, and thy discount has lost to me and my fellow-men the greatest blessings of a continent, as well as the principal products of our toil. Few indeed are they who know and understand thy seductive power. We shall expose thy falseness so that our children shalt not be deceived by thee.

General Observations-Charles Lindbergh,
Banking and Currency and the Money Trust

-----------------------------------------------------------------------------

But the fact remains that we have to live. I would like a model that finds balance for us all. Dialogue under this pretense is the hope that what is found "self evident" is the "quality"(link) to me is written out in relation to the science, all but forgotten. IN that sense, publicly this is an effacing aspect of thinking that science may have the answer, while in it's own pretense lacks that same quality. I am not sure.

Best,

Fidel

Ah! It looks like R. Freeman of Harvard and the one I pointed to are two different people altogether.

siamdave

Spectrum et al, if you are not aware of Banketeering  http://www.rudemacedon.ca/banketeering.html  then you are not aware of the real source of the problem. Getting to the root is necessary before talking about solutions.

George Victor

couldn't root out your banketeering, sd. Must have gone to the Caymans.

N.Beltov N.Beltov's picture

"The global financial crisis has revealed the need to rethink fundamentally how financial systems are regulated. It has also made clear a systemic failure of the economics profession."

Abstract: "The economics profession appears to have been unaware of the long build-up to the current worldwide financial crisis and to have significantly underestimated its dimensions once it started to unfold. In our view, this lack of understanding is due to a misallocation of research efforts in economics. We trace the deeper roots of this failure to the profession’s insistence on constructing models that, by design, disregard the key elements driving outcomes in real-world markets. The economics profession has failed in communicating the limitations, weaknesses, and even dangers of its preferred models to the public. This state of affairs makes clear the need for a major reorientation of focus in the research economists undertake, as well as for the establishment of an ethical code that would ask economists to understand and communicate the limitations and potential misuses of their models."

http://www.debtdeflation.com/blogs/wp-content/uploads/papers/

Go to Dahlem Report: Economic Crisis, etc. 

 

Here's more from the pages of Monthly Review ... on the Education of Alan Greenspan ....

 

"In his effort to account for the complete failure of foresight at the Fed, Greenspan explained that the supposedly sophisticated asset pricing models that he and others in the financial community had relied on had been based almost exclusively on the experience of the last two decades during a period of rapid financial expansion, and had failed to incorporate the negative shocks visible from a longer-term historical perspective. As Greenspan himself put it, “The whole intellectual edifice...collapsed in the summer of last year because the data inputted into the risk management models generally covered only the past two decades, a period of euphoria. Had instead the models been fitted more appropriately to historic periods of stress, capital requirements would have been much higher and the financial world would be in far better shape today” (“Greenspan Testimony on Sources of Financial Crisis,” Wall Street Journal, October 23, 2008; see also “Greenspan Says He Was Wrong on Regulation,” Washington Post, October 24, 2008).

The extreme short-sightedness of building models on “a period of euphoria” and ignoring “historic periods of stress” meant that the historical reality of capital accumulation was simply written out of the analysis. As Marx explained, overproduction of capital inevitably leads to periods of massive devaluation, by which the system prepares the ground for a further expansion. “Business is always thoroughly sound, and the campaign in fullest swing, until the sudden intervention of the collapse” (Capital, vol. 3, chapter 30). "

http://monthlyreview.org/nfte081201.php

 

It's the system, stupid. 

 

 

 

 

Spectrum Spectrum's picture

wrote:
It's the system, stupid.
Cry

Dahlem Report: Economic Crisis(link) wrote:

This opinion paper is the outcome of one week of intense discussions within the working group on ‘Modeling of Financial Markets’ at the 98th Dahlem Workshop, 2008.

 

In fact, if one browses through the academic macroeconomics and finance literature, “systemic crisis” appears like an otherworldly event that is absent from economic models. Most models, by design, offer no immediate handle on how to think about or deal with this recurring phenomenon.2 In our hour of greatest need, societies around the world are left to grope in the dark without a theory. That, to us, is a systemic failure of the economics profession.

 

 

 

N.Beltov N.Beltov's picture

In a recent review of Michael Perelman's "Railroading Economics: The Creation of the Free Market Mythology," Carlos J. Castro notes the following:

"The problem is that they have an ideology and believe it is a theory. The firm belief of microeconomics is that if the world worked like the theory, that is, if it were a free market, then there would be efficiency and economic growth, and everybody would be better off. But this is a belief, not a fact. The free market just produced a major housing bubble and a banking crisis, as Marxist political economy had predicted, and this crisis will mean more hardship for millions of working people around the world. A scientific ethos requires that if the theory does not explain the facts, the theory is wrong."

The theory is wrong. But why would market fundamentalists change their views? It's a religious belief and, therefore, whatever scientific claims notwithstanding, it won't be subject to a proper evaluation.

Spectrum Spectrum's picture

 

 

Coase theorem(link)

Quote:
In law and economics, the Coase theorem, attributed to Ronald Coase, describes the economic efficiency of an economic allocation or outcome in the presence of externalities. The theorem states that when trade in an externality is possible and there are no transaction costs, bargaining will lead to an efficient outcome regardless of the initial allocation of property rights. In practice, obstacles to bargaining or poorly defined property rights can prevent Coasian bargaining.

This theorem, along with his 1937 paper on the nature of the firm (which also emphasizes the role of transaction costs), earned Coase the 1991 Nobel Prize in Economics. The Coase theorem is an important basis for most modern economic analyses of government regulation, especially in the case of externalities. George Stigler summarized the resolution of the externality problem in the absence of transaction costs in a 1966 economics textbook in terms of private and social cost, and for the first time called it a "theorem". Since the 1960s, a voluminous literature on the Coase theorem and its various interpretations, proofs, and criticism has developed and continues to grow.

Spectrum Spectrum's picture

Modigliani-Miller theorem (link)

 

Quote:

The Modigliani-Miller theorem (of Franco Modigliani, Merton Miller) forms the basis for modern thinking on capital structure. The basic theorem states that, in the absence of taxes, bankruptcy costs, and asymmetric information, and in an efficient market, the value of a firm is unaffected by how that firm is financed.[1] It does not matter if the firm's capital is raised by issuing stock or selling debt. It does not matter what the firm's dividend policy is. Therefore, the Modigliani-Miller theorem is also often called the capital structure irrelevance principle.

Modigliani was awarded the 1985 Nobel Prize in Economics for this and other contributions.

Miller was awarded the 1990 Nobel Prize in Economics, along with Harry Markowitz and William Sharpe, for their "work in the theory of financial economics," with Miller specifically cited for "fundamental contributions to the theory of corporate finance."

Spectrum Spectrum's picture

 It was easy for me to see the reatcionary and initial actions to combat the decline of a recession were rooted in previous recessionary times of the thirties, and such simpicity,  was to combat it in that same way.

If one is prepared to only work in generalities of the current situation, I would expect that nothing will change. IN this "state of conflict" there is no doubt it brings one face to face with the circumstance. If one wants to stay in that state, then fine, continue to work those generalities.

Explain yourself and what you would do different.

You've offered nothng new. Stupid Money mouth

Spectrum Spectrum's picture

Gauge theory (link)

 

Quote:
In physics, gauge theory is a quantum field theory where the Lagrangian is invariant under certain transformations. The transformations (called local gauge transformations) form a Lie group which is referred to as the symmetry group or the gauge group of the theory. For each group parameter there is a corresponding vector field called gauge field which helps to make the Lagrangian gauge invariant. The quanta of the gauge field are called gauge bosons. If the symmetry group is non-commutative, the gauge theory is referred to as non-abelian or Yang-Mills theory. Quantum electrodynamics is an abelian gauge theory with the symmetry group U(1) and one gauge field, the electromagnetic field, with the photon being the gauge boson. The standard model is a non-abelian gauge theory with the symmetry group U(1)×SU(2)×SU(3) and twelve gauge bosons: the photon, three weak bosons Z0 and W^\pm; and eight gluons.

Spectrum Spectrum's picture

Noether's theorem (link)

Quote:

Noether's theorem (also known as Noether's first theorem) states that any differentiable symmetry of the action of a physical system has a corresponding conservation law. The action of a physical system is an integral of a so-called Lagrangian function, from which the system's behavior can be determined by the principle of least action. This seminal theorem was proven by Emmy Noether in 1915 and published in 1918.[1]

Spectrum Spectrum's picture

 The other reason is just that the complete mapping of E8 is the largest mathematical structure ever mapped out in full detail by human beings. It takes 60 gigabytes to store the map of E8. If you were to write it out on paper in 6-point print (that's really small print), you'd need a piece of paper bigger than the island of Manhattan. This thing is huge.

The root of the problem had to be identified in terms of an "E8 object" and it's constituents, and thusly, the complexity of that economic situation understood in a global perspective in relation to that root problem. That "is" the "perfect symmetry" in this case?

Gauge theory

Many powerful theories in physics are described by Lagrangians which are invariant under certain symmetry transformation groups.

All transactions.

This then is a illuminative vision according to a complex relation of data which is related to the symmetry of money(coin.) A reference then to Charles Lindberg in an attempt to combat the illusions that are perpetuated.

How is this money conserved in the system and travelled through all phases? ;)

 

Best,

George Victor

 Spec:

"Knowing that Larry Summers is up there in positon with Obama, as past previous president of Harvard, is this some relation that we should worry about? "

-----------------------------------------------

Larry is meeting with Steve (or Tony)  and Jim down in Washington, trying to save the remnants of the Canadian auto industry.  That makes the quoted sentence the one relevant sentence in all of your ramblings...even though you did not give it context, and could be musing about Larry the sexist former pres. of Harvard.

You are having us on, spec., in a forum where the central idea  is that mainstream economists should be   taken out and shot with a ball of their own shit, which would be difficult in your case, given your diarrheal tendency.

Fidel

NDP MP Tony Martin and senator Hugh Segal were in New York for the USBIG Conference first week of March.

Quote:

One of the overarching themes of the conference was the current economic crisis. There was a sense that the economic crisis calls for bold solutions, which could lead to greater openness to basic income. But there was also a sense of urgency, that basic income is necessary to respond to the major crises of our time, economic and environmental.

Stanley Aronowitz, in particular, argued that we can’t expect to return to full employment. Moving forward, we will have to find ways to structure our economy differently.

Another theme was the need to bring basic income out of our circle and into the political and public mainstream. Hugh Segal spoke of the need to stop “preaching to the choir,” while Tony Martin referred to Martin Luther King, Jr., arguing that we need to change the wind – the political context in which basic income is addressed.

I agree, if we have full employment with our obsolete capitalist economies of today, we would choke on the pollution and accelerate dangerous climate change. Debt driven capitalism requires continuous growth, otherwise bubble economies are the result. And someone has to burst the bubble with higher interest rates at some point. Now they seem to be at the point where jigging bank interest rates alone is comparable to doing CPR on a corpse and crossing their fingers in hopes that it will work.

Spectrum Spectrum's picture

Fidel wrote:

I agree, if we have full employment with our obsolete capitalist economies of today, we would choke on the pollution and accelerate dangerous climate change. Debt driven capitalism requires continuous growth, otherwise bubble economies are the result. And someone has to burst the bubble with higher interest rates at some point. Now they seem to be at the point where jigging bank interest rates alone is comparable to doing CPR on a corpse and crossing their fingers in hopes that it will work.

My own thoughts.

Conglomeration and centralization of power is the understanding of something that has risen to the top of our society. Has gone beyond all borders.  Writes its "own figures" for profit loss, while still operating at a profit. Who does not see them "flyng under radar" as a operation in society, while operating without regard to the signs of recession/inflation(non contributory)? Imagine having the audacity, to keep a low profile while "economic failure" is transfered to the homeowners?

Can you name one commodity where this might be the case Fidel? One instititution?

How would one apply such a method as Lincoln did on his historical Green back, to understand how money is conserved? Or,  to find attempts by a reserve, who may have sought to stop a Kennedy or, steal a child(Lindberg), who may of have moved to a similar agenda. (Of course speculation of the worst sort here, but may be fuel for some good writer?:)

Best,

Spectrum Spectrum's picture

 George,

THe things I have not forgotten are my roots, nor the place that I occupy in society. THis babble section is a nice way in which to speak to those who want to "open their minds" to what is coming or is unfolding. Work to bring forward "a just systemic process" that deals humanitarily with all levels of our societies.

IT's not I who developed "those possibilities" but those who saw the conflict( the injustice) and thought to find resolve. They are people of science who saw  in their trade,  relevance,  to apply it to the current conditions.

Who is so flexible to take the "science jargon" to such conditions in our society? Or the ability? Degration to "verbal slight of diarrhea, stupid"[sure I'm gulity] is a good indicator of the absence of such an ability?:) I am not always certain.

Because you just do not have "the ability in this "time and space" to even conceive of that larger vision...you must withdraw from, with the most appropriate rehtoric of your essence:) One would hope such digestion would not boil over in such a way, but then, again a lightbulb works good if it has a switch, to cleanse oneself of the old,  to bring on opportunity for the new.

Larry Summers and his "expose" is not the issue. BUt yes, these would define his charcter to some degree. HIs disembarking from his position.

Of course, I am amazed about his new porfolio. THis has gotten away from the issue, not pointed to it's relevance. That is being "superficial" while I am giving advance notice of work that is being done that has more depth. Work that is relevant to my roots. So I suggest Union Leaders, while I am not. I  hold strong to democratics institutions.

There are many who are writing on the economy without substance today who are "mechanically speaking" as some sceinitist do "upholding that lineage of work and obervation. It's time for a change. The only way to do that is get your feet wet and become "emersed psychologically"  in the conflict in order to find a way out. Inventors of a sort, you might say.

Thinking outside of the box "is" being very explicit.

Best,

 

guy cybershy

  Have a listen to Michael Hudson.  This is from the program "Guns and Butter" from earlier this week

http://www.kpfa.org/archive/id/48892

Spectrum Spectrum's picture

guy cybershy wrote:

  Have a listen to Michael Hudson.  This is from the program "Guns and Butter" from earlier this week

http://www.kpfa.org/archive/id/48892

I want to thank you for bringing this forward for listening. I also want to thank others for bringing the information they brought forward here as well.

While I engage younger minds then myself, older professors with those science degrees, how is it reforms can ever be thought dealt with properly if they did not know of what this information you provide, will unleash upon our societies?

So most definitely this adds importance to the fuel and need for reformation. Becuase of the long range feudal system I can see,  how it is important now,  that we stave off that eventuality.

That things would decline to the point where local gangs or mafia  would overtake others for control of turf, that such a decline had all to be in the recognition of that 1%  we are feeding?

Again, I have to remind those who deal with the economic issue that I am no stranger to the labor that forms the backbone of this country. I have been here at babble now enough that you understand my intent is not to giveout what some consider "a running off of the mouth," or some "preaching choir," but  to explore how the everyday bloke like me with an interest in science is telling people to watch out for those who may be under the cloak of the neoliberal striped cat, to choose to become yourself, foundational leaders for a just society.

I have forwarded these concerns as you present them to me. What would you think if they fell on deaf ears as well? I am listening to the times.

Best,

Spectrum Spectrum's picture

Symmetry and the Beautiful Universe, by Leon M. Lederman and Christopher T. Hill

 

It will not be easy for many to recognzie what has transpired but by this same application of such pursuates,  are being illustrated in an effort by scientists to provide "new models" for a developing new economic society that is just. Yes, there is reason to fear that a Neoliberalism extremist may be among them, so we must counteract that by "having our own" to watch the process and ensure that such models do not maintain and continue to advantage the top 1% as it has.

 

Appendix, Pg 316, Symmetry and the Beautiful Universe, by Leon M. Lederman and Christopher T. Hill

Appendix, Pg 316, Symmetry and the Beautiful Universe, by Leon M. Lederman and Christopher T. Hill

 

Best,

Sarann

The Science of Economics????????? I did very well in economics at college.  Very well indeed.  My secret thought as I regurgitated my lessons.  It's all bunk.

Sarann

The Science of Economics????????? I did very well in economics at college.  Very well indeed.  My secret thought as I regurgitated my lessons.  It's all bunk.

M. Spector M. Spector's picture

Hey, stereo!

Spectrum Spectrum's picture

Sarann wrote:
The Science of Economics????????? I did very well in economics at college.  Very well indeed.  My secret thought as I regurgitated my lessons.  It's all bunk.

 

Shall I cast the light unto you by saying, that it must have been what was learnt at the Chicago school? And that perhaps, you missed the course on the philosophy of science? Cry

AS well,  you do not understand the "gravity of the situation" when looking at all transactions?:) Possibly to young to know?

Best,

Jacob Richter

I prefer the Marxist tradition of critiquing political economy (challenging ruling-class orthodoxy and emphasizing the politics implicit in "economics"), and this I say as someone who aced micro- and macroeconomics.

Spectrum Spectrum's picture

See, while I would push you to escape the duality that exists,  there are those that like to hunker down in their positions,  as to continue the merry go round.

If you want to break free from the lineage of one's teacher,  a Chicago school of thought, or,  a parents ideology,  to participate in something new, then you need to recognize that while you may have all the education in the world, it does not raise you above that duality. You are only now "mechanically speaking," while ignoring that quality to life.

So, without descending in the feudilistic states of warfare,  pretensed under crime, or sanctioned by neoliberalism think tank armies and police forces, it is behooved,  that the quality of this struggle,  is to recognize that the other part of the duality exists as quality of life. To rise above the societies. That the upper one percent is inclusive under a systemic process that is an equitable humanitarian model for disemination.

It will mean,  that Obama will need to turn his back on the Chicago school?If he did, it could cost him his life?

It means that both parties will need to be dragged kicking and screaming to accept the outcome of a model that both sides had choosen to take part in,  in order to strive for that "highest ideal state."

We must  refuse to become a state in war and governed by neoliberalism police action, while recognizing the decay this represents, all,  whilst unaware we have been reduced to such a feudalistic system.

It means "waking up" from our sleep.

Best,

 

DrConway

I realize I'm late to the party, but I know about particle physics and gauge transformations somewhat since it's incidental to the theory of weak interactions.

I will say right now that I have absolutely no idea how gauge transformations have any applicability to economics.

The (oversimplified) meaning of a gauge transformation is simply that if you set up equations that describe a physical system, you can move around anywhere you like and the equations will still work. This is somewhat analgous to the Newtonian reference-frame transformations which allow you to use F = ma regardless of where the observer sits relative to the object under study.

(Subject to some limitations, mind)

The difficulty I have with the idea of a gauge transformation being of use in economics is that there would have to be conserved quantities. But nonconservation is the rule, not the exception, in economics. Money supply is most assuredly not conserved. You can print more or less money as desired.

Interest rates are not conserved. Et cetera and so on. If anyone can show a conservation law applicable in economics, I would like to see it.

It will not surprise anyone, I think, if I note that the nonconserved quantities in economics are so myriad precisely because they are set and developed by human beings at will.

By contrast the very existence of conservation laws in the universe has to do with the fact that we humans cannot, by any means whatsoever, upset the quantities on which they depend. Nonconservation of momentum would require that we somehow be able to choose, arbitrarily, a preferred frame of reference. Nonconservation of energy requires a similar arbitrary preference, which we cannot impose.

 

Frank

Hi Everyone:

Sorry if I'm off-topic here, but does anyone know of any good alternative sites for BC politics?

[email protected]

Spectrum Spectrum's picture

Dr.Conway,  I thought this might be helpful for you to see the whole works. Not often is perspective in science used to arise above what has been normally happening with the economy to see it in a new light. Imagine using the term "Economic Manhattan Project," for us to consider how seriously this undertaking is presented?

 

Photo by Steve Hsu->

Quote:
The first photo is the morning panel discussion. From left to right, Eric Weinstein, Nouriel Roubini, Richard Freeman and Nassim Taleb.

Quote:
The Economic Crisis and its Implications for The Science of Economics.

May 1 - 4, 2009
Perimeter Institute

Concerns over the current financial situation are giving rise to a need to evaluate the very mathematics that underpins economics as a predictive and descriptive science. A growing desire to examine economics through the lens of diverse scientific methodologies - including physics and complex systems - is making way to a meeting of leading economists and theorists of finance together with physicists, mathematicians, biologists and computer scientists in an effort to evaluate current theories of markets and identify key issues that can motivate new directions for research. Perimeter Institute was suggested to be the gathering point and conference organizers plan to foster a very careful, dispassionate discussion, in an atmosphere governed by the modesty and open mindedness that characterizes the scientific community.

The conference will begin on May 1, 2009, with a day of talks by leading experts to an invited audience on the status of economic and financial theory in light of the current situation. Three days of private, focused discussions and workshops will ensue, aimed at addressing complex questions and defining future research agendas for the world that can help address and resolve them.

Perimeter posted some recommended reading as follows:

Recommended Reading

 

This is a follow up to the conference that has already taken place.

Quote:
PIRSA:C09006 - The Economic Crisis and It's Implications for The Science of Economics

The Perimeter Institute conference on economics is being organized in an effort to better evaluate the state of economics as a predictive and descriptive science in light of the current market crisis. We believe that this requires careful, dispassionate discussion, in an atmosphere governed by the modesty and open mindedness that characterizes the scientific community. To do this we aim to bring leading economists and theorists of finance together with physicists, mathematicians, biologists and computer scientists to evaluate current theories of markets, and identify key issues that can motivate new directions for research. The conference will begin on May 1, 2009, with a day of invited talks by leading experts to a public audience of around 200 on the status of economic and financial theory in light of the crisis. We will then continue for three days of focused discussion and workshops with an invited group of around 30, aimed at defining research agendas that address that question and beginning work on them. See: Welcome to the Economic Manhattan Project

Uncle John

As you cannot know both the velocity and position of a given particle, I think you cannot know both the amount and velocity of a given dollar through the economy. Uncertainty applies both in physics and economics. Is the Schroedinger's cat paradox a matter of physics or game theory? Any given market participant is in the box, and I think that the outlook of any given participant in a given market is going to be distorted by subjectivity.

Fidel

Uncle John wrote:

As you cannot know both the velocity and position of a given particle, I think you cannot know both the amount and velocity of a given dollar through the economy. Uncertainty applies both in physics and economics. Is the Schroedinger's cat paradox a matter of physics or game theory? Any given market participant is in the box, and I think that the outlook of any given participant in a given market is going to be distorted by subjectivity.

In the case of today's liberalized financial capitalism, uncertainty is ignored and all but eliminated. Obama has maintained a revolving door relationship between the Wall St lobby and Washington.  In this parallel universe of old world science, there is but one unobserved observer, an invisible hand with all too familiar human characteristics. And the fat cat is alive and well-fed always. The fix was in long ago.

 

docjmd

Unionist wrote:

I give up.

Would one of the above posters please explain to me what this thread is about?

Small words, please.

It's not rocket science as you might be lead to believe. By the way, I just entered this list of postings, and have not reviewed all the responses.

As a Ph.D. trained in both physics and economics, it may comfort you to know that I have fought a losing battle for  32 years about the RELEVANCE OF CURRENT ECONOMICS TO REAL WORLD PROBLEMS. THAT IS WHAT IS THIS ESOTERIC, INTIMIDATING RHETORIC IS ALL ABOUT.

As a consequence, I along with many others have evolved into the field of ALTERNATIVE FUTURES WITH MULTIPLE SCENARIOS which encompass a wide variety of academic disciplines and styles of thinking.

Economics, in it's desperation to become a "science" has achieved internal [mathematical precision] at the cost of being invalid as a predictor of many social issues

For now I hope this simplified answer may be of some help.

Jeffrey M Doyle, Ph.D. 

 


peterjcassidy peterjcassidy's picture

There was no broadly consenusal economic analyists that accuately predicted  the economic crisis before it unfolded nor accurtatley described  it as unforlded agreed on prescription for dealing with it now. . Different economists and differetnifn schools of economics may use scientific tools such as  mathematicla analyis, but economics is not a science, certainly ot a hard science like physics or mathematics. That, I gsther esd whay the  conference  wad about- the incacccuracy in predictnng and describing the economic crisis that is the hallmark of bad or soft science.

docjmd

Thank you for those Plain and Elegant words.

M. Spector M. Spector's picture

peterjcassidy wrote:

There was no broadly consenusal economic analyists that accuately predicted  the economic crisis before it unfolded nor accurtatley described  it as unforlded agreed on prescription for dealing with it now. . Different economists and differetnifn schools of economics may use scientific tools such as  mathematicla analyis, but economics is not a science, certainly ot a hard science like physics or mathematics. That, I gsther esd whay the  conference  wad about- the incacccuracy in predictnng and describing the economic crisis that is the hallmark of bad or soft science.

Christ, that's painful to read! Don't you have a spell-checker?

Fidel

[url=http://www.globalresearch.ca/index.php?context=va&aid=12411]Models and Pseudo-models: Economists' Artifice[/url]

 

Quote:
No matter how complicated the models became, no model ever provided a satisfactory explanation of planetary motion.

 

Surely during this long period, some mathematicians believed that the problem was just too difficult. They were wrong, of course. Given the ideas the models were based upon, the problem wasn't too difficult, it was impossible. All models based upon false assumptions make their problems impossible to solve. When Kepler realized the impossibility of any solution based on Aristotle's assumptions, he discarded them and found the solution that had eluded mathematicians for two millennia.

 

The theory of celestial spheres, introduced by ancient Greeks, was the mainstay of the geocentric system. Copernicus and the others were somehow unable to dismiss a theory that was officially accepted. Our economists act just like Copernicus. They should ask whether they can't get things right because all of their ideas about economy are wrong. If they are, continuing to apply them will never get anything right. No number of models, no matter how complicated and interesting intellectually, will suffice. Paraphrasing Gibbon, "Are economists sacrificing the happiness of millions to a fond partiality to a worthless idea since most of the crimes that disturb the internal peace of society are produced by the theory's confining to a few the possession of those objects that are needed by all?" Edward Gibbon and Adam Smith were contemporaries. That's how long this question has been crying out for an answer. How much longer must humanity wait?

Spectrum Spectrum's picture

If you use Firefox, right click your mouse and see "check spelling"  there. Click on it and it will highlight the words spelled (spelt:) wrong. Click on misspell word "underlined in red" and it will give you the alternative, for which you accept.

peterjcassidy peterjcassidy's picture

Spectrum wrote:

If you use Firefox, right click your mouse and see "check spelling"  there. Click on it and it will highlight the words spelled (spelt:) wrong. Click on misspell word "underlined in red" and it will give you the alternative, for which you accept.

Thanks. Will try it.

Cueball Cueball's picture

peterjcassidy wrote:

There was no broadly consenusal economic analyists that accuately predicted  the economic crisis before it unfolded nor accurtatley described  it as unforlded agreed on prescription for dealing with it now. . Different economists and differetnifn schools of economics may use scientific tools such as  mathematicla analyis, but economics is not a science, certainly ot a hard science like physics or mathematics. That, I gsther esd whay the  conference  wad about- the incacccuracy in predictnng and describing the economic crisis that is the hallmark of bad or soft science.

I rather liked it. Read like middle english. Nice. Can hear the lithping, in particular I like this: "That, I gsther esd whay the conference wad about..."

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