Economics Needs A Scientific Revolution
Here is a short piece on the necessity of empirical measurment and scientific approach for classical economics. The author argues that economics as a field has a dismal record of predicting behavior and blames theories and weak assumptions for the current results.
Article Abstract & Introduction (Via Arxiv)
I argue that the current financial crisis highlights the crucial need of a change of mindset in economics and financial engineering, that should move away from dogmatic axioms and focus more on data, orders of magnitudes, and plausible, albeit non rigorous, arguments.
Article Excerpts (Via Arxiv)
“Compared to physics, it seems fair to say that the quantitative successof the economic sciences is disappointing. What is the flagship achievement of economics, apart from its recurrent inability to predict and avert crises, including the current worldwide credit crunch?”
“Of course, modelling the madness of people is more difficult
than the motion of planets, as Newton once said. But the goal here is
to describe the behaviour of large populations, for which statistical regularities
should emerge, just as the law of ideal gases emerge from the incredibly
chaotic motion of individual molecules.”
is built on very strong assumptions that quickly become axioms: the rationality
of economic agents, the invisible hand and market efficiency, etc. An
economist once told me, to my bewilderment: These concepts are so strong
that they supersede any empirical observation.”