Sunday, June 29, 2014

Diane Coyle — Economists and humanity

Peter Smith sent me his new book The Reform of Economics: How the complex systems approach is building a realistic and humane alternative to laissez-faire. In a letter accompanying it, he said he has two motivations. One is to get economics out of the trap of over-simplifying so that models can use linear algebra and thus be made ‘tractable’. This is one of the things that makes complexity economics and agent-based modelling appealing; virtual economies run on a computer do not need to be solved algebraically.…
The book dates the choice of the purely deductive path to Lionel Robbins and his 1935 essay The Nature and Significance of Economic Science. He defined economics as the science of constrained choice, which, “Not only excludes uncertainty, but it also excludes from the scope of economics both institutions and the medium-term evolution of economic systems.” This isolates economics from the institutional framework of the economy, and hence from what determines the availability of resources over time – it makes economics an inherently static subject.
Natural scientists do regard economics as bizarrely non-empirical…
The Enlightened Economist
Economists and humanity
Diane Coyle | freelance economist and a former advisor to the UK Treasury. She is a member of the UK Competition Commission and is acting Chairman of the BBC Trust, the governing body of the British Broadcasting Corporation

1 comment:

Matt Franko said...

"so that models can use linear algebra....complexity economics and agent-based modelling .... virtual economies run on a computer "

Why are we led to believe that we have to "model" aspects of this human existence that we have authority over in the first place?