I knew that if I stayed at this blog long enough, I would eventually be able to link to arxiv (hat tip commenter mclaren):
WARNING: Physics Envy May Be Hazardous To Your Wealth!
Authors: Andrew W. Lo, Mark T. Mueller
(Submitted on 13 Mar 2010 (v1), last revised 20 Mar 2010 (this version, v3))
Abstract: The quantitative aspirations of economists and financial analysts have for many years been based on the belief that it should be possible to build models of economic systems – and financial markets in particular – that are as predictive as those in physics. While this perspective has led to a number of important breakthroughs in economics, `physics envy’ has also created a false sense of mathematical precision in some cases. We speculate on the origins of physics envy, and then describe an alternate perspective of economic behavior based on a new taxonomy of uncertainty. We illustrate the relevance of this taxonomy with two concrete examples: the classical harmonic oscillator with some new twists that make physics look more like economics, and a quantitative equity market-neutral strategy. We conclude by offering a new interpretation of tail events, proposing an “uncertainty checklist” with which our taxonomy can be implemented, and considering the role that quants played in the current financial crisis.
There’s a more general science envy in the nexus of finance, social science, and media. In a few weeks, Bobo Brooks will come out with a book purporting to be about neuroscience which will in fact be a bunch of pop psychology about how conservatives are right about everything.
angler
Definitely a trend, even English profs are in on it:
http://www.nytimes.com/2010/04/01/books/01lit.html?src=me&ref=general
Undercover FBI Agent DougJ
Definitely a trend, even English profs are in on it:
Very good point. I saw this article yesterday and nearly puked.
licensed to kill time
The italics make an already somewhat challenging abstract even more difficult to read, IMHO.
arguingwithsignposts
@angler:
Emphasis mine. Perhaps one of the scientists in our midst could make sense of this sentence? If a theory is unprovable, wouldn’t that mean you couldn’t provide empirical evidence for it?
anonymous
The author whines a little in Part 8 (physics envy?). But the other Parts are nice.
Comrade Jake
If a theory is unprovable, wouldn’t that mean you couldn’t provide empirical evidence for it?
No. It simply means there are things that are true which cannot be proved. See Godel, Kurt.
AB
I tried to form an opinion about this, but my head got nuked instead. Back to studying BECs…
Loneoak
As a philosopher/ethnographer of science, who works closely with scientists on a daily basis, I have to point out that the cultural superiority that scientists smugly acquire has a lot to do with “physics envy.” Scientists are assumed to be able to talk about every realm of human experience, but the rest of us need to shut up, give up our proper share of university funds, and give way to the real knowledge of scientists. It happens all the freaking time in my life, and I work with a group of scientists already convinced of the importance of interdisciplinarity. And when scientists feign upset (“I saw this article yesterday and nearly puked”) if humanists/social scientists want some of that cultural authority, I really get pissed. Good lord, if I puked every time I saw some scientist make or assume an outrageous, over reaching claim about human nature, morality, or social structure my office would smell like a the medical ward of a cruise ship. The economists don’t want only the precision of physics–something I fully acknowledge as one of humanity’s great accomplishments–they also want the cultural authority of scientists. Want to get rid of physics envy, then give up the cultural authority.
licensed to kill time
Thanks for changing the italics, Agent DougJ. Maybe now I can figure out what the heck they are talking about. Hah.
Mark S.
I don’t know if this has much to do with this, but why is there so much wankery about whether markets are rational or not? To me, that sounds about as fruitful a discussion as whether evolution is rational or not.
sukabi
when they can overcome the human condition of greed with science (other than offering lobotomies), then they’ve got something… until then all the scientific calculations will come up short. Greed wins.
The Grand Panjandrum
I’d put medical science in this category as well. Of course hope does spring eternal that it will one day enter completely into the realm of hard science.
Uloborus
Trained in the scientific community (what a strange career path mine has been!) I retort:
Arguing:
You can get evidence for something unprovable. You just can’t get enough evidence. Anecdotes are evidence, just wildly insufficient evidence. More likely, someone’s just using those terms carelessly.
Loneoak:
I wish you weren’t right. I’m quite sure you’ve heard the phrase ‘Science is either physics or stamp collecting.’ And you’ve heard it said as arrogantly as I have.
EDIT: To Panjundrum:
Medicine is hard science. It’s just SO FREAKING COMPLICATED that doctors basically despair of explaining that ‘This treatment reduces mortality rate by 17% – but odds are you’re still going to die.’ is the best you can get.
kid bitzer
’cause physics is da bomb. literally. lotta prestige comes from being able to destroy cities.
gbear
OT via NYT: Happy Easter, boyfuckers.
AB
Okay, so, what is the take-away from this anyway?
Redshift
Ms. Redshift used to be in psychology, and psychologists have this in spades. If you go to a psychology conference, they insist they’re not a social science, and look down on all the other social sciences because they’re a “hard” science. If you mention this to anyone in the “hard” sciences, puzzlement would be the mildest reaction.
They’re in much the same situation as medicine, studying something that is susceptible to scientific inquiry, but so freaking complicated that only pieces of it ever become “hard.” (Other social sciences are “less” hard arguably because groups of people are an order of magnitude more complex than that.)
From what I could see, this led them to a rather bad place. On one hand, seeking the cultural superiority that Loneoak talks about leads them to distance themselves unnecessarily from related fields. On the other, the drive to be more “scientific” causes a lot of papers to be put in terms that have the trappings of hard science, but aren’t really, expressing conclusions much more firmly than are warranted and giving more status to research that was more reductionist, like rat studies and brain-chemistry research.
RSA
Very interesting! (Up to about p. 30, where it started in on stuff I don’t really know much about.) I don’t find their qualitative breakdown into levels of uncertainty very compelling, though. There is a continuum, but their breakpoints seem to be pretty arbitrary, having to do more with what we’re willing to assume and how sophisticated our modeling techniques are than any sharp boundaries in reality.
Loneoak
Redshift points out a very important aspect of all this. The sciences are plural and disjointed in many cases. It is often the case that when researchers in empirical fields have pretensions of being something other than that what they are (biologists as moral philosophers, economists as physicists) they will overstate their case and bungle their empirical claims. When psychologists reach for the authority of “hard science,” they produce shitty research. When psychologists do psychology, they have to potential to produce useful and insightful research. Far from being a reason to sit only within one’s discipline, this is a reason to be aware that all disciplines have limited and limiting practices which shape the criteria for quality knowledge. You have to understand the practices, strengths, and weaknesses of other fields to understand your own.
Redshift
@AB: I think an appropriate takeaway is that formulas do not equal understanding. A lot of fields have “physics envy” because physics has been able to reduce a lot of phenomena to exact formulas and laws (sometimes very simple.) This is actually because many physical phenomena can be isolated and studied separately, but it doesn’t make the real world where they’re all interacting any less complex.
Paul Krugman writes quite a bit about how economics is enamored of models, and a lot of economic research is about exploring the implication of an interesting model, not testing whether it matches the real world. I can’t recall if he says this, but I suspect that’s because such testing is really hard, because separate elements can’t be isolated and controlled experiments can only be done on small scale systems.
Using formulas and equations is like using numbers — they can be legitimately used to make research more rigorous, but they can also be used to make it sound more authoritative without making it a more accurate representation of the real world, and it’s hard for non-experts to recognize the difference. Economics is different from other fields in this respect because it’s given a lot more credence in matters that affect our lives. At its best, economics is a science. At its worst, it’s ideology dressed up in equations.
NobodySpecial
Yeah, I’m sorry, Bush Sr. was almost completely correct. Had he said ALL economics is voodoo, he would have been.
Chuck Butcher
I admit that it has been many years since I was in college studying Mech Eng. None of us thought we were scientists, our job was to understand what scientists found and use in practical application – ie applied science. That meant a lot of science classes – a shit load of them in a lot of disciplines.
In the interest of broadening myself and sheer curiousity I took some social sciences courses. I don’t know how to break this to the psychiatry, economic and some other disciplines, but applying science to something is quite a bit different from something being science. Humans, whether in physical or mental or behavior aspects are plenty variable enough to violate that essential piece of provability and repetition of result.
It isn’t an insult to recognize something as an art with science applied to it.
Redshift
As a followup to that point, one of the most tragically hilarious aspects of our politics is listening to people declare that we must ignore the results of climate research because it’s not proven or not reliable, and cite their preferred economists who tell of dire economic consequences if we address climate change.
Martin
I’ve never understood how economists can be so stupid on this point. Physics is predictive because the objects that you are modeling don’t have free will to react to the model, rendering it worthless.
That’s also the reason why markets are not rational. They can’t be rational because the whole point of the game is to get the other players to be irrational. Is there any point in the history of economics that you could point to the majority of the participants as being rational? The use of revolving credit alone should debunk that idea. Or bottled water. Shit, the list is endless. Rational actors are bullshit. They don’t exist.
Alex S.
@ Martin:
Heh, that is a fantastic argument. I will use it extensively.
Hart Williams
@ loneoak
Not just scientists. Doctors, Psychologists, etc. etc.
José Ortega y Gasset pointed this out in the 1930s: In essence, he argued, we had reached a point of increasing specialization where “experts” were virtual idiot savants within a very narrow range of knowledge, and virtual morons OUTSIDE of that sliver.
But, he continued, they presume that SINCE they are experts within their narrow field, they are experts in ALL fields, and are given (implicitly) to making grand “expert” pronouncements on subjects about which they know virtually nothing — certainly nothing more than the average layman would know.
Nothing seems to have changed, except for the current mania for interpreting other disciplines through THEIR specialization, as though that were meaningful and crackerjack.
cf. “The Dancing Wu-Li Masters,” “The Tao of Physics,” “The Tao of Pooh” et al, ad nauseum.
AB
I guess I still don’t understand the term ‘physics-envy’.
Presumably this means that people in soft-sciences are envious of physics because physics can do something, and it seems to be that physics is supposed to be able to predict things perfectly. But as far as I could tell from the paper, the authors understand that physics isn’t meant to predict things perfectly, it just makes idealized and simplified models and treats other factors as perturbations to the simplified model. So what is the issue?
Svensker
@ gbear
These @#!#%@##s have the audacity to compare themselves to the Christ on Easter Sunday? Jesus, who was reviled because of his innocence, his purity, and his willingness to challenge authority, is compared to men abusing their authority to molest boys in their care and getting called on it? OK, now, I am really pissed. Their response to this problem in the Church has been to victimize their victims all over again, while cloaking themselves in righteousness. Evil bastards.
Redshift
@Martin: I would argue that makes an economic model based on the idea that everyone is acting perfectly rationally stupid, but it doesn’t make the idea of modeling behavior of participants in a market stupid. A market is like a gas, it has emergent properties that can’t be effectively predicted by figuring out what an individual particle ought to do and adding them up. And it doesn’t help that in this case, the idea of how an individual particle behaves is also wildly incorrect.
Chuck Butcher
Svensker,
Martydom is a rather large feature of Catholicism and other religions.
Eric U.
even physicists play with models, which are only an imperfect representation of the physical world.
As an engineer, I always wondered about the “quants” that were taking over Wall Street. What we’ve learned is that an awful lot of them were just figuring out how to skim profits from their firm’s customers by methods that should be or are illegal. My personal opinion of the markets is that you can’t model stupid. I’ve made a lot of money assuming that there are a significant number of stupid investors. Certainly never lost money assuming that.
Amanda in the South Bay
@ Loneoak
I sorta see that here in Silicon Valley, where being a super duper programmer, etc. means that you have some unique insight into stuff that has nothing do with programming. (See Ray Kurzweil and some of his kookier views).
Also, a lot of the people who are using arcane quantitative methods in economics and finance come from science/enginneering backgrounds, and look at economics as being virgin territory for being a big fish in a small pond. Yeah, economists proper need a fuckload of math, but lets not forget that its a large influx of mathematicians, etc. who are taking over economics and finance.
Amanda in the South Bay
Also, Wiki the Salem Hypothesis-that a disproportionate number of people with engineering backgrounds (or science fields outside of anything dealing with evolution) are creationists.
Mark S.
Well, you might think the stupidity might balance itself out and on the whole most people are acting rationally. But I don’t think most economists take enough into account fraud and the fact that some of these actors have become so big that they can manipulate the market.
MattR
It may be an urban legend, but when I was taking economics courses as an undergrad one of my professors told me of a study that showed that economists were more likely to act rationally (in an economic sense) than the general population. The problem seems to be that economists forgot this detail and assumed that everyone would be like them.
Bill E Pilgrim
In a talk at Harvard during an event put on by Stephen Pinker and others to commemorate the birth of the cognitive revolution, Noam Chomsky said that basically this is what had steered psychology into the swamp of behaviorism for so long.
It was an attempt to be entirely quantitative in an imitation of physics he said. Or, so they thought, he added, it was actually just bad science and ignored data that was staring them in the face.
The video is youtubeable out there somewhere, but pardon me for not digging it up.
priscianus jr
The idea that there’s a unified theory of physics and economics goes back to British economic philosophers of the 17th century. The irony is that by concocting bogus mathematical models of economics that supposedly parallel physical models, they ignore the very real relations between economics and physics, such as the fact that natural systems have load capacity limits (the number of organisms that can be supported by a given ecosystem), the concept of biomass, primary productivity, etc., etc.
http://www.phys.uu.nl/~wwwfm/Research/Background.html
Mark S.
@Bill E Pilgrim
I always liked this quote of Chomsky about ev psych:
Uloborus
What is physics envy about? Well, from my experiences learning to be a scientist, it’s about math. A physicist can run a lot of nice numbers and make a model and test it really easily and do really easy statistical analyses. Much more often than in other fields a physicist can test if he’s right or wrong.
This is very important and very big. A physicist can show an equation describing how gravity distorts time, run a few tests, and more or less prove not only that it happens, but that their equation is correct.
On the other end of the scale you have psychologists. They have an immense amount of data. They’ve demonstrated any number of truly fascinating facts about how people think. But understanding how it all ties together? Predicting people, or controlling how they think experimentally? Forget it. And you have very few equations.
So the physicists feel like the psychologists haven’t proven anything and are just guessing. They look down on that and think it’s easy. And instead of it being impossible to conduct the kind of controlled experiments with people you can with particles being a redeeming factor, it’s just further reason to dismiss psychology as a ‘soft’ science.
I’m oversimplifying slightly – but not much. In general the scientific community has this attitude, and the more numerical and testable your subject is, the more you’re a Real Scientist.
Anne Laurie
The inverse of “physics envy”, of course, is the popular joke that social cripples take refuge in the hard sciences because it’s easier for them to create abtruse models of invisible particles than to figure out how to react to the subtle and ever-shifting patterns of human social behavior. And then physics eventually pushes its theories so close to the edge of our current modelling abilities as to once again require something more like religious faith than ‘logic’ to pursue them. One of the funniest sequences in the BIG BANG THEORY involves a theoretical physicist breaking up with the potential father of her children over string vs. loop theory, using the folk template of arguments over interfaith marriages… “We can’t ‘just let them decide for themselves’, they’re children!”
Uloborus
Addendum:
This leads physicists to overreach themselves, too. Their equations are such hard science, they haven’t bothered to prove a lot of them. They’ve got the equation. They can extrapolate from that!
Not really meaning to bang on physicists. Physics is important and physicists are great and all. Just explaining a prejudice that absolutely exists in the scientific community. ‘More experimental than thou.’
aaron
sounds like the ‘science’ that explain that even though people like krugman and others were right about the mortgage bubble and meltdown, the lack of ‘hard science’ really excuses the performance of those who enabled it yet didnt see it coming.
In other words its ass covering crap.
Anne Laurie
It can be argued that the intersection here — at the heart of the current Crash — is that a certain class of “rational economists” grossly overstated the reliability of their models due to their own psychological deficits and/or personal greed, and a certain class of “financial geniuses” manipulated those economists’ innocence of psychology to
stealcapture a proportion of the general financial wealth out of all proportion to their actual social utility. Certainly neither category of socialparasiteactor could have succeeded so well outside of their partnership.Svensker
@ Chuck Butcher
Well, yeah, but not while pretending that the person DOING the persecution is the martyr. That would be like having Pontius Pilate and the Sanhedrin as the persons that Christians revere.
themann1086
Right; it’s not so much that physics is the most pure science or anything; its models, though, are both easy to understand and fairly accurate (at least for the layman’s purpose). Sure, things get a lot harder when you add in, say, air resistance, or you’re dealing with fast or tiny objects, but the basic, “simple” backbones of physics are good enough. As you get into more complicated systems (biology, sociology, etc) models get a lot more complicated and a lot less accurate.
Or, what XKCD said.
priscianus jr
Loneoak (8)
i think you nailed it (I am a historian of science). However, regarding the Times article that angler (1) cited (about cognitive literary studies), I know a little about this field, and in my opinion the article was very poor. I hope this does not come off sounding arrogant, because I don’t think you have to be the proverbial rocket scientist to understand the basic concepts involved. But she just did the lazy journalist thing, her main goal being to fill up a column by making it sound cute, recherché and somewhat goofy. Also, the development of cognitive poetics (aka cognitive stylistics) s not simply a quest for prestige, but a positive attempt to address a very serious intellectual crisis in the field of literary studies. It’s closely related to the work of such well-known theorists as George Lakoff and Umberto Eco.
Amanda in the South Bay
@MattR
I bet you dollars to doughnuts most economics professors who specialize in some sort of quantitative economics have one or more graduate degrees not in economics, though.
Martin
@Redshift:
No, it’s not. The gas doesn’t go off and read your paper about how the market should react and then create a marketing strategy or a financial product or whatever to fool everyone into thinking they are acting rationally when they’re doing anything but.
That’s the whole point of regulation – to fix the parameters of your model so that some agency can’t come along and rewrite them and make the model useless – that doesn’t happen in hard sciences. Models are reproducible in science because the initial conditions can be fixed. But we have such a thin veneer of regulation in this country that it’s almost pointless to expect any real economic model to work – unless the thing you are modeling is how someone is going to come along and fuck with everyone’s models because the regulation sucks.
Mike Furlan
http://www.fooledbyrandomness.com/jorion.html
gnomedad
@ Anne Laurie:
Here ya go.
jl
Economic statistican here (which becomes ‘econometrician’ when I am in a fit of physics envy).
Don’t have much to add for myself, just references to other researchers people might find interesting.
For analogies between physics and economic theory, most in depth work is by Joseph L McCauley. But also read J. Barkely Rosser Jr, who comments on some of mcCauley’s overly rash jumps to economphysics. Rosser Jr also has written interesting things on lack of computability of many economic theories, which casts doubt ability of economics to overcome its physics envy.
Level 4 and 5 uncertainty reminds me of economist Gracilia Chichilnisky’s ides of ‘endogenous uncertainty’ which applied to recent financial crashes, focuses on securities whose value depends on endogenous actions of other agents, not states of nature that occure exogenously to decisions of economic agents. She found such a system is inherently unstable and will produce booms and busts and crashes. She claims the optimal approach to limiting damages of crashes in these kinds of economies is old fashioned limits on leverage and arbitrage, and adequate reserve requirements by anyone playing the role of lender.
I think that the article’s discussion of copulas misses an important point. One of the Li’s contributions was that if there was not enough data on fundamentals, or long enough time series on fundamentals, IF you assumed some set of securities prices were efficient, you could substitute the securities prices for the unobservable prices of fundamental economic goods. This might work if everyone else was using fundamental prices, but if everyone started using supposedly efficient securities prices as inputs to the model, then everyone is just modeling everyone else’s securities price models, and maybe everyone ended up being herding-type noise traders?
I don’t think that the article emphisizes enough how the mathematicians and economists who invented some of the quant techniques were running around warning people that they were misusing them before the crash. Robert Engle and I think Shreve and Bertsakis were saying this kind of thing before the crash.
The analogies between modern economic theory and thermo were mathed out by the late Paul (not Robert) Samuelson, and if you search ‘economics thermodynamics’ in journals like Physica A, Engineering Economics and Ecologicial Economics, you will find lots of detailed treatments.
The idea of the role of physical and thermodynamic constraints on economic activity has been studied by well known standard economists, such as Robert Solow (siren alert: Nobel memorial prize winner). But the results were kind of trivial: if we can improve the efficiency of resource intensive technology infinitely we can keep growin’ with limited resources. Wow. I think ecological and environmental economists are looking at the matter more closely, with numbers, now.
I agree with commenter above that the availability of information is a big problem. As far as I know, the ‘Radner equilibrium’ (by Roy Radner in 1968) is the foundation for financial market equlibrium theory. Radner pointed out in plain English that his equilbrium blew up if anything knoced it away from equilibrium prices and consensus rational expectations equilibrium. It was unstable. I think this little problem has been ignored by most people.
jl
Also, Andrew Lo is a financial economist:
http://web.mit.edu/alo/www/
He wrote Econometrics of Financial Markets with Campbell and MacKinlay, Princeton Univ Press 2000.
henqiguai
themann1086 @45
For too, too many years I had always presented that hierarchy as “a technician is an applied engineer is an applied physicist is an applied mathematician”. Of course things get immediately messy when you start looking at some of the more theoretical branches of all of the classic sciences. Oh, and that hierarchy ? Yeah, I’ve lived that path. Waitin’ for the next iteration…
liberal
Uloborus wrote,
But that’s the thing. AFAICT economists don’t actually have physics envy; they have math envy. In physics, models are tested for how well they conform to nature. Not so much economics. (Which makes it more like math, which is not a science per se.)
jl
liberal @54
An old economics joke, often told by mathematicians, is that economics is applied mathematics with no applications.
I thought that was a kneeslapper when I first heard it. or I was deeply offended. I forget now.
slightly_peeved
I do know of one historical example of scientists who thought that they had human thought down pat, and put their money where their mouth was. They made serious claims on their ability to understand human behaviour and even reproduce it.
Said area, Artificial Intelligence, almost collapsed in the 80s, and still suffers a pretty bad reputation for claiming stuff it can’t deliver on.
Anyone claiming they can scientifically determine how people think should be reaaaaalllly careful about claiming any form of certainty.
@themann1086:
Another thing to remember – most of physics is easily testable, and the tests are repeatable. Biology, not as much, sociology not at all.
Mike Furlan
So if we had 100,000 years of market data, then you might be able to draw some reasonable conclusion about how returns are distributed.
Otherwise, the only reasonable opinion is “I don’t know.”
But you can’t get a job that way, much better career move is to lie.
mclaren
@Uloboros:
Not so much. See “Believing in treatments that don’t work,” The New York Times, 2 April 2009.
One of the biggest reasons for the exponential explosion in health care costs (aside from corruption and collusion throughout the medical-industrial complex, from lowly medical devicemakers all the way up to health insurance cartels) is that most doctors are not very bright and have no concept of the scientific method, and as a result they prescibe lots of treatments and tests that don’t work and actually make things worse. The evidence that doctors are not very bright proves overwhelming: 48% of the applicants are accepted to U.S. medical schools — this tells us that only the really dull 50% of the population gets turned down for medical school. Your plumber is probably smarter than your doctor. Doctors, in fact, work very much like plumbers, with rules of thumb rather than by scientific reasoning and empirical evidence. In fact, the current practice of medicine has strayed so far from the scientific method that a new movement is afoot in the medical profession calling for doctors to practice “evidence based medicine.” The mere fact that we need a movement among young doctors to agitate for “evidence based medicine” should tell us there’s a big problem in the medical profession in America.
@Martin:
Exactly. The way I like to put it is this: an astronomer never goes out and focuses a telescope on a distant nebula which then notices that it’s being observed and changes its behavior. This makes the hard sciences much simpler to deal with than economics.
Ultimately, economics boils down to modeling human behavior. Alas, human behavior tends to be governed by emotions and no one has yet succeeded in modeling human emotions with mathematics. Indeed, merely suggesting an equation like “Love^2 = sech(hate)/log(envy)” suffices to reveal the ridiculous nature of the attempt.
@AB:
The difference is this: physics abounds with mathematical models of nature in which, the more accurately we measure the real world, the more closely we approach the results of the mathematical model. This occurs in special relativity, general relativity, quantum chromodynamics, physical chemistry, and a wide variety of other areas. When economists make even the most rudimentary predictions, however, observe reality tends to contradict their calculations. For example, rational expectation theory predicts that Martin Luther King could not have led the voting rights marches in the deep south because the increase in marginal utility of gaining the right to vote is mathematically not nearly as great as the risk of being killed.
@Uloborus:
Kahneman and Tversky won their Nobel prize in economics for their work revealing the many cognitive biases from which we suffer. See (pdf)
“Judgment under uncertainty: heuristics and biases,” by Amos Tversky.
Recent books worth reading include Mean Markets and Lizard Brains by Terry Burnham and Animal Spirits by George Akerloff.
Over the last 10 years or so the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel (not actually a Nobel prize in economics, but everyone calls it that) seems to have recognized its error in awarding prestigious prizes to a series of kooks (c.f., Milton Friedman) who claimed that capital markets were perfectly efficient and self-correcting, and who then went on to advocate the kind of bizarre laissez-faire market deregulation that wrecked the world economy. As a result since 2002 the Sveriges Riksbank Prize in economics has been awarded to researchers who have revealed the inefficiency of capital markets, the lack of accurate information available to the general public, and the irrationality of the participants.
Interestingly enough, Dan Ariely of MIT has published papers (such as “Effort for payment: A tale of two markets”) which show that how hard a person works is determined by what kind of market that person thinks they’re dealing with. If it’s perceived to be a monetary market, that person will work less hard if pay decreases; but if it’s perceived to be a social market, where reputation is the reward instead of money, there’s no fall-off in how hard people will work in return for a reward.
Social markets based on reputation have their own irrationalities, as I’ve pointed out repeatedly about the commenters in Balloon Juice.
Hart Williams
And now I remember why economics is called “the dismal science.”
http://en.wikipedia.org/wiki/The_dismal_science
bob h
One problem where we can trust physics entirely is global warming. The physics is very old and impossible to argue with. But Republicans choose to deny it.
Lurking Canadian
I agree with your general point, that doctors are not necessarily geniuses and we should not hold them up as tin gods. I think the supply of doctors is artificially restricted in order to keep doctor salaries high and a lot more people could become doctors than do become doctors.
But the statistic you quote above doesn’t mean what you claim it means. The only people who apply to medical school already have a four year science degree with honour roll grades and high MCAT scores, because others know they need not apply. So the “dumb 50%” isn’t the dumb 50% of the population, it’s the dumb 50% of the top 5% of students in the 25% of science students in the 30% of the population who graduate university. By my math that puts us way the hell and gone at the right hand edge of the curve.
This does not mean that your plumber might not be smarter than your doctor. There are some dumb undergraduates in the world, and even more dull and incurious ones. But it does mean that by-and-large doctors can be expected to be like any other professional population.
psycholinguist
Okay, let me stick up for the psychologists for a moment.
This notion of psychologists need to do the reductionist program to feel legit does exist, won’t deny that.
But that can work both ways – the silliest shit I’ve seen comes from the physicists from the bottom end, and the economist from the top, trying to do psychology. We (psychologists) exist because our object of study isn’t accessible from physics – there’s an old paper by Fodor on the disunity of science, and I would recommend it to anybody who thinks psychology is just a placeholder until the really good brain scanners are developed.
The problem for psychologists, unlike other sciences (at least to the same degree) is that we get co-opted by all the batshit crazy people like Dr. Phil who call themselves psychologists. How’d you like to walk around all day with a Dr. Laura sign around your neck?