Someday, scientists will learn that mathematical models only predict what they are constructed to predict. At that point, they will have finally intellectually evolved to the point of a 13 year-old computer programmer. Because computer models are neither studies nor are they science.
For some reason, science fetishists routinely forget that all scientific disciplines are inherently axiomatic, and that whatever truths science reveals are inherently subjective in nature. Because of this, said fetishists tend to accept mathematical models as proof of argument, when in reality the only thing mathematical models prove are that computers are capable of logic.
It is important to remember that in order for a conclusion to be correct, the logic must be correct and the premises must be sound. As such, if a mathematical model is proved incorrect, then it is obvious that the assumptions upon which the model the model is based are inherently flawed. The lesson to take away from all this is that one must always question the underlying assumptions. This is especially true in the computer age, for the logic of computer-generated mathematical models is virtually always sound.
Incidentally, this addresses a fallacy found in John Case’s post from yesterday, specifically in reference to his second “point:”
Austrian economists also argue that mathematical models and statistics are an unreliable means of analyzing and testing economic theory, and advocate deriving economic theory logically from "basic principles" – read "divinely inspired principles" – of human action.
Again, the reason why Austrians reject mathematical models is because they are inherently axiomatic. This is why CPI and GDP are such laughable measures. CPI excludes fuel and food costs, yet purports to measure price inflation. Seeing as how fuel and food are fairly common purchases for all people in a given economic system, it is absurd on its face to exclude them from a metric that’s supposed to measure systemic inflation. GDP also has its own problems; for example, government spending is seen as production, not consumption, and is considered to be as efficient in production as private production. There are other concerns for both metrics, but it should be obvious that accepting mathematical models based on these models is foolish, to say the least.
Furthermore, given the sheer amount of knowledge that one must possess in order to build data-driven models, it is simply easier and more correct to analyze economic phenomena from a “basic principles” standpoint. Plus, human action is easily observed, and one can generally determine why a given person behaves a certain way. As such, it is easier to simply base policy on how humans actually behave, instead of basing it on an inherently subjective model that con only say what programmers tell it to say. All the math in the world cannot change human nature.