Noah Smith:
There are insights that you get from doing economics that you won’t get in a physics lab or from Shakespeare.
The main insight, in my opinion, is that most things in the world have some randomness in them. Economics deals with hideously complex systems where controlled experiments are usually impossible. If you want to isolate one phenomenon, you’re going to have to ignore an awful lot of interesting stuff.
I spent a lot of time -- most of the 1980s and half the '90s I'd guess -- trying to simplify. Trying to prune away the irrelevant. It doesn't come easy. You have to prioritize everything. You have to separate out separate topics and treat them separately. You have to learn to recognize separate issues.
Things are not "hideously complex" when you prune off the irrelevant. Who was it... Who was it that said "The ideas which are here expressed so laboriously are extremely simple and should be obvious." Who was that, anyway?
I like a baseball analogy for that hideous complexity.
ReplyDeleteEvaluating whether to trade player A for player B using models and metrics... useful, also hideously complex.
Trying to figure out how the designated hitter works by crunching 100 years of box score data... hideously complex and also dumb. Read the rulebook.
A lot of economics debate gets mixed up about whether the question at hand calls for econometric number crunching or looking at the institutional rulebook.
I seldom find analogies useful.
ReplyDeleteI don't know anything about "econometric number crunching". (Me? I look at the past.)
a lot of people, people who say economics isn't a science maybe, seem to think that the rules we put in place sort of define the economy, so we can put any rule in place that we want, and this will give us the economy that we want.
Those people are wrong.
An example of what I'm talking about would be sovereign debt and fixed vs floating rate currency regimes. One might set out to look at centuries of data (or "look at the past" or apply econometrics or the semantic rubric of your choosing...) and end up drawing all manner of bad conclusions and spurious correlations from failing to consider the relevant rules and institutional arrangements.
ReplyDeleteThe point is not that a rule that "will give you the economy you want" but that understanding the rules are essential to understanding the economy you have.
I think you have an apple and a cumquat here. Noah is talking about modeling. Keynes, who relied more on compelling narrative, was trying to get people to think outside of the tight classical economic box by realizing that in different realms causes will have differing effects.
ReplyDeletea lot of people, people who say economics isn't a science maybe, seem to think that the rules we put in place sort of define the economy, so we can put any rule in place that we want, and this will give us the economy that we want.
I really have no idea what you are talking about here. I say econ is not a science because 1) there is no firm and agreed to theoretical foundation [think fresh vs salt water] and 2) it is inextricably intertwined with politics, so there can [almost] never be a search for truth, rather than a search for bias confirmation - at least on one side of the spectrum.
Cheers!
JzB
Cheese, you didn't think my post title was funny?
ReplyDelete