Very well said, Vladimir_M—a comment I wish I could vote up twice.
That basically agrees with my experience (mentioned in the discussion you linked) that economists lack a Level 2 understanding of their speciality. That is, they cannot trace the inferential paths they rely on, all the way back to the layman level. In my estimation, this leads them to advocate truly absurd policies, since this poor understanding prevents them from identifying where a model no longer outputs policies justifiable through such an inferential path.
For example, they equate growing GDP with a good economy. And as a general rule, that’s a good measure. But you have to know where the rule breaks down, and this requires a deeper understanding than most economists have. A Level-2 economist would say something like,
“Yes, GDP generally correlates with good economic health, but in the wake of this hurricane, most of that spending is just rebuilding destroyed stuff. Now, it’s certainly better to rebuild, given the hurricane, but this is just restoring the previous level of economic health—the high GDP numbers you see can’t be taken to mean that the economy was somehow improved, in any sense that we care about, as a result of the hurricane striking.”
But we never hear anything like that.
As another example, the consensus seems to be that we have to make sub-zero interest rates to clumsy banks that just revealed themselves to be extremely incompetent, without asking whether those banks are actually satisfying genuine consumer desires better than such desires would be satisfied without such a policy.
In contrast, physicists can say, “Why do we make that assumption? Well, because you have to account for these observations, and most of that work is done by these models, which leaves you with …” That’s tracing back to the layman level, and so a Level 2 understanding. If they’re reluctant to do so, then yes, it could be a (less common) Level 1 physicist, but more likely, it’s because they realize it will take a long time to trace out the inferential path.
Unfortunately, high schools don’t show students this path very well, which I’m finding out as I “relearn” the basis of physics from some books I’ve been reading that specifically discuss how these models in physics were discovered (like Atom by Asimov).
That basically agrees with my experience (mentioned in the discussion you linked) that economists lack a Level 2 understanding of their speciality. That is, they cannot trace the inferential paths they rely on, all the way back to the layman level.
Yes, that’s a very good remark. This summarizes my frustration with economic concepts very well.
Then you may be interested in this exchange I’m having with John Salvatier, a follower of Scott Sumner, a mainstream monetary economist (MME) who really aggravates me by how he advocates those stupid monetary policies I mentioned, and his (Sumner’s) very transparent lack of a Level 2 understanding. (This is touched on in my exchange with John, in which he agrees that Sumner’s model [though perhaps not his general understanding] would not be able to give the right recommendations in cases where nominal GDP drops for good reasons, but rather, would slavishly try to force it back up, steamrolling over good efficiencies.)
Unlike the popular MMEs, John is able to take the time to cross the (enormous) inferential distance between our positions on economic policy.
Very well said, Vladimir_M—a comment I wish I could vote up twice.
That basically agrees with my experience (mentioned in the discussion you linked) that economists lack a Level 2 understanding of their speciality. That is, they cannot trace the inferential paths they rely on, all the way back to the layman level. In my estimation, this leads them to advocate truly absurd policies, since this poor understanding prevents them from identifying where a model no longer outputs policies justifiable through such an inferential path.
For example, they equate growing GDP with a good economy. And as a general rule, that’s a good measure. But you have to know where the rule breaks down, and this requires a deeper understanding than most economists have. A Level-2 economist would say something like,
“Yes, GDP generally correlates with good economic health, but in the wake of this hurricane, most of that spending is just rebuilding destroyed stuff. Now, it’s certainly better to rebuild, given the hurricane, but this is just restoring the previous level of economic health—the high GDP numbers you see can’t be taken to mean that the economy was somehow improved, in any sense that we care about, as a result of the hurricane striking.”
But we never hear anything like that.
As another example, the consensus seems to be that we have to make sub-zero interest rates to clumsy banks that just revealed themselves to be extremely incompetent, without asking whether those banks are actually satisfying genuine consumer desires better than such desires would be satisfied without such a policy.
In contrast, physicists can say, “Why do we make that assumption? Well, because you have to account for these observations, and most of that work is done by these models, which leaves you with …” That’s tracing back to the layman level, and so a Level 2 understanding. If they’re reluctant to do so, then yes, it could be a (less common) Level 1 physicist, but more likely, it’s because they realize it will take a long time to trace out the inferential path.
Unfortunately, high schools don’t show students this path very well, which I’m finding out as I “relearn” the basis of physics from some books I’ve been reading that specifically discuss how these models in physics were discovered (like Atom by Asimov).
SilasBarta:
Yes, that’s a very good remark. This summarizes my frustration with economic concepts very well.
Then you may be interested in this exchange I’m having with John Salvatier, a follower of Scott Sumner, a mainstream monetary economist (MME) who really aggravates me by how he advocates those stupid monetary policies I mentioned, and his (Sumner’s) very transparent lack of a Level 2 understanding. (This is touched on in my exchange with John, in which he agrees that Sumner’s model [though perhaps not his general understanding] would not be able to give the right recommendations in cases where nominal GDP drops for good reasons, but rather, would slavishly try to force it back up, steamrolling over good efficiencies.)
Unlike the popular MMEs, John is able to take the time to cross the (enormous) inferential distance between our positions on economic policy.