Economic theory uses scientific method

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  • george of the jungle goshen, UT
    May 5, 2013 6:12 a.m.

    Pretty simple. If there isn't an objective, it goes to wast.

  • Baron Scarpia Logan, UT
    May 2, 2013 6:45 a.m.

    A criticism of economics has been reliance on statistic models that encouraged companies to engage in financially-risky behaviors because the "models" suggested that they were prudent.

    The soft social sciences – the study of people behavior have long had "physics envy." That is, the hard sciences use sophisticated empirical techniques to quantify the natural world, and economics, psychology, sociology, and business disciplines strive to use similar methods to demonstrate equal rigor.

    The problem is that human behavior (e.g., purchase intentions, behavioral reactions to a tax incentive, etc.) is much more difficult to measure compared to say the physical reactions of chemicals.

    The latest Harvard Business Review includes a study on how the size of a CEO's signature is predictive of corporate financial performance and that the signature is an indicator of CEO narcissism. There are plenty of leaps of faith here, but because it is "empirical," using sophisticated math and probability methods, some are accepting it as "truth."

    Now I challenge any investor to use signature size to pick stocks! Perhaps some do ... and that may be why people make bad decisions.