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30 sats \ 33 replies \ @Undisciplined 6 Aug \ parent \ on: Jeff Bezos’s Yacht: Driver of Economic Activity econ
I was thinking about our common modelling practice of dividing the population into "high types" and "low types".
Yes, what are high types and what are low types? These classifications look suspiciously collectivist.
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It's a modeling gimmick to classify people into low skill and high skill groups, with the simple binary being chosen simply for mathematical convenience. It lets the model generate heterogeneity in outcomes such as high types getting degrees and low types not
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Another statistical modeling gimmick, huh? How are they working out for the people using the models?
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In terms of getting published I guess it's working out just fine
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Getting published? How is it doing on modeling reality? Or is it just a model constructed from previous data?
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It's not really a statistical technique. It helps work out simplified equilibrium conditions. If it helps, it's no worse of an assumption than the standard one-type assumption, which Austrians make all the time.
I think Austrians should take results from this kind of work as clues or hints as to what might be true. It's a lot easier to engage in deductive reasoning if you have a sense of the destination.
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There is also a lot of inductive reasoning going on in Austrian economic thinking! Sometimes setting the destination before doing the reasoning is a lost cause, isn’t it? That reminds me of much of the research going on by The ScienceTM.
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At least for me, it’s a lot easier to work with a model in mathematical notation to derive conclusions.
You know the assumptions in the model, so you can use verbal reasoning to get to the same place but it might not be as obvious without the hint.