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62 sats \ 23 replies \ @SimpleStacker 17h \ parent \ on: Jeff Bezos’s Yacht: Driver of Economic Activity econ
It's best to think of the models as tools to assist in thinking about bigger picture topics, and not specifically as predictive models of what's actually gonna happen.
My post on game theory and self custody is a good example. Although I didn't use any math, the model I presented can actually be modeled in mathematical terms. It's only meant to illustrate a particular strategic dynamic, and the factors that can variously strengthen or weaken that dynamic. It's not meant to give us a prediction about what will really happen in real life.
It's possible to conduct this reasoning in words, but much harder than if you used the assistance of diagrams, equations, etc.
I also wonder if it would help to think of the models as being about incentives and equilibrium conditions, rather than descriptions of what individuals will necessarily do.
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Yes, this may be true, but then, it is about something other than economics, isn’t it? Economics is about what people do, not what mathematical systems do. The mathematical models may point out a way to look at things is true.
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We're just talking about the reasoning process behind economic beliefs.
The only difference between deductive verbal reasoning and mathematical logic is the notation. There's nothing inherently more human or economicsy about the preferred approach of Austrians. I think they're approach has its merits, but that's not one of them.
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Perhaps there is one difference. The variables in mathematical reasoning represent only one, pure class of things, whereas verbal reasoning may have something less pure with more that one case or class as one of the bases of the reasoning.
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This whole discussion started because you didn't like the idea of dividing laborers into two classes.
Generally speaking, it's quite common to have heterogeneous goods in models.
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No, I think there are a lot more than just two classes! I also understand that there are models containing heterogeneous goods, hopefully a lot of different goods! People coming n two classes is too simplistic, IMO.
You might be onto something. Mathematical reasoning is not superior to verbal reasoning. The mathematical approach may be more pure and rigorous, but it also leaves out a lot of the nuances of human behavior. Mainstream economists tend to over-elevate the claims of mathematical models.
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This is why I say these modelling results should be used to hint at results that can be developed more rigorously.
In my thinking, the nuances are also very important for understanding human actions and trying to imposing rigid rules of mathematics on them is fruitless.
Yeah I think that's a pretty fair assessment. They're more a description of what situations are strategically stable based on the incentives at play, rather than a description of what individual people actually do or how they think about it.
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I don’t think there is a human alive that would think in terms of a mathematical model before purchasing something or deciding priorities to satisfy needs and desires. OK, yes, there are certain “market players” that will use mathematical models and algorithms to buy and sell on the controlled stock markets and futures exchanges, I must admit.
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Mmm, that's true but it's also true that people do behave in a way that can be mathematically modeled. For example, when prices go down people tend to buy more of a good, which can be modeled mathematically as a demand function.
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Again, you speak of aggregates not individual people. Individual people make the aggregates. Have you found any models that work each and every time they are applied to a situation? If you are using statistics, then you can categorically state that if A then B and be correct in every case.
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Unfortunately, mathematical models cannot represent human action. There are no proper variables that fit the situation. The reasoning is about something other than human action and catallactics, IMHO.
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