That is what the model says. Reality?
That is what the model says.
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I’m sure the economic model is just as reliable as the global warming models.
People have a bad habit of believing computer models because computers somehow have the aura of being coldly analytical. They forget that every line of code and every algorithm was produced by a human and putting it into a computer does not make the model “better”.
In fact, every model, no matter how encompassing, can never include all the variables that drive reality. A perfect example are the housing default models used back before the GFC. On paper, everything looked great; “safe as houses”. One of the items left out of the housing default model was the physiology involved when one property gets foreclosed in a neighborhood, there is a “contagion” effect that causes surrounding property values to crater, setting off more foreclosures, etc.
“...build into models an assumption that all market participants — bankers, lenders, borrowers and consumers — behave rationally at all times, as if they were economists making the most financially favorable choices. Clearly, he says, rational behavior is not that dependable, or else people would not do self-destructive things like taking out mortgages they could not afford, a key factor in the financial crisis. Nor would completely rational executives at financial firms invest in securities backed by those risky mortgages, which they did.”
https://knowledge.wharton.upenn.edu/article/why-economists-failed-to-predict-the-financial-crisis/