Can Mathematical models predict the economy?
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14-09-2013, 06:43 PM
Can Mathematical models predict the economy?
During the 90's many people thought this. In the Book and documentary series from the book Commanding Heights. This computer modeled economy was touted as the new great thing, you just put mathematical models in a computing device and lo and behold it's magic, you have predictions for the economy..... However after the bubbles have burst-busted (chas can correct the grammar) many people now question the mathematical based modeled economy. And as we all know now, it was a total failure.

What do you guys think now in 2013 of the 90's mathematical modeled economy?
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14-09-2013, 06:53 PM
RE: Can Mathematical models predict the economy?
Why don't you start here:
http://en.wikipedia.org/wiki/Economics
?

But what you're actually asking is about the quants and whether the stock market can be modelled, right?
Start here: http://en.wikipedia.org/wiki/Quantitativ..._(finance)

Give me your argument in the form of a published paper, and then we can start to talk.
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14-09-2013, 07:02 PM
RE: Can Mathematical models predict the economy?
(14-09-2013 06:53 PM)Hafnof Wrote:  Why don't you start here:
http://en.wikipedia.org/wiki/Economics
?

But what you're actually asking is about the quants and whether the stock market can be modelled, right?
Start here: http://en.wikipedia.org/wiki/Quantitativ..._(finance)

It's called a discussion, hence we discuss. Many of the same methods are being implied today and we are creating new bubbles, repeating the same mistakes.

Why would people believe that mathematical models could predict human behavior in the first place?
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14-09-2013, 07:38 PM
RE: Can Mathematical models predict the economy?
Modern mainstream economics is based on the Keynesian models. Since Keynes died young, Paul Samuelson is credited with being the "father of Keynesian economics", and he wrote the economics textbooks taught in the universities.

In 1948 when the US slashed spending by 60% and went on the gold standard he said the Keynesian models proved it was suicide and would destroy the US economy. Of course, it ushered in 2 decades of not only great prosperity, but more importantly, the poor were lifted and the country became more equal.

The whole time he had been stating the Keynesian models also proved the Soviet centrally-planned economy was so much more efficient, the Soviet Union would surpass the US "in a few years". Every revision of the economics textbooks just kept pushing the date out further and further. Even just a few months before the Soviet Union collapsed, when it so crystal clear to everybody with any common sense that the centrally planned economy wasn't working, he STILL insisted the Keynesian models were infallible and the Soviet Union would surpass the US in the near future.

The problem with all the models, and with all empirical data, is it is SO easy to cherry pick and manipulate the data, you can use the models to justify just about any position. While not dismissing models, personally, I prefer the same scientific method that Einstein used: thought experiments, and looking for axioms, namely "a premise or starting point of reasoning. As classically conceived, an axiom is a premise so evident as to be accepted as true without controversy." The fact is that most of the economists completely ignore axioms. You can provide an axiom that is SOOO obvious and which they cannot possibly refute, yet they will always claim they have empirical data to prove otherwise. If you look at it historically in hindsight, axioms have had a much better track record of predicting the economy than any of their models.
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14-09-2013, 07:38 PM
RE: Can Mathematical models predict the economy?
Modern mainstream economics is based on the Keynesian models. Since Keynes died young, Paul Samuelson is credited with being the "father of Keynesian economics", and he wrote the economics textbooks taught in the universities.

In 1948 when the US slashed spending by 60% and went on the gold standard he said the Keynesian models proved it was suicide and would destroy the US economy. Of course, it ushered in 2 decades of not only great prosperity, but more importantly, the poor were lifted and the country became more equal.

The whole time he had been stating the Keynesian models also proved the Soviet centrally-planned economy was so much more efficient, the Soviet Union would surpass the US "in a few years". Every revision of the economics textbooks just kept pushing the date out further and further. Even just a few months before the Soviet Union collapsed, when it so crystal clear to everybody with any common sense that the centrally planned economy wasn't working, he STILL insisted the Keynesian models were infallible and the Soviet Union would surpass the US in the near future.

The problem with all the models, and with all empirical data, is it is SO easy to cherry pick and manipulate the data, you can use the models to justify just about any position. While not dismissing models, personally, I prefer the same scientific method that Einstein used: thought experiments, and looking for axioms, namely "a premise or starting point of reasoning. As classically conceived, an axiom is a premise so evident as to be accepted as true without controversy." The fact is that most of the economists completely ignore axioms. You can provide an axiom that is SOOO obvious and which they cannot possibly refute, yet they will always claim they have empirical data to prove otherwise. If you look at it historically in hindsight, axioms have had a much better track record of predicting the economy than any of their models.
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14-09-2013, 07:56 PM
RE: Can Mathematical models predict the economy?
Central planning exists in all economies technically. Some want an elected group of people doing the central planning (communism/socialism) and some believe a non elected group of people (Private corporate owners) should do the planning while competing with each other at the same time.

Both Models can be corrupted by inside and outside (sanctions, invasions etc).
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14-09-2013, 08:25 PM
RE: Can Mathematical models predict the economy?
Agreed that both Models can be corrupted by inside and outside. But, there is no central planning in a free-market system. I am a small private corporate owner. Are you saying that someone is "planning" my business for me? Back when Hong Kong was purely free market, who were the central planners? Only if there's a nationwide monopoly, which always comes about through special government intervention and therefore is not capitalist, can it be said that monopoly is centrally planned. Sure, government policy can influence decisions, but in a free market system, government doesn't make the decisions or plan the economy. Centrally planned economy has always referred to a socialist/communist system where the entire economy, all the means of production, is owned by the State and is planned by one group of leaders. Today only N Korea and Cuba have a centrally planned economy.
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15-09-2013, 01:35 AM
RE: Can Mathematical models predict the economy?
(14-09-2013 08:25 PM)frankksj Wrote:  Agreed that both Models can be corrupted by inside and outside. But, there is no central planning in a free-market system. I am a small private corporate owner. Are you saying that someone is "planning" my business for me? Back when Hong Kong was purely free market, who were the central planners? Only if there's a nationwide monopoly, which always comes about through special government intervention and therefore is not capitalist, can it be said that monopoly is centrally planned. Sure, government policy can influence decisions, but in a free market system, government doesn't make the decisions or plan the economy. Centrally planned economy has always referred to a socialist/communist system where the entire economy, all the means of production, is owned by the State and is planned by one group of leaders. Today only N Korea and Cuba have a centrally planned economy.

Government intervention in business or business intervention in politics has always been going on. Businesses want to intervene in government to get what it wants and vice versa.

Not to mention that from the beginning of capitalism to today the only group of people ever able to acquire power are from and represent the business class( a small minority)The idea that government and business are or ever have been separate isn't historically true. Corporations ( the few large ones) wield a lot of influence on policies in many sectors of society.
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15-09-2013, 07:52 AM
RE: Can Mathematical models predict the economy?
(14-09-2013 07:02 PM)I and I Wrote:  It's called a discussion, hence we discuss.

Having read several of your threads now, I'm pretty confident that your purpose is not to have a discussion. In a discussion, one does not continually change his position and ignore responses and challenges to his positions.

Some of the points you make are valid. Some are questionable, but thought provoking. I suspect the problem people have with you has nothing to do with your point of view. It's the "I'm going to be the biggest douchebag in the playground" approach that you deliver them with.

As for your point: yes, we are recreating bubbles. It's not because of flawed mathmatical models. It's because of politicians who pander to the public and promise them a consequence free world and large finanical interests who make a mint off running up the bubble and are never held accountable when things turn on them.

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When ignorance reigns, life is lost
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15-09-2013, 08:08 AM
RE: Can Mathematical models predict the economy?
Can Mathematical models predict the economy?
"New maths model to predict box office success"
http://articles.economictimes.indiatimes...ages-model

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