Long time, no see.
Well… one of the challenges I have is that I don’t know how to begin topics.
I sat down to write about macroeconomics, because I have been reading a lot about it recently, and thinking about problems in macro. However, I am not good at macro, and never was. The problem I have is that I think macro is difficult because the ideas are not very good, I don’t think it is because I am not smart enough.
One of the biggest challenges for anyone to overcome is the feeling of inadequacy, and there are always people who will use their knowledge against you. However, you need not despair. People who really understand things, should, as a moral principle, try to bring more people into the fold. If they don’t, it is because they are jockeying for some sort of special status in society, whether they do this consciously or not is another matter…we all do it, let’s not get all up our own asses here. The trick is not to take it personally. There is always tomorrow, and people forget the dumb things you say if they are phrased as questions.
Back to macro. If it were in fact good, you would be able to write to the laymen the way that top physicists do. There is nothing comparable to “Brief History of Time” for macroeconomics. But not all of economics is this bad, microeconomics has “Freakonomics” which is pretty good. The ability to communicate is a very important litmus test for whether ideas are good, this is the thinking behind the “Feynman technique“.
But hold up. Let’s be “not wrong” for a minute. For macro, consider this: I may not have encountered good macro. So I reserve judgement at this point. The closest I have encountered to a good breakdown is probably my advanced undergraduate macro class. Credit where credit is due. I had one good teacher, at least, along the way. But even that class required me to master the basics of linear algebra, which is a bit of a barrier for the uninitiated.
As for the the graduate work. It got wayyy too math heavy, to the point that it was not philosophical at all. There is a difference between solving differential equations and understanding economic principles. We didn’t discuss the merits of using certain parameters, etc… it was all about “can you even solve for x, bro?”. Yes. I had adequate algebra to get the degree. Only to never, ever, not once ever use it in any job since.
Ok, math, as a subject is not under fire here. Thinking rigourously has been a useful skill, in every job or every person issue I have ever had. But it’s not economics!
For those who don’t know what I’m getting at: One of the dirty not-so-secrets about economics is that most academic economists only want students who can do the math, they aren’t there to teach so much as to weed-out. I presume they teach economics only to their favourite PhD students, which (I’m guessing) only happens around 2nd or 3rd year of of a PhD. And even then, I didn’t go that far, so I don’t know. But, a sad result is that I learned a lot of math, and how to solve problems, but I didn’t learn about the subject that my degree is for…at least not in macro. For that, I have had to turn to the economics in books after all that schooling to start to piece it together.
Food for thought: I was never required to actually read Adam Smith, I did that on my own. Nor was I required to read Keynes or Hayek. I still haven’t read Keynes. The economist we did read: Samuelson. Anyone heard of him? To be a little balanced here, we did read a lot of later scholars. B/c..that’s the idea of textbooks.
There are no shortage of moments where I read something in a book or The Economist or whatever and curse at my shitty education. Nobody likes to be the last one to get a joke.
But I digress…
Another issue I have is that I am very worried about “confirmation bias“. Which is the issue that you are more likely to accept one-sided explanations for things you already believe.
There is a line in 1984 that goes:
“The best books… are those that tell you what you know already.”
So, this works as an emotional truth, but not as a rational truth. The trick is with the word ‘best’. If by best, you mean the books that gives you that ‘rush’ of solving a mystery or whatever, sure…you are going to like things that validate your world view.
So my bias: I don’t like standard macroeconomics. As a student, I was on board with it up until I got to the part where they tried to teach me how to build aggregate demand functions. The models use a universal human being to solve their problem. This is not wrong, though. It’s like trying to simplify the world down to particles in physics. You want to know the “base” of your economy? It’s people, not one person.
The problem is NOT whether this is absolutely true, the problem is whether a model that uses the universal person creates useful predictions.
Does this crazy leap in logic give us a better understanding or not?
I think the jury is still out. But … what do I know?
I think people are diverse as a fundamental reality to confront. So there are population dynamics to consider. It matters what mix of people you have. I don’t think you can model past this. You have to bring it in to the modelling.
BTW: Holding this idea casts me outside of “correct” or “orthodox” economics. Every MACROeconomist (99%) you read in the news has submit to the “expedience” of the representative consumer. To do otherwise is to lose the special privilege of having your ideas taken seriously. I’m pretty sure. This drives me crazy. But I’m not really an expert. I admit I don’t understand the stuff.
Anyway, I didn’t intend to go that far into it today. Instead I wanted to jot down a guide for myself. Some sort of simple tool to help me know if I understand something. Actually, what follows is my attempt to redress the Feynman technique.
The reason is that I am starting to study alternative theories from the orthodox. There are a few, and they seem pretty good. There’s complexity theory, Minsky’s theories of debt cycles, and a few others. They all seem better to me than what is in the textbooks. And I want them to be true. So I need to devise a way to know whether I should buy these ideas where I reject the standard ideas.
It seems to me, I am likely to accept new theories more easily…so I should go back and get better at the classical stuff. But I need to know whether I understand it will enough to be able to choose the better alternative.
It’s probably beyond me to do this, but it’s healthy to have ambitions.
This is a rough guide, and I am open to suggestions. Please do comment.
If you understand an idea you can communicate through or handle these three challenges:
- Uniqueness: You can precisely separate the idea from more general ideas.
- E.G. The sky is different from ‘up’, because there are other concepts like ‘ceiling’ or ‘canopy’ that are also part of ‘up’.
- [Optional] you can pinpoint the first utterance of the idea: “This idea was first written down by Plato in ancient Greece”
- Existence/truth: You can support the idea with appeal to something in the real-world, it will be at least difficult to refute.
- I can tell you to go outside, in an open area, and look up.
- Where are the clouds? What else would you call that place?
- Sometimes people call this the “sniff test” or “common sense”.
- [optional] In the special case of scientific concepts, this might be synonymous with ‘reproducibility’.
- Play: You can bend the rules forwards and backwards with the idea, meaning you can search the for the ways in which an idea breaks down.
- You can play devil’s advocate.
- You know the common misuse of a concept (you know when other people are wrong).
- You can be creative, and enter discovery of new ideas.