Re: Economics

[Ed Weick]

Title: Re: Economics

Hi Thomas,   On my most eclectic shelves, I have few volumes of a series of hardcover French comic books featuring a handsome hero who is searching the universe for his beloved.  The hero is accompanied a wistful little gamin of a clown.  The scene is forever shifting around the pair, inspiring the gamin to ask, on more than one occasion, "What is reality, Papa?"  In their ever changing world, they encounter a failed God trying to remake creation, motorcycle gangs led by Adolph Hitler chasing wild Indians, and armies of dogs, in uniform, marching onward to some strange and distant destiny.  What, indeed, is reality?   I keep those volumes around and look at them every once in awhile because I see them as a commentary on the human condition.  We are caught in a universe of shifting scenes, incomprehensible signals, and strange emphases, and while we think some of us see things the same way, we really don't.  No two people, even twins, will process information from the chaotic tableau we refer to as the "real world" identically.  There is no "real world".  What's out there depends on the onlooker.  "Peace, order and good government" (POG), depends on a consensus of onlookers, something that is rarely achieved.   That is why we have theory.  Theory helps us to make sense of phenomena we observe but can't explain unless we have some agreed upon reference points.  In theory, we begin with assumptions and first principles and, gradually, bit by bit, invent a logical reality which may explain at least some of the things that go on in the world out there.  People have always been doing this, with new bodies of theory displacing older ones.  In our modern, secular world, theories attempt to explain man's behaviour toward man.  In medieval times, the concern was man's behaviour toward God.  That is still the concern in much of the world, which can help to explain events like September 11th.   The practitioners of any science will always agree on some basic things.  All economists, for example, will agree that people respond to market price, and that they do so with some consistency.  That tiny piece of reality is therefore understood, or at least economists can pretend it is.  Unless somebody has a better idea, the matter can be put to bed.  However, that does not mean that economists will agree on larger issues such as the role of the state in the economy, what "globalization" is doing to the world or even what "globalization" is, or the obligations of the rich world to the poor.  They can't even fully agree on whether or not a country is in recession and have to invent odd little cues like the two-successive quarter rule to help them think about it.    Why can't they agree?  Probably because the issues are too complex and getting people who experience reality in many different ways to agree on assumptions and first principles is just too difficult.  The issues come pouring in at a hot and heavy pace and the tableau is ever changing.  Along with the phenomenally wealthy Bill Gates, there are terrorist out there, and refugees, and collapsing economies, and exploding cities, and aging populations, and people starving or dieing of AIDS.  All we can do is wander around like the hero and his gamin friend, perhaps understanding some things a little better and fixing them, but only little by little.   Theory isn't the problem.  Complexity is.   Regards, Ed Weick   ----- Original Message ----- From: Thomas Lunde To: [EMAIL PROTECTED] Sent: Monday, March 04, 2002 4:46 PM Subject: Re: Economics Hi Ed: Thanks for your welcoming note.  I might add that I think the arts missed a gifted writer, still time though, you have an ability to write with clarity. As I am on my hobby horse for awhile and scrutinizing the innards of the concept of economics, I will ask if you will elaborate on the following statement: Real world issues don�t often come in a way that make the tools of economics directly applicable. Mostly they come as very difficult questions. Now it would seem to me, simple minded layman that I am - that if reality and theory don't fit, it's highly probable the theory is wrong.  Reality is an awful hard thing to argue against.  Now, wouldn't it be 'rational' for the 'science' of Economics to test the theories it teaches in the amphitheatre of reality and that it is highly irrational to continue to teach theory that rarely can be applied in the real world? With great respect: Thomas Lunde on 2/1/02 8:19 AM, Ed Weick at [EMAIL PROTECTED] wrote The list has see considerable discussion of the nature of economics recently. I haven�t been able to participate because I�ve been busy on other things, though I�ve tried to read some of the material. The problem in at least some of the postings is a failure to distinguish between economics as something that is taught in the classroom and economics as one must use it as a practitioner. In the classroom, economists are taught macro and micro economics. They encounter economic thinkers of the past ­ the physiocrats, the classicists, Marx, neoclassicists, Keynesians. They encounter self-interest, rational choice, and welfare theory. Some of this is presented algebraically, some geometrically, and some as words. All of this is well and good because it makes young minds work. The intent, as I understood it when a student, is not to learn about the real world, but to learn how economists imagined the world, and still imagine it. When one gets out of the classroom, and even before, one encounters the real world, where real issues must be resolved with real answers. As an economist in the Canadian public service, I was never able to satisfy my superiors by drawing indifference curves or citing the iron law of wages. What they demanded of me was short, snappy and well reasoned answers, something they could use to move a particular issue forward. Undoubtedly, what I had learned in the classroom helped because it had sharpened my ability to think rationally and provide helpful, if not necessarily correct, responses. That, in my opinion, was the real value of what I had been exposed to as a student. I still don�t know if what my professors taught me was right, wrong or relevant. All I know is that it helped to make me a useful thinker. Real world issues don�t often come in a way that make the tools of economics directly applicable. Mostly they come as very difficult questions. For example, why has Argentina had to repudiate its debt and why is it now in a deep recession? Classroom economics can provide some insights into this, but if I really had to provide an answer, I would consult someone with several years of experience in international finance and monetary policy ­ someone who knew the turf, so to speak. I would also search out people who knew about the history and culture of Argentina, because I suspect that what has happened there is far larger than something that economists or monetary experts can deal with. One aspect of globalization and mass communication is that issues now come thick and fast and from all over the place. Rather than discreet and separable events, they pound in on us as a babble of noise. Here again the specific content of the individual bits and pieces learned in the classroom may be of little use. Drawing indifference curves would not be very helpful and one probably wouldn�t have time to draw them anyhow. Yet I would maintain that the fact that one had to use those bits and pieces as tools to try to sort things out in the imaginary world of the classroom was helpful. It helped one to learn how to pick apart the various strands of the noise and to rank or sequence them in ways important to finding real world solutions. So, to end this, I would suggest that we not get too hung up on the "nature" of something like economics as a received body of thought or theory. Certainly, one should not hesitate to question its premises. But to me the important question is whether what one learned in academe has helped one to think and solve problems. Even though I have not drawn a single indifference curve since leaving the classroom, I would answer this in the affirmative. Ed Weick