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If you know Chinese, there is a must read: Economic Explanation(經濟解釋） by Steven Cheung. If you don't, you can read: Economic Explanation: Selected Papers of St

If you know Chinese, there is a must read: Economic Explanation(經濟解釋） by Steven Cheung. If you don't, you can read: Economic Explanation: Selected Papers of Steven N.s. Cheung. (Same book name but different content - collection of essays vs a book on theories) Why Steven Cheung? As a close friend to Ronald Coase, he too focuses on empirical research (the real world) rather than blackboard economics (the imaginary world); hates the use of math for the sake of it; emphasizes on testable implications (positive economics). His classic paper The Fable of the Bees is a great example of how empirical work destroys blackboard economics.

jnordwick 10y ago
I only agree with empirical economics when it is forward looking. If you have these great models that you've honed and can accurately predict ten of the last ten recessions, but your model then goes on to predict 20 of the next zero recessions, I'd say you basically overfitted to your prejudices and your model is bunk. I get really wary of economists that "prove" their theories on back data but still can't predict worth shit. However, this guy sounds really interesting, and I've bookmarked him to go looking for this weekend. Thanks for the cites.
HSO 10y ago
> how empirical work destroys blackboard economics The value of empirical work hinges on the assumption that the economic environment you're modeling is ergodic, or at the very least stationary AND that you have enough data of good enough quality. If those conditions are not given, then you need theory. To establish relationships, not just time-series properties, this needs to hold for all variables separately as well as their copula, else you need theory. If one of the ingredients in your model is not observable, you need theory. I am really tired of all this post-adolescent posturing by "hard scientists" who haven't thought things through. Maybe the relevant distinction is not between "real world" and "imaginary world" but between mirage and best-you-can-do-under-the-circumstances. (Then again, I am a theorist so perhaps I am overly harsh.) I suggest Polya's Plausible Reasoning [1] as a better guide to "economic epistemology". Maybe look into Rational Belief theory (key reference: M. Kurz's 1994 papers [2,3]) for a "compromise" in modeling. Also, Fischer Black: Estimating Expected Return [4]. _________ [1] https://www.amazon.com/Mathematics-Plausible-Reasoning-Two-Volumes/dp/1614275572/ https://www.amazon.com/Mathematics-Plausible-Reasoning-Two-V... [2] http://web.stanford.edu/~mordecai/OnLinePdf/03.OnRBE_ET_1994.pdf http://web.stanford.edu/~mordecai/OnLinePdf/03.OnRBE_ET_1994... [3] http://link.springer.com/article/10.1007/BF01213817 http://link.springer.com/article/10.1007/BF01213817 [4] http://www.cfapubs.org/doi/abs/10.2469/faj.v51.n1.1873 http://www.cfapubs.org/doi/abs/10.2469/faj.v51.n1.1873
- qntty 10y ago
  thanks for the Polya recommendation
3151 10y ago
Maybe i overread it but The Fable of the Bees is from Bernard Mandeville. https://en.wikipedia.org/wiki/The_Fable_of_the_Bees https://en.wikipedia.org/wiki/The_Fable_of_the_Bees My two takes for a good historic understanding of economics are this Books: Economics of Good and Evil, Tomáš Sedláček https://www.amazon.com/Economics-Good-Evil-Economic-Gilgamesh/dp/019932218X/ref=sr_1_1?ie=UTF8&qid=1474617689&sr=8-1&keywords=Tom%C3%A1s+Sedl%C3%A1cek https://www.amazon.com/Economics-Good-Evil-Economic-Gilgames... and Schwarzbuch Kapitalismus, Robert Kurz (could't find a English Version) https://www.amazon.com/Schwarzbuch-Kapitalismus-Ein-Abgesang-Marktwirtschaft/dp/3548363083/ref=sr_1_1?ie=UTF8&qid=1474617771&sr=8-1&keywords=robert+kurz https://www.amazon.com/Schwarzbuch-Kapitalismus-Ein-Abgesang...
- longsangstan 10y ago
  If I remember correctly Steven Cheung' deliberately "steal" the name of the book you mentioned. Here is link of his paper: https://www.jstor.org/stable/724823?seq=1#page_scan_tab_contents https://www.jstor.org/stable/724823?seq=1#page_scan_tab_cont...

jnordwick 10y ago

I only agree with empirical economics when it is forward looking. If you have these great models that you've honed and can accurately predict ten of the last ten recessions, but your model then goes on to predict 20 of the next zero recessions, I'd say you basically overfitted to your prejudices and your model is bunk. I get really wary of economists that "prove" their theories on back data but still can't predict worth shit. However, this guy sounds really interesting, and I've bookmarked him to go looking for this weekend. Thanks for the cites.

HSO 10y ago

> how empirical work destroys blackboard economics The value of empirical work hinges on the assumption that the economic environment you're modeling is ergodic, or at the very least stationary AND that you have enough data of good enough quality. If those conditions are not given, then you need theory. To establish relationships, not just time-series properties, this needs to hold for all variables separately as well as their copula, else you need theory. If one of the ingredients in your model is not observable, you need theory. I am really tired of all this post-adolescent posturing by "hard scientists" who haven't thought things through. Maybe the relevant distinction is not between "real world" and "imaginary world" but between mirage and best-you-can-do-under-the-circumstances. (Then again, I am a theorist so perhaps I am overly harsh.) I suggest Polya's Plausible Reasoning [1] as a better guide to "economic epistemology". Maybe look into Rational Belief theory (key reference: M. Kurz's 1994 papers [2,3]) for a "compromise" in modeling. Also, Fischer Black: Estimating Expected Return [4]. _________ [1] https://www.amazon.com/Mathematics-Plausible-Reasoning-Two-Volumes/dp/1614275572/ https://www.amazon.com/Mathematics-Plausible-Reasoning-Two-V... [2] http://web.stanford.edu/~mordecai/OnLinePdf/03.OnRBE_ET_1994.pdf http://web.stanford.edu/~mordecai/OnLinePdf/03.OnRBE_ET_1994... [3] http://link.springer.com/article/10.1007/BF01213817 http://link.springer.com/article/10.1007/BF01213817 [4] http://www.cfapubs.org/doi/abs/10.2469/faj.v51.n1.1873 http://www.cfapubs.org/doi/abs/10.2469/faj.v51.n1.1873

qntty 10y ago
thanks for the Polya recommendation

3151 10y ago

Maybe i overread it but The Fable of the Bees is from Bernard Mandeville. https://en.wikipedia.org/wiki/The_Fable_of_the_Bees https://en.wikipedia.org/wiki/The_Fable_of_the_Bees My two takes for a good historic understanding of economics are this Books: Economics of Good and Evil, Tomáš Sedláček https://www.amazon.com/Economics-Good-Evil-Economic-Gilgamesh/dp/019932218X/ref=sr_1_1?ie=UTF8&qid=1474617689&sr=8-1&keywords=Tom%C3%A1s+Sedl%C3%A1cek https://www.amazon.com/Economics-Good-Evil-Economic-Gilgames... and Schwarzbuch Kapitalismus, Robert Kurz (could't find a English Version) https://www.amazon.com/Schwarzbuch-Kapitalismus-Ein-Abgesang-Marktwirtschaft/dp/3548363083/ref=sr_1_1?ie=UTF8&qid=1474617771&sr=8-1&keywords=robert+kurz https://www.amazon.com/Schwarzbuch-Kapitalismus-Ein-Abgesang...

longsangstan 10y ago
If I remember correctly Steven Cheung' deliberately "steal" the name of the book you mentioned. Here is link of his paper: https://www.jstor.org/stable/724823?seq=1#page_scan_tab_contents https://www.jstor.org/stable/724823?seq=1#page_scan_tab_cont...