July 03, 2003

Economics and Measurement

Gene Callahan has an excellent article on the use (and abuse) of statistics in economics:

Measurement in the physical sciences depends upon the postulate that certain elements in the situation being measured are constant. A meter is always a meter, whether Joe or Mary or Sam is doing the measuring. And that meter should stay constant over time. Even Einstein, in formulating his theory of relativity, which contends that measurements of length are dependent on the observer's frame of reference, still must posit some unchanging elements, such as the speed of light, in order to formulate physical laws based on that idea.

However, once we enter into the realm of human action, there are no quantitative constants. Human action springs from the meaning that humans attach to their situation. Since that is the case, as knowledge is gained, as life is lived - in short, as time passes - the meanings humans attach to the circumstances of their world will alter. Such alterations are inherently unsusceptible to quantitative measurement or prediction. We cannot measure an interpretation, nor can new human meanings be predicted in advance - otherwise, they would not be new!