Mark Thoma highlighted a recent article, A Crisis at the Edge of Physics. You might wonder why an economist would be interested in a crisis going on in the physics world. For those who don’t follow economics, his explanation is probably not too helpful, “Seems like much the same can be said about modern macroeconomics (except perhaps the ‘given the field its credibility’ part)…” Let me discuss this for a moment, because it is really quite interesting.
As I’ve long speculated, certain kinds of physics are pushing up against the limits of knowledge. High energy physics is destroying particles with more and more energy, leading to ever more bizarre theories of the cosmos. Dark matter and dark energy are showing the cosmos to be mostly “things” we only know don’t seem to exist the way regular matter and energy does, but still interacts with it in unusual ways. Could it be that there is nothing else to know and that theoretical constructs about the universe will not be verifiable through experiment? Some physicists think so, “They criticized a newfound willingness among some scientists to explicitly set aside the need for experimental confirmation of today’s most ambitious cosmic theories — so long as those theories are ‘sufficiently elegant and explanatory.'”
This is shocking because for decades now, scientists have been beating up on postmodern literary theorists who claim that there is no objective truth. And now we have physicists (Of all scientists!) claiming that their theories don’t need to be right but instead just “elegant” and “explanatory.” This has long been the basis for supersymmetry theory. But I have to say, I’m not sure this is the wrong approach. Maybe at the extreme edges of science, experimentation will be useless. Clearly, we should still be doing it — or trying to. But it is possible that we can probe only so far when it comes to the creation of the universe.
This is really interesting, however, in how it relates to economics. Far from looking at things that call into question the universal limits of knowledge, economics deals with pedestrian issues. Economies may be very complicated, but there are no fundamental constraints on understanding them. However, many economists on the right have in fact given up worrying about real world data. They have their Real Business Cycle (RBC) models that are “sufficiently elegant and explanatory” that it doesn’t matter if they have no relationship to the real world.
In the past, I’ve written about my own experience with large scale environmental models. There is a strong urge to get lost in those models — to see them as more real the the world they supposedly model. A good example of this kind of thing in economics is the use of Dynamic Stochastic General Equilibrium (DSGE) models, of which RBC models are part. The idea with these models is to derive macroeconomic outcomes based upon microeconomics. I’m not an economist. But I can tell you that in environmental models, it is usually best to not use micro-scale models in macro-scale models. For example, it is best to model carbon respiration with one big leaf rather than with a detailed forest model. Clearly, there are times when you want a detailed forest model. But in general, macro-scale models are best when they are based on simple empirical models.
And why is that? To me, the biggest issue is that the more elements you add to a model, the more degrees of freedom you add. So you end up with a model that is entirely dependent upon calibration. And the model loses its meaning because its results are swamped by exactly how the calibration is done. What has happened in the RBC models is that economists have given up on modeling the real world and use it just to look for elegance and explanatory power. But it doesn’t matter if the person doing this calls herself a physicist or an economist. She is really just a mathematician — but a particularly useless one.
As I indicated before, this is somewhat defensible with regards to high energy physics and cosmology. These fields are already largely mystical. But in economics — a subject that is supposed to be above all useful — this is just madness.
For powers long accustomed to tranquility and without experience with disaster, this is a hard lesson to come by. Lulled by a period of stability which had seemed permanent, they find it nearly impossible to take at face value the assertions of the revolutionary power that it means to smash the existing framework. The defenders of the status quo therefore tend to begin by treating the revolutionary power as if its protestations were merely tactical; as if it really accepted the existing legitimacy but overstated its case for bargaining purposes; as if it were motivated by specific grievances to be assuaged by limited concessions. Those who warn against the danger in time are considered alarmists; those who counsel adaptation to circumstance are considered balanced and sane, for they have all the good “reasons” on their side: the arguments accepted as valid in the existing framework. “Appeasement,” where it is not a device to gain time, is the result of an inability to come to grips with a policy of unlimited objectives.
This is a picture of soldiers represented in an almost a Homeric vision of bravery — a wounded man being carried to safety as he fires at the enemy. So it shouldn’t be a surprise that it is an artistic construction made with toys. But it became a very big deal last week when a 
If you were a decent politician — one who cared about your constituents — you would plan ahead. If there was a tsunami coming, you would evacuate the coast and get clean-up crews ready for the resulting damage. But it seems that on the right in American politics, such basic actions don’t make sense. I think this is all part of the Republican Party exchanging competence for ideology. Because there are Republican governments all over the nation that are facing a major — and largely predictable — catastrophe: the ending of federal subsidies for people buying health insurance on the federal exchanges. And these governments are doing nothing to prepare.
On this day in 1892,