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Comment by rodgerd | Hacker News Reader

> most of the models used in Economics are based on abstract reasoning about "ideal" markets and actors (or more recently on game-theoretic ideas) instead of experimental data.

Essentially it's like pre-Enlightenment Natural Philiosophy, in that it's a discipline that claims to explain the way the world works, but actually explains who has the most sway in getting their ideas accepted.

> ...should provide ample data to develop "real" models of economic behavior against, and I think that many researchers actually already make use of this data.

I suspect reality will get about as much traction against idealogues of e.g. the Chicago School as actual climate science does agains useful idiots like Bjørn Lomborg. It's about providing views that happen to be useful to moneyed interests, not reality.

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I suspect reality will get about as much traction against idealogues of e.g. the Chicago School

This is an odd criticism. I could see it applied to Chicago's cousin, the Austrian school, which clearly relies more on ideas (viz. the work of Hayek and Mises, both of whom considered themselves political philosophers as much as economists).

But Chicago is just the opposite. It's been criticized for being too tied up in the mathematics of it all. Chicagoans love numbers.

It's my understanding that your right that Chicagoan's are known for their love of math but not necessarily their love of empiricism. However they almost exclusively use RBC(real business cycle) models which are created based on stylized assumptions about human behavior(always rational, lives forever, always able to borrow) and then the parameters are played with until it fits some data in the real world(usually the parameters are completely unrealistic). And they make pretty terrible predictions. To my knowledge they aren't ever used to actually make any predictions about the economy. People who do predictions like the(CBO, FED, IMF etc..) use old school Keynesian-style aggregate models of the economy.

Larry Summers said of RBC models

1. RBC models use parameter values that are almost certainly wrong,

2. RBC models make predictions about prices that are completely, utterly wrong, and

3. The "technology shocks" that RBC models assume drive the business cycle have never been found. (They assume that during recessions we just forget how to be efficient.)

And they make pretty terrible predictions.

That's a fair criticism, as far as it goes: it's been said (of Austrians, anyway) that they've predicted 8 of the last 3 recessions.

The thing is, qualitatively, we can say that "old school Keynesian-style aggregate models" are just as bad. The difference is that, rather than modeling based on coldly-rational actors, they're modeling based on (and I quote) "animal spirits". And those models told us that the end of WWII and curtailing war spending was going to usher in a new depression worse than the Great Depression; and that the Sequester and "fiscal cliff" were going to plunge us back into the depths of 2008.

The fact is that both approaches like to pretend that they understand what's happening, but neither really do. Anybody claiming they have an accurate model of macroeconomics is trying to sell you something.

HOWEVER, this is all talk about Macro.

If you take a look at the Micro world, you'll see that Chicago really are the winners. Microeconomics is a solved problem, at least to a first approximation. And the progenitor of that was pretty much Gary Becker - from University of Chicago.

So it's not fair to criticize Chicago when (a) in the micro world, they really have been triumphant; and (b) in the macro world, they're just a different kind of wrong than Keynesianism.

Thank you. Simple and true.

Have there been experimental or empirical studies to support that micro is a solved problem?

I'm not sure how one would do a study to test a statement so sweeping. But I was probably too glib in any case.

It would be more accurate to say that the framework within which microeconomic phenomena is pretty well understood. While there's still plenty of room for research to fill out all the details, there's very broad consensus about how the answers tend to look. Concepts like price elasticity are well understood and non-controversial.

That stands in sharp contrast to macroeconomics, where even when talking about the same stuff, say, ZIRP, there's fundamental disagreement about what factors we should be researching. (and when I say "we", I mean people that aren't me, 'cause I'm not an economist)

The claim that the U.S. would have grown at the same speed if the sequestration had not gone into effect is a minority view not held by the FOMC, the IMF, or the CBO.

"New York University economist Paul Romer recently complained about how economists use math as a tool of rhetoric instead of a tool to understand the world."

It's possible to love numbers and still not be interested in empirical data. One thing you may notice about much raw economic data is that it was selected because (a) it was easy to collect, or (b) it gives "reasonable results" according to the accepted theory.