Economics — where does it lead us?

19 Feb, 2021 at 09:51 | Posted in Economics | 2 Comments

Image result for ariel rubinstein The issue of interpreting economic theory is, in my opinion, the most serious problem now facing economic theorists. The feeling among many of us can be summarized as follows. Economic theory should deal with the real world. It is not a branch of abstract mathematics even though it utilizes mathematical tools. Since it is about the real world, people expect the theory to prove useful in achieving practical goals. But economic theory has not delivered the goods. Predictions from economic theory are not nearly as accurate as those offered by the natural sciences, and the link between economic theory and practical problems … is tenuous at best. Economic theory lacks a consensus as to its purpose and interpretation. Again and again, we find ourselves asking the question “where does it lead?”

Ariel Rubinstein

2 Comments

  1. We know perfectly well “where” economics leads: we are there, in neoliberal hell.

  2. Options markets are where prices are formed. Oil prices right now are driven not by supply and demand for physical oil, but by options momentum and noise traders. If you want to predict the real world, look at options markets.
    .
    Goldman Sachs’s predictions are accurate because they trade on them, and produce profits (backstopped by the Fed, whose put is implicitly included in their models). GS traders know how to trade bear markets.


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