Sunday, August 1, 2010

The answer is YES

I came to an interest in economics having already read guys like John Kenneth Galbraith in high school.  His New Industrial State came out my senior year.  I was quite excited by anyone who would attempt to describe something so big and complex as the industrialized society that was USA.

However, I soon learned that in the world of academic economics, folks tended to describe the world with a LOT of parts left out.  This was true even in courses that described themselves as macroeconomics.  And the guy most responsible for trying to reduce the incredible complexity of industrialization to some mathematical formulas was Paul Samuelson and he called his economics "neoclassical."
Does Neoclassical Economics Rot Your Brain?
Timothy B. Lee Jul. 30, 2010, 12:31 PM  
If you don’t normally read the comment section, I encourage you to click through to yesterday’s post about “clean slate” thinking. I particularly want to endorse this perspective from Jed Harris:
I think it turns on on whether one gives more weight to models or observations. The modernist architects and planners had very strong models, and ignored or had contempt for actually existing social reality, so they didn’t work very hard to observe or understand it. They didn’t feel any obligation to test their theories in the small before trying to apply them in the large. They didn’t have to listen to “the little people” who didn’t understand the theory and only knew what they personally observed.
This is exactly right, and it succinctly makes a point that I’ve tried to make in the past. Jed goes on to argue that “the most serious threat from theory run amok at the expense of observation seems to be neo-classical economics.” Prompting a thoughtful response from some other readers, especially Jess.
I think I share Jed’s sentiment but wouldn’t quite put it this way. Models by themselves aren’t threats to anything. What matters is how models are used. The neoclassical model, like all models, is an approximation of reality, and it fits some problems better than others. more

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