Knowing and Making

If conventional economic theory is so wrong (as we are repeatedly told ) why does it survive so well? This post by UnlearningEcon  prompted me to think again about why economics, despite widely accepted empirical data from behavioural econ, is broadly taught in the same way as before, and why its basic assumptions still underpin much modern research. Some have a sociological explanation for this. In this view, economists are invested in the old approaches, have spent decades honing specific mathematical skills, and effectively collude to make sure new ideas do not displace the old. The top journals only accept papers that cite the same old work, perpetuating the models. Science, as they say, advances one funeral at a time. No doubt there's something to this, but I don't think economists are quite so closed minded. There is a clue in the above article: "...Euclidean geometry, despite being incorrect, is more effective than non-Euclidean geometry in some engineerin

[ Tara posting today ] We had a great response to our Cognitive Economics session at the American Economic Association’s conference a few weeks ago. For those who weren’t there, here’s a quick summary of the four papers presented, and the discussion at the end. Dan Benjamin, Kristen Cooper, Ori Heffetz, and Miles Kimball presented What Do People Want ? The key question of this paper is: how can we measure happiness? And how do we account for the biases and differences across different groups and demographics? The authors have built a model that examines the multiple dimensions of wellbeing by asking individuals a huge number of different questions. Any single question about your true wellbeing will be affected by a lot of “noise” - i.e. biases. They reduced this noise by asking individuals multiple questions including tradeoffs and interpersonal comparisons. By statistical analysis, they found a small number of underlying factors that best predict the different dimensions of wellbe