Fellow big mammal battlepanda has some reflections on the discipline of economics.
1. Economics is not like the other sciences. Acknowledge that.
Battlepanda points out that you really can't do the lab thing in many areas of economics (though there are experimental economists busy at work in some areas), and mostly she's right. It's certainly not like physics. But one might be able to successfully liken it to epidemiology. Epidemiologists don't go out and start epidemics to test their theories about how disease progresses. They learn from past cases of epidemics (and a whole bunch of other biological information) and use this information to give advice about how to deal with future cases. People who do macroeconomics are in a similar position.
We make broad stroke assumptions such as "each individual will act to maximize his utility" or "if the price is driven down to zero, demand is infinite" not because we are intellectually lazy, but because making those assumptions allow us to simplify a real-life situation the point where we can apply logic.
Enormous danger lurks here. Being able to "apply logic" -- or more precisely, being able to use sophisticated mathematical techniques -- on top of false simplifying assumptions can be worse than trading your Econ textbooks for whiskey and never thinking about demand curves again. When you confidently apply fancy math to screwed-up empirical assumptions, you come out with full-fledged false beliefs about how the world works. Then you walk zombie-like through the world, using your math-derived cred to impress and terrify people until they embrace your false and destructive beliefs. Ye Gods, let this not happen unto me! Give me rather the honest second-order knowledge that I have no first-order knowledge! (Or even better, some genuine first-order knowledge. And yes, this preference ordering is transitive.)
No doubt, simplifying assumptions that make the calculations easier are needed in lots of fields. If they don't change the results, it's all cool. But I'm worried that economists have a tendency to accept false conclusions derived false premises because the structure of the argument is so mathalicious. This tendency must be overcome. It's the same kind of tendency one sees in lots of other fields (evolutionary psychology, anyone?). Somebody falls in love with a cool mode of argument and suddenly they're applying it in the most dubious places.
The government has put a ceiling on the rent of properties in Jenny's town. Is Jenny better off? Do you even need to look at the graph? That would be a bit of a waste of time, wouldn't it, since this is blatently a "government-actions-have-unintended-consequences-that-end up-hurting-the-very-people-they-are-trying-to-help" question.
Somebody falls in love with a cool mode of argument...
As I've told libertarians before, ours is a messy world. We've got collective-action problems, the diminishing marginal utility of money, asymmetric information, monopolies, monopsonies, differences in bargaining power, and all sorts of wacky things that require massive empirical investigation before you can even think about how theory should be applied. Be careful out there.
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