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why are all these clever/respectable people pushing something that seems like such obvious gunk??
The truth is, even most highly respectable/smart people do not have a deep understanding of econometric modeling.
The subset of people who actually understand the math behind the models is extremely tiny. Including among people who have Masters in Econ/Finance. IMO learning it in a class, even getting an A in the class, is not really enough. Because the classes just teach you how to use the models, but you don't really spend time tinkering with the underlying assumptions or thinking too hard about what falsifies the models.
It kinda takes years of tinkering in the depths of the math, trying to build your own models, answering objections to them by other people, that builds your ability to deeply understand the models. Usually the only people who ever do that are people in PhD programs.
the classes just teach you how to use the models, but you don't really spend time tinkering with the underlying assumptions or thinking too hard about what falsifies the models.
Guess that made me a bad student, then?? I basically did the opposite, focused on figuring out what was happening and the assumption, specify model etc, and then the exact commands in Stata later.
Quite a few of these people are PhDs, e.g. the physicist Giovanni-something. They usually have an astonishing grasp of math
No, that makes you a good student. Thinking about the underlying assumptions is what differentiates an "economist" from a "technician". When we were hiring for new faculty positions, sometimes people would say of a fresh grad, "That guy's just a technician," referencing the idea that they were good with the math, but they weren't thinking carefully about the underlying economics.
I remember sitting in ecmt labs with people just discussing with the TA or professor "what's the command for that? Do we have a test for that?" Having no idea what they were investigating or actually doing
Basically memorizing, if problem, then run y command
Indeed. That's 90% of students. Even the good ones.
Quite a few of these people are PhDs, e.g. the physicist Giovanni-something. They usually have an astonishing grasp of math
Ah, yeah, another common problem with people who are good at math from other fields trying to comment on economics. Econometric theory isn't just math. It's a close connection between math, the underlying economics, and how your assumptions tie the underlying economics to the math. I find that people coming from a physics/engineering background often fail to grasp that. Because they are used to modeling physical systems where the underlying assumptions are natural law and (afaict) 100% accurate to how the world behaves. Not so for economics/finance.
As someone with both a physics and econ background, I like to offend physicists by saying econ is harder than physics. (Because of the assumptions issue, but also because of some self-referentiality in what we do. How people think about econ actually affects how the economy behaves. But how we think about physics doesn't affect how nature behaves.)
hheeeeehe, yeah that's definitely how you annoy the kings of the "hard" sciences :) wishy-washy economics be harder
All very good explanations for what's going on, thank you
Yeah, any model based on a simple time series is inherently flawed.
How can one construct a model when the unit of account ($) isn't a constant? This is particularly relevant for the 2020-21 era stimulus which saw 20-30% inflation across many assets.
How can you say that the model is useful if the predicted ranges are so large? For example, this model implies a current BTC price of anywhere between $52k and $528k:
https://charts.bitbo.io/long-term-power-law/
How can it possibly account for macro-scale events which aren't guaranteed to happen but completely change the price behavior of the asset (ETF approvals, MSTR, etc.)?
But to answer your question,
A few takes: