Quote for the day II.

A better one:

Economics tried to model itself on Newtonian physics. It sought to establish universally and timelessly valid laws governing reality. But economics is a social science and there is a fundamental difference between the natural and social sciences. Social phenomena have thinking participants who base their decisions on imperfect knowledge. That is what economic theory has tried to ignore.

George Soros.

Before an angry economist vents their frustration at outsiders speculating about the workings of their subject, I’ll confess to significant ignorance and knowledge that this is not entirely true. Theories of information asymmetry and more psychologically-orientated branches of the discipline, like behavioural economics, have no doubt got to grips with the limits of rational choice theory. But I know from First Year experiences that treating economic agents as optimally rational remains the norm. And I always retained the hunch that any science predicating itself on such a proposition was doomed to fall short of explaining the mess that is the real human world.

By the way – don’t miss the video.

(Hat Tip: Ignorant Technician).


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