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    February 2011

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    Maxine's Essays

    • 21st Century Regress
      Sometimes it seems like the world is going to hell and there's absolutely nothing a girl economist can do about it.
    • What Exactly Are We Crowding Out?
      The current economic downturn isn't a random draw of a black ball from an urn containing white balls and black balls. There's no sampling distribution. Very specific policies and actions landed us here. Now we must decide not only what policies need to be put in place to prevent it happening again, but also what policies would best drive us out of the ditch faster and sustainably.
    • I Wish It Were Only Butter
      We should be giving up some butter if we must. We should not give up education or health investment (or infrastructure or the environment (hello, BP). They may be the only legacies of any value that we pass on to our children and grandchildren.
    • Rational Health Investment?
      The obvious "market solution" is to improve the long run return on investments in health among the disadvantaged through meaningful and effective publicly funded education. The obvious short run "market solution" is to reduce the costs of investment and the shadow price of health for the disadvantaged by providing health insurance cover and reduced out-of-pocket costs.
    • The Socrates Parameter
      To the extent that our limbic systems respond to such engineering by over-riding the judgment of our frontal lobe and to the extent that our frontal lobe is deprived of the information it requires to make a rationally self-interested judgment, we are not only pigs and fools, we are slaves.
    • The Economic Rewards of Virtue
      If individual virtue tempers our "piggy" desires and conditions our choices to something that is both individually and socially better, then the economic rewards of virtue as embodied in and promoted by societal norms and institutions are far greater than we have ever suspected. As economists, we would do well to recognize this when we teach U max.
    • The Market for Morals
      Markets then are places where more is exchanged than goods and services, labor and product, credit, and interest. They are places where we also develop the personal virtues of temperance and prudence and the social virtues of benevolence and justice. When they function well, they produce trust, loyalty, and sympathy among those who trade there.
    • Post-Modern Applied Economics: It’s the Error Term, Stupid
      Maxine believes it’s time to refocus attention and discussion on the error term. It is often where much of the action is in our models. It is where unexpectedly catastrophic events dwell resulting in fat tails. It is where our animal spirits manifest and cause us to do the right thing or the wrong thing or the thing everyone else is doing rather than the self-interested, fully-informed rational thing. It is where God and miracles and chance dwell.
    • Intergenerational Win-Win: Health Insurance, Education, Environment, Infrastructure
      So when we’re talking about fiscal stimulus packages and we’re borrowing from our grandchildren to finance them, we should be thinking about how to use stimulus monies to create value for those grandchildren AND stimulate our economy.
    • Short-term Private Payoffs, Long-term Social Costs
      The real health reform discussion, the one we should be having, is “What must we do to create a health system that is both efficient and fair?” The answer will almost certainly include relegating the private sector to markets where market forces or regulation are effective at aligning short-term private incentives and goals with long-term societal interests. If such markets are scarce or non-existent in health, then the private health sector will be of limited value.
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    Thanks for this post. As someone who is studying anthropology, I have a great interest in the history, theory, and practice of economics--for numerous reasons. Anthros and econs tread similar ground, but often in pretty different ways. Still, I think that each side has a lot to gain from the other, IMO.

    "I suspect he's harsher because he hasn't spent as much time among psychologists, sociologists, and anthropologists as I have. We may not bring much to the table, but at least economists have a strong sense of the potential value of efficient production and allocation."

    Economists bring plenty to the table, and deal with pretty important issues at various levels. It's just about time to take stock of the difference between theoretical human behavior and the various ways in which humans all around the world actually behave.

    "It relates to very fundamental questions about economic methodology, about the ways in which conjectures about economic actors and economic outcomes become theory and how those theories are evaluated and judged relative to other theories."

    If theories are never actually checked on the ground, and in various contexts, then how can anyone be sure that they make any sense? I have always wondered exactly how economists actually cross-check their ideas and theories.

    Anyway, I'm glad I found your site.

    To become a "true and useful science," economics needs two things"

    1. Empirical data. Official reports and statistical extrapolations are not hard data. The reality is just too complex to arrive and anything that is not uncertain. These data are best guesses that pass for fact when they are not.

    2. Falsifiable hypotheses. Experimental testing is all but impossible in economics, as it is in most of psychology, other than cognitive studies on brain function. However, connecting brain function to complex human thought and behaviors is still in its infancy.

    The human "sciences" are actually still very much branches of philosophy, not "real" science like physics, chemistry, and biology.

    Let's call a spade a spade here. This is not actually a criticism of economics. I happen to be a philosopher and have good reason to think that philosophy is an important field of study that has made hugely significant contributions. In fact, the hard sciences are spin-offs of philosophy.

    But a discipline whose assumptions (foundations) are not testable cannot be called a true science. There are no continuing arguments in the hard sciences for the simple reason that they are resolvable on the basis of fact. That is not the case in much of economic theory or we wouldn't be arguing for decades over matters that are undecidable.

    "There are no continuing arguments in the hard sciences for the simple reason that they are resolvable on the basis of fact."

    No continuing arguments in the hard sciences? Are you sure about that?

    The comments to this entry are closed.

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