> There's plenty more to the economy, and to economics, and to the crisis than predicting stock prices. Reducing the question to stock prices is avoiding the question, IMO.
You're absolutely correct. The point I was trying to make is that the economic model we use drastically under-predicts "rare" events like the 2008 crash. I wasn't trying to make a statement about the "cause" of the crash, so much as state that the model under-predicts such events.
> Not really. Newtonian physics is inaccurate in ways that are hard to measure at everyday human scale. The 2008 crisis was pretty noticeable, all over the world. I think an apt physics analogy would be something like getting a nuclear explosion out of starting a fire (technically, out of buying a house), something that's been done successfully for millennia without major incident.
All theoretical models are based on arbitrary axioms/assumptions. The degree to which they predict reality successfully is largely predicated by the degree to which the underlying axioms correctly reflect reality. I don't think this is a binary thing. I don't think that the field of economics is "invalidated" because it "failed" to predict the 2008 crash. I might argue that it's "less" correct or reflective of reality than Newtonian mechanics is, but again, I don't think the degree to which our predictive systems represent reality is binary. I don't think that they're either right or wrong, only more or less successful.
You're absolutely correct. The point I was trying to make is that the economic model we use drastically under-predicts "rare" events like the 2008 crash. I wasn't trying to make a statement about the "cause" of the crash, so much as state that the model under-predicts such events.
> Not really. Newtonian physics is inaccurate in ways that are hard to measure at everyday human scale. The 2008 crisis was pretty noticeable, all over the world. I think an apt physics analogy would be something like getting a nuclear explosion out of starting a fire (technically, out of buying a house), something that's been done successfully for millennia without major incident.
All theoretical models are based on arbitrary axioms/assumptions. The degree to which they predict reality successfully is largely predicated by the degree to which the underlying axioms correctly reflect reality. I don't think this is a binary thing. I don't think that the field of economics is "invalidated" because it "failed" to predict the 2008 crash. I might argue that it's "less" correct or reflective of reality than Newtonian mechanics is, but again, I don't think the degree to which our predictive systems represent reality is binary. I don't think that they're either right or wrong, only more or less successful.