LETTER: Economics and Volcanic Ash

To the editors:

In his Apr. 23, 2010, op-ed “Volcanic Ash Allowing,” I’m not sure what Pierpaolo Barbieri has in mind when he calls for “fully determined models delivering certainty.” Perhaps he is referring to the models peddled by certain misguided financiers. But to suggest that the entire profession of economics engages in an extreme kind of wishful thinking, or worse, deception, is grossly unfair and misleading. Cobb-Douglas will not predict economic growth in the way that Newton’s Laws describe motion, but it generates crucial insights into economic phenomena and is a powerful tool in understanding the principles underlying economic relationships.

The author wants to draw the wrong conclusion from the fact that simplified models get things wrong (even dramatically wrong). No one denies that we need to better understand and communicate the limitations of data, that it is crucial to guard against unjustified trust in our preferred models (perhaps the author forgets that before the crisis, there were plenty of critics of the efficient market hypothesis who were using data and simulation to predict pathological behavior in asset markets). But a data-driven, formal approach to making policy decisions is quite frankly the best we can do and therefore essential. “Embracing uncertainty” and abandoning mathematical models, while assuming that human behavior isn’t even “remotely predictable” is wrong-headed.

Models, by design, are simplifications with clearly false assumptions. But the success of models lies in their ability to rationalize and often rightly predict the behavior of more complex real systems. Confused applications of the uncertainty principle notwithstanding, the author’s disdain for the “data-heavy, model-driven graduate student” is unjustified. Perhaps in his next piece, Mr. Barbieri can suggest an alternative to restrictive modeling in understanding and predicting phenomena.

As imperfectly informed as the experts at the Volcanic Ash Advisory Center might be, their judgments on the basis of data and computer simulation are presumably more useful than the alternative: the intuitions of the CEO of Air-or-Bust, or perhaps, Mr. Barbieri, on when it’s safe to fly.

EMAD ATIQ

Cambridge, U.K.

Apr. 24, 2010

Emad Atiq is a MPhil Candidate, Department of Philosophy at the University of Cambridge, Trinity College, and a member of the Gates Scholars Council.