by Alan Kirman quote.I have said this before but it is spot on here. Heterodox economists that challenge the existing "normal paradigm" (Thomas Kuhn) in which research and development is pursued are barking up the wrong tree, I believe. Unless they come up with a formal model that replaces the current "standard model," they will not be heeded.I don't see that as possible for the simple reason that a representative model of a macro social system would be intractable without sophisticated AI not yet developed, and even then this is just a guess in dealing with a subject rife with uncertainty and in which institutional arrangements are determinative, and where non-economic factors like power are highly influential in a socio-economic system. (Power is the basis of economic rent extraction, for
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Alan Kirman quote.
I have said this before but it is spot on here. Heterodox economists that challenge the existing "normal paradigm" (Thomas Kuhn) in which research and development is pursued are barking up the wrong tree, I believe. Unless they come up with a formal model that replaces the current "standard model," they will not be heeded.
I don't see that as possible for the simple reason that a representative model of a macro social system would be intractable without sophisticated AI not yet developed, and even then this is just a guess in dealing with a subject rife with uncertainty and in which institutional arrangements are determinative, and where non-economic factors like power are highly influential in a socio-economic system. (Power is the basis of economic rent extraction, for example.)
I think that solution is to distinguish theory from practice and separate economics into theoretical and applied, sort of like physics and engineering. Neither theoretical nor practical economic could ever hope to approximate the precision of natural science and engineering owing the difference in subject matter., e.g., ergodic versus non-ergodic
But let the theoretical folks try if that is what they want to do and someone is willing to fund it. Applied economists interested in practical success should recognize this and point out that the theoretical road is a dead end practically. The evidence is clear.
Actually, microeconomics is already separated into theoretical and practical in the real world, which applied economics is done in firms and tested in the marketplace. The lacuna is in macroeconomic applied to policy formulation, where the normal paradigm fails at the points where it is most needed.
The solution is to separate theoretical macroeconomics from applied and call applied macroeconomics "political economy" to distance it from theory. This would then necessitate political economic being approached as a subset of the social system that includes qualitative as well as quantitative factors and requires taking social, political, and economic factors into consideration.
Societies are complex adaptive systems subject to reflexivity (learning) and emergence (surprise). Treating them as static rather than dynamic, simple (however complicated) rather than complex, rigidly determinative rather than stochastic, and chiefly quantitive instead of blend of qualitative and quantitive is a sure way to model inadequacy and failure.
Lars P. Syll’s Blog
What’s the use of economics?
Lars P. Syll | Professor, Malmo University