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I believe that the failure is more profound than generally recognized. It goes back to the foundations of economic theory. Economics tried to model itself on Newtonian physics. It sought to establish universally and timelessly valid laws governing reality. But economics is a social science, and there is a fundamental difference between the natural and social sciences. Social phenomena have thinking participants who base their decisions on imperfect knowledge. That is what economic theory has tried to ignore.
—George Soros, Remarks at the Festival of Economics, Trento, Italy, GeorgeSoros.com, June 2, 2012.
The Soros speech is the economic event of the weekend, June (it is Geometry June), and indeed, the summer. All focus lower down in the text, where Mr. Soros observes crisis realities and prescribes hope for a recovery of a “fantastic object.”
I would focus on the beginning of this tour de force.
Economic methodology is a British cottage industry. Few in the United States of Math think about how we think about thinking. The English, the Scots, the Welsh (Drat! I know I left someone out.) take “how we think” seriously. We do not. Americans bathe in our technocratic heritage of math and engineering certitude.
(Okay, we have Shiller and Thaler and Kahneman, but mostly, we have differential equations. They do have Phillips and his Curveite machine, but stay with me.)
The Soros speech is important. The clock is ticking. Europe is a social science. It’s too late for Newtonian physics. Discuss.