Why the 101 model doesn't work for labor markets →

I’m in the middle of a short book called The Conservative Nanny State (Dean Baker, 2006) which is legally available for free online.

So far it has been very interesting to me.  The central claim is that a lot of what the government does, in a wide range of areas, predictably redistributes wealth upward from poor people to rich people, but does so indirectly enough that it isn’t usually seen as “welfare for the rich.”

The book is very easy to read and doesn’t assume any familiarity with the topics covered (for instance it explains to the reader what the Fed does).  I get the sense that Baker is going through a bunch of possibly controversial issues and taking brief definite stands, and that he might not be as convincing to someone more familiar with the issues as he is to me.  So I would be interested to hear what any of you think of it, if this sounds relevant to your interests.

(Something I learned from the book that I was surprised I had never heard before: Richard Nixon implemented price and wage controls from 1971 to 1974.  See here and here.)

wirehead-wannabe:

nostalgebraist:

Some of the kinds of criticisms I have read about economics methodology (that struck me as interesting at the time):

Deirdre McCloskey says that theoretical economics doesn’t make enough quantitative predictions and derives too many “yes”/”no” results (e.g. “existence proofs”) that can’t be easily mapped onto real-world testable predictions.  See her essay The Secret Sins of Economics, which is a delight to read and should be read by everyone just for pure fun, whether or not she’s right.  (The other “Secret Sin” is statistical significance testing, which also asks “yes or no” rather than “how much.”)

Steve Keen makes a whole bunch of criticisms in his book Debunking Economics.  IIRC a lot of them are along the lines of “these models are not ‘good at prediction’ in what anyone would think of as an ordinary sense of the phrase” — e.g. there is often large markup pricing in many industries so it is not clear why we should be modeling these industries as perfectly competitive, even approximately.  He also has a nice chapter about how equilibrium methods aren’t always valid because some systems just wander around and never hit an equilibrium.  Keen’s book is very wide-ranging and polemical so I’m sure some of his arguments are much better than others.

Samuel Bowles’ book Microeconomics: Behavior, Institutions, and Evolution is not so much a critique as a complete alternate-universe version of microeconomics that implies a critique of the traditional version.  Bowles doesn’t like the way that certain institutional features (e.g. perfectly enforceable contracts) are introduced in economic models when convenient as though they are “outside constraints” and not part of the model’s world.  Instead he builds up a whole self-consistent picture based on evolutionary game theory, where the institutions (as well as individual actors’ behavior) arise out of evolutionarily stable strategies rather than being postulated at the start.  I have never managed to read more than 1/3 of this book because it is long and dense, but what I have read of it is very cool and looks a lot more like what I would have expected microeconomics to be before I knew anything about it.

That sounds really interesting! Would you recommend it to someone with no formal education in economics whatsoever? I’ve been meaning to find time to read an actual econ textbook for a while now.

Yes, I think Bowles’ book would be accessible without any prior econ experience.  Just remember that what you will learn from it is alternate-universe microeconomics and than people with traditional econ educations may not recognize any of it.

(via wirehead-wannabe)

Some of the kinds of criticisms I have read about economics methodology (that struck me as interesting at the time):

Deirdre McCloskey says that theoretical economics doesn’t make enough quantitative predictions and derives too many “yes”/“no” results (e.g. “existence proofs”) that can’t be easily mapped onto real-world testable predictions.  See her essay The Secret Sins of Economics, which is a delight to read and should be read by everyone just for pure fun, whether or not she’s right.  (The other “Secret Sin” is statistical significance testing, which also asks “yes or no” rather than “how much.”)

Steve Keen makes a whole bunch of criticisms in his book Debunking Economics.  IIRC a lot of them are along the lines of “these models are not ‘good at prediction’ in what anyone would think of as an ordinary sense of the phrase” – e.g. there is often large markup pricing in many industries so it is not clear why we should be modeling these industries as perfectly competitive, even approximately.  He also has a nice chapter about how equilibrium methods aren’t always valid because some systems just wander around and never hit an equilibrium.  Keen’s book is very wide-ranging and polemical so I’m sure some of his arguments are much better than others.

Samuel Bowles’ book Microeconomics: Behavior, Institutions, and Evolution is not so much a critique as a complete alternate-universe version of microeconomics that implies a critique of the traditional version.  Bowles doesn’t like the way that certain institutional features (e.g. perfectly enforceable contracts) are introduced in economic models when convenient as though they are “outside constraints” and not part of the model’s world.  Instead he builds up a whole self-consistent picture based on evolutionary game theory, where the institutions (as well as individual actors’ behavior) arise out of evolutionarily stable strategies rather than being postulated at the start.  I have never managed to read more than 1/3 of this book because it is long and dense, but what I have read of it is very cool and looks a lot more like what I would have expected microeconomics to be before I knew anything about it.