Thursday, October 23, 2008

The Physicist and the Economist

I must admit, I don't get the whole point of this particular article. It is a "visualization" (can I call it that?) of a conversation between a physicist and an economist, all written by an engineer (go figure)! I don't get it. Why can't it be a conversation between an engineer and an economist? Especially when this engineer could not really ask questions and provide counter rebuttals that an physicist could?

For example, I would jump all over this one:

The Physicist: I have heard they call your profession the dismal science. Is economics really a science?

The Economist: Yes, I think it you, we start with empirical observations, and then use some of the same math that you use in physics.

Ah, but it is NOT the same. In physics, when we discover a new phenomenon and try to start to understand it, we usually start with some phenomenological model based on our existing understanding (i.e. our model will be crude, but it would not violate any known laws). At this point, yes, I can see how this would be similar to what economist would do. But this is where it differs. As our understanding progresses about the phenomenon, the theoretical description of it evolves until it can be DERIVED via First Principles. In other words, it is no longer simply a phenomenological model that appeared out of nowhere. The model has been replaced by a theory in which the description of the phenomenon has been derived from a set of well-established "axioms" or starting point in physics.

One can clearly see how this is done in the history of conventional superconductivity, for example. The phenomenological model of superconductivity from the London equation was in placed to extract the relevant parameters. It wasn't until the BCS theory do we have a complete description that gives us a complete understanding of the system starting from First Principle. Only then can one declare that we have a good understanding of that phenomenon. It is why we still say that we don't have an accepted understanding of high-Tc superconductors. We haven't figured out all the details and a complete derivation from First Principle that can account for all that we have observed, despite the fact that we have MANY phenomenological model already in place. Is this done in economics where it is derived out of an established First Principle (does "scarcity" have a fundamental mathematical model that is always used as a starting point?)?

Secondly, when we have an established theory, that theory in turn predicts new observations and new phenomena that have never been observed before. So physics also involves the investigation of uncharted territory, not just the description of existing phenomena. The existence of neutrinos and left-handed material are all predictions based on theory way before such things are ever discovered. ALL established theories, not just a few, do that, and do that accurately.

The "physicist" in the article makes another simple and naive statement:

The Physicist: Hmm...that's interesting, in the universe of physics there really is no scarcity...there just is...what is... For each interaction or change the total matter and energy is conserved, that is, we end up with the same amount of matter-energy we started with, so scarcity becomes a rather odd idea...

That's also momentum, charge conjugation, etc.. etc. symmetry/conservation laws to be considered here,not just "energy". And I don't even want to go into the "fundamental particles as building blocks" argument because it will involve a whole different can of worms with emergent phenomena. This whole thing just adds to my earlier point that economics will never be like physics.

I often wish that people would just simply represent things that they know well and leave others well enough alone.

Wow! Now that's already 2 rants for this morning. Am I in a bad mood or what? :)


1 comment:

sandycharm said...

I have a funny tale to share. During a general education class last week, my lecturer told us about Michelson's measurement of the speed of light and his Nobel prize. There was an arts major who asked how and after the lecturer described it briefly to her, she claimed it's easy to win the Nobel prize.
I felt so offended.