The Assumptions Economists Make

The Assumptions Economists Make

Book - 2012
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Economists make confident assertions in op-ed columns and on cable news - so why are their explanations often at odds with equally confident assertions from other economists? And why are all economic predictions so rarely borne out? Harnessing his frustration with these contradictions, Jonathan Schlefer set out to investigate how economists arrive at their opinions. While economists cloak their views in the aura of science, what they actually do is make assumptions about the world, use those assumptions to build imaginary economies (known as models), and from those models generate conclusions. Their models can be useful or dangerous, and it is surprisingly difficult to tell which is which. Schlefer arms us with an understanding of rival assumptions and models reaching back to Adam Smith and forward to cutting-edge theorists today. Although abstract, mathematical thinking characterizes economists' work, Schlefer reminds us that economists are unavoidably human. They fall prey to fads and enthusiasms and subscribe to ideologies that shape their assumptions, sometimes in problematic ways. Schlefer takes up current controversies such as income inequality and the financial crisis, for which he holds economists in large part accountable. Although theorists won international acclaim for creating models that demonstrated the inherent instability of markets, ostensibly practical economists ignored those accepted theories and instead relied on their blind faith in the invisible hand of unregulated enterprise. Schlefer explains how the politics of economics allowed them to do so.
Publisher: Cambridge, Mass. : Belknap Press of Harvard University Press, 2012
Description: xv, 356 p. ; 22 cm
ISBN: 9780674052260
Branch Call Number: 330 Sch


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Sep 17, 2013

I'm an eclectic reader, but I've read only a few books on economics. It has always struck me as a pseudo science, similar to astrology. Surely, the star economists, relied on heavily by governments are the court astrologers of today. Schlefer appears to agree, and, as a political scientist, writing a history of the field for the layman, he has both a jaundiced eye and a dry wit. Concepts are very clearly explained, and the dependence on models that are truly absurd laid bare. It's obvious these things are impractical and have no predictive value because not a single one of these experts predicted either the Great Depression of 1929 or the Great Recession of 2008 (though plenty of other people did). With a track record like theirs, why does anyone take them seriously. That's the question!

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