Sunday, October 17, 2010

Economic Models & Reality

We don't understand economic models. Economic models don't understand reality.

'Economic models, all other things remaining the same, depict reality' ADD 'All other things never remain the same' EQUALS 'Economic models never depict reality'

If economic models contained places for all possible variables they would be a reality, but still not our one.

Economic models used as prediction tools don't work unless there are no serious shocks, but then 'what's the point?'

If only one could be an economist without talking about mathematical models, but that isn't possible any more, not via the academic route.

[Related Post – Paul Krugman: Macro Economic Madness -]


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