The theory you are discussing (grad micro 101 equilibrium existence) is not actually crazy if you think about what the mathematical assumptions actually imply. Really the economic assumptions boil down to "small changes in prices lead to small changes in demand" and the math is just rigorously defining small in terms of a general topology.
Small price changes don’t necessarily lead to small results. There’s a reason companies advertise 19.99 not 20 which has been experimentally verified many times.
People simply act irrationally, which is a fundamental issue when trying to treat economics as math.
Matter is not continuous and yet we don’t need atoms to predict how a metal sheet will bend. There are a lot of sound theories about how to deal with discontinuity, and how the problem solves itself when numbers get large enough.
Or think of it like weather and climate: we cannot predict that there will be a thunderstorm on a given day 2 months from now, but we can be fairly confident that in x years, the average global temperature will be y±z°C. Because when you aggregate enough events, statistical effects become dominant.
"But reality is not linear" is not really a gotcha.
> Matter is not continuous and yet we don’t need atoms to predict how a metal sheet will bend.
At sufficient detail atomic structure has a huge impact on how a metal sheet bends. Metallurgy seriously investigates at this level.
Hand waving details is fine when discussing with friends, it’s not a sound foundation for serious academic research.
Also, the degree to which the weather is unpredictable 2+ weeks out is somewhat overblown. It generally snows in DC several days a year yet the odds it snows in DC 2 weeks from now is essentially zero not ~4/365. Similarly you can more accurately predict thunderstorms than a pure guess 2 months from now. We may call it climate, but a physical model of earths tilt, prevailing winds, CO2, etc is better than just historic data.
> Hand waving details is fine when discussing with friends, it’s not a sound foundation for serious academic research.
It's how physics worked for hundreds of years. Make a handwavy model, find out it works on some cases but breaks down on others, then make a slightly less handwavy model the next time.
Metallurgy considering atomic structure is a very new concept, and was not needed for the first millenias of metalworking.
The issue with economics is not handwaving, is that models are hard to test due to systems not being well isolated.
The history of physics is the exact opposite of what you say. Models were subject to considerable criticism and refinement on theoretical, philosophical, and aesthetic grounds. Newton did not discover universal gravitation because Kepler's laws broke down. Maxwell did not discover his correction because Ampère's laws broke down. Einstein did not discover relativity because Newtonian mechanics broke down. Investigation proceeded along different lines altogether and was accompanied by a degree of scrutiny not to be characterized as 'handwavy'.
> At sufficient detail atomic structure has a huge impact on how a metal sheet bends. Metallurgy seriously investigates at this level.
I know, it’s my job. But as much as we like to obsess about the mechanisms for dislocations climbing and solute interactions, nobody cares when they are designing an aircraft. They have macroscopic laws they put in their finite elements code. These are perfectly adequate to describe most known modes of failures of industrial alloys. Nobody is going to model all the atoms in a macroscopic widget, ever. It’s beyond pointless.
Do you have a citation for confidently predicting global temperature (whatever that is) on a climate timeline (10+ years). A study I read showed that all the models from 2000's and 2010's were off by quite a bit.
Falling back to "people are irrational", in the economic sense of rational (ie not having complete, transitive, and reflexive preferences) quickly leads to any economic claim being unfalsifiable.
Biology was forced to deal with the insanity of biochemistry because that’s what is actually happening. Economics can’t get away from the innate complexity of actual humans if it wants to be actually useful for more than just propaganda.
You misunderstand the difficulty. We don't have (and likely won't ever have) the ability to read people's thoughts and say what they were thinking when they made their choices. In order to do any analysis of human choices you must impose assumptions on the process because otherwise you can say that "they were thinking xyz" and there is no way to falsify that.
Economics chooses to impose assumptions that peoples observed choices are a better way to study their behavior than what they say, and so we look at the observable state of the world for an individual economic agent. You can do analysis of people whose preferences are not rational (in the strict mathematical sense that I described above) but you must choose what kind of irrationality they have. And that gives you the ability to assume any results. That isn't any way to do science. Rationality is the worst option except for all the rest as they say.
Rationality isn’t an option because it’s wrong. There’s literally zero reason to invest any time into models using it whatsoever when the opportunity to look for something that actually works exists.
You don’t need to read people’s minds to predict their behavior at sufficient granularity to be useful. Economics is blessed with plenty of opportunities to collect high quality real world data without needing to conduct arbitrary experiments.
How much gas will this specific gas station sell on date X. Build whatever models you want at whatever scale is relevant and they face the brutal truth of a knowable answer to judge them. That’s how science progresses not arbitrary assumptions to make modeling easier.
"Newtonian mechanics isn't an option because it is wrong. There’s literally zero reason to invest any time into models using it whatsoever when the opportunity to look for something that actually works exists."
Do you see the issue here when I frame it this way? The core microeconomic assumption of people having preferences which are complete, reflexive and transitive (these are formal mathematical definitions! They don't require a whole lot to hold!) has been incredibly useful in the 20th and 21st centuries much like understanding Newtonian mechanics was in the 18th and 19th centuries.
Besides this, you are still not engaging with the philosophy of science point that I am making. Because of the fact that humans have this pesky thing called free will, unless we impose some assumptions on their thinking nothing we study about causality in the behavior of humans is falsifiable. Maybe you eat because you feel hungry. Maybe you eat because you worship bread as a god. I fundamentally can't say either way without making assumptions that you likely find unobjectionable.
> Do you see the issue here when I frame it this way?
Honestly no.
Newton mechanics can be accurate to 20 decimal places, that’s currently indistinguishable from reality in relevant and well understood contexts. Making Newtonian Mechanics actually useful.
The core microeconomic assumption is never anywhere close to that accurate. It works except XYZ which doesn’t apply is acceptable, it never works isn’t.
