Economy

Who benefits from uncertainty?

Date: June 3, 2023.
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The 1980s' physics, chemistry, mathematics, and biology classes in high school principally focused on certainty. Called Scientific Determinismthanks to great efforts by Laplace (1749-1827), this theory can be defined as follows:

If we knew both the position and velocity of every particle in the universe, we would be able to predict everything that would happen in the future...

This suggestion by French scientist Pierre Laplace was thoroughly examined by Stephen Hawking as well in his latest - and final - book. He explained that how quantum mechanics can prove that nothing in universe or in science is that constant.[1]

Similarly, the ceteris paribus” clauses are widely used is economics to rule out the possibility of other factors changing, since the causal relation between two variables is more complex than thought.

In other words, we try to explain the formulation and description of economics by assuming that all other variables are held constant, except those under immediate consideration. As a natural result, clever students in my classes instantly object to this assumption.

Although Laplaces vision of scientific determinism remained valid over the past few centuries, scientists deemed it necessary to study economics as a relatively young branch of science, in a more dynamic way.

Economics has gone through numerous changes since the introduction of equations and formulas into economic theory over the last century.

Static and single-equation models have been replaced with dynamic and multiple-equation models. Economic theory suggests that past events affect the future.

Therefore, we would need a certain period of time to see the results of an attempt and decide whether it has been successful or not.

It should also be known that unexpected parameters can impact the equation. So, when making calculations, we should consider the time factor as well as multiple variables that may potentially impact the outcome. Otherwise, we would guarantee failure, in lieu of success.

Economics only, or the data we possess will not help us on our path to create a clear vision for our future

Economics only, or the data we possess will not help us on our path to create a clear vision for our future.

Political, sociological, demographic, and technological developments must be taken into account as well.

When preparing a future vision, it is important to know where you stick the needle of the compass. This is called finding the right reference point. Hawking says in his latest - and final - book:

A butterfly flapping its wings in Australia can cause rain in Central Park, New York. The trouble is it is not repeatable. The next time the butterfly flaps its wings a host of other things will be different, which will also influence the weather....

In short, when we think about each theory we had created in the past, each of them would possibly seem quite rational to us; however, there is a very high likelihood that the same chain reaction may not occur again.  In other words, uncertainty prevails over definite proportions.

There is significant confusion in emerging countries about education, industry and economic policies in relation to the cause-effect relationships I mentioned above.

The main reason behind this confusion is that the methods and approaches we use are far from being dynamic and multivariable.

Without scientifically developed statistics, all government incentives or interventions would get lost at an endless sea of confusion and uncertainty

Sadly, the governments and businesspeople in these countries are trying to make predictions based on current circumstances they can see, since they dont have the slightest idea about what disruptive innovationmay bring, not to mention the fact that the conditions they try so hard to preserve will actually disappear very soon. The same thing is happening with other emerging countries.

We are clearly not very successful at making reasonable assumptions by gathering data from different databases.

And the fact that governmental statistical institutions fail to provide a comparative and reliable report on sectors or industries does not go unnoticed either.

It would also not be very wise for researchers to pay attention only to reports or surveys prepared and issued by associations or professional organisations using their own methods, because recognised scientific methods and techniques are required to turn data into numbers.

Without scientifically developed statistics, all government incentives or interventions would get lost at an endless sea of confusion and uncertainty.

The outcome of any research or study that is not based on substantial, accurate information would naturally turn out to be incorrect.

Decision makers in most countries make blind flightsin economy, education, construction and agriculture.

Governments sadly comply with the instructions of self-seekers or those with the loudest voice.

Today, economies are more fragile than ever before because of people who have been given the chance to defend all the bad decisions

Maybe it is the governments who benefit the most from this cosmic uncertainty, as it enables them to gain an even more easily defensible position against any claim without any proof to back it up.

Could you guarantee that things would get better if we took a different path?Sadly, this is the most of the leaders' response to criticism about many failing efforts such as the operations of monetary or tax policies, and even this response alone reaches a dead end for attempts to find an effective solution.

Today, economies are more fragile than ever before because of people who have been given the chance to defend all the bad decisions.

Bringing an intellectual revolution to developed countries and enabling further development of arts and science, cosmic uncertaintyhas unfortunately paved the way for rhetorical practices and recklessness, not to mention its usefulness for political leaders as an instrument even to restrict the freedom of artistic expression and scientific inquiry.

Unfortunately, this is also a strong element of the post-truth era. We have to just sit back and watch since we have no power to turn the tide.

[1] Brief Answers to the Big Questions, Stephen Hawking, 2018

Source TA, Photo: Shutterstock