Economists and their platonic vision of economic models

A nice interview of Jonathan Schlefer of HBS. He is a political scientist and has written a book called – The Assumptions Economists Make. It seems both econs and non-econs are having a great time writing books.

Shclefer gives a nice perspective on  econs and their models:

Q. To what extent do you see a “march of progress” in the efforts of successive generations of economists to build useful models of the real economy?
A.There is a kind of progress in economics. Critics point out flaws in models; supporters revise the models to respond; and the models do become sharper. For example, John Maynard Keynes’s “General Theory” was a brilliant book, but his model was somewhat muddy, if you even grant that he had a model per se. If his model had been clearer, there wouldn’t have arisen so many disputing schools of “Keynesians” (with various prefixes and suffixes to distinguish themselves). But whichever side you’re on in these disputes, the models favored by different sides have become sharper and the bases of disputes clearer.
Q. You are particularly critical of neo-classical economics, which has its roots in the late 19th century. As you note, that was a period of great optimism that the world was an orderly place and that scientific inquiry would shortly discover those rules. In economics, this expectation culminated in the “discovery” that markets move naturally toward stable equilibriums. Scientists long ago concluded that natural systems actually tend toward entropy. Why has faith in an orderly universe endured so much longer among economists?
A. I think economists’ faith in an orderly universe is Platonist: There is an absolute orderly world, they hope, if only we could logically uncover it. These market imperfections surrounding us are mere deviations from the harmony of market equilibrium. Platonism is appealing. We would like certainty. But the Platonic ideal is either inaccessible — an almost religious faith that you cannot apply to practical policy — or it’s corrupt if you try to apply it. Thomas Sargent [an economist at New York University, and Nobel Prize laureate] wrote a fascinating essay called “Evolution and Intelligent Design.” Sargent means the term intelligent design to capture some hope for a perfect order, which he finds in tension with disorderly evolution.

The Platonic vision can persist in economics because economic models are mathematical (in that sense Platonic), and you can never decisively prove them wrong. You can say President Obama’s stimulus worked because the economy would have done worse without it. Or you can say it failed because the economy would have done better without it. But you can’t decisively prove how the economy would have behaved without the stimulus. There are rational ways of weighing these disputes, but they rarely persuade people to change their minds. Physics models can be tested in experiments, which can be replicated anytime, anywhere, but economic models cannot. So you can maintain Platonic visions.

Useful to keep getting views on how others perceive the econ field..


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