Tuesday, January 17, 2012

Econ 1 from Brad DeLong


•Reich, Tyson, DeLong--currently being written...
Auxilliary reading books:

•Partha Dasgupta: Economics: A Very Short Introduction 

•Paul Seabright: The Company of Strangers

•Milton Friedman and Rose Director Friedman: Free to Choose"

I read the first two books but I am not sure whether my understabding of economic matters improved.

As Mike Reay says in
"....it seems as if the ‘ideas’ used to
distinguish economics from a spreadsheet program were those of what might be called the ‘core’ of modern American economics, that is, a series of insights and practical techniques centered primarily on basic microeconomics. Core skills such as instinctively considering costs as well as benefits, focusing on incentives and maximizing decisions, assuming prices respond to supply and demand, and acknowledging opportunity costs, were what most subjects mentioned when asked to identify ‘what economists know that others don’t.’

This ‘core’ has in the past sometimes been glossed as simply ‘mere undergraduate level’ theory used by lowly applied practitioners (e.g. Enthoven 1963, Allen 1977, Hamilton 1992), but this is misleading insofar as it was the academic as much as the nonacademic interviewees who identified it as central to their unique expertise. Furthermore, as a set of almost unconscious attitudes, tacit skills, and habits developed through extensive experience working as an economist, the core was not thought to be something easily picked up just by doing a BA ineconomics, let alone by running a few regressions on Microsoft Excel; I think there’s sort of a reasoning of ‘maximize this subject to that’ that has implications that are second nature to us, which aren’t necessarily understood [by others]. Now that’s not something that could beexpressed in five minutes. The idea could be expressed in five minutes, but then the doctor, for example, would have to practice it for a while before it became natural."
Delong says in John Stewart Mill vs. the European Central Bank:
"One of the dirty secrets of economics is that there is no such thing as “economic theory.” There is simply no set of bedrock principles on which one can base calculations that illuminate real-world economic outcomes. ....
Economists have none of that. The “economic principles” underpinning their theories are a fraud – not fundamental truths but mere knobs that are twiddled and tuned so that the “right” conclusions come out of the analysis.
The “right” conclusions depend on which of two types of economist you are. One type chooses, for non-economic and non-scientific reasons, a political stance and a set of political allies, and twiddles and tunes his or her assumptions until they yield conclusions that fit their stance and please their allies. The other type takes the carcass of history, throws it into the pot, turns up the heat, and boils it down, hoping that the bones will yield lessons and suggest principles to guide our civilization’s voters, bureaucrats, and politicians as they slouch toward utopia."

P.S. May be there is still hope for me. I got the answer right for the question on opportunity cost in the post
Do economists understand the concept of opportunity cost?
May be not. An older post Opportunity Cost says that 78 percent of the economists got it wrong.

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