Saturday, July 19, 2014

Brad DeLong — Is Choosing to Believe in Economic Models a Rational Expected-Utility Decision Theory Thing?


This is a good one. I won't spoil it.

OK, I can't resist.
The fact that so few economists are in the third camp–and that any economists are in the second camp–makes me agree 100% with Andrew Gelman’s strictures on economics as akin to Ptolemaic astronomy, in which the fundamentals of the model are “not [first-order] approximations to something real, they’re just fictions…”
WCEG — The Equitablog
Is Choosing to Believe in Economic Models a Rational Expected-Utility Decision Theory Thing?
Brad DeLong

4 comments:

y said...

This is a good and important one from DeLong:

http://delong.typepad.com/sdj/2010/12/what-do-econ-1-students-need-to-remember-second-most-from-the-course.html

"...how many ways a market economy can go wrong and go badly wrong. I count seven ways that market economies can and do go badly wrong"

Tom Hickey said...

Thanks, y. Promoted to a post.

y said...

DeLong sounds like a post-Keynesian in this latest post.

Tom Hickey said...

Edging into it.

Actually folks like DeLong and Krugman can provide a useful service by creating a bridge between the mainstream and PKE, MMT, and Institutionalism.

Once it is admitted that the mainstream is not dealing with the actual economy but a stylized version that is mathematically tractable and ideologically "correct," then it's an easy step back into reality.

What the mainstream regards as frictions, imperfections, and shocks, is the normal course of events and the mainstream models are seen as formal models of imaginary and idealized worlds that not only do not exist but cannot exists owing to human limitations, cultural and institutional factors, and the arrow of time that result in complexity and uncertainty.