What is Economics Studying?

2-minute read

Having spent all five of my years as a graduate student trying to get psychologists and economists to agree on basic ideas about decision-making, I think the following two pieces complement one another perfectly:

Blanchard and Fischer is about “modern” macro, models based on agents who know what the economy is like optimizing over time, possible under some limits. This is the DSGE style of macro. which has lately come into so much discredit — thoroughly deserved discredit. Chaikin and Lubensky is about modern condensed matter physics, especially soft condensed matter, based on principles of symmetry-breaking and phase transitions. Both books are about building stylized theoretical models and solving them to see what they imply; implicitly they are also about the considerations which go into building models in their respective domains.

What is very striking, looking at them side by side, is that while these are both books about mathematical modeling, Chaikin and Lubensky presents empirical data, compares theoretical predictions to experimental results, and goes into some detail into the considerations which lead to this sort of model for nematic liquid crystals, or that model for magnetism. There is absolutely nothing like this in Blanchard and Fischer — no data at all, no comparison of models to reality, no evidence of any kind supporting any of the models. There is not even an attempt, that I can find, to assess different macroeconomic models, by comparing their qualitative predictions to each other and to historical reality. I presume that Blanchard and Fischer, as individual scholars, are not quite so indifferent to reality, but their pedagogy is.

I will leave readers to draw their own morals.