Tag Archives: Economics

The limits of formal models The practical limits of formal models become especially apparent when attempting to integrate diverse information sources. Neither statistics nor medical science begins to capture the uncertainty attendant in this process, and in fact both encourage pernicious overconfidence by failing to make adequate allowance for unmodeled uncertainty sources. Instead of emphasizing the uncertainties attending field research, statistics and...

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Modern mainstream (neoclassical) economics relies to a large degree on the notion of probability. To at all be amenable to applied economic analysis, economic observations allegedly have to be conceived as random events that are analyzable within a probabilistic framework. But is it really necessary to model the economic system as a system where randomness can only be analyzed and understood when based on an a priori notion of probability? When attempting to convince us of the...

The problem with unjustified assumptions An ongoing concern is that excessive focus on formal modeling and statistics can lead to neglect of practical issues and to overconfidence in formal results … Analysis interpretation depends on contextual judgments about how reality is to be mapped onto the model, and how the formal analysis results are to be mapped back into reality. But overconfidence in formal outputs is only to be expected when much labor has...

What makes economics a science? Well, if we are to believe most mainstream economists, models are what make economics a science. In a recent Journal of Economic Literature (1/2017) review of Dani Rodrik’s Economics Rules, renowned game theorist Ariel Rubinstein discusses Rodrik’s justifications for the view that “models make economics a science.” Although Rubinstein has some doubts about those justifications — models are not indispensable for telling good...

Mainstream flimflam defender Wren-Lewis gets it wrong — again! Again and again, Oxford professor Simon Wren-Lewis rides out to defend orthodox macroeconomic theory against attacks from heterodox critics. A couple of years ago, it was rational expectations, microfoundations, and representative agent modeling he wanted to save. And now he is back with new flimflamming against heterodox attacks and pluralist demands from economics students all over the world:...

Heterodoxy — necessary for the renewal of economics A sense of failure is, for all intents and purposes, being translated into a context of relative success requiring more limited changes – though these are still being seen as significant. Part of the reason that they are seen as significant is that changes from within mainstream economics do not have to be major in order to appear radical. It is our contention that heterodox economics is being...

Analogue economies and reality Modelling by the construction of analogue economies is a widespread technique in economic theory nowadays … As Lucas urges, the important point about analogue economies is that everything is known about them … and within them the propositions we are interested in ‘can be formulated rigorously and shown to be valid’ … For these constructed economies, our views about what will happen are ‘statements of verifiable fact.’ The...

Trumponomics: causes and consequences Real-world economics review issue no. 78 22 March 2017 Trumponomics: causes and consequences Trumponomics: everything to fear including fear itself? 3 Jamie Morgan Can Trump overcome secular stagnation? 20 James K. Galbraith Trump through a Polanyi lens: considering community well-being 28 Anne Mayhew Trump is Obama’s legacy. Will this break up the Democratic Party? 36 Michael Hudson Causes and consequences of...

Your model is consistent? So what! In the realm of science it ought to be considered of little or no value to simply make claims about the model and lose sight of reality. There is a difference between having evidence for some hypothesis and having evidence for the hypothesis relevant for a given purpose. The difference is important because scientific methods tend to be good at addressing hypotheses of a certain kind and not others: scientific methods come...