Comments on: The fatal flaw of economics http://learnsigma.com/fatal-flaw-economics/ lean, six-sigma & quality Sat, 06 Mar 2010 21:16:26 +0000 http://wordpress.org/?v=2.9.2 hourly 1 By: shaun sayers http://learnsigma.com/fatal-flaw-economics/comment-page-1/#comment-4762 shaun sayers Wed, 25 Nov 2009 06:40:17 +0000 http://learnsigma.com/?p=3374#comment-4762 It's not that economics is flawed or that it fails in any way. In my experience economics contains a set of fundamental truths that can explain a lot of what happens in our world. Things like "there's no such thing as a free lunch", scarcity and supply & demand. Predicting the future on the other hand is a different kettle of fish altogether. The basic problem that we face right now is that economic systems are becoming increasingly integrated. That means the systems are moving away from more traditional and easier to predict linear systems based on a single nation's actions, to complex, multi-national no-linear systems. In other words it is becoming more akin to a model we might use for predicting climate change, where there will certainly be cause and effect relationships, but untangling the complexities of them is very difficult to predict. The principle of the butterfly effect applies in this case So who calls it right? Well somebody will, through statistical probability alone. Provided there are enough differing predictions (and there are) then somebody will be right at the end of the day, but are they "right" or is it just pure chance? The reality is that the systems are now so complex that we simply don't understand all the causes and effects anymore. My belief though is that underneath the fundamental laws of economics, like those of physics, will hold firm It's not that economics is flawed or that it fails in any way. In my experience economics contains a set of fundamental truths that can explain a lot of what happens in our world. Things like "there's no such thing as a free lunch", scarcity and supply & demand. Predicting the future on the other hand is a different kettle of fish altogether. The basic problem that we face right now is that economic systems are becoming increasingly integrated. That means the systems are moving away from more traditional and easier to predict linear systems based on a single nation's actions, to complex, multi-national no-linear systems. In other words it is becoming more akin to a model we might use for predicting climate change, where there will certainly be cause and effect relationships, but untangling the complexities of them is very difficult to predict. The principle of the butterfly effect applies in this case

So who calls it right? Well somebody will, through statistical probability alone. Provided there are enough differing predictions (and there are) then somebody will be right at the end of the day, but are they "right" or is it just pure chance? The reality is that the systems are now so complex that we simply don't understand all the causes and effects anymore. My belief though is that underneath the fundamental laws of economics, like those of physics, will hold firm

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