Tuesday, April 21, 2009

Financial crisis and economics at Perimeter

I'll be attending an interdisciplinary conference at the Perimeter Institute, May 1-4: The Economic Crisis and its Implications for The Science of Economics. It should be a combustible mix of personalities ;-)

I give the economists credit for entering the lion's den of theoretical physicists. Here is how J. DOYNE FARMER, of the Santa Fe Institute and Prediction Company, described a meeting of this type that occurred 20 years ago.

With some justification, many economists think that the entry of physicists into their world reflects merely audacity, hubris, and arrogance. Physicists are not known for their humility, and some physicists have presented their work in a manner that plays into this stereotype. The cultural barrier between the two groups will be difficult to overcome. This schism was already evident at a conference held at the Santa Fe Institute in 1988 titled “The Economy as an Evolving Complex System.” Roughly half the participants were economists and the other half physicists. Although many of the physicists were largely ignorant of economics, that did not prevent them from openly criticizing the economists. At one point, Nobel laureate Phil Anderson said, “You guys really believe that?” At another point, Larry Summers (now Secretary of the Treasury) accused physicists of having a “Tarzan complex.” This was not just a turf war. Whether due to nature or nurture, this conference clearly showed that there is a deep epistemological divide between physicists and economists that is difficult to cross.

The first day talks are listed below. Perimeter is usually good about putting their talks online, so you can probably enjoy them yourself without schlepping all the way to Canada :-)

9:15 - 10:00 Eric Weinstein Conference Overview

10:00 - 10:45 Nouriel Roubini

11:10 - 11:55 Nassim Taleb

11:55 - 12:40 W. Brian Arthur Neoclassical Economics and its Policy Biases: Is there an alternative?

12:40 - 1:00 Panel Discussion with Speakers

1:00 - 2:30 Lunch Break

2:30 - 3:15 Emanuel Derman Scientists, Sciensters, Anti-Scientists & Economics

3:15 - 4:00 Andrew Lo The Adaptive Markets Hypothesis and Financial Crisis

4:15 - 5:00 Richard Alexander

5:00 - 6:00 Panel Discussion with Speakers and Wrap Up


Ian Smith said...

The "science" of economics?

Not one of these people has ever done any honest work and not one has ever run an honest business.

They're academics. They're a joke.

The physicist doing the most useless "work" on black holes seeks to be more useful by doning "work" on the "science" of economics. It's so rediculous it hurts.

Sabine Hossenfelder said...

Well, as the reported and documented Nice Guy Of Physics, I guess Lee is the right one to pull this off.

Last time I asked though they weren't sure whether the talks will be recorded. I would certainly be in favor of it (if only so I don't have to get up at 8am on what happens to be a national holiday in Germany).

Sabine Hossenfelder said...

Oh, and you shouldn't miss my Playlist to prepare for the conference ;-)

Steve Hsu said...

Bee, thanks for those links -- I love Paul Young's Love Of The Common People but hadn't seen the video in about 20 years :-)

Ian Smith said...

träges Geschwätz!

David Coughlin said...
This comment has been removed by the author.
Luke Lea said...

I would guess it is an IQ divide, something that is guaranteed to fuel a lot of resentment and condecension.

Physics professors at top universities typically score a couple of standard deviations higher than their counterparts in the economics departments.

Seth said...

Sounds like a fascinating conference. I look forward to watching 'the dailies' (so to speak) over the internet.

If you think string theorists have been operating at an "empirical deficit" these past few decades, consider what "the econ" tribe has to cope with. They have lots of data, but no real means of introducing controls. Sure there are time-series techniques for attempting to isolate variables, but these methods are pretty limited -- especially when you compare them to the enormous complexity of human economic activity.

'Econ' are folks who have come to terms with this basic reality. Some just "don't get it" and imagine they are doing better science than they are. Others are socialized into the tribe and just kind of "forget" day-to-day that there's this elephant in the room. It has no effect on their working lives, since no one else can do better. Life goes on.

But there's a tiny minority -- and a guy like Doyne Farmer is the epitome for my money -- who are deeply interested in the problem space, fully recognize the empirical difficulties, yet are completely unwilling to just "go along" with crappy methods.

But of course, Farmer got initiated into the 'phys' tribe and has been staging raids into 'econ' territory (Derman is another good example, though he has gone native to a degree). It's a pity that the 'econ' regard this simply as trespassing rather than trading with the new-comers and applying the new tools in their own 'culture'. Some will, eventually, and build major careers on it. But in the meantime the establishment isn't happy with the trespassers.

And the idea of Larry 'Tarzan' Summers calling anybody *arrogant* is good for a belly-laugh! Thanks for sharing that anecdote :)

CW said...

Thanks to Arun on Bee's blog, my attention has been drawn to this recent op-ed on the economic perspective of Frederick Soddy, chemist and collaborator of Ernest Rutherford.

Frederick Soddy, born in 1877, was an individualist who bowed to few conventions, and who is described by one biographer as a difficult, obstinate man. A 1921 Nobel laureate in chemistry for his work on radioactive decay, he foresaw the energy potential of atomic fission as early as 1909. But his disquiet about that power’s potential wartime use, combined with his revulsion at his discipline’s complicity in the mass deaths of World War I, led him to set aside chemistry for the study of political economy — the world into which scientific progress introduces its gifts. In four books written from 1921 to 1934, Soddy carried on a quixotic campaign for a radical restructuring of global monetary relationships. He was roundly dismissed as a crank.Read the entire piece.

CW said...

[PS: I think Google broke something in the Blogger comment editor. The final sentence was supposed to be in a separate paragraph.]

Scott said...

"Physics professors at top universities typically score a couple of standard deviations higher than their counterparts in the economics departments."

Possibly a function of being bright and interested in money leads to employment that leads to high pay...as opposed to being bright and interested in information.

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