Billy Brown wrote:
> I would definitely agree with you that the economy is far more complex (and
> thus more difficult to predict) than anything physicists have been able to
> model. After all, physics models don't have to deal with sentient beings as
> a fundamental particle!
This is the prime reason it is so difficult. The weather does not change as a result of someone predicting what is going to happen, but producers and consumers always change their behavior based on what the economists say, which winds up skewing the actual performance away from the predicted result. Things have been fine in the past ten years because people are happy with the way things are going, so they don't want to disturb the equilibrium. The moment some politician comes along promising to make things even better with their pet law, the equilibirum will get disturbed, creating resonance effects that, if they feed back upon each other, may spin things out of synch with people's wants.
> However, IMO the public skepticism of economists is entirely justified for
> this very reason. We listen to physicists because they have a long history
> of making precise, accurate predictions. We listen to meteorologists
> because they admit they can't be especially accurate, but they can tell us
> what the odds are. We largely ignore economists because we remember the
> last 20 guys who claimed to be able to make physicist-like predictions, but
> in fact weren't even as good as the weather man.
Economics should be considered to be a form of what has been called 'warning fiction'. They accurately extrapolate what will happen if things go on as they are. When the results of that extrapolation are out of synch with what people want, they will change their behavior to prevent that unwanted future from happening.
> The public gave economists their chance. We've seen their advice have a
> profound effect on public policy for most of the 20th century. But if
> you're wrong often enough, people eventually start to notice.
Note how Greenspan has established a practice of not sharing the long range foecasts of the Federal Reserve, which is why the stock market surges or dives on the slightest comment of his. Everybody knows they have the most sophisticated modeling systems, but if they give out the results of the models, the real world will change. Its the uncertainty principle in action. The Fed therefore tries to act kind of like Asimov's Second Foundation.