Economics – when the model becomes the message11 January, 2013 at 13:54 | Posted in Economics, Theory of Science & Methodology | 3 Comments
Today there is a post up on Real-World Economics Review Blog – one of my favourite blogs – by Peter Radford on the sorry state of modern economics:
Economists nowadays love to talk about their models. They produce models to explain and elucidate. They devise more complex models to mimic the entire economy. They cobble together small models to illustrate a particular problem. Not to model is not to be an economist.
I call these models caricatures. That’s what they are. Caricatures.
Think of those old political cartoons. The subject of the cartoonist’s scorn was always a politician whose features were exaggerated to make a point. If the nose was large in real life, it became huge in the cartoon. If the ears were a little on the above average side, then they became elephantine. A squeaky voice was portrayed as a squeal. And so on. The point being that the viewer of the cartoon was assumed to be aware of the foible or feature being drawn out, and the exaggeration was a device to convey new information or to highlight something about the subject.
Models are the same thing.
They are gross simplifications with certain features of the real world suppressed or eliminated entirely in order to draw attention to others. If the model is supposed to throw light on one thing, then other stuff is thought of as extraneous and eliminated …
The reason a caricature works is that we already know about the nose, the ears, or the voice. There is nothing new being conveyed. Recognition is simplified so that another message can be attached to it and passed along more readily.
In contrast, the reason economists use models is to look for things that are not already known. They are looking for insights not easily revealed by the complex web of reality, but which may come into sharper focus when that complexity os removed.
The success or failure of the technique resides largely in the choice[s] about which aspect of reality to suppress. And therein lies the source of the mess. Economists have made some pretty damn awful choices. So much so that any insights gained are unlikely to have much, if any, relevance to the real world. The cartoon remains just that, a cartoon …
Apparently economists like caricatures because they cannot draw good portraits. Economics is mostly a cartoon. We need it to be more.