Home > Uncategorized > Nobel Committee making a colossal fool of itself

Nobel Committee making a colossal fool of itself

from Lars Syll

In its ‘scientific background’ description on the 2017 ‘Nobel prize’ in economics, The Royal Swedish Academy of Sciences writes (emphasis added):

dumstrut-317x330In order to build useful models, economists make simplifying assumptions. A common and fruitful simplification is to assume that agents are perfectly rational. This simplification has enabled economists to build powerful models to analyze a multitude of different economic issues and markets.

 

badluck

What absolute nonsense! Writing this and at the same time giving the prize to an economist that has devoted his whole career to show how utterly wrong this modelling strategy is, is truly an amazing case of having bad luck when thinking …

  1. lobdillj
    October 11, 2017 at 1:54 am

    The Royal Swedish Academy of Sciences has been foolish before…Krugman, for example. Wynne Godley and Hyman Minsky…were they even nominated?

  2. October 11, 2017 at 7:16 am

    As clarified by Avner Offer’s and Gabriel Söderberg’s new book — The Nobel factor: the prize in economics, social democracy, and the market turn (Princeton University Press 2016). The Economics Nobel prize was created by bankers to support the freedom of capitalists, and about half of the prizes have gone to Chicago School (free market) economists. However, to give an appearance of neutrality, the other half is awarded to an eclectic assortment of economists, to fool the public into thinking that they are unbiased. At the same time, when they give the prize to really dangerous threats (like Thaler, Shiller), they have to take steps to neutralize the main message of behavioral economics, by putting in nonesense remarks like the one you have cited. (see my post on Ideological Macro & Increasing Inequality)
    https://rwer.wordpress.com/2017/01/15/ideological-macroeconomics-increasing-inequality/
    Considering the free marketeers remarkable (and even continuing) success at keeping the pubic deluded for decades, we have to hand it to them — they really do have the power to make people believe that the emperor is wearing clothes, when he is stark naked.

  3. October 18, 2017 at 9:56 am

    I don’t believe economists understand what makes up a useful model, or how simplifying model assumptions are created and applied. When I first began working in strategic planning and modeling, the tool most used was linear programming models. Usually four-point linear programming models. These were replaced long ago by models based mathematically on differential equations and using some version of Actor-Network-Theory. The linear programming models were optimization models using simple and unrealistic data inputs. There was no other choice, since the models and the computers on which they ran (this is 1979) had limited data banks and limited processing capacity, as well as the always incorrect assumption that an optimal solution could be computed. This meant when we used these models for actual planning, we had to translate the results of the models into the situations on which the planning was focused. For example, infrastructure build time and costs were adjusted for variations in location, weather, investment timing, etc. Also, customer demand was adjusted to consider not only money availability but also family and neighborhood locations, region of the nation, and local, state, and federal planning policies. In simple terms, the linear programming model results gave us a big and undifferentiated slice of the factors for planning. But we had to provide manually the details that zeroed the planning in on a specific target. I don’t see economists doing any of this. In fact, it seems that often economists don’t understand even the basics of the models they operate. And that’s rather frightening.

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