Friday, November 10, 2006

Empirical Economists Forecast Worse Than Meteorologists!

When I was in college I took a meteorology class. One project was to use complex mathematical models to predict the effect of different objects on the microweather. How would a shift in wind direction alter the effect of a stationary object such as a tree on the microweather? These models were designed with great detail to incorporate the laws of physics to the 'infinite' degree.

What this proves is that meteorological events are extremely complex even at the microlevel. Is it any wonder why the daily weather forecasts (a macro event) are educated guesses? The weather forecast record demonstrates this fact.

Now consider the fact that these meteorological forces lack the ability to 'change their minds!' Humans change their minds all the time and that is their God-given right. Even if humanity operated as inanimate forces the forecasts would seldom be correct, as shown by the above meteorological example. But humans do not behave in a way that empiricism requires. We make decisions subjectively!

Why should we rigidly impose an incorrect methodology on the science of economics rather than simply using a methodology that is compatible with human action? Subjectivism uncovers universal principles of human action and it supports the use of human logic to describe the uncertain future, the present circumstances, and the cause and effect of past events. One of many examples of the accuracy of the subjectivist methodology can be seen in a book by Murray Rothbard entitled "America's Great Depression."

Empirical economists are worse forecasters than meteorologists not simply because of the extra complexity of the system but because the appropriate methodology for social sciences is subjectivism not empiricism. The empiricists' equations do not even have the firm foundation of physics to validate them. Exposing them as interventionists is an inevitable outcome of the divine economy theory.

No comments: