Interesting take on economics

An economist is hired as a consultant by a game company to help developing a consistent virtual economy: http://blogs.valvesoftware.com/economics/it-all-began-with-a-strange-email/

 

I particularly liked this bit: “Econometrics purports to test economic theories by statistical means. And yet what it ends up testing is whether some ‘reduced form’, an equation (or system of equations), that is consistent with one’s theory, is also consistent with the data. The problem of course is that the ‘reduced form’ under test can be shown to be consistent with an infinity of competing theories. Thus, econometrics can only pretend to discriminate between mutually contradictory theories. All it does is to discover empirical regularities lacking any causal meaning. To put it bluntly, it is impossible to avoid absurd conclusions such as ‘Christmas is explained by a prior increase in the demand for toys’. And when we do (avoid them), it is only by accident (or because of a good hunch), as opposed to scientific rigour.

 

Made me think of Charles Stross’ “Halting State”

 

(H/T to BoingBoing)

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