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Please beware that "economics" is a very dangerous subject in that the notions of "right" or "wrong" are very, very different from theoretical fields like mathe
by HSO 16y ago
Please beware that "economics" is a very dangerous subject in that the notions of "right" or "wrong" are very, very different from theoretical fields like mathematics, practical fields like engineering, or experimental fields like physics (yes, I'm aware this is perhaps overgeneralizing, but you get my point).
My practical advice to a beginner would be: Please disregard any theories in the beginning, by which I mean both rigorous microeconomic models and (especially) the narrative sort found in books for layreaders or newspapers.
Stick to data! Read a lot of data. And then some more. Also, instead of theories about the data generating processes, read their concrete definitions, what exactly do they measure (not just the general idea they're intended to capture but what exactly, like "192 vendors of banana in location X are self-reporting Y"), how are they collected, what market mechanisms exist (market microstructure), etc. Stick to the concrete and read data.
Only when you're ready to make a commitment, take a year or two off and dive into economic literature. Economics is a field where, if you don't know what's what, you will be "had" by the next plausible-sounding, impressive-looking idée du jour if you're not careful.
One has to know quite a bit to see the assumptions underlying the theories and how they influence its results, and I can tell you that the mainstream theory rests on very shaky theoretical foundations. The typical structure of economics literature is that this weak foundation is first brushed over in one sentence (usually starting with "we assume that..." and ending with "...to keep things simple/tractable/whatever"), then comes some big mathematical exercise, and then comes a very plausible-sounding discussion of the main idea that is constructed to either resonate or astonish you. there is also quite a bit of advocacy here, don't forget we're dealing with a real-world subject with somewhat fuzzy notions of "right" and "wrong", hence the incentive is there to fund/get funded for certain lines of research or results that support or refute political views.
Also, unlike in other fields, you will generally not find that the "best" economists naturally emerge in brand-name departments, like Harvard or MIT. It's very political. In my own opinion, the better thinkers are found on the fringes, perhaps with "official" specializations in physics or sociology or psychology and not officially branded "economists" at all!
So stick to data, you will know more than most branded economists and you can't go wrong, after all, the data is the data... ;)
- gtani 16y agoThanks for this. So you're recommending econometrics as a start? Is that Bayesian or Frequentist?
- HSO 16y agoI would actually not recommend econometrics as the OP seems to just start out in this area. My recommendation is: get to know the data, learn what is available, read the definitions/construction methods, plot it in so many ways, do simple statistical summaries, for subperiods, for the entire sample, nothing fancy. One caution though: Try to do so _before_ making up your mind as to what explains the world, and even more important, try to forget everything you've already been programmed to read into the data. It's like in some karate movie, you have to "empty your mind" and let the data come to you, and if you let it sink in, at some point, you will start to ask questions and seek your own answers. I think that's a better way than to be presented with one or two general frameworks and then force fed so many specific models and examples that invariably one ends up seeing the world and asking the same questions like "them". One concrete example is "aggregate demand". It's a concept presented in the most basic textbooks as a "fact" but it's really an artifact. Fischer Black claimed that the more he thought about it, the less he understood how one could distinguish between "aggregate supply" and "aggregate demand", yet economics is taught like that in every basic textbook I have seen so far. There are very few "facts" in finance and economics, so for the beginner, before consulting what others have thought, I would recommend first having an unadulterated look at the facts before reading explanations or stories.