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A few points: (1) Many if not most economists are empirical. Recent John Bates Clark medals---a good reflection of what academic economists think is the best w
by john_horton 16y ago
A few points:
(1) Many if not most economists are empirical. Recent John Bates Clark medals---a good reflection of what academic economists think is the best work being done right now---have gone to economists doing empirical work. Recent examples include what works for development (evaluated with large randomized controlled trials), what are the causes of growing income inequality, how should we structure auctions etc. http://en.wikipedia.org/wiki/John_Bates_Clark_Medal http://en.wikipedia.org/wiki/John_Bates_Clark_Medal . To say that most economists have no contact or interest in empiricism is incorrect.
(2) The point about simple models is not that economists fully believe them---it's that they force everyone to be explicit about assumptions. They also try to identify what are the key features of admittedly very complex phenomena. This is what models do in most scientific endeavor. That the models often perform poorly is a sign of an immature science---not fraud or dishonesty. You'd get eternal fame and become fantastically rich if you came up with a financial model with great predictive powers---do economists not create such models because they are stupid and corrupt? That seems unlikely.
(3) The transistor example completely misses the key distinction that every presentation of the simple supply and demand model always makes - i.e., there is a difference between the short term and long term. If demand doubled for transistors tomorrow, the price wouldn't rise?
(4) You confuse absolute and comparative advantage.
(5) "In the 1950s the US had a great economy. Except for some points of information, biomedical, and materials technology, it's not clear that our standard of living is as high now."
This is where I stopped reading - this is so obviously wrong http://www.wolframalpha.com/input/?i=GDP/capita+real+US http://www.wolframalpha.com/input/?i=GDP/capita+real+US
that it's hard to take seriously any conclusions on the relative merits of different industrial policies the follow from this "fact."
- thomasz 16y agoGDP / capita is a pretty meaningless metric if you consider that wealth is a lot more concentrated these days.
- john_horton 16y agoIncome is more concentrated today compared to the post-war period, but I don't think that makes the mean meaningless---it depends upon how much weight you put on a dollar held by different parts of the distribution. That being said, I think you'd be hard pressed to show that any part of the income distribution is worse-off in real terms than they were in 1950. Incidentally, we only know about these changes in the income distribution because empirically oriented economists have been collecting and analyzing this data for many years.
- thomasz 16y agoI agree with you on the assumption that most likely all parts of the income distribution are better of today compared to the 50's -- on absolute terms. But _relative_ wealth becomes an important metric as soon as basic needs -- food, shelter etc. -- are satisfied.
- john_horton 16y agoAgreed - relative inequality definitely matters.
- dennisgorelik 16y agoCould you suggest better metric than GDP per capita?
- aloneinkyoto 16y agoHuman development index (HDI) Genuine progress indicator (GPI) Index of Sustainable Economic Welfare (ISEW) Gross national happiness (GNH) The Gini coefficient Just to name a few. None of which is perfect, but at least better than the GDP when it comes to actually saying something about the quality and state of an economy.
- anamax 16y ago> The Gini coefficient Why do I care how much someone else has?
- aloneinkyoto 16y agoRich man in a ghetto or rich man among friends. Pick one.
- anamax 16y ago> Rich man in a ghetto or rich man among friends. Pick one. Rich people don't live in ghettos - that's why ghettos have a very "good" Gini coefficient. (Ghettos would be better off if they did have rich residents.) I didn't hate rich folks when I lived in a ghetto. Was I doing something wrong?
- deleted 16y ago[deleted]
- Benjo 16y agoIn response to point 5. Is it clear that per capita GDP is a good measure of standard of living? Adjusted median income has not risen much with GDP. Do you have an argument for why standard of living should be evaluated as a mean instead of a median? http://www.stanford.edu/class/polisci120a/immigration/Median%20Household%20Income.pdf http://www.stanford.edu/class/polisci120a/immigration/Median...
- john_horton 16y agoThere are lots of different moments & quantiles of the income distribution that are interesting and useful to look at, but its not like the mean is terribly misleading here. In the plot you provide, median income in real dollars has increased from 25K in 1950 to 40K in 1990---a 70% increase in real income.
- SHOwnsYou 16y ago> Is it clear that per capita GDP is a good measure of standard of living? Yes. This is something else virtually every economist will agree on. ACists, neoclassical, keynesian, Chicago, Austrian, I'm sure there are other major schools I'm forgetting, but this is a very accepted measure of standard of living in the field of economics.
- aloneinkyoto 16y ago> Yes. This is something else virtually every economist will agree on. A statement which only help to make his point about economists being ignorant crocks. GDP is heavily doubted as a good measure of standard of living in all other social sciences. Examples of what the GDP measure fails to take into account: ecological sustainability, wealth distribution, non-market transactions, underground economy, non-monetary economy, subsistence economy, quality improvements and inclusion of new products, what is being produced, externalities, sustainability, etc, etc... http://en.wikipedia.org/wiki/Gross_domestic_product#Limitations_of_GDP_to_judge_the_health_of_an_economy http://en.wikipedia.org/wiki/Gross_domestic_product#Limitati...
- SHOwnsYou 16y ago