Knowing and Making

Some recent interesting articles: A Physicist Turns the City Into an Equation is a description of an ambitious project by Luis Bettencourt and Geoffrey West at the Santa Fe Institute to develop mathematical models of the behaviour of cities (and earlier, of the physiology of living organisms). They claim to have found some strong correlations in both cases. For instance, a city that doubles in size increases its productivity and economic activity per capita by 15%. And animals that grow larger become more efficient users of energy. However, it's not clear whether they have a real model which explains these phenomena, or just some statistical correlations. Paul Mason went to the LSE and conducted a whimsical interview with the ghost of John Maynard Keynes. As fits someone who changes his mind with the facts, he has grown out of Keynesianism and is seeking a new model which can handle fiat currencies and global finance. An excellent challenge. Another challenge comes from Tyl...

Greg Mankiw asks us to spare a thought for the top ten percent of earners who apparently bear the main burden of the economic downturn. I wish he had figured out how to measure whose utility  has been hurt the most, as opposed to just whose consumption  has fallen. Unfortunately this is a blind spot of many economists. Poor people simply get more value out of a dollar than rich people. This also means that they are hurt more by a smaller fall in income. Diminishing marginal returns have been part of economic theory for two hundred years, so I'm not sure why people keep forgetting it.