Economics in simple language
Came across this and was impressed with how the dialogue made all the economic talk make sense.
There’s the micro econ view- which seems to be that held most by policy makers in D.C. and the mass media and then there’s the macro view for which there are few speakers and less publicity.
But the bottom line is that as a ‘science’ , the lessons of quantum mechanics simply doesn’t exist in the micro econ view.
The link points out the contradictions and reasons for the contradictions that the PTB’s put forth for their need (/s) to inform the public about what’s going on.
It’s worth reading so I bring it to this outlet.
“If we could have developed a brilliant theory of conflict, then the possibility of conflict between rational agents withers (i.e. it tends to zero).
Let me now argue that this proposition is inescapable: Let’s call this brilliant theory of conflict T. T, by definition, predicts the negotiating tactics of each rational party. For example, it predicts how long each one of them is prepared to hold out; i.e. to delay agreement, at a cost, in order to achieve a better outcome. But if the parties are rational, and T is unique, then they must work out what T predicts. Thus, to the extent that disagreement and delay is costly to each of the bargainers, they will agree immediately. To see this, think that if we can both predict (even within a range of commonly shared predictive error) how long our conflict/disagreement will last before we settle, and we can also predict (more or less) what that settlement will be, then why not settle now for the same outcome without the costly conflict?”
“The above illustrates nicely the economists’ tragedy: The ambition to create the ultimate model results in a theory of human behaviour which cannot hold unless the humans populating the model operate like inanimate algorithms following slavishly a particular script. The moment you introduce creativity and a capacity to subvert the rules that supposedly govern our behaviour, the whole theoretical edifice collapses. To illustrate this further, take again theory T. ”
“Which brings me to your final question: What can be salvaged from the theoretical wreck that is economics? My answer is: The process of discovering the limits of analytical reason. By studying critically all models, we end up none the wiser about quantitative outcomes but much, much smarter about the complexities of really existing capitalism. Our exploration of economics may take us, in the end, right back to the point we started: Not having a clue about when the next crisis will hit, what sectors will dominate, whether the stock exchange will pick up soon or not. But, while we shall not have a determinate model of prices and quantities, we shall be much more appreciative of capitalism’s motivated irrationality, its penchant for surprising even the powers that be, its capacity to create incredible wealth and untold suffering by means of precisely the same process. Or, as T.S. Eliot once wrote:
We shall not cease from exploration
And at the end of all our exploring
We will return to where we started
And know the place for the first time – Little Gidding, one of T. S. Eliot’s Four Quartets”
So, to wrap up, it seems to me that once one’s mindset identifies economics with modeling, the urge to keep modeling overcomes any philosophical, ideological or analytical commitment to an economics that retains any link to really existing capitalism.