Friday, June 30, 2006

Just how do economists reach their conclusions?

Here's a primer:

Let's start with how economists reach our conclusions. Non-economists might be forgiven for presuming that we construct our arguments in the same way that they do: apply their preferred mixture of values and interests in order to decide whether or not they like a policy, and then assemble arguments to support that position. This might explain why many would view economists as opponents: by the simple act of disagreeing, aren't economists making it clear that we don't share the same values?

Except that's not how we work. Our starting point is always a model: a stylized representation of how the economy works. Once we're satisfied that we have a model that incorporates the main features of interest — this step necessarily involves a certain amount of subjective judgment — we compare what the model would predict if the policy were in place with what would happen without it. The difference between the two predictions is the effect of the policy.

After describing the problems that arise from this fundamental misunderstanding, the author (Stephen Gordon of the University of Laval at Quebec City) goes on to offer some suggestions about what can be done:

Clearly, economists can make a more concerted effort to explain to non-specialists what it is they are saying, and why. This isn't a simple task — economics is a difficult and technical subject — and it's made more complicated by the fact that there are any number of commentators who have built their careers on misunderstanding and misrepresenting what economists have to say.

But it would be easier if progressives made an effort to set aside their distrust of economists and actually listen to what we are trying to say. Yes, you may be forced to re-examine some long-held opinions, but is that really a bad thing? And you may be pleasantly surprised to learn that we too are preoccupied with finding solutions to the problems of poverty and inequality.

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Cross-posted at nanopolitan 2.0; if this is not a good time to make a plug for my other blog, what is?


  1. Anonymous said...

    This exactly what Prof. Joseph Stiglitz is doing for years. His works as accessible to both experts and nonexperts alike.

  2. Anonymous said...

    I find it tough going. Marshall (teacher of Keynes) advice, which I only vaguely remember, is that econmists after they do the technical analysis should then tear it up and write in plain English. There are some like Brad DeLong, Krugman, Stiglitz, Pollin, Easterley who try to do that but their conclusions are different. Matt Ridley at the end of "The Red Queen" says that probably half the ideas in his book are wrong and "I sometimes feel that we are fated never to understand ourselves because part of our nature is to turn every inquiry into an expression of our nature: ambitious, illogical,, manipulative, and religious." I think that similar things are true for economics. Possibly commonsense, a set of prejudices (hawk or dove) and empiricism may help with some decisions. More confused

  3. Anonymous said...

    From a comment in, I remembered an Indian economist Raghram Rajan. A biographical sketch can br found at:
    An interview with him:
    An article which contains some of his ideas:
    He also a wrote a book but I have not read. He seems understandable.