Tuesday, July 18, 2017

Chris Dillow — Facts, frictions & "mainstream" economics

A major problem with conventional economics is that it is like doing physics without taking friction into account. OK for creating simple teaching models to illustrate fundamentals, maybe. But disastrous in doing advanced theory and especially in applications like engineering.

There are a lot of inefficiencies in economic behavior that are difficult to measure and very difficult to reduce in a cost-effective way, such as transaction cost. Ignoring these factors or pretending that they don't contribute substantially to results can render modeling quite non-representational when predictions are compared to evidence.

And this is in addition to "theonomic" assumptions!

Stumbling and Mumbling
Facts, frictions & "mainstream" economics
Chris Dillow | Investors Chronicle

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