Re: statistical mechanics vs economics

From: davidmerritt (davidoff_at_davidmerritt.co.uk)
Date: 12/09/04 

Date: Thu, 9 Dec 2004 08:03:57 +0000 (UTC)

Hmmm.... I think the two models you are looking at arent really related
in any way bar their functional form. The CD production function is a
VERY basic and hopeless tool to enable to one group of economists to
demonstrate their unrealistic view of how GDP can be modelled.

Models created in the physical sciences often have their methodolgy
routed in experimental data, not observed data as in the social
sciences. In your example how the entropy for a perfect monoatomic gas
directly derived from some relationship is not how model making in
economics is performed.

Economics is full of examples where mathematical methods from physics
have been applied to attempt to encapulsate economic behavour but in
reality the data generation process for the two sciences is too
different to justify this approach.

Of much more interest is the use of econometric (and statistical
techniques) being developed for use on economic data, and their
application to physics, which I think will be directly useful to
certain experiments in the physical sciences.

For me, quantum mechanics and the radomness it displays mirrors in many
respects quantum behavour, where as this is relatively strange in
physics economists have been dealing with random actions since the days
of Smtih, Ricardo and Malthus.

I've read many physics comments that forward a view saying because they
can't see the determinants of the seemingly random behavour they indeed
decide to call it random. In econometrics the situation is similar
with regard to macroeconomic variables (there are just too many
variables to add to a regression to perfectly model GDP), however
rather than just saying its random behavour they are developing more
complex statistical techniques of forecasting and analysing the so
called randomness in an attempt to identify any trends and underlying
relationships (for example the progress in time series analysis
techniques by Granger). Furthermore the sucess of these new methods in
econometrics in recent years demonstrates their potential to shine light
on what previously where thought as truely random variables.

Becuase of the physical scienes ability to recreate experiments with a
high degree of homogenity statistical tehniques similar to those
deployed in economtric analysis indeed prove useful to certain groups
of physical science academics

SORRY FOR THE LONG POST!

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