economics and modelling: why have economists tinkered rather than rewritten?


Post-crisis we do appear to be sleepwalking through a dreamscape in which everything kind of looks like it did before, but there is slightly surreal stuff happening in the periphery of our vision like Greece imploding, revolutions in the middle east, the Tories in Britain getting serious about the country’s oil dependency. Roman Frydman expresses astonishment at one point that the one group of people who seemed to survive the financial crisis relatively unscathed were the economists, who have got away with tinkering with their models rather than having to consider the possibility that those models bare little relation to the reality they purport to describe and are wholly inappropriate to the financial markets. I suspect that faith in the integrity of the economist’s models is something that we all have a fair amount invested in, irrespective of whether we could ever hope to understand those models.

Oliver Sutton’s comments on the Guardian article:

The Business podcast: Broken economic models and the role of emotion in finance by Roman Frydman, David Tuckett and Phillip Inman join Heather Stewart to discuss the failure of mathematical models during the financial crisis

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