Monday, November 20, 2017

What are economists good and bad at?

Succinct summary from Claudia Sahm:
Being good at counterfactual thinking, trade offs, comparative advantage, and other non-intuitive logic, as well as a love of numbers, are useful attributes of economists BUT only as part of a larger team. For example, we, economists, tend to have blind spots from our assumptions on efficiency, credibility, rationality, markets, etc., in a way that a non-economist would not. And yet, economist are known for going it alone. Sigh.
Her take-away: Economists work best as part of a team with diverse viewpoints.
Groupthink … the lack of meaningful diversity … in economics has real consequences for real people. We give advice to Congress on how to spend hundreds of billions of dollars in stimulus. We make decisions at the Fed on interest rates. And in many capacities, we have input on financial markets, regulation, and business practices. This adds up to profound effects on many, many lives. And yet, our closed-system culture puts great emphasis on top five publications (an internal status marker) and the credibility of our economic institutions (making sure economists remain key to policy).
Excuse the dangling preposition in the title.

2 comments:

  1. It was very useful for me. Keep sharing such ideas in the future as well. This was actually what I was looking for, and I am glad to came here! Thanks for sharing the such information with us.

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  2. By studying markets, economists provide a wealth of knowledge and foresight for the government and businesses, beneficial also to those in between. In taking this economics course this semester, it has helped me to better understand economics on a more global platform. In the beginning of the text, it states, “The one thing that unites economists is their use of the rational-actor paradigm to predict behavior. Simply put, it says that people act rationally, optimally, and self-interestedly. In other words, they respond to incentives” (Froeb, 2016, p. 4). This concept makes sense for all aspects in life. Overall, people are inherently good. We must believe this in the study of economics. Also, we must understand that incentives drive people. Sahm describes above that economists are often viewed as solitary. In contrast, it is better to believe that working together provides a more ell-rounded understanding of economics as differing viewpoints come together. This diversity in the study of economics helps those to understand the concepts better, while studying the markets surrounding them. This ties into the ethics involved in economics. Some believe that economists are attempting to influence the market and the way people react to it, when in actuality “the rational-actor paradigm is only a tool for analyzing behavior, not advice on how to live your life” (Froeb, 2016, p. 7). Economists have a better understanding of markets when they have a better understanding of people.

    Reference:
    Froeb, L.M., Mikhael, S., McCann, B.T. & Ward, M.R. (2016). Managerial Economics: A
    problem solving approach, 4th edition. Boston, MA: Cengage.

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