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Actual economics professor here. This is a partial list. Any specialist in any subfield of the discipline could list a large set of open problems. Nearly al

Actual economics professor here. This is a partial list. Any specialist in any subfield of the discipline could list a large set of open problems. Nearly all have broader significance. In my own specialty (industrial organization) unsolved problems which would be of interest to readers here include optimal regulation of platforms and two-sided markets. Theory and empirics are difficult, so regulators are to some extent fumbling in the dark a bit. It is not at all clear how to regulate (for example) Amazon’s offering its own versions of products sold on its marketplace OR what the right tariff Apple should charge for access to the App Store is. Extremely confident claims that such behavior is permissible or should be forbidden are likely unsupported by any careful analysis one way or the other.

lisper 4y ago
Out of curiosity, how does one even begin to address such a question? Because it seems to me that the answer turns entirely on your choice of a quality metric, which is entirely subjective. If you are a consumer, you would come up with one answer, and if you are a shareholder you would come up with a different one. On what principled basis could one possibly resolve this?
- tomrod 4y ago
  Not the OP. Designing a policy for minimization of dead weight loss in the economy (typically centered around consumer surplus), with preferential properties including time stability, enforceability, and fairness across implementees.
  - lisper 4y ago
    But "dead weight", "fairness", and the desirability of time stability (weighed against other considerations) are all judgement calls.
    - tomrod 4y ago
      No, they really aren't. - Lacking time stability means no one tomorrow has any incentive to stick to the policy, and means the policy is unlikely to succeed in its objectives. - Deadweight is lost efficiency - The only arguable one is "fairness", and to clarify I blunted the term to avoid the nuance of explaining Pareto optimality. But sure, we can also consider egalitarianism and other moral frameworks.
      - ttfkam 4y ago
        Many industries got rid of deadweight only to find during the pandemic they and their industry had lost resilience when circumstances changed (which they always do). See: CPUs and GPUs in 2020-2021, baby formula in 2022, etc. It can absolutely be a judgment call.
        colinmhayes 4y ago
        deadweight loss has a specific meaning in economics.
        ttfkam 4y ago
        TIL
        wbsss4412 4y ago
        Deadweight loss refers to a net reduction in consumer+producer surplus within the economy. It has nothing to do with the everyday meaning of the term “deadweight”.
        ttfkam 4y ago
        TIL
      - lisper 4y ago
        > - Lacking time stability means no one tomorrow has any incentive to stick to the policy, and means the policy is unlikely to succeed in its objectives. That's true, but time stability means that a bad policy is going to be maintained even in the face of evidence that it is bad. Deciding which is worse is, as I said, a judgement call. > Deadweight is lost efficiency The flip side of increased efficiency is decreased resilience. Without unused capacity (i.e. inefficiency) the slightest contingency will send the entire system into chaos. How much inefficiency you want to maintain as a hedge against contingencies is a judgement call. Different people have different risk postures. > Pareto optimality I think it's safe to assume that people on HN understand Pareto optimality (or are capable of looking it up). Do you really think that Pareto optimality is synonymous with "fairness"? > we can also consider egalitarianism and other moral frameworks. Of course we can consider these things. But that doesn't answer my question, which is how do we address them in a principled way that doesn't degenerate into a political dispute?
- rvba 4y ago
  The "fair" way to do it is allocation of costs per value of sales AND zero access to data by market owner. So everyone pays the same charge for IT costs AND market does not have an unfair advantage.
- huitzitziltzin 4y ago
  Theory and data. Both are hard, especially in the cases I listed. With a good theory of (e.g.) platforms, you could likely identify a few different fundamental forces which may push in different directions. Hypothetical example: force X would benefit the platform at the expense of sellers, force Y would benefit the sellers at the expense of the platform. A priori it may not be possible in theory to put a magnitude on those effects: there may be nothing that would say "we can show that X > Y in every case." This is where you need data. (This part is especially hard for platform markets!) You would need data on the platform side AND on the consumer side AND on the supplier side. You write down a model of (generally) consumer demand, supplier response and platform behavior (at least - probably taking a somewhat simplified approach to at least one of those sets of agents). With your estimates, you would try to answer the "Is X > Y?" question posed above. You can also simulate the impacts of counterfactual policies, among other things.
  - lisper 4y ago
    Thanks!
  - nybble41 4y ago
    > This is where you need data. More specifically, this is where you need data which does not and cannot exist. Specifically, an objective scale which would allow you to compare the cost or benefit of policy to the platform and the sellers. There is no such objective scale, because value is subjective and not comparable between different economic actors, or even for the same actor at different times. Any model which assigns numeric "estimates" for these costs and benefits so they can be compared is substituting the authors' own subjective valuations in place of those of those who will be affected by the policy.
    - huitzitziltzin 4y ago
      > More specifically, this is where you need data which does not and cannot exist. This is wrong. All important work in my field in the past 25 years has been empirical. > Any model which assigns numeric "estimates" for these costs and benefits so they can be compared is substituting the authors' own subjective valuations in place of those of those who will be affected by the policy. Very, very wrong. You’ll never get away with picking your own parameter values in modern empirical IO. If you don’t know the field that’s fine. I probably don’t know your field either. But don’t make these overconfident and totally wrong claims about what’s done in a field you don’t know anything about.
rfreytag 4y ago
I posted the Wikipedia article hoping you and others like you would fill out what is an obviously incomplete list.
- Der_Einzige 4y ago
  If you mean filling it out on wikipedia they will have little to no hope unless they are accepted by the wikipedia editorial politiburo.
  - daanlo 4y ago
    This is weird. I have made edits with a new account on articles and they were accepted. Not very significant articles, maybe.
  - paulpauper 4y ago
    It's the same thing with stack overflow/exchange, in which good questions and answers not uncommonly get downvoted and or removed. I think there is an epidemic of petty academic tyrants. These are people who are objectively quite smart but maybe not as accomplished as they wished or hoped so they take out their frustrations on others in the only way they can have control in a world in which they are otherwise irrelevant and powerless. Universities , graduate departments churn out so many students relative to the supply of good paying jobs annually that not everyone will be able to achieve their idealization of career success. What I do know: the TED talk stuff will not work on these people.
- gzer0 4y ago
  I have tried adding edits, many that I thought would have been beneficial as being part of that particular industry / having intimate knowledge of a topic; only to be rejected by some moderator that could not bother to understand the topic. It's infuriating. I've stopped trying to contribute.
  - paulpauper 4y ago
    I have tried adding edits, many that I thought would have been beneficial as being part of that particular industry / having intimate knowledge of a topic; only to be rejected by some moderator that could not bother to understand the topic. yup this is a common problem with Wikipedia.
tomrod 4y ago
Now I'm inordinately curious how many other economics PhDs and professors visit here, between your comment and Amazon's hiring under Pat Bajari.
- gmac 4y ago
  One additional data point: I'm approximately an associate professor of economics in North American terms. Also curious how many of us there are here. As it happens, one of my colleagues was recently hired by Amazon (quite nearly appending an extra zero to their salary in the process).
  - bachmeier 4y ago
    Amazon is the second largest employer of economists, behind only the Fed: https://www.cnn.com/2019/03/13/tech/amazon-economists/index.html https://www.cnn.com/2019/03/13/tech/amazon-economists/index.... I've talked to several big names that have told me about megaoffers from Amazon. (They probably don't care if people know, since they told me, but I'm not going to name them.)
  - lukas099 4y ago
    What does an Amazon economist do?
    - huitzitziltzin 4y ago
      They hire in three buckets: - Time series forecasting. - Reduced-form causal inference - Structural, especially what is called "structural IO". Among the questions people in the last category will answer are: how should we price this product? How should we decide which new markets to enter?
- bachmeier 4y ago
  Quite a few, but the benefit of participating in discussions about economics on HN is less than the opportunity cost. As economics is heavily computational, HN is as natural a fit for an economics PhD as a CS PhD.
greggsy 4y ago
A lot of these seem like systems thinking problems, rather than pure economics. Tackling it across multiple perspectives might not even result in a satisfactory answer for any party, but it can improve the situation.
lol1lol 4y ago
What would be a good place for a beginner to start working on a problem related to IO economics of platforms? I've studied MITx Microeconomics course. It appears undergrad level Micro course, and a background in machine learning and software engineering.
- huitzitziltzin 4y ago
  It's a hard field b/c there is not that much introductory / accessible material. There is a recent book by Belleflamme and Peitz, which should some day be followed up by a second volume about regulation. There is also a recent survey of the empirics by Marc Rysman and two coauthors.
lupire 4y ago
I suspect that "Solved Problems in Economics" would be a shorter list.
UmbertoNoEco 4y ago
> Theory and empirics are difficult, so regulators are to some extent fumbling in the dark a bit. So, just like economists!
fallingfrog 4y ago
I have a couple questions, from the point of view as an outsider, I see there being three big problems with economics at least the way it is popularly understood: 1) many of the assumptions in economics are culturally specific 2) many of the models in economics, while self consistent and plausible, have not been adequately tested with real world data 3) economic models don’t seem to take constraints into account leading to absurd results like infinite growth Within the field, are any of those three seen as important problems? Thank you
- huitzitziltzin 4y ago
  >1) many of the assumptions in economics are culturally specific Which ones and maybe I can comment. I don't think this is true. > 2) many of the models in economics, while self consistent and plausible, have not been adequately tested with real world data This is everything that we do. The entire field is all about data and has been for probably 30 years (more actually, but we can point to an improvement in our own standards in the mid-1980's). > 3) economic models don’t seem to take constraints into account leading to absurd results like infinite growth A very basic definition of economics in undergrad classes is "the theory of optimizing behavior subject to constraints" so constraints are very much our bread and butter. Separately I don't think most (or any) macro economists (or growth guys) would say "yeah my model gives great predictions for what the situation will be 1,000 years in the future". Even 50 years in the future is pushing it. >> at least the way it is popularly understood This may be your problem. The understanding of the field you find from commenters on this website is a million miles from what it is really about.
- mr_toad 4y ago
  > three big problems with economics at least the way it is popularly understood The popular understanding of economics has very little to do with economics.
SnowHill9902 4y ago
You say “optimal” and “right” nonchalantly. Under what ethical framework are you trying to solve these “problems”?
ben_w 4y ago
> It is not at all clear how to regulate (for example) Amazon’s offering its own versions of products sold on its marketplace I’m glad people like you are at least thinking about it. I have no insights (different degree), but I was wondering about that exact thing a few months ago.
moralestapia 4y ago
>This is a list of some of the major unsolved problems, puzzles, or questions in economics. The opening line.
nybble41 4y ago
> In my own specialty (industrial organization) unsolved problems which would be of interest to readers here include optimal regulation of platforms and two-sided markets. Theory and empirics are difficult, so regulators are to some extent fumbling in the dark a bit. It is not at all clear how to regulate (for example) Amazon’s offering its own versions of products sold on its marketplace OR what the right tariff Apple should charge for access to the App Store is. The subject was "unsolved problems in economics", not "unsolved problems in politics". Regulation is a political topic, not an economic one. That last point might be economic in nature, but only if Apple is the one making the decision, and is free to choose their own price without fear of regulation. Otherwise it's still politics.
- huitzitziltzin 4y ago
  > the subject was "unsolved problems in economics", not "unsolved problems in politics". Regulation is a political topic, not an economic one. If you don’t care about getting it right, fine. Ask politicians to do whatever they want on the basis of whatever biases they have. If you want to get it right, then you need to weigh the costs and benefits of different regulatory policies. That requires theory and data.

lisper 4y ago

Out of curiosity, how does one even begin to address such a question? Because it seems to me that the answer turns entirely on your choice of a quality metric, which is entirely subjective. If you are a consumer, you would come up with one answer, and if you are a shareholder you would come up with a different one. On what principled basis could one possibly resolve this?

tomrod 4y ago
Not the OP. Designing a policy for minimization of dead weight loss in the economy (typically centered around consumer surplus), with preferential properties including time stability, enforceability, and fairness across implementees.
- lisper 4y ago
  But "dead weight", "fairness", and the desirability of time stability (weighed against other considerations) are all judgement calls.
  - tomrod 4y ago
    No, they really aren't. - Lacking time stability means no one tomorrow has any incentive to stick to the policy, and means the policy is unlikely to succeed in its objectives. - Deadweight is lost efficiency - The only arguable one is "fairness", and to clarify I blunted the term to avoid the nuance of explaining Pareto optimality. But sure, we can also consider egalitarianism and other moral frameworks.
    - ttfkam 4y ago
      Many industries got rid of deadweight only to find during the pandemic they and their industry had lost resilience when circumstances changed (which they always do). See: CPUs and GPUs in 2020-2021, baby formula in 2022, etc. It can absolutely be a judgment call.
      - colinmhayes 4y ago
        deadweight loss has a specific meaning in economics.
        ttfkam 4y ago
        TIL
      - wbsss4412 4y ago
        Deadweight loss refers to a net reduction in consumer+producer surplus within the economy. It has nothing to do with the everyday meaning of the term “deadweight”.
        ttfkam 4y ago
        TIL
    - lisper 4y ago
      > - Lacking time stability means no one tomorrow has any incentive to stick to the policy, and means the policy is unlikely to succeed in its objectives. That's true, but time stability means that a bad policy is going to be maintained even in the face of evidence that it is bad. Deciding which is worse is, as I said, a judgement call. > Deadweight is lost efficiency The flip side of increased efficiency is decreased resilience. Without unused capacity (i.e. inefficiency) the slightest contingency will send the entire system into chaos. How much inefficiency you want to maintain as a hedge against contingencies is a judgement call. Different people have different risk postures. > Pareto optimality I think it's safe to assume that people on HN understand Pareto optimality (or are capable of looking it up). Do you really think that Pareto optimality is synonymous with "fairness"? > we can also consider egalitarianism and other moral frameworks. Of course we can consider these things. But that doesn't answer my question, which is how do we address them in a principled way that doesn't degenerate into a political dispute?
rvba 4y ago
The "fair" way to do it is allocation of costs per value of sales AND zero access to data by market owner. So everyone pays the same charge for IT costs AND market does not have an unfair advantage.
huitzitziltzin 4y ago
Theory and data. Both are hard, especially in the cases I listed. With a good theory of (e.g.) platforms, you could likely identify a few different fundamental forces which may push in different directions. Hypothetical example: force X would benefit the platform at the expense of sellers, force Y would benefit the sellers at the expense of the platform. A priori it may not be possible in theory to put a magnitude on those effects: there may be nothing that would say "we can show that X > Y in every case." This is where you need data. (This part is especially hard for platform markets!) You would need data on the platform side AND on the consumer side AND on the supplier side. You write down a model of (generally) consumer demand, supplier response and platform behavior (at least - probably taking a somewhat simplified approach to at least one of those sets of agents). With your estimates, you would try to answer the "Is X > Y?" question posed above. You can also simulate the impacts of counterfactual policies, among other things.
- lisper 4y ago
  Thanks!
- nybble41 4y ago
  > This is where you need data. More specifically, this is where you need data which does not and cannot exist. Specifically, an objective scale which would allow you to compare the cost or benefit of policy to the platform and the sellers. There is no such objective scale, because value is subjective and not comparable between different economic actors, or even for the same actor at different times. Any model which assigns numeric "estimates" for these costs and benefits so they can be compared is substituting the authors' own subjective valuations in place of those of those who will be affected by the policy.
  - huitzitziltzin 4y ago
    > More specifically, this is where you need data which does not and cannot exist. This is wrong. All important work in my field in the past 25 years has been empirical. > Any model which assigns numeric "estimates" for these costs and benefits so they can be compared is substituting the authors' own subjective valuations in place of those of those who will be affected by the policy. Very, very wrong. You’ll never get away with picking your own parameter values in modern empirical IO. If you don’t know the field that’s fine. I probably don’t know your field either. But don’t make these overconfident and totally wrong claims about what’s done in a field you don’t know anything about.

rfreytag 4y ago

I posted the Wikipedia article hoping you and others like you would fill out what is an obviously incomplete list.

Der_Einzige 4y ago
If you mean filling it out on wikipedia they will have little to no hope unless they are accepted by the wikipedia editorial politiburo.
- daanlo 4y ago
  This is weird. I have made edits with a new account on articles and they were accepted. Not very significant articles, maybe.
- paulpauper 4y ago
  It's the same thing with stack overflow/exchange, in which good questions and answers not uncommonly get downvoted and or removed. I think there is an epidemic of petty academic tyrants. These are people who are objectively quite smart but maybe not as accomplished as they wished or hoped so they take out their frustrations on others in the only way they can have control in a world in which they are otherwise irrelevant and powerless. Universities , graduate departments churn out so many students relative to the supply of good paying jobs annually that not everyone will be able to achieve their idealization of career success. What I do know: the TED talk stuff will not work on these people.
gzer0 4y ago
I have tried adding edits, many that I thought would have been beneficial as being part of that particular industry / having intimate knowledge of a topic; only to be rejected by some moderator that could not bother to understand the topic. It's infuriating. I've stopped trying to contribute.
- paulpauper 4y ago
  I have tried adding edits, many that I thought would have been beneficial as being part of that particular industry / having intimate knowledge of a topic; only to be rejected by some moderator that could not bother to understand the topic. yup this is a common problem with Wikipedia.

tomrod 4y ago

Now I'm inordinately curious how many other economics PhDs and professors visit here, between your comment and Amazon's hiring under Pat Bajari.

gmac 4y ago
One additional data point: I'm approximately an associate professor of economics in North American terms. Also curious how many of us there are here. As it happens, one of my colleagues was recently hired by Amazon (quite nearly appending an extra zero to their salary in the process).
- bachmeier 4y ago
  Amazon is the second largest employer of economists, behind only the Fed: https://www.cnn.com/2019/03/13/tech/amazon-economists/index.html https://www.cnn.com/2019/03/13/tech/amazon-economists/index.... I've talked to several big names that have told me about megaoffers from Amazon. (They probably don't care if people know, since they told me, but I'm not going to name them.)
- lukas099 4y ago
  What does an Amazon economist do?
  - huitzitziltzin 4y ago
    They hire in three buckets: - Time series forecasting. - Reduced-form causal inference - Structural, especially what is called "structural IO". Among the questions people in the last category will answer are: how should we price this product? How should we decide which new markets to enter?
bachmeier 4y ago
Quite a few, but the benefit of participating in discussions about economics on HN is less than the opportunity cost. As economics is heavily computational, HN is as natural a fit for an economics PhD as a CS PhD.

greggsy 4y ago

A lot of these seem like systems thinking problems, rather than pure economics. Tackling it across multiple perspectives might not even result in a satisfactory answer for any party, but it can improve the situation.

lol1lol 4y ago

What would be a good place for a beginner to start working on a problem related to IO economics of platforms? I've studied MITx Microeconomics course. It appears undergrad level Micro course, and a background in machine learning and software engineering.

huitzitziltzin 4y ago
It's a hard field b/c there is not that much introductory / accessible material. There is a recent book by Belleflamme and Peitz, which should some day be followed up by a second volume about regulation. There is also a recent survey of the empirics by Marc Rysman and two coauthors.

lupire 4y ago

I suspect that "Solved Problems in Economics" would be a shorter list.

UmbertoNoEco 4y ago

> Theory and empirics are difficult, so regulators are to some extent fumbling in the dark a bit. So, just like economists!

fallingfrog 4y ago

I have a couple questions, from the point of view as an outsider, I see there being three big problems with economics at least the way it is popularly understood: 1) many of the assumptions in economics are culturally specific 2) many of the models in economics, while self consistent and plausible, have not been adequately tested with real world data 3) economic models don’t seem to take constraints into account leading to absurd results like infinite growth Within the field, are any of those three seen as important problems? Thank you

huitzitziltzin 4y ago
>1) many of the assumptions in economics are culturally specific Which ones and maybe I can comment. I don't think this is true. > 2) many of the models in economics, while self consistent and plausible, have not been adequately tested with real world data This is everything that we do. The entire field is all about data and has been for probably 30 years (more actually, but we can point to an improvement in our own standards in the mid-1980's). > 3) economic models don’t seem to take constraints into account leading to absurd results like infinite growth A very basic definition of economics in undergrad classes is "the theory of optimizing behavior subject to constraints" so constraints are very much our bread and butter. Separately I don't think most (or any) macro economists (or growth guys) would say "yeah my model gives great predictions for what the situation will be 1,000 years in the future". Even 50 years in the future is pushing it. >> at least the way it is popularly understood This may be your problem. The understanding of the field you find from commenters on this website is a million miles from what it is really about.
mr_toad 4y ago
> three big problems with economics at least the way it is popularly understood The popular understanding of economics has very little to do with economics.

SnowHill9902 4y ago

You say “optimal” and “right” nonchalantly. Under what ethical framework are you trying to solve these “problems”?

ben_w 4y ago

> It is not at all clear how to regulate (for example) Amazon’s offering its own versions of products sold on its marketplace I’m glad people like you are at least thinking about it. I have no insights (different degree), but I was wondering about that exact thing a few months ago.

moralestapia 4y ago

>This is a list of some of the major unsolved problems, puzzles, or questions in economics. The opening line.

nybble41 4y ago

> In my own specialty (industrial organization) unsolved problems which would be of interest to readers here include optimal regulation of platforms and two-sided markets. Theory and empirics are difficult, so regulators are to some extent fumbling in the dark a bit. It is not at all clear how to regulate (for example) Amazon’s offering its own versions of products sold on its marketplace OR what the right tariff Apple should charge for access to the App Store is. The subject was "unsolved problems in economics", not "unsolved problems in politics". Regulation is a political topic, not an economic one. That last point might be economic in nature, but only if Apple is the one making the decision, and is free to choose their own price without fear of regulation. Otherwise it's still politics.

huitzitziltzin 4y ago
> the subject was "unsolved problems in economics", not "unsolved problems in politics". Regulation is a political topic, not an economic one. If you don’t care about getting it right, fine. Ask politicians to do whatever they want on the basis of whatever biases they have. If you want to get it right, then you need to weigh the costs and benefits of different regulatory policies. That requires theory and data.