Monday, April 26, 2021

Implicit assumptions in Econ 101 made explicit — Jason Smith

Econ 101 assumes a lot of things — from the existence of a market and a medium of exchange, to being in an approximately stable macroeconomy that's near equilibrium, to the rates of change of supply and demand in response to each other, to simply the existence of a large number of agents.

This is usually fine — introductory physics classes often assume you're in a gravitational field, near thermodynamic equilibrium, or even a small cosmological constant such that condensed states of matter exist. Econ 101 is trying to teach students about the world in which they live, not an abstract one where an economy might not exist.

The problem comes when you forget these assumptions or try to pretend they don't exist. A lot of 'Economism' (per James Kwak's book) or '101ism' (see Noah Smith) comes from not recognizing the conclusions people drawn from Econ 101 are dependent on many background assumptions that may or may not be valid in any particular case.

Additionally, when you forget the assumptions you lose understanding of model scope (see here, here, or here). You start applying a model where it doesn't apply. You start thinking that people who don't think it applies are dumb. You start thinking Econ 101 is the only possible description of supply and demand. It's basic Econ 101! Demand curves slope down [7]! That's not a supply curve!
Information Transfer Economics
Implicit assumptions in Econ 101 made explicit
Jason Smith

1 comment:

AXEC / E.K-H said...

NOTE on Jason Smith on ‘Implicit assumptions in Econ 101 made explicit"

Supply-demand-equilibrium is such an incredibly idiotic construct that the only thing it is good for is to demonstrate that virtually every proto-scientific garbage is swallowed by the representative economist.

Econ 101: Economists flunk the intelligence test at the first hurdle

Econ 101: Supply-Demand-Equilibrium is dead for 150+ years

What’s wrong with Econ 101? Economists, of course!

Econ 101 or How to train morons

The false foundations of economics

Egmont Kakarot-Handtke