 | In a shortage, businesses lose gas before homes | The Oil Drum | John Darnell, Bartlett's energy advisor |  |
64 comments on We're In Deep Water
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64 comments on We're In Deep Water
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The problem (if indeed it is a problem) is not with economics but with how people behave and how easy it is to model. As you say, the higher the interest rate, the shorter the planning horizon. The fact that people living in an economy with hyper-inflation find it difficult to plan for their retirement is not because they are short-sighted but because it's hard figure out what is going to happen in the next year, let alone 20 years out.
I agree that economic models do not do a good job of modeling the non-linearities and discontinuities that can happen over the long term. But that is because it is hard to do. It's like blaming physics and engineering for us not having fusion power; it's just hard.
But I strongly disagree with the approach taken by economists. The mainstream of this pseudoscience is making their assumptions, building their models and is trying to fit the reality to their models. Worse of all - if their models fit some particular situation or event they take this as a proof that the model works. But if it does not fit - then they do not challenge their assumptions but attribute it to the profoundly meaningless word "externalities". When everything goes OK those externalities can easily be ignored... but if something really begins to mess up the real world slowly begins to abandon the economist fantasy world. Eventually if we experience an economic implosion, everything will become an externality.