In the end, I think economics is an interesting and complex field (hence why I spend so much of my free time working on it), not something trivial that can be solved quickly by writing down the right Lagrangian. I do think economists have framed the problem incorrectly (in terms of individual human behavior), but many economists share at least part of that criticism (problems with microfoundations).The question is whether economists have the wrong model. The response of heterodox approaches is yes. The generally agreed reason is that economics is a social science, and therefore also bound up in psychology, rather than a natural science like physics. There is no normal paradigm in either social science or psychology at this point, unlike physics, and that itself says something about the difference in the subject matter. As a result, attempts to formalize economics similar to physics sacrifice too much for methodological convenience.
What gets sacrificed is representativeness of reality. Business schools realized this and switched to the case method similar to law. Then it is a matter of figuring out which case applies to the events being investigated. However, there are no agreed upon stable criteria for deciding in specific cases since events are never unfold in exactly the same way over time. As in law, the different parties present their arguments on how their analysis squares with precedent by being "on all fours" with a prior decision based on the facts of both cases.
Information Transfer Economics
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Jason Smith
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Krugman on models (II)
Lars P. Syll | Professor, Malmo University
3 comments:
There is no normative frame in physics either regarding many many things Tom. It's an illusion, and physics envy has no epistemic basis.
That may be true of contemporary physics, Ignacio, but conventional economists have worked mostly out of a classical paradigm, as Philip Mirowski has explored, e.g., in More Heat than Light: Economics as Social Physics.
There is also problems with econophysics. Attempting to use chaos theory to explain behaviour patterns.
(i) the atoms in a human society are not dumb. They learn and adapt over time. Much more than any other biological system and certainly differently to atoms in a gas.
(ii) the economy as it stands is a Procrustean economy - it has been subject to the religious restrictions of marginal economic theory for decades. Therefore data from this economy will naturally fit certain curves because the system is heavily restricted. Nobody has any idea what things will look like if the straitjacket is taken off.
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