On Sat, 20 Sep 2014 20:59:56 -0500, F. George McDuffee
wrote:

On Sat, 20 Sep 2014 13:25:40 -0400, Ed Huntress
wrote:

snip
If you spent your time seeking facts, instead of playing head games
with yourself, you might actually come up with something useful.
/snip

This seems to be a pandemic with economists and policy
makers. The various economic/ideological "schools" now
appear to be no more appropriate to today's top level
socioeconomic/fiscal challenges, such as the disappearance
[not just the off-shoring] of work, than do the "Carlist" or
"Jacobite" positions. Times have moved [rapidly] on and
they are still wandering around lost in the 1930s, debating
exchange rates, emigration policy, inflation rates, and
non-teriff trade barriers.

Well, the study of economics is changing. I think you'll see a new
generation, that was taught in a different way, starting to make their
voices heard in the near future -- less theory, and more
evidence-based research.

My son has a degree in economics and a master's in mathematics. He
represents one wing of it -- the econometrics, Big Data wing. It
landed him a very good job, first with a think tank and now with a
top-ranked consulting firm. But he's only 26; although he's
co-authored a number of journal articles, he's not at a level where
anyone outside of a narrow field would have heard his voice.

The other is the Behavioral Economics wing. These are the ones who are
taking cues from psychology to examine how real people behave
economically in the real world. They have a lot to add to the
conversation.

Between the two, my bet is that what we hear from the economics
profession is going to be very different in ten years or so.


One major area of concern is their failure to appreciate
that another layer of complexity has been abruptly
"trowelled" over the existing micro and macro economic
layers. This new "hyper-economics" [for lack of a better
word] appears to be at least as different from macro as
macro is from micro. This is not only due to the new
globalization and rise of sovereign transnational
corporations including the banks, but also to the rise of
automation, Artificial Intelligence, bioengineering,
nanotechnology, instantaneous world wide communications, and
things we are not yet aware of.

Complexity is a reason that pure theorizing is going to decline in
importance. The theories get tangled up as more of them become
involved in the equations. It's like differential equations in
engineering, and real-world engineering has gravitated toward
numerical analysis, such as FEA. Economics is going the same way.

This is where econometrics comes in. You analyze data with statistics
and calculus; you apply some knowledge and experience to the
relationships; you build a model. Your model is a hypothesis. You test
the model against predicted results. You refine it with new data. You
see if you can simplify it by throwing out variables that you thought
might be important but which prove to be irrelevant. If the model
isn't giving good results, you re-think it, first looking for other
variables that you missed.

This is what my son does for a living. He just completed a big pricing
model for a car company. It took three months of 7-day-a-week work.
Today he left for Costa Rica to cool off. g

Three days per month, for the next two years, he will test and refine
the model as results come in.

That's how much of economics is being done today. It applies to all
sorts of things that economists study.

--
Ed Huntress