Gearty Grilling: Mary Morgan on Modelling the Economy

Summary

In this discussion, Mary Morgan explores the world of economics, addressing criticisms that economists are overly focused on mathematical models to the detriment of practical application. She argues for a balance between ideological and problem-solving approaches within the field. Morgan also touches on the performativity of economic models, suggesting that they shape the economy rather than merely reflecting it. The conversation highlights the evolution of economics over the past 25 years, with the rise of experimental and behavioral economics challenging traditional models.

Takeaways

• 😀 Economists work hard but often within their own theoretical models, which can make their thinking similar.
• 🤔 Some criticize economics for being too focused on mathematics and theoretical models, distancing it from real-world problems.
• 📚 Thomas Piketty argues that economics needs to move beyond its obsession with mathematical models and theoretical speculation.
• 🔍 Mathematical modeling in economics embeds ideological perspectives, which can influence problem-solving and outcomes.
• 🔄 Economic models like auction theory not only describe the world but also shape how economies function in practice.
• 👥 Economic models often oversimplify human behavior by focusing on 'economic man,' ignoring the complexities of real-world social situations.
• 💡 There’s a distinction between individual behavior models and larger macroeconomic models, which handle more complex systems.
• 📈 Macroeconomic models are praised for their accuracy, though still limited in their ability to predict changes in vast, open systems.
• 💰 Trickle-down economics is critiqued as an ideological stance, rooted in political presuppositions rather than robust economic evidence.
• 📊 Modern economics has evolved, with fields like behavioral economics and game theory challenging older, more rigid models.

Q & A

What criticism does Thomas Piketty have regarding the discipline of economics?

Thomas Piketty criticizes the discipline of economics for its over-reliance on mathematics and theoretical speculation, which he believes often leads to ideological biases and neglects real-world issues and the public good.

How does the use of mathematical models affect economists' perspectives?

The use of mathematical models tends to make economists think in similar ways, limiting their perspectives. These models shape how they view the economy, which can lead to a narrow focus, disconnecting their work from real-world complexities.

What is the 'performativity' literature in economics, and how does it relate to models?

The performativity literature in economics suggests that the models economists create don't just describe the economy but actually help shape and form it. For example, auction theory models influence how real-world auctions are designed and conducted.

What is the difference between 'economic man' and 'real man' in economic theory?

The 'economic man' is a simplified, rational individual often used in economic models, while 'real man' represents the complex, sociological realities of human behavior. Economic models frequently overlook the complexities of 'real man,' creating a disconnect between theory and reality.

How does the focus on individual behavior differ from macroeconomic modeling?

Models focused on individual behavior, like game theory, tend to be more simplistic and thin, whereas macroeconomic models attempt to handle larger systems with many people. These macro models are more complex and aim to predict changes in the overall economy.

Why are macroeconomic models considered relatively accurate despite their complexity?

Macroeconomic models, which deal with large populations and complex systems, are considered relatively accurate because they can predict outcomes within a small margin of error. Despite the difficulty of modeling such large systems, these models perform well in understanding broad economic trends.

What is the relationship between economic models and political ideologies?

Economic models often reflect the political ideologies of the economists and politicians who create or support them. For example, models supporting trickle-down economics align with right-leaning political ideologies, showing how models can be shaped by political beliefs.

What are some weaknesses of using small models for big economic problems?

Small models often lack the depth and breadth needed to address big economic problems. They may oversimplify complex issues and fail to incorporate enough real-world evidence to be fully trustworthy or applicable to large-scale situations.

How has the field of economics changed in the last 25 years according to the speaker?

The field of economics has evolved significantly, with more emphasis on experimental economics, behavioral economics, and game theory. These areas challenge the traditional, math-heavy core of economics and bring in more practical, real-world applications.

Why might it appear that new economic approaches are strengthening mainstream economics instead of changing it?

Although new approaches like behavioral economics and experimental economics challenge traditional models, they can also seem to reinforce the mainstream by expanding the toolkit economists use without fundamentally changing the discipline’s core reliance on mathematical models.