Of Unrealistic Models Modeling 'Reality'

In my last post, I made reference to something is called "social aspiration gap" by the RSA. After reading one of the latest posts of Matthew Taylor's blog, its concept now is clearer to me. I am sorry for the misunderstanding. The social aspiration gap they are concerned about is:

The existent gap between the current "social needs and expectations, and on the other, what the state and market can realistically provide"[ref].

The first ideas that came to my mind were the following. Agreeing in much with the RSA, I thought perhaps that there are three ways of approaching this "gap". I have talked quite a lot already of the first approach in this blog, which refers to nurture self-control, empathy and common-sense, and awareness of today's World challenges, this is ... a whole new way of thinking in Taylor's words. Second, we need to get the industry and economic corporations involve in these new way of thinking, because whether we like it or not, they drive our economy and therefore society (as I discussed in my previous post). The third one and last one, which I found definitely more impossible than the previous two, a new economic model ... (yes, I know I am a crazy dreamer, but what else I can do?)

I wonder what economists are doing nowadays ... is not that we have patched the current model already too much? I am not an economist, in fact I know very little, but I was thinking that it is maybe time to re-invent the wheel, rather than keeping in patching it.

This reminds me of Tomas Sedlacek in his book "Economics of Good and Evil" (which also I first heard from an RSA video and I am about to finish ;] -- BTW pretty easy to read even for newbies like me -- ). He wrote that:

"Systems containing internal inconsistencies, which are partially in conflict with reality and frequently based on purely and intentionally unrealistic assumptions and which come to absurd conclusions in extremes, are nonetheless successfully applied."

"It would appear that the system has its lifespan not due to its infallibility or logical consistency, but because the nonexistence of
a competing system."

And according to Tomas Sedlacek, economic systems or models are not the exception. Furthermore, he wrote, paraphrasing someone else, that "models and their assumptions are unrealistic" ...

(well my opinion still divided in here, but let me continue ....)

So, let me tell you what I know about scientific models, (at least empirical software models) they are created upon some evidence, and yes indeed most of the times "assumptions" need to be made in order to build a model to describe certain phenomena. Of course some particular cases would not follow the model. That is the reason models in science take years, sometimes even decades, to mature and put them into practice. And of course a model would properly work only under the same circumstances it was built in. When something has changed, the model can be either patched or re-invented depending on how drastic was the change.

On the other hand, we have the chaos theory (this is the reason my opinion is divided). I am sure all you have heard of the famous butterfly effect, which was observed precisely when a weather prediction model was rerun with exactly the same initial conditions for a second time, just that this second time
one of the initial conditions had a very very small difference, almost insignificant, and despite its insignificance made the model forecast a very different weather. So this discovery proved that a very well defined system model can become unpredictable.

So either way, none-chaotic or chaotic, I wonder what do economists have done ... because for sure our society has changed and our natural world has too ... How old are our economic models? In which circumstances they were created? Our current economic models have changed too? To which extent? Or they have just been only patched? (or not even that?) ... It would not be the time of stop patching the wheel and re-invent it instead?

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Today's illustration: Plato's Cave


Image Taken from [here]