by Summary:
A good example of this is the phrase, "the new normal." At first, economists and policy makers were surprised and perplexed when policy predictions of their models based on historical trends did not turn out. So then they dragged in the concept of "the new normal" in stead of admitting they didn't have a grip on what is actually going on. We see this recently in Janet Yellen's statement that the Fed didn't really understand inflation, like it's not doing what it is supposed to be doing. The problem with admitting uncertainly is psychological. It is upsetting. Human are very good at fooling themselves by creating conceptual constructs that secure their place in a known structure. Without this humans feel as though at sea in a storm. For the ancients this was accomplished through
Topics:
Mike Norman considers the following as important: John Hicks, uncertainty
This could be interesting, too:
A good example of this is the phrase, "the new normal." At first, economists and policy makers were surprised and perplexed when policy predictions of their models based on historical trends did not turn out. So then they dragged in the concept of "the new normal" in stead of admitting they didn't have a grip on what is actually going on. We see this recently in Janet Yellen's statement that the Fed didn't really understand inflation, like it's not doing what it is supposed to be doing. The problem with admitting uncertainly is psychological. It is upsetting. Human are very good at fooling themselves by creating conceptual constructs that secure their place in a known structure. Without this humans feel as though at sea in a storm. For the ancients this was accomplished through
Topics:
Mike Norman considers the following as important: John Hicks, uncertainty
This could be interesting, too:
Mike Norman writes Uncertainty — Brian Romanchuk
Mike Norman writes George A. Akerlof — What They Were Thinking Then: The Consequences for Macroeconomics during the Past 60 Years
Mike Norman writes The Effects of Uncertainty on Economic Outcomes — On the Economy
Mike Norman writes Lars P. Syll — a question of economic methodology
The problem with admitting uncertainly is psychological. It is upsetting. Human are very good at fooling themselves by creating conceptual constructs that secure their place in a known structure. Without this humans feel as though at sea in a storm.
For the ancients this was accomplished through myth and magic. For moderns it is done through models and math. Neither approaches are capable of overcoming uncertainty. The latter does a better job, but it still leaves gaps that few are willing to admit and risk psychological upset that affects "expectations."
Lars P. Syll’s Blog
Hicks on neoclassical ‘uncertainty laundering’
Lars P. Syll | Professor, Malmo University