October 27, 2011
UNEXPECTEDLY! Why Economic Models Are Always Wrong. “If you had to readjust the constant in Newton’s law of gravity every time you got out of bed in the morning in order for it to agree with your scale, it wouldn’t be much of a law. But in finance they just keep on recalibrating and pretending that the models work.”
Of course, if the models are always wrong, that’s a good argument for leaving things to markets, instead of having regulators — whose models are always wrong, remember — trying to run things.