The Non-Science of Economics

Posted On: Tuesday - June 20th 2017 6:03PM MST
In Topics: 
  Websites  Global Financial Stupidity  Economics

Commenter "Heidelberg", under the post Mark Steyn 3-hour interview on CSPAN-2 BookTV, left an unrelated comment with this link on economics. This site, "failed evolution", has the banner "the unbalanced evolution of homo sapiens". It looks like a decent site, at first glance and the blogroll seems "fair and balanced", though some of the stuff is greek to me - no, I mean some of it is written in Greek, so not particularly readable for most of us.

Anyway, the short article is on economics, and the author, Mr. system failure due to insufficient evolution (what was his mother thinking?! Probably this is a Greek thing, but still better than LaTundra - More on kid's names here) theorizes that the non-science of economics cannot predict economic events well due to a parallel to Physics' Heisenberg Uncertainty Principle. It's a pretty good parallel, as Heisenberg proved in theory that at this very small quantum-level of matter, the act of observing matter would change it's state or condition. In economics, because there are government people, big-businessmen, pundits and the like always predicting what will happen, their influence on the system via psychology of buyers and sellers changes the outcome.

That one thing does not stop economics from being a science, but there is another major problem that does. Only the very simple supply/demand and elasticity concepts can be seen to work in only a very small market, to the point where some good predictive numbers can actually be obtained. A small sailing club where dues come in and expenses are known may be an example. The elasticity of demand when prices are changed, all that stuff could be measured pretty well. A small isolated island economy that trades in seashells could be an example. This stuff doesn't scale up, though, and things get hard to predict quickly, even without heavy-handed government fuckage with the markets. Markets like the stock market are even worse in terms of conforming to any decent economic theory, because, though loads of information is out there, many in the market are not privy to, or don't even care about the information on real value of companies or assets. People are making money off of other people's decisions, so it becomes very psychological very quickly. Those of us who have been around our share of nutcases or stay home during the wrong few certain days of the month know that predicting of behaviors is not science at all, but a worthless waste of time.

Between the Greek guy's point and the point of the last paragraph, prediction of market prices is like prediction of any weather out past 4 days - complete bullshit, basically. This brings us to one of our favorite websites:

(What's that small column of junk through the "d"? - that's a comment - Zerohedge comments are useless on some browsers!)

Now, I've read that site for a long while, as the Peak Stupidity review states. I've had lots of praise for the commenters (when I can read them) on the site. I will say something about the people, a bit more so a few years back, who read the site for market advice, not the big picture of the problem, as I read it for. These, now, seem to be less than 10% of the commenters, as the types of people has definitely changed. First, of course, I think it's a waste of time to read this site for direction on how to invest, per what was just written 2 paragraphs up-post.

However, the 2nd issue is the hypocrisy of some of the comments on the stock market. Rightfully, many of these people call out the government distortion of the markets via the Federal (private) Reserve Bank, the bailouts to the big banks, and crony capitalism in general. "The whole system, it's all rigged in favor of the big guys!" "The market is working completely backwards due to the idiot business version of the Lyin' Press." "I want to short this stuff because it's all way overvalued, but they keep propping it up!", etc. OK, point taken, that this is no free market. Then, why are you still participating?

The 2nd part of this hypocrisy is the, also rightful, condemning of the American economy's reliance on FIRE, Financial, Insurance, Real Estate*. These are big money industries that produce nothing of worth - they DO! NOT! CREATE! WEALTH!, but just move money around. OK, point taken that this is not a productive healthy economy. Then why are you still participating in the Investment business?

Well, there are some people who really practice what they preach on there, and talk gardening, off-the-grid money managing, and off-the-grid all sorts of things, up to complete prepper stuff. These comments are what make the site well worth reading. Don't read ZeroHedge for market advice. Don't read anything for market advice - it's all rigged for the big guys that run the computer trading-programs. Don't forget, if you shop around you can get up to 0.25% annual compounded (haha) interest on a Certificate of Deposit. Thanks, Federal Reserve!

* I would substitute Education for the 2nd part of Real Estate, as it is also a big non-productive sector nowadays.

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