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Science and the quest for truth – Lars Syll

According to economist Robert Aumann:

” In my view, scientific theories are not to be considered ‘true’ or ‘false.’ In constructing such a theory, we are not trying to get at the truth, or even to approximate to it: rather, we are trying to organize our thoughts and observations in a useful manner.”

What a handy view of science. How reassuring for all of you who have always thought that believing in the tooth fairy make you understand what happens to kids’ teeth. Now a ‘Nobel prize’ winning economist tells you that if there are such things as tooth fairies or not doesn’t really matter. Scientific theories are not about what is true or false, but whether ‘they enable us to organize and understand our observations’ … Mirabile dictu!

What Aumann and other defenders of scientific storytelling ‘forgets’ is that potential explanatory power achieved in thought-experiment models is just not enough for attaining real explanations. Model explanations are at best conjectures, and whether they do or do not explain things in the real world is some- thing that needs to be tested. To just believe that you understand or explain things better with thought experiments is not enough. Without a warranted export certificate to the real world, model explanations are pretty worth- less. Deriving results within models is not enough. And objective truth is an important concept in any real science.

Source: Real World Econ Rev., 23 Feb 18

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Also from Lars Syll: The efficient market hypothesis: pseudoscientific mumbo-jumbo

The efficient market hypothesis – EMH – argues there is no free lunch and prices are ‘right’. Well, as we all know, that is not true. Noise does influence asset prices and the law of one price is blatantly violated again and again …

” The price is often wrong, and sometimes very wrong … If policy-makers simply take it as a matter of faith that prices are always right, they will never see any need to take preventive action. But once we grant that bubbles are possible, and the private sector appears to be feeding the frenzy, it can make sense for policy-makers to lean against the wind in some way. Central banks around the world have had to take extraordinary measures to help economies recover from the financial crisis. The same people who complain most about these extraordinary measures are also those who would object to relatively minor steps to reduce the likelihood of another catastrophe. That is simply irrational. ” – Richard Thaler

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