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My experience of economics teaching is something like this: - Here is a set of assumptions which are obviously wrong - Given that set of assumptions, we can m

My experience of economics teaching is something like this: - Here is a set of assumptions which are obviously wrong - Given that set of assumptions, we can make this model, which has been shown not to hold true in reality due to the above - Repeat ad nauseum

candiodari 8y ago
True, but consider utilitarianism. Have you ever tried modeling the economy using a more reasonable set of assumptions ? Not so easy. But yeah I get it. Obviously the basic economic assumptions ignore: 1) government in general, but especially tax law. It's WAY too complex to model, unfortunately (and I doubt that's a coincidence), nor is it even constant. 2) it ignores that the vast majority of markets are supply- or demand- constricted. In reality demand graphs flatten off at some point. Let's take bread. There is only demand for so much bread, and lowering the prices past a point no longer increases demand at all. So you can see it exists. Supply bound is similar. We are just not going to produce more land than there is. That market is absolutely supply bound. The weird thing economics glosses over is that nearly every market is either supply constricted or demand constricted, and the common equations just don't work there. 3) information. Economics assumes perfect information, when that obviously doesn't exist. Information spreads though, so over very long time frames perhaps there's a case to be made that perfect information does exist as long as the information is old enough. The thing is, whilst I might agree that the first one is at least theoretically solvable, it's just too much work. The second and third are impossible to model. And I bet you could come up with 10 more.
- nopinsight 8y ago
  Your general point that economics models greatly simplify the real economy is a good one. However, the field has made significant advances to introduce real-world constraints into the models. Example of a subfield addressing your 3): https://en.m.wikipedia.org/wiki/Information_economics https://en.m.wikipedia.org/wiki/Information_economics I believe 2) is addressed as well but I am not a professional economist so maybe someone can help edify us.
  - candiodari 8y ago
    Even if there are a few game theoretic games in advanced papers that have limited information it would be a rather large stretch to say that economics incorporates limited information at this point in time. Maybe it's coming, I don't know ... It's not going to be soon. A similar problem exists for 2. Yes I can find a paper or two, or probably even more that talk about it, but they don't exactly have a wide following because it just makes things too hard. Incorporating both ? Can't even find a paper on it.

candiodari 8y ago

True, but consider utilitarianism. Have you ever tried modeling the economy using a more reasonable set of assumptions ? Not so easy. But yeah I get it. Obviously the basic economic assumptions ignore: 1) government in general, but especially tax law. It's WAY too complex to model, unfortunately (and I doubt that's a coincidence), nor is it even constant. 2) it ignores that the vast majority of markets are supply- or demand- constricted. In reality demand graphs flatten off at some point. Let's take bread. There is only demand for so much bread, and lowering the prices past a point no longer increases demand at all. So you can see it exists. Supply bound is similar. We are just not going to produce more land than there is. That market is absolutely supply bound. The weird thing economics glosses over is that nearly every market is either supply constricted or demand constricted, and the common equations just don't work there. 3) information. Economics assumes perfect information, when that obviously doesn't exist. Information spreads though, so over very long time frames perhaps there's a case to be made that perfect information does exist as long as the information is old enough. The thing is, whilst I might agree that the first one is at least theoretically solvable, it's just too much work. The second and third are impossible to model. And I bet you could come up with 10 more.

nopinsight 8y ago
Your general point that economics models greatly simplify the real economy is a good one. However, the field has made significant advances to introduce real-world constraints into the models. Example of a subfield addressing your 3): https://en.m.wikipedia.org/wiki/Information_economics https://en.m.wikipedia.org/wiki/Information_economics I believe 2) is addressed as well but I am not a professional economist so maybe someone can help edify us.
- candiodari 8y ago
  Even if there are a few game theoretic games in advanced papers that have limited information it would be a rather large stretch to say that economics incorporates limited information at this point in time. Maybe it's coming, I don't know ... It's not going to be soon. A similar problem exists for 2. Yes I can find a paper or two, or probably even more that talk about it, but they don't exactly have a wide following because it just makes things too hard. Incorporating both ? Can't even find a paper on it.