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December 21, 2017



I still miss (for economists) "The economy is human. Take into account humanity: goal setting & circumventing causality."
Which amounts to: Be aware of complexity. With reference to the Cynefin framework: Economies are ideally and to a substantial extent complex adaptive systems (complex domain) rather than complicated, let alone obvious systems. If economists and (on their advice or of that of their long dead forebears) politicians treat economies as ordered (complicated or obvious) systems, that will damage their adaptivity and may plunge them into chaos. Assume interaction rather than (unambiguous) causality as a rule, with clear causality as a usually temporary and artificial exception, not least artificial because of the performative effect of our own economic models. (Eg humans behaving selfish and rational because of our Homo economicus assumptions and markets behaving recognisably as they do because we assume them to behave as such.)


Is there a place where I could find my favourite:

Economy is an agreement made by people, it's not a law of nature.

Usually I have 'money' instead of 'economy', but for the sake of the commandments here...

And the laws of nature as revealed by natural sciences are of course also models and not the real thing. It's common to lose the basis on that side of the fence as well.

Per Kurowski

If when setting their risk weighted capital requirements for banks, the regulator’s economists used the ex ante perceived risk of bank assets as proxies for the ex post risks to banks. How should we classify that?



Spot on! The same goes for Econometrics and Finance, possibly a fortiori. Cf. the current bitcoin discussions. There is no single best story. But there are good and bad, smart and not-so-smart stories.


And then you have the case of the so-called Ricardian trade model, where both the model-builders and their critiques are wrong.

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