Economist versus quant
There’s an uneasy relationship between economists and quants. Part of this stems from the fact that each discounts what the other is really good at.
Namely, quants are good at modeling, whereas economists generally are not (I’m sure there are exceptions to this rule, so my apologies to those economists who are excellent modelers); they either oversimplify to the point of uselessness, or they add terms to their models until everything works but by then the models could predict anything. Their worst data scientist flaw, however, is the confidence they have, and that they project, in their overfit models. Please see this post for examples of that overconfidence.
On the other hand, economists are good at big-picture thinking, and are really really good at politics and influence, whereas most quants are incapable of those things, partly because quants are hyper aware of what they don’t know (which makes them good modelers), and partly because they are huge nerds (apologies to those quants who have perspective and can schmooze).
Economists run the Fed, they suggest policy to politicians, and generally speaking nobody else has a plan so they get heard. The sideline show of the two different schools of mainstream economics constantly at war with each other doesn’t lend credence to their profession (in fact I consider it a false dichotomy altogether) but again, who else has the balls and the influence to make a political suggestion? Not quants. They basically wait for the system to be set up and then figure out how to profit.
I’m not suggesting that they team up so that economists can teach quants how to influence people more. That would be really scary. However, it would be nice to team up so that the underlying economic model is either reasonably adjusted to the data, or discarded, and where the confidence of the model’s predictions is better known.
To that end, Cosma Shalizi is already hard at work.
Generally speaking, economic models are ripe for an overhaul. Let’s get open source modeling set up, there’s no time to lose. For example, in the name of opening up the Fed, I’d love to see their unemployment prediction model be released to the public, along with the data used to train it, and along with a metric of success that we can use to compare it to other unemployment models.