Re: Equilibrium Questions

ruetheday_at_outgun.com
Date: 02/28/05 

Date: 28 Feb 2005 12:43:40 -0800

>I undestand what you mean perfectly. When I was a student I confronted

>one of my teachers exactly in the same way: "wait a minute! The REAL
>world doesn't behave like this!" He proceeded to explain to me how
>reductionism is a necessary part of education; you just can't unload a

>ton of stuff at maximum detail on students. It has to be done little
by
>litte. The important thing is to explain to the student that models
are
>NOT reality; unfortunately many economists fail to understand this,
>confuse the map with the terrain, and dictate wrong-headed economic
>policy ("the map says there's no river here", then people drown).
>Remember the magic chant of economics? "ceteris paribus". We just have

>to remember that the world is never in a "ceteris paribus" situation
:)

Assumption of ceteris paribus is not the problem. Leaving certain
details out of the model is not the problem either.

The problem is that while economics originally started out as the study
of real world market interaction in an effort to explain real world
problems, economists living during a particular time in the evolution
of the field created a level of abstraction that does not in any way
represent the way markets actually function in the universe in which we
live. They created this abstraction for the express purpose of being
able to apply a certain set of mathematical techniques to this
hypothetical market to prove that markets in general had certain
qualities that supported their own preconceptions (some would say
ideology). Somewhere along the line, modern economists lost sight of
the history of their profession and its original goals, and the use of
more and more sophisticated mathematical techniques built upong further
and further levels of abstraction became an end unto itself.

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