Thursday, September 17, 2020

Politics is an American industry — Steve Randy Waldman

Good observations, as characteristic of SRW.

I would add that many assume that economic models are general descriptions of reality, including those that build them. But that is not the way they function, since reality is much more complicated and often complex, whereas models are simplifications that function to assist thinking about the real world and its goings-on. 

Models are general descriptions of ideal "worlds" that are used to compare thinking about complicated and even complex matters in terms of getting some handle on it. They can be useful if their limitations are recognized, but often, they are not, or are swept under the rug in discussion.

Every model has to be evaluated in terms of 1) usefulness (pragmatic criterion) and 2) scope and scale (representation). Often, economy of expression leads to over simplification, for instance. The scope of the assumptions may exclude highly relevant data, so that the information generated by the model cannot "see" important aspects of reality. In other words, the model is "blind" in these respects.

Scale is also important and in economics especially. For example, extending the micro by implication to the meso and macro can fall victim to the fallacies of composition, hasty generalization, excludedd middle, and so forth. 

Finally, there may be significant cognitive-affective bias operation in model building, data collection and processing, and interpretation of output, as well as "what the model says."

At the macro level, the essential must be distinguished from the productive. Relatively little actual production activity is involved in a service-dominated economy such as contemporary developed economies. Maybe only about 25%, depending on the criteria for abstraction that are selected. And not all production or services are essential or vital, whereas some of both are.

Politics is an interesting factor in economics, too, since a great deal of economics, micro (individuals, "atomic" firms), meso (subsystems), and macro (national systems), and global (world system) – depend on policy choices, who makes them, and how they are made and implemented. Politics is an "industry," and under capitalism, the question arises, who makes the decisions and who gets the profits?

Getting a handle on this is an important aspect of learning and doing economics.

Politics is an American industry
Steve Randy Waldman

See also

Household Wealth by Wealth Percentile
Steve Roth

1 comment:

Peter Pan said...

The most important step is to flesh out the conclusion. That will serve as a guide to developing the model.