Dummy variables

There are lots of jokes about economists. Few of them are complimentary, and even fewer are funny. "If all the economists in the world were laid end-to-end they wouldn't reach a conclusion".*

Or how about the one where a physicist, a chemist and an economist are stranded on a desert island, with only a single can of bully beef for sustenance. One problem: no can opener. The physicist proposes breaking it open with a rock, but they can't find a rock. The chemist wants to use seawater to erode the can, but they're not going to live long enough for that to happen. In despair they turn to the economist, who says, "Well, first let's assume we have a can opener". LOL (not).

The results produced by economic models are notoriously dependent on the starting assumptions, but there's nothing unique about that. Discovery Channel ran a programme this week called "Is everything we know about the Universe wrong?". Despite the title, the show was mainly a parade of cosmologists bragging about how good their "standard model" is at explaining the way the universe works. So well done them.

One problem, though. The model only "works" if you assume the existence of dark matter (never seen, measured or even described), dark energy (likewise), and the new kid on the block, dark flow (don't ask). As the cosmologists admit, their calculations suggest that these never-seen phenomena have to be significantly greater in scale than the bits of the universe that we can see if their theories are to hold. It casts a whole new light on the notion of something "working".

It seems as if economists have missed a trick here. "Yes, I know we forecast growth of 5% and the economy actually shrank, but that's fully explained by a swing in Dark GDP, which is entirely in line with our models".

Physics and economics may be coming together in another sphere too. The new book by baby-faced physicist Brian Cox, "The Quantum Universe", is sub-titled "Everything that can happen, does happen". As a summary of the last couple of days' events in Greece, that's unimprovable.

* Slightly funnier variant from David Frost some time in the late 1960s: "If all the dolly birds in swinging London were laid end-to-end, I wouldn't be a bit surprised".