Why are economic theories formulated when they are not exact?

Answer 1

It is very discouraging to have to learn a bunch of stuff in school that has little or no use or practicality. The people that run schools almost never tell you BEFOREHAND that what you are learning is of little or no value. This is because they are running a business, and they are afraid that if they tell you that what they are teaching is useless, that you will drop out of their program and not pay them any more money.

All knowlege is potentially false. All knowlege is false TO SOME DEGREE. This may seem unreasonable, but recall that only a few hundred years ago, it was "common knowlege" that the world was flat. Anybody who argued for any other shape was not only called an idiot, but often persecuted or even sometimes killed for their beliefs.

Currently, it is very difficult to know why certain things work the way that they do. Economics and religion deal with particularly difficult to understand arenas. If we don't make ANY theories on these subjects, there can be no advancement of knowlege and learning. Because of the difficulty in understanding these subjects, we are not nearly as skillful in imagining possibilities yet. When we have had a few hundred years of practice in imagining alternative possibilities, our theories about economics and God will be much more useful than they are now.

About the only use economic theories provide at the present time, is as an opportunity to examine how other people have thought about the subject so far. If you can examine another person's thinking, and spot flaws in their logic or their reasoning, then you can come up with a better description of what is going on. In this way, you will be helping to improve the thinking on the subject and just as WikiAnswers might help make it easier to find the answers to questions, you might make it easier for others to understand economics.

Business people have to make decisions with poor and inadequate information all the time. Fortunately, poor and inadequate information is usually not completely fatal to a small business. It is somewhat better to work with a consistent strategy than a random one. This is almost always the case in a computer game, for instance. The implication is that even if your strategy is flawed, inferior or even just plain NUTS, it is STILL better than either NO strategy, or a strategy that is changed constantly. Look to the stock market for evidence of this statement.

Picking a direction almost always leads to results that are better than refusing to even guess. While economists would be insulted by this description of their "work", it is helpful to recall that even during OUR lifetime, continents were considered "fixed", and while even though a 4th grader could see plainly that Africa and South America fit together like nearly perfect jigsaw puzzle pieces, it was considered laughable to think that continents ever "moved". Now, the science textbooks have been changed, and "everybody" KNOWS that continents move, even though nobody has ever actually SEEN it happen (we die too soon).

Don't take the preachings of the inexact sciences too seriously, just pass the test and forget the material. Be glad that you don't have to memorize thousands of magic formulae as the old alchemists did. Totally worthless effort, except for when they got something right...

An example of two theories that can't both be right in TODAY'S world are Black Holes and the Big Bang theory of the creation of the universe. Imagine a big massive object. According to the Black Hole theory (as it currently exists), all the matter gets crushed to a tiny fraction of its previous size, and even LIGHT can't escape!

Now, imagine an even BIGGER, many times more massive object! The entire universe! If it was as small as a tiny pinprick, then it should have been so dense that NOTHING could ever have escaped its gravitational grasp! It should be the MOTHER of all Black Holes! So, how is it possible then, that almost all astronomical scientists embrace BOTH of these theories as true? Someday, one or the other theory will have to be altered substantially, as they can't both be true as they are currently conceived. The one that gets altered is going to be considered false from that point on. Until then, you will be laughed at, for saying that either theory is false.

All good scientists will admit that theories don't prove anything. They are simply the best model discovered to date that fits all the facts that we currently have available. As we obtain more facts, we must change and revise what we believe. The scientist generally does this more graciously than other human beings, because they don't usually think that they have all the answers. It is painful to refute an entire lifetime of work and effort, but a good scientist will do it in a heartbeat if one scrap of evidence arises that shows that what he preached as gospel yesterday is now found to be nothing but hot air. In this way, science can progress. If we fail to let go of false ideas and teachings, then we doom ourselves to repeat the mistakes of previous generations for the rest of our lives. Part of a good education entails realizing that we are routinely taught false and useless information, and that we must learn to discern this for ourselves and practice PRUDENT skepticism about anything we hear.

Your life may very well depend on this in the next year or two. Does the vaccine offered to you actually help prevent the Swine Flu or doesn't it? Oddly, the answer is not the same for everyone. There is absolutely no doubt that the vaccine will kill some of the people some of the time. It is your job to determine whether or not your chances of survival are better or worse if you accept it. If you fail to get it right, you won't produce any more offspring, and the collective intelligence level of the remaining population will rise. Nature is harsh, but ultimately, quite fair.

Answer 2

It is very discouraging to have to learn a bunch of stuff in school that has little or no use or practicality. The people that run schools almost never tell you BEFOREHAND that what you are learning is of little or no value. This is because they are running a business, and they are afraid that if they tell you that what they are teaching is useless, that you will drop out of their program and not pay them any more money.

All knowlege is potentially false. All knowlege is false TO SOME DEGREE. This may seem unreasonable, but recall that only a few hundred years ago, it was "common knowlege" that the world was flat. Anybody who argued for any other shape was not only called an idiot, but often persecuted or even sometimes killed for their beliefs.

Currently, it is very difficult to know why certain things work the way that they do. Economics and religion deal with particularly difficult to understand arenas. If we don't make ANY theories on these subjects, there can be no advancement of knowlege and learning. Because of the difficulty in understanding these subjects, we are not nearly as skillful in imagining possibilities yet. When we have had a few hundred years of practice in imagining alternative possibilities, our theories about economics and God will be much more useful than they are now.

About the only use economic theories provide at the present time, is as an opportunity to examine how other people have thought about the subject so far. If you can examine another person's thinking, and spot flaws in their logic or their reasoning, then you can come up with a better description of what is going on. In this way, you will be helping to improve the thinking on the subject and just as WikiAnswers might help make it easier to find the answers to questions, you might make it easier for others to understand economics.

Business people have to make decisions with poor and inadequate information all the time. Fortunately, poor and inadequate information is usually not completely fatal to a small business. It is somewhat better to work with a consistent strategy than a random one. This is almost always the case in a computer game, for instance. The implication is that even if your strategy is flawed, inferior or even just plain NUTS, it is STILL better than either NO strategy, or a strategy that is changed constantly. Look to the Stock Market for evidence of this statement.

Picking a direction almost always leads to results that are better than refusing to even guess. While economists would be insulted by this description of their "work", it is helpful to recall that even during OUR lifetime, continents were considered "fixed", and while even though a 4th grader could see plainly that Africa and South America fit together like nearly perfect jigsaw puzzle pieces, it was considered laughable to think that continents ever "moved". Now, the science textbooks have been changed, and "everybody" KNOWS that continents move, even though nobody has ever actually SEEN it happen (we die too soon).

Don't take the preachings of the inexact sciences too seriously, just pass the test and forget the material. Be glad that you don't have to memorize thousands of magic formulae as the old alchemists did. Totally worthless effort, except for when they got something right...

An example of two theories that can't both be right in TODAY'S world are Black Holes and the Big Bang theory of the creation of the universe. Imagine a big massive object. According to the Black Hole theory (as it currently exists), all the matter gets crushed to a tiny fraction of its previous size, and even LIGHT can't escape!

Now, imagine an even BIGGER, many times more massive object! The entire universe! If it was as small as a tiny pinprick, then it should have been so dense that NOTHING could ever have escaped its gravitational grasp! It should be the MOTHER of all Black Holes! So, how is it possible then, that almost all astronomical scientists embrace BOTH of these theories as true? Someday, one or the other theory will have to be altered substantially, as they can't both be true as they are currently conceived. The one that gets altered is going to be considered false from that point on. Until then, you will be laughed at, for saying that either theory is false.