I found it as a rather interesting take on the subject, particularly relevant to me and the direction my diploma project seems to be heading. When I started reading, I was expecting someone being salty about interactions with strawman… and I was pleasantly surprised.
Frankly, now I actually want to learn about economics for reasons other than "my adviser said so". It sounds like a treasure trove of hard problems.
speaking as an engineer The fundamental problem with physics is the results are only as good as the model. Theoretical results are valid under theoretical conditions; practical conditions always contain a long list of qualifiers and modifiers that can completely overwhelm the theoretical underpinnings of any problem. Example: in theory, carbon fiber is an obvious aerospace material. In practice, many of the carbon fiber components of the Boeing 777 were swapped out for aluminum because the non-destructive testing options for composite materials are severely curtailed compared to traditional aerospace alloys. Any stochastic system has this problem. Statistically, you can predict that five out of 100 assemblies will fail in the first year. In practice, you have no idea that 50 of them will fail because your distributor's warehouse is marginally more humid than your permeable packing materials can handle. It comes down to the model: if you have all the inputs modeled correctly, all the outputs will be correct. However, statistics in general (and economics in particular) relies on rejecting spurious inputs. Physicists are drawn to economics because both trades boast complex systems with remarkable reducibility. Wolf populations, stock market cycles, harmonic oscillators and spring dampers can all be successfully modeled with first and second order differential equations therefore there are mathematical underpinnings to the whole of the universe. Staring into that shit is like staring into The Matrix. But in practical terms, the dependencies that influence the wolf population are not the primary dependencies that influence the survival of one wolf. The equities markets can be modeled, the behavior of individual stocks (and investors) cannot. A spring is an easy equation. A worn spring under varying temperature conditions less so. Economics equations are stupid simple compared to physics equations. Even Newton's Four have some squares'n'shit in them. The Phillips Curve, which the Federal Reserve believes governs employment, has like one log in it. Algebra. That's where the most prestigious economists in the world think the secrets of one of the most important functions of economics lives. Everything we do, the assembled mass of the US economy, and it all comes down to (wage growth) = (wage growth)^(trend rate) - f(unemployment rate) Economists predicted the likelihood of a global recession in 2007 at two in a billion - it was a "six sigma" event. This despite the fact that economics is essentially a history of recessions and depressions. It's not that everyone is stupid - it's that they come to worship the model more than what they're modeling. I would argue that this weakness can also afflict physicists. over here in the real world, we think you're all arrogant. Any profession that steadfastly insists on the relevance of asymptotes over margins of error has no place in the real world.
Reconciling models with observation is where it's at, yo. Increasingly, the only way to be competitive in physics nowadays is having the ability to do theory/modeling with at least one toe in the realm of experimentalism. And I definitely used to be somewhat arrogant, but between grad school and wunderkind Devac, here, well, that's over. Besides, many of the most "respected" people in their fields are miserable people. All too often, the arrogance you might perceive is just a disguise for an intense self-loathing. At least I'm upfront about how much I hate myself, which I think can be somewhat healthy.It's not that everyone is stupid - it's that they come to worship the model more than what they're modeling. I would argue that this weakness can also afflict physicists.
And that... wouldn't drive someone towards economics? Where you can make $250k a year as a "quant" surrounded by people who think compound interest equations are intense? Again - not going to stereotype, not going to point fingers. However, if someone were, say, not competitive in physics due to their disdain for experimental reconciliation, there are other avenues open to that person in environments where their investigative rigor need not be particularly acute.Reconciling models with observation is where it's at, yo. Increasingly, the only way to be competitive in physics nowadays is having the ability to do theory/modeling with at least one toe in the realm of experimentalism.
I grew up at Los Alamos National Labs so I've known plenty an experimental physicist. We're all on the same page about this. It's hilarious, however, that you point at Black-Scholes, considering where Myron Scholes ended up. Arrogant economists indeed.
Some industry officials said that Federal Reserve Bank of New York involvement in the rescue, however benign, would encourage large financial institutions to assume more risk, in the belief that the Federal Reserve would intervene on their behalf in the event of trouble. Federal Reserve Bank of New York actions raised concerns among some market observers that it could create moral hazard since even though the Fed had not directly injected capital, its use of moral suasion to encourage creditor involvement emphasized its interest in supporting the financial system.
I suspect that economists may be more susceptible to this pitfall then physicists. The theoretical underpinnings of economics, as you point out in your discussion of theoretically assumptions and practical results, are purely ideological. Economists whose work reflects a world view which is fundamentally optimistic about capitalism are more likely to insist that major recessions--events which cast doubt on capitalisms benevolent nature--are unlikely (if not impossible, the way many economists talked about a financial crisis in 2007).Economists predicted the likelihood of a global recession in 2007 at two in a billion - it was a "six sigma" event. This despite the fact that economics is essentially a history of recessions and depressions. It's not that everyone is stupid - it's that they come to worship the model more than what they're modeling. I would argue that this weakness can also afflict physicists.
Oh ok, later, good luckHe might also anticipate that he could easily adapt established models or techniques in physics to study economic phenomena and impress the profession. If you are one of these people, let me try to disabuse you of these notions.