The Fundamental Delusion of Predicting Based on the Past

The video discusses the limitations of current economic models, highlighting the illusion of stability they present. It emphasizes the concept of Knightian uncertainty, which challenges the assumptions of deriving future probability distributions from past data. The video critiques the reliance on Gaussian normal distributions and underscores the importance of aligning economic models with real-world phenomena. Historical examples, such as those by Kindleberger and McKay, illustrate the failure of models to predict economic bubbles. The video calls for a shift towards models that accurately describe the world as it is.

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