Libertarian Jackass

"Life is short, but truth works far and lives long; let us speak truth." -- Schopenhauer

Wednesday, October 08, 2003

"Nonhuman entities react according to regular patterns; man chooses"

After two people won the Nobel Prize in Economics for "analyzing economic time series," I'm beginning to wonder if the field of economics is the only field that heralds an individual for not making any contribution to human knowledge. Consider one Nobel-winning contribution:

He found that the concept of autoregressive conditional heteroskedasticity (ARCH) accurately captures the properties of many time series and developed methods for statistical modeling of time-varying volatility. His ARCH models have become indispensable tools not only for researchers, but also for analysts on financial markets, who use them in asset pricing and in evaluating portfolio risk.

While these guys sit around fiddling with data, it is interesting to note that "in the mathematical treatment of physics the distinction between constants and variables makes sense; it is essential in every instance of technological computation. In economics there are no constant relations between various magnitudes. Consequently all ascertainable data are variables, or what amounts to the same thing, historical data. The mathematical economists reiterate that the plight of mathematical economics consists in the fact that there are a great number of variables. The truth is that there are only variables and no constants. It is pointless to talk of variables where there are no invariables."

If in the realm of human action there are no constants, how can one predict the future of the "financial markets" using history (statistics)? I realize the whole point of statistical analysis is to grasp the relationship between factors, but without "constants" statistical laws do not exist.

Is it any wonder that one of this year's winners has a B.S. in Physics?

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