Physics and economics

17 April, 2016 at 12:15 | Posted in Economics | 5 Comments

cover_frontFrom the times of Galileo and Newton, physicists have learned not to confuse what is happening in the model with what instead is happening in reality. Physical models are compared with observations to prove if they are able to provide precise explanations … Can one argue that the use of mathematics in neoclassical economics serves similar purposes? … Gillies‘s conclusion is that, while in physics mathematics was used to obtain precise explanations and successful predictions, one cannot draw the same conclusion about the use of mathematics in neoclassical economics in the last half century. This analysis reinforces the conclusion about the pseudo-scientific nature of neoclassical economics … given the systematic failure of predictions of neoclassical economics.

Francesco Sylos Labini is a researcher in physics. His book is to be highly recommended reading to anyone with an interest in understanding the pseudo-scientific character of modern mainstream economics. Turning economics into a ‘pseudo-natural-science’ is — as Keynes made very clear in a letter to Roy Harrod already back in 1938 — something that has to be firmly ‘repelled.’

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  1. Thanks for the tip.

    Is it really malice? Making models and using mathematics but failing to make successful predictions, may not be from a lack of ambition. Physics tend to work a lot in vacuum, but society is an ether. I think the reasoning is that there is nothing wrong with the ideal gas law despite it being a poor tool for a liquid. Neoclassical economics makes the assumption of ideal society, it assumes utopia. That is why they tend to react to deviation from dogma by attempting to adjust society towards the model. This is not science, this is politics, plain and simple. I think political economy was a term that gave less confusion about whats going on.

    Anders Borg and many other Swedish texts on politicial economy use the term inertia (“tröghet”) to explain failings of policy and so forth. This is a recurring suggestion of “deviation from ideal”, and since we are dealing with society here, ideal means utopia.

    I have no issue with utopia, only problem is, if you assume that society already is utopia, you become unable to make it one. Where would you go if you assume you have already arrived?

  2. Newtonian physics powered the Enlightenment. And it’s true: science can explain our world.

    But physics is just one corner of science and, scientists have now realized, it is NOT the case that all science reduces to physics.

    The science that guides understanding of complex, dynamic social systems is Darwin. He came around AFTER economics settled on a method. But economics settled on wrong.

    The problem isn’t a failure to do Econ enough like physics. The problem isn’t Hume or logical positivism. The problem is that you’re using the wrong science.

    Economists seem to be selected for the trait of being to good at math to realize this.

    • Exactly this. Economic systems are not ideal gases, they are ecosystems, with predator-prey dynamics, even. And they change via natural selection, albeit with different laws of inheritance than Mendel’s.

  3. Whilst the neoclassic macroeconomics models are unsatisfactory, it does not mean that all models are equally poor. My new model has some properties of being both fully comprehensive, covering all of the Big Picture, whilst being sufficiently simple as to be easy to understand (as Einstien required about good scientific theories). It sounds impossible until you read my book about it. Write to me for a copy. Its a shame the above author did not see it first, but he can do so if he write to me at: chesterdh@hotmail.com This book “Consequential Macroeconomics” is available as an e-book for free! It shows how our dismal pseudo science can become a happy, live, true one.

  4. […] From the blog of Lars P. Syll […]


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