Difference between revisions of "Economic Thinking In A Fallible World (YouTube Content)"

Economic Thinking In A Fallible World (YouTube Content) (view source)

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-|title=Eric Weinstein: What Math and Physics Can Do for New Economic Thinking
+|title=Economic Thinking In A Fallible World
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-|host=[[Eric Weinstein]]
+|host=Marshall Auerback
-|guests=
+|guests=[[Eric Weinstein]]
-|length=01:31:26
+|length=00:16:42
-|releasedate=25 April 2014
+|releasedate=22 June 2014
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-|link1=[https://www.youtube.com/watch?v=XA22-PeraII Watch]
+|link1=[https://www.youtube.com/watch?v=TrZmq1Ti3Po Watch]
 |link2title=Portal Blog
-|link2=[https://theportal.group/the-economics-of-radical-uncertainty/ Read]
+|link2=[https://theportal.group/eric-weinstein-economic-thinking-in-a-fallible-world/ Read]
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-|prev=Towards a Mathematics of New Economic Thinking for Reflexive Markets (Fields Institute Content)
+|prev=The Economics of Radical Uncertainty (YouTube Content)
 |next=Economic Thinking In A Fallible World (YouTube Content)
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-'''The Economics of Radical Uncertainty''' was a presentation by [[Eric Weinstein]] and others hosted by the Institute for New Economic Thinking.
+'''Economic Thinking In A Fallible World''' was an interview with [[Eric Weinstein]] by Marshall Auerback of the Institute for New Economic Thinking.
-{{#widget:YouTube|id=XA22-PeraII}}
+{{#widget:YouTube|id=TrZmq1Ti3Po}}
 == Description ==
-How do human beings truly react when confronted with conditions of genuine "unknown unknowns"? According to Frank Knight, "Uncertainty must be taken in a sense radically distinct from the familiar notion of risk, from which it has never been properly separated...The essential fact is that 'risk' means in some cases a quantity suscep- tible of measurement, while at other times it is something distinctly not of this character; and there are far-reaching and crucial differences in the bearings of the phenomena depending on which of the two is really present and oper- ating...It will appear that a measurable uncertainty, or 'risk' proper, as we shall use the term, is so far different from an unmeasurable one that it is not in effect an uncertainty at all."
+By Marshall Auerback
-The economics literature from Knight onward is very good at laying out the propensity of markets to greatly overshoot and undershoot the fundamentals. However, economics does not adequately address the implications of "Knightean" uncertainty, because the discipline finds it hard to model this phenomenon. To get a full measure of this, one has to enter into the realm of psychology and neuroscience. That's where the definition lies. Radical uncertainty, like so much else, is too important to be left to the realm of economics alone.
+The philosopher Karl Popper argued that we cannot know empirical truths with absolute certainty.
+According to Popper, even scientific laws can't be verified beyond a shadow of a doubt. They can only be falsified by testing. One failed test is enough to falsify, but no amount of conforming instances are sufficient to verify. Scientific laws are hypothetical in character and their truth remains subject to testing. Ideologies that claim to be in possession of the ultimate truth are making a false claim; therefore, they can be imposed on society only by force.
+This concept creates particular challenges for economists, who like to think of themselves as "scientists" subject to the disciplines of rigorous empirical truths. But economics and economic policy don't work that way because empirical economic truths typically are open to interpretation.
+The reality is far more complicated. In situations with thinking participants, the participants' view of the world is always partial and distorted. So our view of the world by necessity is fallible and incomplete. In addition, these distorted views can influence the situation to which they relate because false views lead to inappropriate actions, as we've seen in many different spheres, such as policy making, central banking practices, and investment decisions.
+Eric Weinstein of Thiel Capital, a mathematician, physicist, and economist, explains these issues and their potential consequences in the interview.
 == Transcript ==