Word: ashes
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...Volcanic Ash Allowing,” I’m not sure what Pierpaolo Barbieri has in mind when he calls for “fully determined models delivering certainty.” Perhaps he is referring to the models peddled by certain misguided financiers. But to suggest that the entire profession of economics engages in an extreme kind of wishful thinking, or worse, deception, is grossly unfair and misleading. Cobb-Douglas will not predict economic growth in the way that Newton’s Laws describe motion, but it generates crucial insights into economic phenomena and is a powerful...
...imperfectly informed as the experts at the Volcanic Ash Advisory Center might be, their judgments on the basis of data and computer simulation are presumably more useful than the alternative: the intuitions of the CEO of Air-or-Bust, or perhaps, Mr. Barbieri, on when it’s safe...
...people’s behavior, clearly enough, is neither rational nor remotely predictable. Neither was the volcanic eruption. Having just attended the inaugural conference of George Soros’s Institute for New Economic Thinking, one thing is clear: The ash cloud over the continent is the perfect metaphor for the state of economics as a field. Both in economics amidst the global financial crisis as well as, it turns out, in volcano ash predictions, we are relying too much on models that have proven fallible...
...wrote in the preface to his masterpiece, “The difficulty lies, not in new ideas, but in escaping from the old ones, which ramify, for those brought up as most of us have been, into every corner of our minds.” Fully determined models, for ash clouds or financial markets, may be resilient, but they are intrinsically incomplete, for they account for neither the inherent unpredictability of human action nor the intractability of certain data...
...convey either idea, which suggests that perhaps the conceptual gulf in languages like English should not be quite so steep. The abandonment of fully-determined mathematical models that cannot deliver the certainty they promise and the consequent embrace of uncertainty may thus be, for economics as well as volcanic ash predictions, a good new principle, but perhaps an even better new beginning...