Re: CAMREC: Interesting site: econophysics

From: the Campaign for Real Economics (camrec@mmu.ac.uk)
Date: Mon Nov 29 1999 - 15:43:54 GMT


Date: Mon, 29 Nov 1999 15:43:54 +0000
Message-Id: <199911291543.PAA08359@alpheratz.cpm.aca.mmu.ac.uk>
To: bogus
From: camrec@mmu.ac.uk (the Campaign for Real Economics)
Subject: Re: CAMREC: Interesting site: econophysics
In-Reply-To: <CAMREC: Interesting site: econophysics>


Message-Id: <199911291543.PAA08359@alpheratz.cpm.aca.mmu.ac.uk>
To: CAMREC list members <camrec@mmu.ac.uk>
From: the Campaign for Real Economics <camrec@mmu.ac.uk>
Date: Mon, 29 Nov 1999 15:43:54 +0000
Subject: Re: CAMREC: Interesting site: econophysics

Thomas Baumgartne wrote:
> Therefore I am somewhat more optimistic than Edmonds when evaluating the
> fruitfulness of the instruments of physics when applied to economics. In my
> view it might just be that the instrument allows relaxation of one of the
> most pernicious "disembodied assumption".

I understand Thomas' point about the possibility of relaxing
disembodying assumptions by using more sophisticated formal tools (taken
from physics in this case) for achieving analytic results about
aggregates - it is always useful to have the widest possible choice of
analytic approaches so one can choose the correct tool for what one is
modelling. I also agree that people's preferences are highly
interdependent in the way he described.

However my point was not for or against any particular formal tool, but
about how they are applied. What is critical is whether such
assumptions are chosen on an a prior manner derived from intuition or
tradition rather than applied in a post hoc manner based on *evidence*
from the object of modelling. The history of science shows how weak
tradition and intuition can be as a guide to truth when they are not
directed by an extensive base of observational evidence.

Now there is considerable evidence that people's preferences do depend
on other's preferences, so that taking account of this is in our formal
models is, in general, a small step forward. I would advocate a much
bigger step towards descriptive accuracy - namely to work from
observations of people's preferences and generalise to aggregate
outcomes from these (using either formal mathematics of computational
simulation). I think that applying slightly more appropriate (but still
highly artificial) assumptions in a prior fashion and hoping to compare
the model to a real set of data later will not be successful, even
though this sort of methodology is fairly standard in physics.

Thus, I conclude, that although I agree with Thomas that physics can
provide analytic tools with new and potentially useful powers, Economics
has more than one problem and the second (that I concentrated on) is, I
argued, the more fundermental.

Regards.

--------------------------------------------------
Bruce Edmonds,
Centre for Policy Modelling,
Manchester Metropolitan University, Aytoun Bldg.,
Aytoun St., Manchester, M1 3GH. UK.
Tel: +44 161 247 6479 Fax: +44 161 247 6802
http://www.cpm.mmu.ac.uk/~bruce



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