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Ways Economists Figure Things Out

We're collecting and systematizing the ways that economists figure things out. Here are examples of how Andrius has sketched the 24 ways of figuring things out for different disciplines and personalities.

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The model shows that the four functions of money are answers why money addresses the corresponding ways that economists figure things out. Why do we want a store of values? Because the economy is ever upended. And so on. A medium of exchange is not necessarily between distinct people or entities but fundamentally is between the functions of money, among which is a medium of exchange in its own sake. Money is the representation of the idealized participant in the economy.

Questions

Please note: In the spirit of fair use, we are sharing excerpts from Wikipedia and other sources which illustrate examples of ways of figuring things out. We cite our sources where the excerpts can be found in their original context.

Justify ownership

Ownership, property, wealth

Justify why property belongs to you. Come up with reasons, what matters and what does not matter. You own what you claim.

  • But when his disciples saw this, they were indignant, saying, “Why this waste? For this ointment might have been sold for much and given to the poor.” However, knowing this, Jesus said to them, “Why do you trouble the woman? She has done a good work for me. For you always have the poor with you, but you don’t always have me. Matthew 26:11
  • Bribe judges Works and Days
  • Explain that injustice and hardship come from the gods. Works and Days
  • Explain that human beings have degenerated and ignore moral and religious standards. Works and Days
  • Quiet those who object. The hawk berated the nightingale in its clutches. Works and Days
  • Argue that it is inevitable.
    • It is not merely that the Malthusian principle of population and the doctrine that wages must normally and necessarily fall to the minimum point were gladly accepted by wicked exploiters as the justification of their profits; but thousands whose immediate interests were not touched by these beliefs found it difficult to avoid them. The Dismal Science
  • Locke argues that property is a natural right that is derived from labour. In Chapter V of his Second Treatise, Locke argues that the individual ownership of goods and property is justified by the labour exerted to produce such goods—"at least where there is enough [land], and as good, left in common for others"—or to use property to produce goods beneficial to human society. Locke states in his Second Treatise that nature on its own provides little of value to society, implying that the labour expended in the creation of goods gives them their value. From this premise, understood as a labour theory of value, Locke developed a labour theory of property, whereby ownership of property is created by the application of labour. In addition, he believed that property precedes government and government cannot "dispose of the estates of the subjects arbitrarily". John Locke
  • If a man does not know how to use something, it is therefore not his property. With money, if a man does not know how to use it then he should not consider it as his property. Socrates makes the argument that a man's assets are not property unless he learns to use them diligently and wisely.
  • We came here first, we planted the flag.
  • "Why have stockholders?" Berle asked. "What contribution do they make, entitling them to heirship of half the profits of the industrial system, receivable partly in the form of dividends, and partly in the form of increased market values resulting from undistributed corporate gains? Stockholders toil not, neither do they spin, to earn that reward. They are beneficiaries by position only. Justification for their inheritance must be sought outside classic economic reasoning.” The position of stockholders' profit, said Berle, “can be founded only upon social grounds. There is... a value attached to individual life, individual development, individual solution of personal problems, individual choice of consumption and activity. Wealth unquestionably does add to an individual’s capacity and range in pursuit of happiness and self-development. There is certainly advantage to the community when men take care of themselves. But that justification turns on the distribution as well as the existence of wealth. Its force exists only in direct ratio to the number of individuals who hold such wealth. Justification for the stockholder’s existence thus depends on increasing distribution within the American population.Wikipedia: The Modern Corporation and Private Property
  • Property rights are constructs in economics for determining how a resource or economic good is used and owned,[1] which have developed over ancient and modern history, from Abrahamic law to Article 17 of the Universal Declaration of Human Rights. Resources can be owned by (and hence be the property of) individuals, associations, collectives, or governments.[2] Property rights can be viewed as an attribute of an economic good. This attribute has three broad components,[3][4][5] and is often referred to as a bundle of rights in the United States:[6] 1) the right to use the good, 2) the right to earn income from the good, 3) the right to transfer the good to others, alter it, abandon it, or destroy it (the right to ownership cessation). Economists such as Adam Smith stress that the expectation of profit from "improving one's stock of capital" rests on the concept of private property rights. Wikipedia: Property rights (economics)

Consider best use of land and resources

  • The text advocates land reform, where land is taken from landowners and farmers who own land but do not grow anything for a long time, and given to poorer farmers who want to grow crops but do not own any land. Arthashastra

Consider the social status of wealth, whether ways of achieving it are honorable, moral, reputable, legal

  • For Aristotle there is a certain "art of acquisition" or "wealth-getting", which is necessary and honourable for one's household, while exchange on the retail trade for simply accumulation is "justly censured, for it is dishonorable". ... Aristotle himself highly disapproved of usury and cast scorn on making money through a monopoly. History of economic thought
  • Aquinas argued it was immoral for sellers to raise their prices simply because buyers had a pressing need for a product. ... Aquinas argued against any form of cheating and recommended always paying compensation in lieu of service obtained as it utilized resources. Whilst human laws might not impose sanctions for unfair dealing, divine law did, in his opinion. History of economic thought

Justify price

  • Dun Scotus thought it possible to be more precise than Aquinas in calculating a just price, emphasizing the costs of labor and expenses, although he recognized that the latter might be inflated by exaggeration, because buyer and seller usually have different ideas of a just price. History of economic thought

Determining willingness to pay

  • If people did not benefit from a transaction, in Dun Scotus' view, they would not trade. Scotus said merchants perform a necessary and useful social role by transporting goods and making them available to the public. History of economic thought
  • Jean Buridan argued that aggregated, not individual, demand and supply determine market prices. Hence, for him a just price was what the society collectively and not just one individual is willing to pay. History of economic thought

Consider the forms of ownership and management

  • Plato also argued that collective ownership was necessary to promote common pursuit of the common interest, and to avoid the social divisiveness that would occur "when some grieve exceedingly and others rejoice at the same happenings." History of economic thought
  • Though Aristotle did certainly advocate holding many things in common, he argued that not everything could be, simply because of the "wickedness of human nature". ... "It is clearly better that property should be private", wrote Aristotle, "but the use of it common; and the special business of the legislator is to create in men this benevolent disposition." History of economic thought

Unsorted examples

Policies and prosperity

Distinguish the basic roles in an economy (consumer, producer, distributor, regulator, etc.)

Consider who should play which roles

  • The reformists' criticism of the monopolies largely centered on the idea that the state "should not compete with the people for profit", as it would tend to oppress the citizenry while doing so; mercantile ventures were not "proper activities for the state". Discourses on Salt and Iron

Budget. Calculate what groups require to fulfill their roles.

  • Locke prepares estimates of the cash requirements for different economic groups (landholders, labourers, and brokers). In each group he posits that the cash requirements are closely related to the length of the pay period. John Locke

Appraise. Calculate the relative value of what each group contributes to the economy.

  • Locke argues the brokers—the middlemen—whose activities enlarge the monetary circuit and whose profits eat into the earnings of labourers and landholders, have a negative influence on both personal and the public economy to which they supposedly contribute. John Locke

Discussing an abstract representative

  • Adolphe Quetelet (1796–1874), another important founder of statistics, introduced the notion of the "average man" (l'homme moyen) as a means of understanding complex social phenomena such as crime rates, marriage rates, and suicide rates. History of statistics
  • Gustav Theodor Fechner used the median (Centralwerth) in sociological and psychological phenomena. History of statistics

Consider, historically, whether an indicator has a consistent meaning, or is its meaning changing, whether absolute or relative.

Using random sampling

  • Arthur Lyon Bowley introduced new methods of data sampling in 1906 when working on social statistics. Although statistical surveys of social conditions had started with Charles Booth's "Life and Labour of the People in London" (1889–1903) and Seebohm Rowntree's "Poverty, A Study of Town Life" (1901), Bowley's, key innovation consisted of the use of random sampling techniques. His efforts culminated in his New Survey of London Life and Labour. History of statistics

Empathize with a participant as to their intent

  • Adam Smith, Wealth of Nations: "He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention." Invisible hand

Focus on distribution of income among classes of people

  • David Ricardo made a distinction between workers, who received a wage fixed to a level at which they could survive, the landowners, who earn a rent, and capitalists, who own capital and receive a profit, a residual part of the income. History of economic thought

Present data visually

  • Nightingale is described as "a true pioneer in the graphical representation of statistics" and is especially well known for her usage of a polar area diagram,[80]: 107  or occasionally the Nightingale rose diagram, equivalent to a modern circular histogram, to illustrate seasonal sources of patient mortality in the military field hospital she managed. Florence Nightingale

Value X as capital based on the value of what it produces

  • Locke develops an early theory of capitalisation, such as of land, which has value because "by its constant production of saleable commodities it brings in a certain yearly income". John Locke

Value X as money based on the value of what it can be exchanged for (or loaned out for)

  • Locke considers the demand for money as almost the same as demand for goods or land: it depends on whether money is wanted as medium of exchange. As a medium of exchange, he states, "money is capable by exchange to procure us the necessaries or conveniences of life" and, for loanable funds, "it comes to be of the same nature with land by yielding a certain yearly income…or interest". John Locke

Consider factors causing relative prosperity

  • As for a country's money stock, if it is large relative to that of other countries, he says it will cause the country's exchange to rise above par, as an export balance would do. John Locke

Use Value - Unconsciously Answering Mind

Consider the nature of wealth

  • flutes are property to one who knows how to play tolerably well, but to one who does not know are nothing more than useless pebbles, unless indeed he should sell them Oeconomicus

Distinguish what is natural and conventional

  • Aristotle: Indeed, riches is assumed by many to be only a quantity of coin, because the arts of getting wealth and retail trade are concerned with coin. Others maintain that coined money is a mere sham, a thing not natural, but conventional only, because, if the users substitute another commodity for it, it is worthless, and because it is not useful as a means to any of the necessities of life, and, indeed, he who is rich in coin may often be in want of necessary food. But how can that be wealth of which a man may have a great abundance and yet perish with hunger, like Midas in the fable, whose insatiable prayer turned everything that was set before him into gold? History of economic thought

Distinguish what is truly directly useful

In The Theory of Business Enterprise (1904) Veblen distinguished production for people to use things and production for pure profit, arguing that the former is often hindered because businesses pursue the latter. History of economic thought

Express consumer preferences as a consumer demand curve`

  • Indifference curves are heuristic devices used in microeconomics to convey preferences of a consumer graphically along with the limitations of a consumer's budget. An indifference curve shows the various combination of two goods that leave the consumer equally satisfied. For example, every point on the indifference curve I1 (as shown in the figure above), which represents a unique combination of good X and good Y, will give the consumer the same utility. The indifference curves shown in the figure above adhere to the three assumptions outlined in that they are convex, do not intersect, and have a higher utility the further the indifference curve is away from the origin. Wikipedia: Consumer choice

Document preferences for available goods

Ranking consumption options from least preferred to most preferred

  • Utility is an economic concept that refers to the level of satisfaction or benefit that individuals derive from consuming a particular good or service, which is quantified using units known as utils (derived from the Spanish word for useful). However, determining the exact level of utility that a consumer experiences can be a challenging and abstract task. To overcome this challenge, economists rely on the consent of revealed preferences, where they observe the choices made by consumers and use this information to rank consumption options from the least preferred to the most desirable. Wikipedia: Marginal utility

Reorganize management (division of labor)

Share management

  • Ischomachus incorporates his wife into household management as soon as they are married and even relies on her to run the household. He does not hide away assets he sees as property, rather he shares them with her. He sees his marriage as a give-and-take relationship, where both he and his wife share equal parts in its success. Oeconomicus

Trace accountability or lack of it

  • In his book with American economist Gardiner C. Means (1896–1988) The Modern Corporation and Private Property (1932) Adolf Berle detailed the evolution in the contemporary economy of big business and argued that those who controlled big firms should be better held to account. Directors of companies are held to account to the shareholders of companies, or not, by the rules found in company law statutes. This might include rights to elect and fire the management, requirements to hold regular general meetings, satisfy accounting standards, and so on. In 1930s America the typical company laws (e.g. in Delaware) did not clearly mandate such rights. Berle argued that the unaccountable directors of companies were therefore apt to funnel the fruits of enterprise profits into their own pockets, as well as manage in their own interests. The ability to do this was supported by the fact that the majority of shareholders in big public companies were single individuals, with scant means of communication, in short, divided and conquered. History of economic thought

Consider how to effectively organize production

  • like workmen in the street of the silversmiths, where one vessel, in order that it may go out perfect, passes through the hands of many, when it might have been finished by one perfect workman. But the only reason why the combined skill of many workmen was thought necessary, was, that it is better that each part of an art should be learned by a special workman, which can be done speedily and easily, than that they should all be compelled to be perfect in one art throughout all its parts, which they could only attain slowly and with difficulty. Division of labour and see the Ecowiki page Division Of Labor

Consider the impact of a management style

  • Two styles of management that are seen in modern organisations are control and commitment:
    • Control management, the style of the past, is based on the principles of job specialisation and the division of labour. This is the assembly-line style of job specialisation, where employees are given a very narrow set of tasks or one specific task.
    • Commitment division of labour, the style of the future, is oriented on including the employee and building a level of internal commitment towards accomplishing tasks. Tasks include more responsibility and are coordinated based on expertise rather than a formal position. Wikipedia: Division of labour

Consider how an organization's characteristics affect its organizational behavior.

  • Labour hierarchy is a very common feature of the modern capitalist workplace structure, and the way these hierarchies are structured can be influenced by a variety of different factors, including:
    • Size: as organisations increase in size, there is a correlation in the rise of the division of labour.
    • Cost: cost limits small organisations from dividing their labour responsibilities.
    • Development of new technology: technological developments have led to a decrease in the amount of job specialisation in organisations as new technology makes it easier for fewer employees to accomplish a variety of tasks and still enhance production. New technology has also been helpful in the flow of information between departments helping to reduce the feeling of department isolation. Wikipedia: Division of labour

Identify obstacles to reorganization

Consider the limitations on or obstacles to change in the system

  • Adam Smith famously said in The Wealth of Nations that the division of labour is limited by the extent of the market. This is because it is by the exchange that each person can be specialised in their work and yet still have access to a wide range of goods and services. Hence, reductions in barriers to exchange lead to increases in the division of labour and so help to drive economic growth. Limitations to the division of labour have also been related to coordination and transportation costs. Wikipedia: Division of labour

Recognize systemic hindrances to genuine economic activity

  • Verden: Output and technological advance are restricted by business practices and the creation of monopolies. History of economic thought

Focus relationships on productivity

Economists focus on how to increase productivity in a productivist mindset. The destination is more important than the journey. The ends justify the means.

  • Thomas Carlyle's 1849 tract, "Occasional Discourse on the Negro Question", in which he argued in favor of reintroducing slavery in order to restore productivity to the West Indies: "Not a 'gay science', I should say, like some we have heard of; no, a dreary, desolate and, indeed, quite abject and distressing one; what we might call, by way of eminence, the dismal science."[2]

https://en.wikipedia.org/wiki/The_dismal_science

  • Ludwig von Mises argues that the economic gains accruing from the division of labour far outweigh the costs, thus developing on the thesis that division of labour leads to cost efficiencies. ... According to Mises, the idea has led to the concept of mechanisation in which a specific task is performed by a mechanical device, instead of an individual labourer. This method of production is significantly more effective in both yield and cost-effectiveness, and utilises the division of labour to the fullest extent possible. Mises saw the very idea of a task being performed by a specialised mechanical device as being the greatest achievement of division of labour. Wikipedia: Division of labor

Propose or criticize a model regarding its equity or efficiency

  • The Lange model (or Lange–Lerner theorem) is a neoclassical economic model for a hypothetical socialist economy based on public ownership of the means of production and a trial-and-error approach to determining output targets and achieving economic equilibrium and Pareto efficiency. In this model, the state owns non-labor factors of production, and markets allocate final goods and consumer goods. The Lange model states that if all production is performed by a public body such as the state, and there is a functioning price mechanism, this economy will be Pareto-efficient, like a hypothetical market economy under perfect competition. Unlike models of capitalism, the Lange model is based on direct allocation, by directing enterprise managers to set price equal to marginal cost in order to achieve Pareto efficiency. ... This model was first proposed by Oskar R. Lange in 1936 during the socialist calculation debate, and was expanded by economists like H. D. Dickinson and Abba P. Lerner.

Wikipedia: Lange model

  • Mises described the nature of the price system under capitalism and described how individual subjective values (while criticizing other theories of value) are translated into the objective information necessary for rational allocation of resources in society.[1] He argued that central planning necessarily leads to an irrational and inefficient allocation of resources. In market exchanges, prices reflect the supply and demand of resources, labor and products. ... Mises and Hayek argued that economic calculation is only possible by information provided through market prices and that centralist methods of allocation lack methods to rationally allocate resources. Wikipedia: Economic calculation problem

Define wealth, credit and resulting choice as a proxy for well being

  • All this exposed the difficulties of slowing the progression of such developments in the presence of a general ‘feel-good’ factor.

Households benefited from low unemployment, cheap consumer goods and ready credit. Businesses benefited from lower borrowing costs. Bankers were earning bumper bonuses and expanding their business around the world. The government benefited from high tax revenues enabling them to increase public spending on schools and hospitals. This was bound to create a psychology of denial. It was a cycle fuelled, in significant measure, not by virtue but by delusion. The Global Financial Crisis – Why Didn’t Anybody Notice?

Watch what farmers and merchants do for the consumers and make a theory on it.

Hans-Florian Hoyer; Collect phenomena of social acts (?private and public?), which are executed by custom, apply methodical thinking. Attempt to give intentions a causality, which makes them predictable.

Exchange Value - Consciously Questioning Mind

Surveying goods: distinguishing commodities and recording their quantities

Cataloguing possessions, their types and quantities

  • Giovanni Villani, as head of the mint in Florence, created a register of all of the coins struck in Florence. Giovanni Villani
  • Conducting census of the population.

Inspect and appraise the quality of wealth

  • Since the 12th century, the Trial of the Pyx is a ceremony that ensures newly minted coins of the Royal Mint conform to specifications. Trial of the Pyx

Keep track of inventory

  • Environmental Asset Accounting / SEEA. What is the SEEA? The System of Environmental-Economic Accounting (SEEA) is a framework that integrates economic and environmental data to provide a more comprehensive and multipurpose view of the interrelationships between the economy and the environment and the stocks and changes in stocks of environmental assets, as they bring benefits to humanity. It contains the internationally agreed standard concepts, definitions, classifications, accounting rules and tables for producing internationally comparable statistics and accounts. The SEEA framework follows a similar accounting structure as the System of National Accounts (SNA). The framework uses concepts, definitions and classifications consistent with the SNA in order to facilitate the integration of environmental and economic statistics. The SEEA is a multi-purpose system that generates a wide range of statistics, accounts and indicators with many different potential analytical applications. It is a flexible system that can be adapted to countries' priorities and policy needs while at the same time providing a common framework, concepts, terms and definitions.

United Nations System of Environmental Economic Accounting

Analyze statistics to get an overall understanding

  • Few studies have taken place regarding the global division of labour. Information can be drawn from ILO and national statistical offices. In one study, Deon Filmer estimated that 2.474 billion people participated in the global non-domestic labour force in the mid-1990s. Of these: around 15%, or 379 million people, worked in industry; a third, or 800 million worked in services and over 40%, or 1,074 million, in agriculture. Wikipedia: Division of labor

Identify and develop the personal qualities for having wealth

Apply received wisdom in managing wealth

Consider personal qualities relevant for managing wealth

  • Socrates discusses the meaning of wealth and identifies it with usefulness and well-being, not merely possessions. He links moderation and hard work to success in household management. Oeconomicus

Discover ways to acquire more wealth

  • Learn and apply the virtues of work. Don't put off work. Works and Days

Consider price formation.

Attach a money value to carry out analyses of value

Express values in terms of money by considering preferences in particular choices. Econocracy: On the Perils of Leaving Economics to the Experts by Joe Earle; Cahal Moran; Zach Ward-Perkins:72

Describing a consumer's utility function based on their behavior

  • Consumer theory, where Samuelson pioneered the revealed preference approach, is a method by which one can discern a consumer's utility function, by observing their behavior. Rather than postulate a utility function or a preference ordering, Samuelson imposed conditions directly on the choices made by individuals – their preferences as revealed by their choices.

Wikipedia: Paul Samuelson

Empiricism and causal inference

  • From approximately 1980 mainstream economics has been significantly influenced by a number of new research programs, including behavioral economics, complexity economics, evolutionary economics, experimental economics, and neuroeconomics. One key development has been an epistemic turn away from theory towards an empirically driven approach focused centrally on questions of causal inference. Wikipedia: Heterodox economics

Ask random subjects hypothetical questions about their preferences so as to mathematically model their typical expected behavior

Consider two scenarios;

  • 100% chance to gain $450 or 50% chance to gain $1000
  • 100% chance to lose $500 or 50% chance to lose $1100

Prospect theory suggests that;

  • When faced with a risky choice leading to gains agents are risk averse, preferring the certain outcome with a lower expected utility (concave value function). (Agents will choose the certain $450 even though the expected utility of the risky gain is higher)
  • When faced with a risky choice leading to losses agents are risk seeking, preferring the outcome that has a lower expected utility but the potential to avoid losses (convex value function). (Agents will choose the 50% chance to lose $1100 even though the expected utility is lower, due to the chance that they lose nothing at all)

These two examples are thus in contradiction with the expected utility theory, which only considers choices with the maximum utility. Also, the concavity for gains and convexity for losses implies diminishing marginal utility with increasing gains/losses. In other words, someone who has more money has a lower desire for a fixed amount of gain (and lower aversion to a fixed amount of loss) than someone who has less money. Wikipedia: Prospect theory

  • ...people attribute excessive weight to events with low probabilities and insufficient weight to events with high probability. For example, individuals may unconsciously treat an outcome with a probability of 99% as if its probability were 95%, and an outcome with probability of 1% as if it had a probability of 5%. Under- and over-weighting of probabilities is importantly distinct from under- and over-estimating probabilities, a different type of cognitive bias observed for example in the overconfidence effect.Wikipedia: Framing (social sciences): Experimental demonstration

More recent research suggests that there is a moderate trade-off between low-levels of inflation and unemployment. Work by George Akerlof, William Dickens, and George Perry,[16] implies that if inflation is reduced from two to zero percent, unemployment will be permanently increased by 1.5 percent because workers have a higher tolerance for real wage cuts than nominal ones. For example, a worker will more likely accept a wage increase of two percent when inflation is three percent, than a wage cut of one percent when the inflation rate is zero. Wikipedia: Phillips curve

Using particular goods or services as proxies for preference structures

Contemporary mainstream economic theory frequently defers metaphysical questions, and merely notes or assumes that preference structures conforming to certain rules can be usefully proxied by associating goods, services, or their uses with quantities, and defines "utility" as such a quantification. Wikipedia: Marginal utility

Conduct an observational study on existing data to develop and check models

Econometrics may use standard statistical models to study economic questions, but most often they are with observational data, rather than in controlled experiments.[10] In this, the design of observational studies in econometrics is similar to the design of studies in other observational disciplines, such as astronomy, epidemiology, sociology and political science. Analysis of data from an observational study is guided by the study protocol, although exploratory data analysis may by useful for generating new hypotheses. Economics often analyzes systems of equations and inequalities, such as supply and demand hypothesized to be in equilibrium. Consequently, the field of econometrics has developed methods for identification and estimation of simultaneous-equation models. These methods are analogous to methods used in other areas of science, such as the field of system identification in systems analysis and control theory. Such methods may allow researchers to estimate models and investigate their empirical consequences, without directly manipulating the system. Wikipedia: Methodology of econometrics

  • One of the fundamental statistical methods used by econometricians is regression analysis. Regression methods are important in econometrics because economists typically cannot use controlled experiments. Wikipedia: Methodology of econometrics`x

Make use of natural experiments

Econometricians often seek illuminating natural experiments in the absence of evidence from controlled experiments. Observational data may be subject to omitted-variable bias and a list of other problems that must be addressed using causal analysis of simultaneous-equation models. Wikipedia: Methodology of econometrics

Describe a mathematical function of value

In welfare economics and social choice theory, a social welfare function—also called a social ordering, ranking, utility, or choice function—is a function that ranks a set of social states by their desirability. Each person's preferences are combined in some way to determine which outcome is considered better by society as a whole.[1] It can be seen as mathematically formalizing Rousseau's idea of a general will. Social choice functions are studied by economists as a way to identify socially-optimal decisions, giving a procedure to rigorously define which of two outcomes should be considered better for society as a whole (e.g. to compare two different possible income distributions). Wikipedia: Social welfare function

Point out the problems in a solution

Arrow's impossibility theorem is a key result in social choice theory, showing that no ranking-based decision rule can satisfy the requirements of rational choice theory.[1] Most notably, Arrow showed that no such rule can satisfy all of a certain set of seemingly simple and reasonable conditions that include independence of irrelevant alternatives, the principle that a choice between two alternatives A and B should not depend on the quality of some third, unrelated option C. Wikipedia: Arrow's impossibility theorem

Determining the value of something in terms of what it can be exchanged for.

  • The value of any commodity, [...] to the person who possesses it, and who means not to use or consume it himself, but to exchange it for other commodities, is equal to the quantity of labour which it enables him to purchase or command. Labour, therefore, is the real measure of the exchangeable value of all commodities (Wealth of Nations Book 1, chapter V). Wikipedia: Labor theory of value

Define a transform to make two different situations comparable

Analyze choices, rationales and response of participants, as with game theory

  • A second approach uses microeconomic models to explain internal firm organization and market strategy, which includes internal research and development along with issues of internal reorganization and renewal. Wikipedia: Industrial organization
  • The extensive use of game theory in industrial economics has led to the export of this tool to other branches of microeconomics, such as behavioral economics and corporate finance. Wikipedia: Industrial organization
  • Game theory is a major method used in mathematical economics and business for modeling competing behaviors of interacting agents. The term "game" here implies the study of any strategic interaction between people. Applications include a wide array of economic phenomena and approaches, such as auctions, bargaining, mergers & acquisitions pricing, fair division, duopolies, oligopolies, social network formation, agent-based computational economics, general equilibrium, mechanism design, and voting systems, and across such broad areas as experimental economics, behavioral economics, information economics, industrial organization, and political economy. Wikipedia: Microeconomics

Testing the hypothesis.

The main tool of the fourth stage is hypothesis testing, a formal statistical procedure during which the researcher makes a specific statement about the true value of an economic parameter, and a statistical test determines whether the estimated parameter is consistent with that hypothesis. If it is not, the researcher must either reject the hypothesis or make new specifications in the statistical model and start over. International Monetary Fund: What is Econometrics?

Gaining personal intuition by taking on a role in an economic endeavor

Marcus: participating in economic projects as practitioners

By creating and running a scheme economists have experiential learning of the operation of the economic system and aspects of it. For example running a barter network or a community currency system which shows the sharing of resources (time, money, favours, debts) in community.

  • The community-based economy can refer to the various initiatives coordinated through multiple forms of interactions. These interactions may involve some form of work performance; project participation; and/or relationship exchange.

Wikipedia: Community-based economics

Observe correlations within economic data

  • In the paper Phillips describes how he observed an inverse relationship between money wage changes and unemployment in the British economy over the period examined. Similar patterns were found in other countries and in 1960 Paul Samuelson and Robert Solow took Phillips' work and made explicit the link between inflation and unemployment: when inflation was high, unemployment was low, and vice versa. Wikipedia: Phillips curve

Quantifying theoretical economic models into mathematical relationships

  • Econometrics uses economic theory, mathematics, and statistical inference to quantify economic phenomena. In other words, it turns theoretical economic models into useful tools for economic policymaking. The objective of econometrics is to convert qualitative statements (such as “the relationship between two or more variables is positive”) into quantitative statements (such as “consumption expenditure increases by 95 cents for every one dollar increase in disposable income”).

Develop robust statistical procedures that can deal with stark changes Theoretical econometricians investigate the properties of existing statistical tests and procedures for estimating unknowns in the model. They also seek to develop new statistical procedures that are valid (or robust) despite the peculiarities of economic data—such as their tendency to change simultaneously. Theoretical econometrics relies heavily on mathematics, theoretical statistics, and numerical methods to prove that the new procedures have the ability to draw correct inferences International Monetary Fund: What is Econometrics?

Applied econometricians apply econometric techniques developed by theorists

Applied econometricians alert theoretical econometricians to problems with estimation techniques

  • Because applied econometricians are closer to the data, they often run into—and alert their theoretical counterparts to—data attributes that lead to problems with existing estimation techniques. For example, the econometrician might discover that the variance of the data (how much individual values in a series differ from the overall average) is changing over time. International Monetary Fund: What is Econometrics?

Calculate how to maximize profit

  • The underlying assumption of production is that maximisation of profit is the key objective of the producer. The difference in the value of the production values (the output value) and costs (associated with the factors of production) is the calculated profit. Efficiency, technological, pricing, behavioural, consumption and productivity changes are a few of the critical elements that significantly influence production economically. Wikipedia: Production (economics)

Idealize the economic environment

  • Both mainstream economists and ecological economists make certain presumptions about the environment surrounding economic activity. Econocracy: On the Perils of Leaving Economics to the Experts by Joe Earle; Cahal Moran; Zach Ward-Perkins:75
  • Mainstream economists working in the neoclassical tradition, as opposed to the Keynesian tradition, have usually viewed the departures of the harmonic working of the market economy as due to exogenous influences, such as the State or its regulations, labor unions, business monopolies, or shocks due to technology or natural causes. Contrarily, in the heterodox tradition of Jean Charles Léonard de Sismondi, Clément Juglar, and Marx the recurrent upturns and downturns of the market system are an endogenous characteristic of it. Wikipedia: Business cycle

Ground individuals within a social system

Socially grounded reconstructions of the individual in economic theory Wikipedia: Heterodox economics

Three Cycle

The investigatory mind links together the other two minds through the learning three-cycle.

The two minds - one defines direct value (what we consume or enjoy - usufruct), and the other defines indirect value (what can get us what we enjoy by production, exchange or other means - instrumentalisation).

Champion a value with a school of thought.

Schools of thought define what has direct value.

  • Before World War II, American economists had played a minor role. During this time institutional economists had been largely critical of the "American Way" of life, especially the conspicuous consumption of the Roaring Twenties before the Wall Street crash of 1929. History of economic thought
  • The orthodox center was also challenged by a more radical group of scholars based at the University of Chicago, who advocated "liberty" and "freedom", looking back to 19th century-style non-interventionist governments. History of economic thought

Economists find merit in formulating and defending their positions on what they choose to value or not and emphasize or not. Choosing to what in life to include or exclude in the scope of economics.

  • One survey of German economists found that ecological and environmental economics are different schools of economic thought, with ecological economists emphasizing strong sustainability and rejecting the proposition that physical (human-made) capital can substitute for natural capital (see the section on weak versus strong sustainability below). Wikipedia: Ecological economics
  • Anarchists[39] often add to this analysis by defending that the presence of coercive hierarchy in any form is contrary to the values of liberty and equality. Wikipedia: Division of labour

Determine what target groups value

  • In 2001, China began a community-driven program for the purpose of reducing poverty levels. “Participatory village planning” was seen to have been used to promote public investments in targeted villages with higher levels of poverty. In the current program, each village conducts a public investment plan where projects are voted on by the village residents themselves. Wikipedia: Community-based economics

Identify a value beyond question that need not be regulated

  • Among the authorities charged with managing these risks, there were difficulties too. Some say that their job should have been ‘to take away the punch bowl when the party was in full swing’. But that assumes that they had the instruments needed to do this. General pressure was for more lax regulation – a light touch. The City of London (and the Financial Services Authority) was praised as a paragon of global financial regulation for this reason. The Global Financial Crisis – Why Didn’t Anybody Notice?

Analyze whose interests are served. Notice historical social trends and compare with the desired reality.

  • In his book with American economist Gardiner C. Means (1896–1988) The Modern Corporation and Private Property (1932) he detailed the evolution in the contemporary economy of big business and argued that those who controlled big firms should be better held to account. History of economic thought
  • Means argued that where an economy is fueled by big firms it is the interests of management, not the public, that govern society. Wikipedia: Gardiner Means

Appreciate the bias in those who have or seek power

Propose, critique, implement, experiment with policy

Conducting many small experiments of alternatives to the existing system which focus on and foster a desired value

  • Reimagining the economy can also mean actively creating alternative economic systems. In the words of degrowth champion Serge Latouche (2017/2018, 277), a “matrix of alternatives” is needed to remodel economic institutions as we know them (Latouche 2007/2009). A politics of degrowth, seen this way, means employing a myriad of small-scale alternatives, such as self-organised exchange systems (Chiengkul 2018), community currencies (Greco 2001), and Community Supported Agriculture (Edwards & Espelt 2020). These ideas are typically based on the idea of the community as the basis and source of economic value (Eskelinen 2020), and are therefore often called “community economies”. Petz, Bonelli, Eskelinen. Le Grand Jeu and the potential of money games for exploring economic possibilities.
  • Berle served in President Franklin Delano Roosevelt's administration through the Great Depression as a key member of his Brain Trust, developing many New Deal policies. History of economic thought

Discovering the will to act

  • And there is also finding the will to act and being sure that authorities have as part of their powers the right instruments to bring to bear on the problem. The Global Financial Crisis – Why Didn’t Anybody Notice?
  • Another set of models tries to derive the business cycle from political decisions. The political business cycle theory is strongly linked to the name of Michał Kalecki who discussed "the reluctance of the 'captains of industry' to accept government intervention in the matter of employment".[57] Persistent full employment would mean increasing workers' bargaining power to raise wages and to avoid doing unpaid labor, potentially hurting profitability. However, he did not see this theory as applying under fascism, which would use direct force to destroy labor's power. Wikipedia: Business cycle
  • In recent years, proponents of the "electoral business cycle" theory have argued that incumbent politicians encourage prosperity before elections in order to ensure re-election – and make the citizens pay for it with recessions afterwards.[58] The political business cycle is an alternative theory stating that when an administration of any hue is elected, it initially adopts a contractionary policy to reduce inflation and gain a reputation for economic competence. It then adopts an expansionary policy in the lead up to the next election, hoping to achieve simultaneously low inflation and unemployment on election day.[59] Wikipedia: Business cycle
  • The partisan business cycle suggests that cycles result from the successive elections of administrations with different policy regimes. Regime A adopts expansionary policies, resulting in growth and inflation, but is voted out of office when inflation becomes unacceptably high. The replacement, Regime B, adopts contractionary policies reducing inflation and growth, and the downwards swing of the cycle. It is voted out of office when unemployment is too high, being replaced by Party A. Wikipedia: Business cycle

Consider how policies generate generate benefits or losses

  • Reversing their laissez-faire policy at home and policy of appeasement of the Xiongnu abroad, he nationalized coinage, salt, and iron in order to pay for his massive campaigns against the Xiongnu confederacy, which posed a threat to the Chinese empire and a limitation to its expansion. ... Nationalizing the salt and iron trades ... produced large profits for the state. Discourses on Salt and Iron
  • The reformists also criticized the aggressive foreign policy of Emperor Wu, which they believed had weakened instead of strengthening China, and whose costs did not justify the benefits involved. Discourses on Salt and Iron
  • In addition, the modernists claimed that the expansionist campaigns were necessary to defend China from barbarian incursions, and that by nationalizing the salt and iron industries the state could obtain the funds needed to defend the empire without imposing additional burdens on the peasantry. Discourses on Salt and Iron
  • Locke argues that a country should seek a favourable balance of trade, lest it fall behind other countries and suffer a loss in its trade. Since the world money stock grows constantly, a country must constantly seek to enlarge its own stock. Locke develops his theory of foreign exchanges, by which in addition to commodity movements, there are also movements in country stock of money, and movements of capital determine exchange rates. John Locke

Consider how policies affect overall prosperity

  • Policies in the early Han were marked by laissez-faire principles, due to the adoption by the early emperors of the Taoist principle of Wu wei (無為), literally meaning "do nothing". As part of their laissez-faire policy, agricultural taxes were reduced from 1/15 of agricultural output to 1/30, and for a brief period abolished entirely. In addition, the labor corvée required of peasants was reduced from one month every year to one month every three years. The minting of coins was privatized, while Qin taxes on salt and other commodities were removed. Later opponents of taxation described the early Han as a prosperous period ... Discourses on Salt and Iron
  • Reformists gradually gained more power through the rest of Former Han, due to the growing unsustainability of the Modernists' policies. Discourses on Salt and Iron

Consider the relationship between individual perceptions and overall economic conditions

  • wherever "good people are snubbed, and evil people are embraced" distress increases. Wherever officials or people initiate unprecedented violence in acts or words, wherever there is unrighteous acts of violence, disaffection grows. When the king rejects the Dharma, that is "does what ought not to be done, does not do what ought to be done, does not give what ought to be given, and gives what ought not to be given", the king causes people to worry and dislike him. ... where people are fined or punished or harassed when they ought not to be harassed, where those that should be punished are not punished, where those people are apprehended when they ought not be, where those who are not apprehended when they ought to, the king and his officials cause distress and disaffection. When officials engage in thievery, instead of providing protection against robbers, the people are impoverished, they lose respect and become disaffected ... where courageous activity is denigrated, quality of accomplishments are disparaged, pioneers are harmed, honorable men are dishonored, where deserving people are not rewarded but instead favoritism and falsehood is, that is where people lack motivation, are distressed, become upset and disloyal.[ ... the ancient text remarks that general impoverishment relating to food and survival money destroys everything, while other types of impoverishment can be addressed with grants of grain and money. Wikipedia: Arthashastra

Consider what parts of the economy are most profitable under a policy

  • Merchants and industrialists in particular prospered during this period. In the early Western Han, the wealthiest men in the empire were the merchants who produced and distributed salt and iron, acquiring wealth that rivaled the annual tax revenues collected by the imperial court. These merchants invested in land, becoming great landowners and employing large numbers of peasants. A salt or iron industrialist could employ over one thousand peasants to extract either liquid brine, sea salt, rock salt, or iron ore. Discourses on Salt and Iron

Consider the good or bad consequences of a policy

  • In addition, the reformists complained that the state monopolies oppressed the people by producing low-quality and impractical iron tools that were useless and made only to meet quotas, yet which the peasants had to pay for regardless of their quality.[12] The reformers believed former private smelting by small-scale family enterprises made better implements "because of pride of workmanship and because they were closer to the users", in contrast to the state monopoly. Discourses on Salt and Iron
  • the reformists complained that the state monopolies could not coordinate their production in accordance with the needs of all the provinces of the empire, with some areas overproducing and actually forcing the peasants to buy the surplus. Discourses on Salt and Iron
  • The modernists took the view that with its iron monopoly the state could effectively distribute tools of good quality for the use of the peasant, as well as stabilizing the price of many essential goods. They also claimed that private workshops were too small, unspecialized, and poorly equipped. Modernists claimed the government workshops offered better working conditions and access to more materials than private workshops. Discourses on Salt and Iron

Make dominant a favored way of thinking

Create the university curriculum

  • The ISIPE network has made a survey analyzing 347 bachelor of economics from France, Chile, Israel, Brazil, Portugal, Spain, Denmark, Mexico City, Turkey, Argentina, Italy, Germany and Uruguay. It shows that curricula worldwide are focused on math/macro/micro, which means that students mainly study the tools an economist uses without really understanding economic problems debated everyday in the media. Moreover, it shows a blatant lack of pluralism: the importance of microeconomics and macroeconomics indicates that bachelor's degrees focus on the neo-classical theory. At the same time, students cannot develop their critical thinking, as reflexive subjects such as history of economic thought or economic ethics are quasi non-existent. The situation is not much better for interdisciplinary courses and economic history. International Student Initiative for Pluralism in Economics: Survey of Economic Curricula
  • Robert Skidelsky cites Imre Lakatos about science in general, where there are basic axioms, accepted working practice, and a protective belt (for accepting or rejecting dissidents). All sciences have this protective belt but in the social sciences it is particularly strong defensive structure which protects them from criticism because of the weakness of the refutation procedure. John Davis says that you have a whole way of judging the quality of research journals which favor the accepted way. Furthermore, government funds the research. Nobel Prize winner Lars Peter Hansen: This reliance on referees leads to a much more conservative strategy. I think it works against novel papers that cross subfield boundaries and that makes it all the more challenging. (Allied Social Science Association Meeting, 2017) History of Economic Thought | How & How NOT to Do Economics with Robert Skidelsky

Nobel Prize

  • Note how odd it is that Economics is one of the rare fields to give a Nobel prize - and the only one that was added later.

Write a textbook

  • "Economics: An Introductory Analysis". Samuelson is also author (and from 1985 co-author) of an influential principles textbook, Economics, first published in 1948. It was the second American textbook that attempted to explain the principles of Keynesian economics....As of 2018, it had sold over four million copies. ... Samuelson's textbook was a watershed in introducing the serious study of business cycles to the economics curriculum. It was particularly timely because it followed the Great Depression. The study of business cycles along with the introduction of the Keynesian approach of aggregate demand set the stage for the macroeconomic revolution in America, which then diffused throughout the world through translations into every major language. Generations of students, who then became teachers, learned their first and most influential lessons from Samuelson's Economics. It attracted many imitators, who became successful in differente niches of the college market. (NB text books are used in different ways e.g. content analysis, comparative literature, not just learning as a student.)

Wikipedia: Paul Samuelson

Hold a debate

  • As complaints surfaced criticizing more and more about the government's policies, the regent Huo Guang, who was the de facto ruler of China after Emperor Wu of Han, called a court conference to debate whether the policies of Emperor Wu should be continued.[9] The resulting debate was divided into two groups, the reformists and the modernists. Discourses on Salt and Iron

Dominate the academic literature

  • In their 1994 work, Pathologies of Rational Choice Theory, Donald P. Green and Ian Shapiro argue that the empirical outputs of rational choice theory have been limited. They contend that much of the applicable literature, at least in political science, was done with weak statistical methods and that when corrected many of the empirical outcomes no longer hold. When taken in this perspective, rational choice theory has provided very little to the overall understanding of political interaction - and is an amount certainly disproportionately weak relative to its appearance in the literature. Yet, they concede that cutting-edge research, by scholars well-versed in the general scholarship of their fields (such as work on the U.S. Congress by Keith Krehbiel, Gary Cox, and Mat McCubbins) has generated valuable scientific progress. (NB this is not about what they try to do but what they actually do).

Wikipedia: Rational Choice Model of Homo economicus Limited debate in the mainstream media

  • Samuelson wrote a weekly column for Newsweek magazine along with Chicago School economist Milton Friedman, where they represented opposing sides: Samuelson, as a self described "Cafeteria Keynesian",[7] claimed taking the Keynesian perspective but only accepting what he felt was good in it.[7] By contrast, Friedman represented the monetarist perspective.

Wikipedia: Paul Samuelson Push out of an academic department

  • It was created as the Cowles Commission for Research in Economics at Colorado Springs in 1932 by businessman and economist Alfred Cowles. In 1939, the Cowles Commission moved to the University of Chicago under Theodore O. Yntema. Jacob Marschak directed it from 1943 until 1948, when Tjalling C. Koopmans assumed leadership. Increasing opposition to the Cowles Commission from the department of economics of the University of Chicago during the 1950s impelled Koopmans to persuade the Cowles family to move the commission to Yale University in 1955 where it became the Cowles Foundation. Wikipedia: Cowles Foundation

Gain public support with appeals, expositions, theatre, pronouncements.(NB their surprise shows that plays were being used, but sparingly). Econocracy: On the Perils of Leaving Economics to the Experts by Joe Earle; Cahal Moran; Zach Ward-Perkins:107

Handing over responsibility: Accumulation of power, complexity of management, lack of transparency

  • But against those who warned, most were convinced that banks knew what they were doing. They believed that the financial wizards had found new and clever ways of managing risks. Indeed, some claimed to have so dispersed them through an array of novel financial instruments that they had virtually removed them. It is difficult to recall a greater example of wishful thinking combined with

hubris. There was a firm belief, too, that financial markets had changed. And politicians of all types were charmed by the market. These views were abetted by financial and economic models that were good at predicting the short-term and small risks, but few were equipped to say what would happen when things went wrong as they have. People trusted the banks whose boards and senior executives were packed with globally recruited talent and their non-executive directors included those with proven track records in public life. Nobody wanted to believe that their judgement could be faulty or that they were unable competently to scrutinise the risks in the organisations that they managed. A generation of bankers and financiers deceived themselves and those who thought that they were the pace-making engineers of advanced economies. The Global Financial Crisis – Why Didn’t Anybody Notice?

  • So where was the problem? Everyone seemed to be doing their own job properly on its own merit. And according to standard measures of success, they were often doing it well. The failure was to see how collectively this added up to a series of interconnected imbalances over which no single authority had jurisdiction. This, combined with the psychology of herding and the mantra of financial and policy gurus, lead to a dangerous recipe. Individual risks may rightly have been viewed as small, but the risk to the system as a whole was vast. The Global Financial Crisis – Why Didn’t Anybody Notice?
  • So in summary, Your Majesty, the failure to foresee the timing, extent and severity of the crisis and to head it off, while it had many causes, was principally a failure of the collective imagination of many bright people, both in this country and internationally, to understand the risks to the system as a whole. The Global Financial Crisis – Why Didn’t Anybody Notice?
  • Given the forecasting failure at the heart of your enquiry, the British Academy is giving some thought to how your Crown servants in the Treasury, the Cabinet Office and the Department for Business, Innovation & Skills, as well as the Bank of England and the Financial Services Authority might develop a new, shared horizon-scanning capability so that you never need to ask your question again. The Academy will be hosting another seminar to examine the ‘never again’ question more widely. We will report the findings to Your Majesty. The events of the past year have delivered a salutary shock. Whether it will turn out to have been a beneficial one will depend on the candour with which we dissect the lessons and apply them in future. The Global Financial Crisis – Why Didn’t Anybody Notice?
  • The 19th-century school of under consumptionism also posited endogenous causes for the business cycle, notably the paradox of thrift, and today this previously heterodox school has entered the mainstream in the form of Keynesian economics via the Keynesian revolution. Wikipedia: Business cycle
  • Expert policy advice and affecting public opinion (Petersen et al., 2010; Stasiak et al., 2016). Empirically, I build on 17 semi-structured interviews with Finnish economists who appear regularly in the Finnish news media. Through the interviews, I illustrate how the economist profession is mediatized. In particular, for economists who work for private banks and labor market organizations or other interest groups, the media is a central channel for political advocacy work and a major part of their job description

The mediatization of the economist profession: How economists use the media to promote political and economic interests The struggle for intellectual relevance and dominance. Cross fertilization of different traditions. Innovative connections among formerly separate theoretical traditions.

  • Over the past two decades,[when?] the intellectual agendas of heterodox economists have taken a decidedly pluralist turn. Leading heterodox thinkers have moved beyond the established paradigms of Austrian, Feminist, Institutional-Evolutionary, Marxian, Post Keynesian, Radical, Social, and Sraffian economics—opening up new lines of analysis, criticism, and dialogue among dissenting schools of thought. This cross-fertilization of ideas is creating a new generation of scholarship in which novel combinations of heterodox ideas are being brought to bear on important contemporary and historical problems, such as socially grounded reconstructions of the individual in economic theory; the goals and tools of economic measurement and professional ethics; the complexities of policymaking in today's global political economy; and innovative connections among formerly separate theoretical traditions (Marxian, Austrian, feminist, ecological, Sraffian, institutionalist, and post-Keynesian) (for a review of post-Keynesian economics, see Lavoie (1992); Rochon (1999)). Wikipedia: Heterodox economics
  • Welcome to the Economist Machine! A Finnish panel of economists explores what Finnish economists think about important economic topics. The questions posed to the panelists cover both current economic policy topics and classic questions in economics.

Two answers to each question. In the Economist Machine, panelists take a position on questions presented in the form of statements on a 5-point scale. For each answer, they also rate the certainty of their opinion on a scale of 1-10. In addition, panelists can supplement their answer with a comment if they wish. Finnish Economics Panel - Ekonomistikone translates as Economics machine Participation in Public Debate / Public Discussion

  • The Media as a site of influence for economists. Many of the economists interviewed explained how essential it is for them to appear in the media. As a testament to the powerful societal position of economists (Fourcade, 2009), various institutions wish to use economists to harness media attention. A chief economist for an interest group stated that media appearances are a core part of his job description. The goal of the interviewee’s employer is to influence Finnish politics and policy, and the media is seen as a central sphere of debate and policy advocacy. Therefore, it is important for economists to appear in the media and to agree to

comment when contacted by journalists. "In Finland, the economic policy discussion is, to a substantial extent, based on public debate. That is where issues are framed—whether we talk about renewing EU economic rules, or the [Finnish] elections, or the budget […]. That is where the frames emerge, often through public discussion. And, of course, I am happy to contribute via public discussion." (Economist, interest group) The mediatization of the economist profession: How economists use the media to promote political and economic interests

  • Lunch sessions or other types of meetings. In addition to phone calls, in-person meetings with journalists are crucial for establishing connections and creating interest. Lunch sessions or other types of meetings are ways for economists to create working relationships with journalists and get their views into the public realm. When I worked [in a former workplace], I used to have lunches with journalists every now and then, but now, that is not necessary. Now, we get enough publicity and it is all about using and maintaining the channels we have. But face-to-face meetings, lunches, coffees, and those kinds of things are useful when you want to be heard and remind people that you exist. (Economist, research institute) The mediatization of the economist profession: How economists use the media to promote political and economic interests

Analysis of bias of forecasters

  • In recent years, research has demonstrated that behavioral biases play a significant role in affecting the accuracy of forecasts. The education and working experience of forecasters influence the accuracy and boldness of their predictions.[26] Forecasting accuracy is also impacted by the forecaster's experience with high inflation rates.[27] Additionally, political events such as terrorism have been shown to influence the accuracy of both expert- and market-based forecasts of inflation and exchange rates.[28] This highlights the range of external factors and biases that should be considered when evaluating the accuracy of forecasts and making informed decisions. Wikipedia: Economic forecasting

Analysis of prediction errors and justification for them

  • The failure of the majority of economists to forecast the "Great Recession" caused soul searching in the profession. The UK's Queen Elizabeth herself asked why had “nobody” noticed that the credit crunch was on its way, and a group of economists—experts from business, the City, its regulators, academia, and government—tried to explain in a letter. It was not just forecasting the Great Recession, but also forecasting its impact where it was clear that economists struggled. Wikipedia: Economic forecasting

Invest money to achieve priorities

There had been programs prior to 2001 in China where investments were made to try to reduce poverty, however, these did not include much participation from the communities themselves. Wikipedia: Community-based economics

Central view

Describe the typical, idealized (rational, self-interested or otherwise) participant of an economy, the Owner

The ideal participant is the vessel for the values of the party.

  • Animal spirits is a term used by John Maynard Keynes (he was not the first to use the term economically) in his 1936 book The General Theory of Employment, Interest and Money to describe the instincts, proclivities and emotions that seemingly influence human behavior, which can be measured in terms of consumer confidence. The original passage by Keynes reads: Even apart from the instability due to speculation, there is the instability due to the characteristic of human nature that a large proportion of our positive activities depend on spontaneous optimism rather than on a mathematical expectation, whether moral or hedonistic or economic. Most, probably, of our decisions to do something positive, the full consequences of which will be drawn out over many days to come, can only be taken as a result of animal spirits – of a spontaneous urge to action rather than inaction, and not as the outcome of a weighted average of quantitative benefits multiplied by quantitative probabilities. Wikipedia:Animal spirits

Tease apart the internal logic of an agent (a firm)

  • The need for a revised theory of the firm was emphasized by empirical studies by Adolf Berle and Gardiner Means, who made it clear that ownership of a typical American corporation is spread over a wide number of shareholders, leaving control in the hands of managers who own very little equity themselves. Wikipedia: Theory of the firm: Background

Modeling the rationality of a participant and their pursuit of total satisfaction'''

  • In 1871 Austrian School economist Carl Menger (1840–1921) restated the basic principles of marginal utility in Grundsätze der Volkswirtschaftslehre[88] (Principles of Economics): Consumers act rationally by seeking to maximize satisfaction of all their preferences; people allocate their spending so that the last unit of a commodity bought creates no more satisfaction than a last unit bought of something else. Wikipedia: History of economic thought
  • The Austrian school is a heterodox[1][2][3] school of economic thought that advocates strict adherence to methodological individualism, the concept that social phenomena result primarily from the motivations and actions of individuals along with their self interest. Austrian-school theorists hold that economic theory should be exclusively derived from basic principles of human action. Wikipedia: Austrian school of economics

Assume motive of agents

Specify choice axioms

  • Contemporary theory bases rational choice on a set of choice axioms that need to be satisfied, and typically does not specify where the goal (preferences, desires) comes from. It mandates just a consistent ranking of the alternatives.[11]: 501  Individuals choose the best action according to their personal preferences and the constraints facing them. Wikipedia: Rational Choice Model of Homo economicus
  • Perfect information: The simple rational choice model above assumes that the individual has full or perfect information about the alternatives, i.e., the ranking between two alternatives involves no uncertainty. Wikipedia: Rational Choice Model of Homo economicus
  • Consistent Preferences: The rational choice model assumes that preferences will remain consistent, in order to maximize personal utility based on available information. Wikipedia: Rational Choice Model of Homo economicus
  • Best course of action: The simple rational choice model assumes that individuals are capable of calculating the best course of action and that they always intend to do so. Wikipedia: Rational Choice Model of Homo economicus
  • Choice under uncertainty: In a richer model that involves uncertainty about the how choices (actions) lead to eventual outcomes, the individual effectively chooses between lotteries, where each lottery induces a different probability distribution over outcomes. The additional assumption of independence of irrelevant alternatives then leads to expected utility theory. Wikipedia: Rational Choice Model of Homo economicus
  • Inter-temporal choice: when decisions affect choices (such as consumption) at different points in time, the standard method for evaluating alternatives across time involves discounting future payoffs. Wikipedia: Rational Choice Model of Homo economicus
  • Limited cognitive ability: identifying and weighing each alternative against every other may take time, effort, and mental capacity. Recognising the cost that these impose or cognitive limitations of individuals gives rise to theories of bounded rationality.

Wikipedia: Rational Choice Model of Homo economicus

Reductionism to remove emotion & humanity

  • In economic terms externalities are human values such as happiness / joy e.g. sanuk in Thailand is important in day to day tasks. Yet economists regard this fun as an externality which if not instrumental (motivational) as largely irrelevant. Economists think of compulsion (the stick not the carrot) to see what is possible economically -after having split humans into "workers" and "emotional beings." sanuk
  • Economics was "dismal" in "find[ing] the secret of this Universe in 'supply and demand', and reducing the duty of human governors to that of letting men alone" or personal freedom.[3] Instead, the "idle black man in the West Indies" should be "compelled to work as he was fit, and to do the Maker's will who had constructed him".[4] Carlyle also extended this imperative to other races.[3]

https://en.wikipedia.org/wiki/The_dismal_science

  • Much of the empirical controversy surrounding the relationship between inflation and unemployment has focused on how people form expectations. This may be neither the most important theoretical nor the most important empirical issue. Instead, this paper suggests that it is not how people form expectations but how they use them—and even whether they use them at all—that is the issue. Economists typically assume that economic agents make the best possible use of the information available to them. But psychologists who study how people make decisions have a different view. They see individuals as acting like intuitive scientists, who base their decisions on simplified, abstract models.6 However, these simple intuitive models can be misleading; George A. Akerlof , William T. Dickens , George L. Perry. Near-Rational Wage and Price Setting and the Long-Run Phillips Curve.

Ludwig von Mises downplayed alienation as mere romantic fiction. Wikipedia: Division of labour

4 Functions of Money Manifesting the Concerns of the Ideal Owner

Events upend economics. Money needs to be hideable, a store of value.

Note theories that become entrenched and new behavior (or newly considered behavior) contradicting them

  • In the 1970s, many countries experienced high levels of both inflation and unemployment also known as stagflation. Theories based on the Phillips curve suggested that this would not occur, and the curve came under attack from a group of economists headed by Milton Friedman.[7] Friedman argued that the Phillips curve relationship was only a short-run phenomenon. This followed eight years after Samuelson and Solow [1960] wrote "All of our discussion has been phrased in short-run terms, dealing with what might happen in the next few years. It would be wrong, though, to think that our Figure 2 menu that related obtainable price and unemployment behavior will maintain its same shape in the longer run. What we do in a policy way during the next few years might cause it to shift in a definite way."[12] As Samuelson and Solow had argued 8 years earlier, Friedman said that in the long run, workers and employers will take inflation into account, resulting in employment contracts that increase pay at rates near anticipated inflation. Unemployment would then begin to rise back to its previous level, but with higher inflation. This implies that over the longer-run there is no trade-off between inflation and unemployment. This is significant because it implies that central banks should not set unemployment targets below the natural rate. Wikipedia: Phillips curve
  • However, in the 1990s in the US, it became increasingly clear that the NAIRU did not have a unique equilibrium and could change in unpredictable ways. In the late 1990s, the actual unemployment rate fell below 4% of the labor force, much lower than almost all estimates of the NAIRU. But inflation stayed very moderate rather than accelerating. So, just as the Phillips curve had become a subject of debate, so did the NAIRU. Wikipedia: Phillips curve
  • Furthermore, the concept of rational expectations had become subject to much doubt when it became clear that the main assumption of models based on it was that there exists a single (unique) equilibrium in the economy that is set ahead of time, determined independently of demand conditions. The experience of the 1990s suggests that this assumption cannot be sustained. Wikipedia: Phillips curve
  • Business cycles in OECD countries after World War II were generally more restrained than the earlier business cycles. This was particularly true during the Golden Age of Capitalism (1945/50–1970s), and the period 1945–2008 did not experience a global downturn until the Late-2000s recession.[20] Economic stabilization policy using fiscal policy and monetary policy appeared to have dampened the worst excesses of business cycles, and automatic stabilization due to the aspects of the government's budget also helped mitigate the cycle even without conscious action by policy-makers. In this period, the economic cycle – at least the problem of depressions – was twice declared dead. The first declaration was in the late 1960s, when the Phillips curve was seen as being able to steer the economy. However, this was followed by stagflation in the 1970s, which discredited the theory. The second declaration was in the early 2000s, following the stability and growth in the 1980s and 1990s in what came to be known as the Great Moderation. Notably, in 2003, Robert Lucas Jr., in his presidential address to the American Economic Association, declared that the "central problem of depression-prevention [has] been solved, for all practical purposes." Wikipedia: Business cycle
  • Over the years, at least two objections to Say's law have been raised: General gluts do occur, particularly during recessions and depressions. ... Wikipedia: Say's law
  • Until the Keynesian revolution in mainstream economics in the wake of the Great Depression, classical and neoclassical explanations (exogenous causes) were the mainstream explanation of economic cycles; following the Keynesian revolution, neoclassical macroeconomics was largely rejected. There has been some resurgence of neoclassical approaches in the form of real business cycle (RBC) theory. The debate between Keynesians and neo-classical advocates was reawakened following the recession of 2007. Wikipedia: Business cycle
  • Post-Keynesian economist Hyman Minsky has proposed an explanation of cycles founded on fluctuations in credit, interest rates and financial frailty, called the Financial Instability Hypothesis. In an expansion period, interest rates are low and companies easily borrow money from banks to invest. Banks are not reluctant to grant them loans, because expanding economic activity allows business increasing cash flows and therefore they will be able to easily pay back the loans. This process leads to firms becoming excessively indebted, so that they stop investing, and the economy goes into recession. Wikipedia: Business cycle
  • One of the criticisms of the Austrian business cycle theory is based on the observation that the United States suffered recurrent economic crises in the 19th century, notably the Panic of 1873, which occurred prior to the establishment of a U.S. central bank in 1913. Adherents of the Austrian School, such as the historian Thomas Woods, argue that these earlier financial crises were prompted by government and bankers' efforts to expand credit despite restraints imposed by the prevailing gold standard, and are thus consistent with Austrian Business Cycle Theory. Wikipedia: Business cycle
  • Jesus: treasure in heaven, where it can't be destroyed by moths
  • Jesus: the one who hid his talent
  • The Lucas critique was not new in 1976. The argument and the whole logic was first presented by Frisch (1938)[citation needed] and discussed by Haavelmo (1944),[3] among others. Related ideas are expressed as Campbell's law and Goodhart's law—but in a 1976 paper, Lucas drove to the point that this simple notion invalidated policy advice based on conclusions drawn from large-scale macroeconometric models. Because the parameters of those models were not structural, i.e. not policy-invariant, they would necessarily change whenever policy (the rules of the game) was changed. Policy conclusions based on those models would therefore potentially be misleading. This argument called into question the prevailing large-scale econometric models that lacked foundations in dynamic economic theory. Lucas summarized his critique: Given that the structure of an econometric model consists of optimal decision rules of economic agents, and that optimal decision rules vary systematically with changes in the structure of series relevant to the decision maker, it follows that any change in policy will systematically alter the structure of econometric models. The Lucas critique is, in essence, a negative result. It tells economists, primarily, how not to do economic analyses. The Lucas critique suggests that if we want to predict the effect of a policy experiment, we should model the "deep parameters" (relating to preferences, technology, and resource constraints) that are assumed to govern individual behavior: so-called "microfoundations." If these models can account for observed empirical regularities, we can then predict what individuals will do, taking into account the change in policy, and then aggregate the individual decisions to calculate the macroeconomic effects of the policy change. Wikipedia: Lucas critique

Quantify inputs and outputs

Economists assign numerical values to money, to the amounts produced and consumed, to derived quantities such as production, and even to job satisfaction.

Express everything mathematically

  • Samuelson was one of the most influential economists of the latter half of the 20th century.[7][8] In 1996, when he was awarded the National Medal of Science.[6] Samuelson considered mathematics to be the "natural language" for economists and contributed significantly to the mathematical foundations of economics with his book Foundations of Economic Analysis. Wikipedia: Paul Samuelson
  • It is clear that maths and statistics are crucial to our discipline. International Student Initiative for Pluralism in Economics: Open letter

Econocracy: On the Perils of Leaving Economics to the Experts by Joe Earle; Cahal Moran; Zach Ward-Perkins:174

Modeling: Apply a metaphor to the economy to make sense of it

  • By using a metaphor we can approach the economy with a similar way we approach the actual item. These lead us to treat it in these ways. e.g. Anthony Giddens wrote about how Labour and Conservatives in the UK prefer the body and the pater familias respectively.
  • Consider George Lakoff's theory of https://en.wikipedia.org/wiki/Conceptual_metaphor conceptual metaphor.
  • Writing of the people, Aristotle stated that they as a whole thought acquisition of wealth (chrematistike) as being either the same as, or a principle of oikonomia ("household management" – oikonomos),[15][16] with oikos meaning "house" and with (themis meaning "custom") nomos meaning "law". History of economic thought

Common metaphors for economy:

  • as a life cycle of an individual
    • Impose a trajectory: In the mid-1840s German economist Wilhelm Roscher (1817–1894) founded the German historical school of economics, which promoted the cyclical theory of nations—economies passing through youth, manhood, and senility—and spread through academia in Britain and the U.S., dominating it for the rest of the 19th century. History of economic thought
  • as household
  • as family
  • as the body
  • as a cyborg
  • as the water system. cf. https://www.youtube.com/watch?v=IszXpzIo_ZQ The Waterworks of Money (Part 1/2) English AND https://www.youtube.com/watch?v=Ycit4WbJuwE (part 2)
  • markets as conversations The Cluetrain Manifesto
  • a car that can break down and be fixed, weather conditions, status of a patient, fighting a battle, sports competition, personal finance, sharing a pie, garden and jungle The seven best metaphors for the economy
  • Anglo-Dutch social philosopher Bernard Mandeville described in The Grumbling Hive, 1705, a bee community that thrives until the bees decide to live by honesty and virtue. As they abandon their desire for personal gain, the economy of their hive collapses, and they go on to live simple, "virtuous" lives in a hollow tree. He argued in other essays that private vices create social benefits. The Fable of the Bees
  • as a cyclical wave
    • In the mid-1840s German economist Wilhelm Roscher (1817–1894) founded the German historical school of economics, which promoted the cyclical theory of nations—economies passing through youth, manhood, and senility—and spread through academia in Britain and the U.S., dominating it for the rest of the 19th century. History of economic thought
  • as an atmosphere or mood
  • as a weather condition

Analogy with thinking in other disciplines

  • An economic equilibrium is a situation when the economic agent cannot change the situation by adopting any strategy. The concept has been borrowed from the physical sciences. Take a system where physical forces are balanced for instance.This economically interpreted means no further change ensues. Wikipedia: Economic equilibrium
  • Similar to Walras,[77] Vilfredo Pareto tried to sketch the mathematical description of economics in analogy to mechanics, explicitly linking pure (and applied) economics to pure (and applied) mechanics.[78][79][80][81][82] Similar approaches were put forward by Irving Fisher in the United States in his 1892 dissertation. Wikipedia: History of economic thought

Imagining an economy by expanding upon an existing case. Methodological utopianism. Simulacrum case study research.

  • Methodological utopianism is used to explore the potential of money via two examples, making use of simulacrum case study research. These examples are the Banjar, a traditional Balinese governance and currency system; and the Neocracy, a real cryptocurrency system. Both are considered through an integralist positioning with implications for practical utopianism and economic evaluation of community currency systems. Backgrounds on utopian studies, and money are given for contextualization of our approach. We take a heterodox economic position and use the “archaeological” approach of utopian thought. The simulacrum case study is introduced as a tool to foster political imagination about possible monetary systems. While the Banjar system is embedded in the local cultural milieu, anthropological learning about existing money systems stimulates the skill to see possibilities here. The Neocracy is utopian in its aims and needs to be proved in praxis with more detailed aspects of implementation being unclear at present. Yet within it we do see a utopian potential which may be realised. Petz, Eskelinen. The politics of money utopias: methodological utopian explorations of the Banjar and the Neocracy.

Choosing the proper words

  • In recent years economic theory has moved towards the study of economic fluctuation rather than a "business cycle"[42] – though some economists use the phrase 'business cycle' as a convenient shorthand. For example, Milton Friedman said that calling the business cycle a "cycle" is a misnomer, because of its non-cyclical nature. ... Arthur F. Burns and Wesley C. Mitchell define business cycle as a form of fluctuation. In economic activities, a cycle of expansions happening, followed by recessions, contractions, and revivals. All of which combine to form the next cycle's expansion phase; this sequence of change is repeated but not periodic. Wikipedia: Business cycle
  • Mainstream economics views business cycles as essentially "the random summation of random causes". In 1927, Eugen Slutzky observed that summing random numbers, such as the last digits of the Russian state lottery, could generate patterns akin to that we see in business cycles, an observation that has since been repeated many times. This caused economists to move away from viewing business cycles as a cycle that needed to be explained and instead viewing their apparently cyclical nature as a methodological artefact. This means that what appear to be cyclical phenomena can actually be explained as just random events that are fed into a simple linear model. Thus business cycles are essentially random shocks that average out over time. Mainstream economists have built models of business cycles based on the idea that they are caused by random shocks.[47][48][49] Due to this inherent randomness, recessions can sometimes not occur for decades; for example, Australia did not experience any recession between 1991 and 2020. Wikipedia: Business cycle

Modeling: Illustrate formal ideas with important real life examples

  • Alfred Marshall viewed math as a way to simplify economic reasoning, although he had reservations as revealed in a letter to his student Arthur Cecil Pigou: (1) Use mathematics as shorthand language, rather than as an engine of inquiry. (2) Keep to them till you have done. (3) Translate into English. (4) Then illustrate by examples that are important in real life. (5) Burn the mathematics. (6) If you can't succeed in 4, burn 3. This I do often. Wikipedia: History of economic thought

(Called 'formal' modelling) Econocracy: On the Perils of Leaving Economics to the Experts by Joe Earle; Cahal Moran; Zach Ward-Perkins:92

Model the overall economy to understand the aggregate effects of the behavior of individual participants

  • As the economy is not only about institutions, but interaction with and between these institutions too, we need to somehow understand how the economy functions and could function as a complex system. Typically, economic modelling is used for the purposes of foresight or assessing alternative policy options, but it can be done for purely epistemological or even pedagogical purposes, in trying to build understanding on how the world functions. Unfortunately, economic modelling today almost invariably means neoclassical modelling. This means modelling premised on standard preferences and technologies, competitive markets, rational expectations, the existence of a unique equilibrium that is Pareto-optimal (Hansen & Ohanian 2016), and more generally a conception of economic agents as self-maximisers, methodological individualism, and methodological instrumentalism (Arnsperger & Varoufakis 2006).Some attempts at versatility include post-Keynesian constant stock-flow modelling (Lavoie & Zezza 2012). Despite this effort the degrowth literature has been quite devoid of economic models, with the exception of some scenario modelling (e.g., Victor 2012). Nevertheless, modelling in general, even its alternative materialisations, is typically based on the assumption that market agents are representative, form their preferences autonomously, and are then assumed to behave in the same way whatever the social context. Petz, Bonelli, Eskelinen. Le Grand Jeu and the potential of money games for exploring economic possibilities.

Qualitative methods of social sciences

  • But all too often students learn to master quantitative methods without ever discussing if and why they should be used, the choice of assumptions and the applicability of results. Also, there are important aspects of economics which cannot be understood using exclusively quantitative methods: sound economic inquiry requires that quantitative methods are complemented by methods used by other social sciences. For instance, the understanding of institutions and culture could be greatly enhanced if qualitative analysis was given more attention in economics curricula. Nevertheless, most economics students never take a single class in qualitative methods. International Student Initiative for Pluralism in Economics: Open letter

Build an economic model

  • Structural econometrics extends the ability of researchers to analyze data by using economic models as the lens through which to view the data. The benefit of this approach is that, provided that counter-factual analyses take an agent's re-optimization into account, any policy recommendations will not be subject to the Lucas critique. Structural econometric analyses begin with an economic model that captures the salient features of the agents under investigation. The researcher then searches for parameters of the model that match the outputs of the model to the data. Wikipedia: Methodology of econometrics
  • One example is dynamic discrete choice, where there are two common ways of doing this. The first requires the researcher to completely solve the model and then use maximum likelihood.[20] The second bypasses the full solution of the model and estimates models in two stages, allowing the researcher to consider more complicated models with strategic interactions and multiple equilibria. Wikipedia: Methodology of econometrics
  • Another example of structural econometrics is in the estimation of first-price sealed-bid auctions with independent private values. The key difficulty with bidding data from these auctions is that bids only partially reveal information on the underlying valuations, bids shade the underlying valuations. One would like to estimate these valuations in order to understand the magnitude of profits each bidder makes. More importantly, it is necessary to have the valuation distribution in hand to engage in mechanism design. In a first price sealed bid auction the expected payoff of a bidder is given by... Notice that the probability that a bid wins an auction can be estimated from a data set of completed auctions, where all bids are observed. This can be done using simple nonparametric estimators, such as kernel regression. If all bids are observed, it is then possible to use the above relation and the estimated probability function and its derivative to point wise estimate the underlying valuation. This will then allow the investigator to estimate the valuation distribution. Wikipedia: Methodology of econometrics
  • Structural estimation is a technique for estimating deep "structural" parameters of theoretical economic models. The term is inherited from the simultaneous equations model. Structural estimation is extensively using the equations from the economics theory, and in this sense is contrasted with "reduced form estimation" and other nonstructural estimations that study the statistical relationships between the observed variables while utilizing the economics theory very lightly (mostly to distinguish between the exogenous and endogenous variables,[1] so called "descriptive models"). The idea of combining statistical and economic models dates to mid-20th century and work of the Cowles Commission.[2] Wikipedia: Structural estimation

Some of the common econometric models are: Linear regression (least squares), Generalized linear models (generalized least squares), Probit (standard normal distribution's quintile levels), Logit (standard logistic distribution's quintile levels), Tobit (truncated or censored), ARIMA (moving average for time-series, possibly periodic), Vector Autoregression (multivariate time series), Cointegration (long term relationship of time series)Wikipedia: Econometric model

The difference between a structural parameter and a reduced-form parameter was formalized in the work of the Cowles Foundation.[3][failed verification] A structural parameter is also said to be "policy invariant" whereas the value of reduced-form parameter can depend on exogenously determined parameters set by public policy makers. The distinction between structural and reduced-form estimation within "microeconometrics" is related to the Lucas critique of reduced-form macroeconomic policy predictions.

Think backwards: Propose a model, optimize parameters based on historical data to provide an economic forecast

Make a forecast by specifying a model, applying it to data to optimize its parameters, and then projecting it forward.

  • A simple example of an econometric model is one that assumes that monthly spending by consumers is linearly dependent on consumers' income in the previous month. Then the model will consist of the equation {$ C_{t}=a+bY_{t-1}+e_{t}$}, where {$C_t$} is consumer spending in month {$t$}, {$Y_{t-1}$} is income during the previous month, and {$e_t$} is an error term measuring the extent to which the model cannot fully explain consumption. Then one objective of the econometrician is to obtain estimates of the parameters {$a$} and {$b$}; these estimated parameter values, when used in the model's equation, enable predictions for future values of consumption to be made contingent on the prior month's income. Wikipedia: Econometric model

Find a variable that precedes others, causes others, dictates or predicts others

  • Ludvigson believes consumer confidence index is a coincident indicator as it relates to consumer's current situations.[32] Winton & Ralph state that retail trade index is a benchmark for the current economic level because its aggregate value counts up for two-thirds of the overall GDP and reflects the real state of the economy.[33] According to Stock and Watson, unemployment claim can predict when the business cycle is entering a downward phase. Banbura and Rüstler argue that industry production's GDP information can be delayed as it measures real activity with real number, but it provides an accurate prediction of GDP. Wikipedia: Business cycle
  • Series used to infer the underlying business cycle fall into three categories: lagging, coincident, and leading. They are described as main elements of an analytic system to forecast peaks and troughs in the business cycle.[36] For almost 30 years, these economic data series are considered as "the leading index" or "the leading indicators"-were compiled and published by the U.S. Department of Commerce. Wikipedia: Business cycle
  • The Business Cycle follows changes in stock prices which are mostly caused by external factors such as socioeconomic conditions, inflation, exchange rates. Intellectual capital does not affect a company stock's current earnings. Intellectual capital contributes to a stock's return growth. Wikipedia: Business cycle
  • In the Keynesian tradition, Richard Goodwin[53] accounts for cycles in output by the distribution of income between business profits and workers' wages. The fluctuations in wages are almost the same as in the level of employment (wage cycle lags one period behind the employment cycle), for when the economy is at high employment, workers are able to demand rises in wages, whereas in periods of high unemployment, wages tend to fall. According to Goodwin, when unemployment and business profits rise, the output rises. Wikipedia: Business cycle
  • Exports and imports are large components of an economy's aggregate expenditure, especially one that is oriented toward international trade. Income is an essential determinant of the level of imported goods. A higher GDP reflects a higher level of spending on imported goods and services, and vice versa. Therefore, expenditure on imported goods and services falls during a recession and rises during an economic expansion or boom. Wikipedia: Business cycle
  • Import expenditures are commonly considered to be procyclical and cyclical in nature, coincident with the business cycle.[54] Domestic export expenditures give a good indication of foreign business cycles as foreign import expenditures are coincident with the foreign business cycle. Wikipedia: Business cycle
  • The slope of the yield curve is one of the most powerful predictors of future economic growth, inflation, and recessions.[78] One measure of the yield curve slope (i.e. the difference between 10-year Treasury bond rate and the 3-month Treasury bond rate) is included in the Financial Stress Index published by the St. Louis Fed. Wikipedia: Business cycle
  • Methods of forecasting include: Econometric models, Consensus forecasts, Economic base analysis, Shift-share analysis, Input-output model and the Grinold and Kroner Model. See also Land use forecasting, Reference class forecasting, Transportation planning and Calculating Demand Forecast Accuracy. Wikipedia: Economic forecasting: Forecast methods

The process of economic forecasting is similar to data analysis and results in estimated values for key economic variables in the future. An economist applies the techniques of econometrics in their forecasting process. Typical steps may include:

  • Scope: Key economic variables and topics for forecast commentary are determined based on the needs of the forecast audience.
  • Literature review: Commentary from sources with summary-level perspective, such as the IMF, OECD, U.S. Federal Reserve, and CBO helps with identifying key economic trends, issues and risks. Such commentary can also help the forecaster with their own assumptions while also giving them other forecasts to compare against.
  • Obtain data inputs: Historical data is gathered on key economic variables. This data is contained in print as well as electronic sources such as the FRED database or Eurostat, which allow users to query historical values for variables of interest.
  • Determine historical relationships: Historical data is used to determine the relationships between one or more independent variables and the dependent variable under study, often by using regression analysis.
  • Model: Historical data inputs and assumptions are used to develop an econometric model. Models typically apply a computation to a series of inputs to generate an economic forecast for one or more variables.
  • Report: The outputs of the model are included in reports that typically include information graphics and commentary to help the reader understand the forecast. Wikipedia: Economic forecasting

Extrapolate trends based on a model

  • Using historical production estimates, Jevons showed that for the previous 80 years production had grown at a relatively consistent rate of 3.5% per year, or 41% per decade. If this growth rate were to continue, production would grow from approximately 100 million tons in 1865 to more than 2.6 billion tons in 100 years. Jevons then calculated that, in that case, the country would produce approximately 100 billion tons within that period.[4] In short, resources were not sufficient for even 100 years, and long before the 100 years point, the growth rate, which was the measure of prosperity, would have to decline. At some point, production would simply hit a peak, which itself meant dire consequences: Wikipedia: The Coal Question
  • In contrast to Malthus's view that resource growth was linear, Jevons took resource growth as being exponential, like population. Wikipedia: The Coal Question

Analyze the supply chain working backwards from the demand for the final product

  • Leontief earned the Nobel Prize in economics for his work on input–output tables. Input–output tables analyze the process by which inputs from one industry produce outputs for consumption or for inputs for another industry. With the input–output table, one can estimate the change in demand for inputs resulting from a change in production of the final good. The analysis assumes that input proportions are fixed; thus the use of input–output analysis is limited to rough approximations rather than prediction. Wikipedia: Wassily Leontief
  • Dantzig's original example was to find the best assignment of 70 people to 70 jobs. The computing power required to test all the permutations to select the best assignment is vast; the number of possible configurations exceeds the number of particles in the observable universe. However, it takes only a moment to find the optimum solution by posing the problem as a linear program and applying the simplex algorithm. The theory behind linear programming drastically reduces the number of possible solutions that must be checked. Wikipedia: Linear programming: History

Deduce agency as the cause of an unfairness which is persistent or increasing.

  • Anti-imperialists see the globalised labour hierarchy between first world and third world countries necessitated by companies (through unequal exchange) that create a labour aristocracy by exploiting the poverty of workers in the developing world, where wages are much lower. These increased profits enable these companies to pay higher wages and taxes in the developed world (which fund welfare in first world countries), thus creating a working class satisfied with their standard of living and not inclined to revolution. Wikipedia: Division of labour
  • Marxists claim hierarchy is created to support the power structures in capitalist societies which maintain the capitalist class as the owner of the labour of workers, in order to exploit it. Wikipedia: Division of labour

Test with a practical example

  • The smell test a. expert opinion based on experience. The fourth step is by far the most important: administering the smell test. Does the estimated model make economic sense—that is, yield meaningful economic predictions? For example, are the signs of the estimated parameters that connect the dependent variable to the explanatory variables consistent with the predictions of the underlying economic theory? (In the household consumption example, for instance, the validity of the statistical model would be in question if it predicted a decline in consumer spending when income increased). If the estimated parameters do not make sense, how should the econometrician change the statistical model to yield sensible estimates? And does a more sensible estimate imply an economically significant effect? This step, in particular, calls on and tests the applied econometrician’s skill and experience. International Monetary Fund: What is Econometrics?

Distinguish functions of money

Consider the origins of money, and more generally, of economics, and how concepts unfolded in a natural progress

  • According to Joseph Schumpeter, the first known advocate of a credit theory of money was Plato. Schumpeter describes metallism as the other of "two fundamental theories of money", saying the first known advocate of metallism was Aristotle. Credit theory of money]
  • Alfred Mitchell-Innes in his papers What is Money? (1913) and The Credit Theory of Money (1914), where he argued against the then conventional view of money arising as a means to improve the practice of barter. In this alternative view, commerce and taxation created obligations between parties which were forms of credit and debt. Devices such as tally sticks were used to record these obligations and these then became negotiable instruments which could function as money. Credit theory of money
  • Exceptions where the relationship between money and debt was less clear occurred during periods where money has been backed by bullion, as happens with a gold standard. Graeber echoes earlier theorists such as Innes by saying that during these eras population perception was that money derived its value from the precious metals of which the coins were made,[11] but that even in these periods money is more accurately understood as debt. Graeber states that the three main functions of money are to act as: a medium of exchange; a unit of account; and a store of value. Graeber writes that since Adam Smith's time, economists have tended to emphasise money as a medium of exchange. For Graeber, when money first appeared its primary purpose was to act as a unit of account, to denominate debt. He writes that coins were originally created as tokens which represented a unit of account rather than being an amount of precious metal which could be bartered. Credit theory of money
  • chartalism is a heterodox theory of money that argues that money originated historically with states' attempts to direct economic activity rather than as a spontaneous solution to the problems with barter or as a means with which to tokenize debt, and that fiat currency has value in exchange because of sovereign power to levy taxes on economic activity payable in the currency they issue. Chartalism
  • In Plato's Republic, the origin of the state lies in the natural inequality of humanity, which is embodied in the division of labour: Well then, how will our state supply these needs? It will need a farmer, a builder, and a weaver, and also, I think, a shoemaker and one or two others to provide for our bodily needs. So that the minimum state would consist of four or five men.... Wikipedia: Division of labour

Consider the sequence by which concepts come into play

  • Friedrich A. Hayek: The price system is just one of those formations which man has learned to use (though he is still very far from having learned to make the best use of it) after he had stumbled upon it without understanding it. Through it not only a division of labour but also a coordinated utilisation of resources based on an equally divided knowledge has become possible. The people who like to deride any suggestion that this may so usually distort the argument by insinuating that it asserts that by some miracle just that sort of system has spontaneously grown up which is best suited to modern civilisation. It is the other way round: man has been able to develop that division of labour on which our civilisation is based because he happened to stumble upon a method which made it possible. Had he not done so, he might still have developed some other, altogether different, type of civilisation, something like the "state" of the termite ants, or some other altogether unimaginable type. Wikipedia: Division of labour, Wikipedia: The Use of Knowledge in Society

Distinguish aspects of wealth

  • Compared to the notion of personal private property, say as one's laptop or bicycle, the functioning of modern company law “has destroyed the unity that we commonly call property.” This occurred for a number of reasons, foremost being the dispersal of shareholding ownership in big corporations: the typical shareholder is uninterested in the day-to-day affairs of the company, yet thousands of people like him or her make up the majority of owners throughout the economy. The result is that those who are directly interested in day-to-day affairs, the management and the directors, have the ability to manage the resources of companies to their own advantage without effective shareholder scrutiny. “The property owner who invests in a modern corporation so far surrenders his wealth to those in control of the corporation that he has exchanged the position of independent owner for one in which he may become merely recipient of the wages of capital... [Such owners] have surrendered the right that the corporation should be operated in their sole interest...” [2]“the owners most emphatically will not be served by a profit seeking controlling group”. Wikipedia: The Modern Corporation and Private Property

Distinguish properties of money

6 ? Properties of Money

Develop scenarios

Develop scenarios

  • Given that coal was a finite, non-renewable energy resource, Jevons raised the question of sustainability. "Are we wise," he asked rhetorically, "in allowing the commerce of this country to rise beyond the point at which we can long maintain it?" His central thesis was that the supremacy of the United Kingdom of Great Britain and Ireland over global affairs was transitory, given the finite nature of its primary energy resource. In propounding this thesis, Jevons covered a range of issues central to sustainability, including limits to growth, overpopulation, overshoot,[3] energy return on energy input (EROEI), taxation of energy resources, renewable energy alternatives, and resource peaking—a subject widely discussed today under the rubric of peak oil. Wikipedia: The Coal Question

Compare the implications of various policies

  • Given that energy depletion posed long-term dangers for society, Jevons analyzed possible mitigation measures. Wikipedia: The Coal Question

Comparing consequences of different models

  • This modification of Malthus's theory did not alter the conclusion that unrestrained population growth would inevitably surpass the nation's ability to expand its resources. Prosperity, in terms of per capita consumption, would therefore fall. Moreover, because the primary resource was non-renewable, the fall would be more dramatic than Malthus envisioned Wikipedia: The Coal Question

Consider how policies affect loyalties and opponents

  • Emperor Wu of Han (r. 141–87 BCE) viewed such large-scale private industries as a threat to the state, as they drew the peasants' loyalties away from farming and towards the industrialists. Nationalizing the salt and iron trades eliminated this threat and produced large profits for the state. ... Although Wu was successful in his campaigns, his policies bankrupted many merchants and industrialists, led to widespread dissatisfaction, and even revolts against imperial authority. Discourses on Salt and Iron
  • They justified the imposition of controls on the grounds that they would thus wrest profits from wealthy private merchants that could pose a threat to the state and bring them into state coffers; particularly, modernists claimed that salt and iron industrialists were "brutal and tyrannical," who employed thousands of workers that could potentially become rebels. Discourses on Salt and Iron

Consider how to have just policies, which distribute the burden with consideration to who can bear how much

  • Arthashastra stipulates restraint on taxes imposed, fairness, the amounts and how tax increases should be implemented. Further, the text suggests that the tax should be "convenient to pay, easy to calculate, inexpensive to administer, equitable and non-distortive, and not inhibit growth. Fair taxes build popular support for the king, states the text, and some manufacturers and artisans, such as those of textiles, were subject to a flat tax. The Arthashastra states that taxes should only be collected from ripened economic activity, and should not be collected from early, unripe stages of economic activity. Arthashastra
  • The king should grant exemption [from taxes] to a region devastated by an enemy king or tribe, to a region beleaguered by sickness or famine. He should safeguard agriculture when it is stressed by the hardships of fines, forced labor, taxes, and animal herds when they are harassed by thieves, vicious animals, poison, crocodiles or sickness He should keep trade routes [roads] clear when they are oppressed by anyone, including his officers, robbers or frontier commanders when they are worn out by farm animals. The king should protect produce, forests, elephants forests, reservoirs and mines established in the past and also set up new ones. Arthashastra
  • It is often argued that the most equitable principle in allocating people within hierarchies is that of true (or proven) competency or ability. This concept of meritocracy could be read as an explanation or as a justification of why a division of labour is the way it is. Wikipedia: Division of labour

Consider who is burdened by economic policy

Consider how to establish rights to balance conflicting goals

  • Kautilya requires that the land sale be staggered and grants certain buyers automatic "call rights". The Arthashastra states that if someone wants to sell land, the owner's kins, neighbors and creditors have first right of purchase in that order, and only if they do not wish to buy the land for a fair competitive price, others and strangers can bid to buy. Further, the price must be announced in front of witnesses, recorded and taxes paid, for the buy-sale arrangement to deemed recognized by the state.

Consider the effect of the economy on the social order

  • Aquinas dealt with the concept of a just price, which he considered necessary for the reproduction of the social order. Similar in many ways to the modern concept of long-run equilibrium, a just price was just sufficient to cover the costs of production, including the maintenance of a worker and his family. History of economic thought
  • Notice historical social trends that bear upon the present and can be extended into the future. John M. Keynes, 'Alfred Marshall, 1842-1924', The Economic Journal 34(135) 1924:322

Teasing apart contributions

  • Robert J. Gordon of Northwestern University has analyzed the Phillips curve to produce what he calls the triangle model, in which the actual inflation rate is determined by the sum of 1) demand pull or short-term Phillips curve inflation, 2) cost push or supply shocks, and 3) built-in inflation. The last reflects inflationary expectations and the price/wage spiral. Supply shocks and changes in built-in inflation are the main factors shifting the short-run Phillips curve and changing the trade-off. In this theory, it is not only inflationary expectations that can cause stagflation. For example, the steep climb of oil prices during the 1970s could have this result. Wikipedia: Phillips curve
  • Stock and Watson claim that financial indicators' predictive ability is not stable over different time periods because of economic shocks, random fluctuations and development in financial systems. Wikipedia: Business cycle
  • Unlike long-term trends, medium-term data fluctuations are connected to the monetary policy transmission mechanism and its role in regulating inflation during an economic cycle. At the same time, the presence of nominal restrictions in price setting behavior might impact the short-term course of inflation. Wikipedia: Business cycle
  • Friedman believed that for the most part, excluding very large supply shocks, business declines are more of a monetary phenomenon. Wikipedia: Business cycle

Distinguish predictable (internal) and unpredictable (external) causes

  • Unpredictable causes include "noise" (chaotic fluctuations) and (external) "shocks".
  • There are many sources of business cycle movements such as rapid and significant changes in the price of oil or variation in consumer sentiment that affects overall spending in the macroeconomy and thus investment and firms' profits. Usually such sources are unpredictable in advance and can be viewed as random "shocks" to the cyclical pattern, as happened during the 2007–2008 financial crises or the COVID-19 pandemic. Wikipedia: Business cycle
  • It is stated that the period of a wave ranges from forty to sixty years, the cycles consist of alternating intervals of high sectoral growth and intervals of relatively slow growth.[3] Long wave theory is not accepted by most academic economists.[4][better source needed] Among economists who accept it, there is a lack of agreement about both the cause of the waves and the start and end years of particular waves. Among critics of the theory, the consensus is that it involves recognizing patterns that may not exist. Wikipedia: Kondratiev wave
  • Within mainstream economics, Keynesian views have been challenged by real business cycle models in which fluctuations are due to random changes in the total productivity factor (which are caused by changes in technology as well as the legal and regulatory environment). This theory is most associated with Finn E. Kydland and Edward C. Prescott, and more generally the Chicago school of economics (freshwater economics). They consider that economic crisis and fluctuations cannot stem from a monetary shock, only from an external shock, such as an innovation. Wikipedia: Business cycle

Analyze instability as caused externally or internally

  • What Is Inflation? Despite the morass of confusion that prevails even within the halls of ivy, there have been a few

economists who have put the spotlight exactly where it belongs. Yale economist Irving Fisher, speaking of inflation and deflation as far back as 1928, maintained that “the extreme variability of money [meaning its purchasing power] is chiefly man-made, due to government finance, especially war finance, as well as to policies and legislation.”1 He further acknowledged that “we may notice that the worst examples of inflation have come from unbalanced government budgets. As we have seen, when a government cannot make both ends meet, it pays its bills by manufacturing the money needed.”2 [MP: note to do this they must have a concept of balance first] The End of Money and the Future of Civilization, New 2024 Edition Chapter Seven, Pg1 by Thomas Greco

Build data sets

  • Data sets to which econometric analyses are applied can be classified as time-series data, cross-sectional data, panel data, and multidimensional panel data. Time-series data sets contain observations over time; for example, inflation over the course of several years. Cross-sectional data sets contain observations at a single point in time; for example, many individuals' incomes in a given year. Panel data sets contain both time-series and cross-sectional observations. Multi-dimensional panel data sets contain observations across time, cross-sectionally, and across some third dimension. For example, the Survey of Professional Forecasters contains forecasts for many forecasters (cross-sectional observations), at many points in time (time series observations), and at multiple forecast horizons (a third dimension). Wikipedia: Methodology of econometrics

Collect panel data (track individuals over time)

  • (These are typically done by a national government to have data for making or reconsidering policy. This can be used as time-series data (the entire group over time) or cross-sectional data (dividing up the group at a particular time) but also can be used to track subgroups of individuals over time to understand the dynamics of the subgroups.) Data sets which have a panel design: German Socio-Economic Panel (SOEP)

Household, Income and Labour Dynamics in Australia Survey (HILDA), British Household Panel Survey (BHPS), Survey of Income and Program Participation (SIPP), Lifelong Labour Market Database (LLMDB), Panel Study of Income Dynamics (PSID), China Family Panel Studies (CFPS), National Longitudinal Surveys (NLSY), Labour Force Survey (LFS) [https://en.wikipedia.org/wiki/Panel_data | Wikipedia: Panel data]]

Distinguish explanatory, dependent and instrumental variables

  • In statistics, econometrics, epidemiology and related disciplines, the method of instrumental variables (IV) is used to estimate causal relationships when controlled experiments are not feasible or when a treatment is not successfully delivered to every unit in a randomized experiment.[1] Intuitively, IVs are used when an explanatory variable of interest is correlated with the error term (endogenous), in which case ordinary least squares and ANOVA give biased results. A valid instrument induces changes in the explanatory variable (is correlated with the endogenous variable) but has no independent effect on the dependent variable and is not correlated with the error term, allowing a researcher to uncover the causal effect of the explanatory variable on the dependent variable. Instrumental variable methods allow for consistent estimation when the explanatory variables (covariates) are correlated with the error terms in a regression model. Such correlation may occur when:
  • changes in the dependent variable change the value of at least one of the covariates ("reverse" causation),
  • there are omitted variables that affect both the dependent and explanatory variables, or
  • the covariates are subject to measurement error.

Instrumental variables estimation

Use regression analysis to relate dependent and independent variables

  • In statistical modeling, regression analysis is a set of statistical processes for estimating the relationships between a dependent variable (often called the outcome or response variable, or a label in machine learning parlance) and one or more error-free independent variables (often called regressors, predictors, covariates, explanatory variables or features). The most common form of regression analysis is linear regression, in which one finds the line (or a more complex linear combination) that most closely fits the data according to a specific mathematical criterion. For example, the method of ordinary least squares computes the unique line (or hyperplane) that minimizes the sum of squared differences between the true data and that line (or hyperplane). For specific mathematical reasons (see linear regression), this allows the researcher to estimate the conditional expectation (or population average value) of the dependent variable when the independent variables take on a given set of values. Wikipedia: Regression analysis

Focus on optimization of assignment for a well defined task

The task is considered apart from the economy as a whole. Econocracy: On the Perils of Leaving Economics to the Experts by Joe Earle; Cahal Moran; Zach Ward-Perkins:67

Analyze the nature of solutions to a system of equations

Computational concerns are important for evaluating econometric methods and for use in decision making. Such concerns include mathematical well-posedness: the existence, uniqueness, and stability of any solutions to econometric equations. Another concern is the numerical efficiency and accuracy of software. A third concern is also the usability of econometric software. Wikipedia: Methodology of econometrics

Codifying a price system that is legally sustainable

  • The city states of Sumer developed a trade and market economy based originally on the commodity money of the shekel which was a certain weight measure of barley, while the Babylonians and their city state neighbors later developed the earliest system of prices using a measure of various commodities that was fixed in a legal code. The early law codes from Sumer could be considered the first (written) financial law, and had many attributes still in use in the current price system today.

Wikipedia: Economic history of the world

Interpreting the effects of monetary politics from the perspective of perceived prosperity

  • The "silverites" argued that using silver would inflate the money supply and mean more cash for everyone, which they equated with prosperity. The gold advocates said silver would permanently depress the economy, but that sound money produced by a gold standard would restore prosperity. Wikipedia: Bimetallism

Creating tables of probable outcomes

  • John Graunt created the first life table, giving probabilities of survival to each age. History of statistics

Use statistics to sort out and zone in on causes of effects, which can then be addressed with policies

  • Nightingale made a comprehensive statistical study of sanitation in Indian rural life and was the leading figure in the introduction of improved medical care and public health service in India. ... The Royal Sanitary Commission of 1868–1869 presented Nightingale with an opportunity to press for compulsory sanitation in private houses. She lobbied the minister responsible, James Sontansfeld, to strengthen the proposed Public Health Bill to require owners of existing properties to pay for connection to mains drainage. ... Historians now believe that both drainage and devolved enforcement played a crucial role in increasing average national life expectancy by 20 years between 1871 and the mid-1930s during which time medical science made no impact on the most fatal epidemic diseases. Florence Nightingale

Discovering the critical point

  • George Dantzig worked on planning methods for the US Army Air Force during World War II using a desk calculator. During 1946, his colleague challenged him to mechanize the planning process to distract him from taking another job. Dantzig formulated the problem as linear inequalities inspired by the work of Wassily Leontief, however, at that time he didn't include an objective as part of his formulation. Without an objective, a vast number of solutions can be feasible, and therefore to find the "best" feasible solution, military-specified "ground rules" must be used that describe how goals can be achieved as opposed to specifying a goal itself. Dantzig's core insight was to realize that most such ground rules can be translated into a linear objective function that needs to be maximized.[7] Development of the simplex method was evolutionary and happened over a period of about a year.[8] After Dantzig included an objective function as part of his formulation during mid-1947, the problem was mathematically more tractable. Wikipedia: Linear programming: History

Model economic activity as a role playing game

Note what impacts the balance between two competing activities, and what are the consequents and feedback loops

  • Leontief used input–output analysis to study the characteristics of trade flow between the U.S. and other countries, and found what has been named Leontief's paradox; "this country resorts to foreign trade in order to economize its capital and dispose of its surplus labor, rather than vice versa", i.e., U.S. exports were relatively labor-intensive when compared to U.S. imports. This is the opposite of what one would expect, considering the fact that the U.S.'s comparative advantage was in capital-intensive goods. According to some economists, this paradox has since been explained as due to the fact that when a country produces "more than two goods, the abundance of capital relative to labor does not imply that the capital intensity of its exports should exceed that of imports." Wikipedia: Wassily Leontief

Consider feedback loops and the resulting adjustments yielding shifts in equilibrium

  • In 1874 working independently, French economist Léon Walras (1834–1910) generalized marginal theory across the economy in Elements of Pure Economics: Small changes in people's preferences, for instance shifting from beef to mushrooms, would lead to a mushroom price rise, and beef price fall; this stimulates producers to shift production, increasing mushrooming investment, which would increase market supply and a new price equilibrium between the products, e.g. lowering the price of mushrooms to a level between the two first levels. For many products across the economy the same would happen if one assumes markets are competitive, people choose on the basis of self-interest, and there is no cost for shifting production. Wikipedia: History of economic thought

Energy flow analysis

  • Physical scientists and biologists were the first individuals to use energy flows to explain social and economic development. Joseph Henry, an American physicist and first secretary of the Smithsonian Institution, remarked that the "fundamental principle of political economy is that the physical labor of man can only be ameliorated by… the transformation of matter from a crude state to an artificial condition...by expending what is called power or energy."

Wikipedia: Heterodox economics

Establish relations from empirical data

  • A basic tool for econometrics is the multiple linear regression model. In modern econometrics, other statistical tools are frequently used, but linear regression is still the most frequently used starting point for an analysis. Estimating a linear regression on two variables can be visualized as fitting a line through data points representing paired values of the independent and dependent variables. For example, consider Okun's law, which relates GDP growth to the unemployment rate. This relationship is represented in a linear regression where the change in unemployment rate ({$ \Delta \ {\text{Unemployment}}$}) is a function of an intercept ({$ \beta _{0}$}), a given value of GDP growth multiplied by a slope coefficient {$ \beta _{1}$} and an error term, {$ \varepsilon $}:{$ \Delta \ {\text{Unemployment}}=\beta _{0}+\beta _{1}{\text{Growth}}+\varepsilon $}. The unknown parameters {$ \beta _{0}$} and {$ \beta _{1}$} can be estimated. Here {$\beta _{0}$} is estimated to be 0.83 and {$ \beta _{1}$} is estimated to be -1.77. Wikipedia: Econometrics
  • Okun's law states that a one-point increase in the cyclical unemployment rate is associated with two percentage points of negative growth in real GDP. The relationship varies depending on the country and time period under consideration. The relationship has been tested by regressing GDP or GNP growth on change in the unemployment rate. Wikipedia: Okun's Law

Quantitative description

  • Industrial organization. One approach is descriptive in providing an overview of industrial organization, such as measures of competition and the size-concentration of firms in an industry. Wikipedia: Industrial organization
  • Leontief was also a very strong proponent of the use of quantitative data in the study of economics. Throughout his life Leontief campaigned against "theoretical assumptions and non-observed facts".[20] According to Leontief, too many economists were reluctant to "get their hands dirty" by working with raw empirical facts. To that end, Wassily Leontief did much to make quantitative data more accessible, and more indispensable, to the study of economics. Wikipedia: Wassily Leontief

Analysis of the impact of government on organizations

  • A third aspect is oriented to public policy related to economic regulation, antitrust law, and, more generally, the economic governance of law in defining property rights, enforcing contracts, and providing organizational infrastructure Wikipedia: Industrial organization

Analysis impact of markets upon each other

  • Recent research by Georgiy Revyakin proved initial Vernon theory and showed economic cycles in developed countries overran economic cycles in developing countries.[56] He also presumed economic cycles with different periodicity can be compared to the products with various life-cycles. In case of Kondratiev waves such products correlate with fundamental discoveries implemented in production (inventions which form the technological paradigm: Richard Arkwright's machines, steam engines, industrial use of electricity, computer invention, etc.); Kuznets cycles describe such products as infrastructural components (roadways, transport, utilities, etc.); Juglar cycles may go in parallel with enterprise fixed capital (equipment, machinery, etc.), and Kitchin cycles are characterized by change in the society preferences (tastes) for consumer goods, and time, which is necessary to start the production. https://en.wikipedia.org/wiki/Business_cycle \ Wikipedia: Business cycle

Agent & Market. Consider what relations hold at the margins

  • American economist John Bates Clark (1847–1938) promoted the marginalist revolution, publishing The Distribution of Wealth (1899), which proposed Clark's Law of Capitalism: "Given competition and homogeneous factors of production labor and capital, the repartition of the social product will be according to the productivity of the last physical input of units of labor and capital", also expressed as "What a social class gets is, under natural law, what it contributes to the general output of industry." Wikipedia: History of economic thought
  • In 1871 Menger's English counterpart Stanley Jevons (1835–1882) independently published Theory of Political Economy (1871), stating that at the margin the satisfaction of goods and services decreases. An example of the Theory of Diminishing Marginal Utility is that for every orange one eats, one gets less pleasure until one stops eating oranges completely. Wikipedia: History of economic thought
  • Marginal considerations are considerations which concern a slight increase or diminution of the stock of anything which we possess or are considering. Another way to think of the term marginal is the cost or benefit of the next unit used or consumed, for example the benefit that you might get from consuming a piece of chocolate. The key to understanding marginality is through marginal analysis. Marginal analysis examines the additional benefits of an activity compared to additional costs sustained by that same activity. In practice, companies use marginal analysis to assist them in maximizing their potential profits and often used when making decisions about expanding or reducing production. Wikipedia: Marginal utility

Understand market behavior in terms of perfect competition

  • Economic theory until then had focused on trying to understand markets alone and there had been little study on understanding why firms or organisations exist. Markets are guided by prices and quality as illustrated by vegetable markets where a buyer is free to switch sellers in an exchange. Wikipedia: Theory of the firm: Background

Analyze movements to or from equilibrium

As its motto Theory and Measurement implies, the Cowles Commission focuses on linking economic theory to mathematics and statistics. Its advances in economics involved the creation and integration of general equilibrium theory and econometrics. The thrust of the Cowles approach was a specific, probabilistic framework in estimating simultaneous equations to model an economy. Its ultimate goal in doing so was to gain policy insight. The Cowles approach structured its models from a priori economic theory. One of its main contributions was in exposing the bias of ordinary least squares regression in identifying coefficient estimates. Consequently, Cowles researchers developed new methods such as the indirect least squares, instrumental variable methods, the full information maximum likelihood method, and the limited information maximum likelihood method. All of these methods used theoretical, a priori restrictions. According to an article by Carl F. Christ, the Cowles approach was grounded on certain assumptions:

  • 1. Simultaneous economic behavior;
  • 2. Linear or logarithmic equations and disturbances;
  • 3. Systematic, observable variables without error;
  • 4. Discrete variable changes as opposed to continuous;
  • 5. A priori determination of exogeneity and endogeneity;
  • 6. The existence of a reduced form;
  • 7. Independence of the explanatory variables;
  • 8. A priori identified structural equations;
  • 9. Normally distributed disturbances with zero means, finite and constant covariances, a nonsingular covariance matrix, and serial independence;
  • 10. A dynamically stable system of equations.

Wikipedia: Cowles Foundation

  • In economics, general equilibrium theory attempts to explain the behavior of supply, demand, and prices in a whole economy with several or many interacting markets, by seeking to prove that the interaction of demand and supply will result in an overall general equilibrium. General equilibrium theory contrasts with the theory of partial equilibrium, which analyzes a specific part of an economy while its other factors are held constant. General equilibrium theory both studies economies using the model of equilibrium pricing and seeks to determine in which circumstances the assumptions of general equilibrium will hold. The theory dates to the 1870s, particularly the work of French economist Léon Walras in his pioneering 1874 work Elements of Pure Economics.[2] The theory reached its modern form with the work of Lionel W. McKenzie (Walrasian theory), Kenneth Arrow and Gérard Debreu (Hicksian theory) in the 1950s. Wikipedia: General equilibrium theory
  • In economics, partial equilibrium is a condition of economic equilibrium which analyzes only a single market, ceteris paribus (everything else remaining constant) except for the one change at a time being analyzed. In general equilibrium analysis, on the other hand, the prices and quantities of all markets in the economy are considered simultaneously, including feedback effects from one to another, though the assumption of ceteris paribus is maintained with respect to such things as constancy of tastes and technology. Mas-Colell, Whinston & Green's widely used graduate textbook says, "Partial equilibrium models of markets, or of systems of related markets, determine prices, profits, productions, and the other variables of interest adhering to the assumption that there are no feedback effects from these endogenous magnitudes to the underlying demand or cost curves that are specified in advance."[1] General equilibrium analysis, in contrast, begins with tastes, endowments, and technology being fixed, but takes into account feedback effects between the prices and quantities of all goods in the economy. The supply and demand model originated by Alfred Marshall is the paradigmatic example of a partial equilibrium model. The clearance of the market for some specific goods is obtained independently from prices and quantities in other markets. In other words, the prices of all substitute goods and complement goods, as well as income levels of consumers, are taken as given. This makes analysis much simpler than in a general equilibrium model, which includes an entire economy. Consider, for example, the effect of a tariff on imported French wine. Partial equilibrium would look at just that market, and show that the price would rise. It would ignore the fact that if French wine became more expensive, demand for domestic wine would rise, pushing up the price of domestic wine, which would feed back into the market for French wine. If the feedback were included, the higher domestic price would shift out the demand curve for French wine, further increasing its price. This further increase would again raise demand for domestic wine, and the feedback would increase, resulting in an infinite cycle that would eventually dampen out and converge. The importance of these feedback effects might or might not be worth the extra calculations necessary. They will generally affect the exact amount of the original good's price change, but not the direction. Partial equilibrium analysis examines the effects of policy action only for one good at a time. Thus, it might look at the effect of a price ceiling for luxury automobiles without looking at the effect of that automobile price ceiling on the demand for bicycles, which would be analyzed separately. Wikipedia: Partial equilibrium
  • In economics, economic equilibrium is a situation in which the economic forces of supply and demand are balanced, meaning that economic variables will no longer change. Market equilibrium in this case is a condition where a market price is established through competition such that the amount of goods or services sought by buyers is equal to the amount of goods or services produced by sellers. This price is often called the competitive price or market clearing price and will tend not to change unless demand or supply changes, and quantity is called the "competitive quantity" or market clearing quantity. Three basic properties of equilibrium in general have been proposed by Huw Dixon.[2] These are:
    • Equilibrium property P1: The behavior of agents is consistent.
    • Equilibrium property P2: No agent has an incentive to change its behavior.
    • Equilibrium property P3: Equilibrium is the outcome of some dynamic process (stability).Wikipedia: Economic equilibrium

Computational, dynamic, stochastic general equilibrium models

  • Forecasters may use computational general equilibrium models or dynamic stochastic general equilibrium models. The latter are often used by central banks. Wikipedia: Economic forecasting

Consider imbalances and unreflected risks as warnings

  • There were many warnings about imbalances in financial markets and in the global economy. For example, the Bank for International Settlements expressed repeated concerns that risks did not seem to be properly reflected in financial markets. Our own Bank of England issued many warnings about this in their bi-annual Financial Stability Reports. The Global Financial Crisis – Why Didn’t Anybody Notice?

Identify, estimate and manage risks

  • Many were also concerned about imbalances in the global economy. We had enjoyed a period of unprecedented global expansion which had seen many people in poor countries, particularly China and India, improving their living standards. But this prosperity had led to what is now known as the ‘global savings glut’. This led to very low returns on safer long-term investments which, in turn, led many investors to seek higher returns at the expense of greater risk. Countries like the UK and the USA benefited from the rise of China which lowered the cost of many goods that we buy, and through ready access to capital in the financial system it was easy for UK households and businesses to borrow. This in turn fuelled the increase in house prices both here and in the USA. There were many who warned of the dangers of this. (Straightforward to manage small risks, problematic to manage large risks when competition is unbridled, cross category, global, thus structurally destabilizing) The Global Financial Crisis – Why Didn’t Anybody Notice?

Manage global risk, opportunity, growth by developing a monetary policy and achieving consensus

Comparing possible policies and developing consensus

  • There was a broad consensus that it was better to deal with the aftermath of bubbles in stock markets and housing markets than to

try to head them off in advance. Credence was given to this view by the experience, especially in the USA, after the turn of the millennium when a recession was more or less avoided after the ‘dot com’ bubble burst. This fuelled the view that we could bail out the economy after the event. The Global Financial Crisis – Why Didn’t Anybody Notice?

  • Inflation remained low and created no warning sign of an economy that was overheating. The Bank of England Monetary Policy Committee had helped to deliver an unprecedented period of low and stable inflation in line with its mandate. But this meant that interest rates were low by historical standards. And some said that policy was therefore not sufficiently geared towards heading off the risks. Some countries did raise interest rates to ‘lean against the wind’. But on the whole, the prevailing view was that monetary policy was best used to prevent inflation and not to control wider imbalances in the economy. The Global Financial Crisis – Why Didn’t Anybody Notice?

Consider feedback loops arising from policy or circumstances

  • In the 1970s, new theories, such as rational expectations and the NAIRU (non-accelerating inflation rate of unemployment) arose to explain how stagflation could occur. The latter theory, also known as the "natural rate of unemployment", distinguished between the "short-term" Phillips curve and the "long-term" one. The short-term Phillips curve looked like a normal Phillips curve but shifted in the long run as expectations changed. In the long run, only a single rate of unemployment (the NAIRU or "natural" rate) was consistent with a stable inflation rate. The long-run Phillips curve was thus vertical, so there was no trade-off between inflation and unemployment. Milton Friedman in 1976 and Edmund Phelps in 2006 won the Nobel Prize in Economics in part for this work. [26] [27] However, the expectations argument was in fact very widely understood (albeit not formally) before Friedman's and Phelps's work on it. Wikipedia: Phillips curve
  • Within economics, it has been debated as to whether or not the fluctuations of a business cycle are attributable to external (exogenous) versus internal (endogenous) causes. In the first case shocks are stochastic, in the second case shocks are deterministically chaotic and embedded in the economic system.[45] The classical school (now neo-classical) argues for exogenous causes and the underconsumptionist (now Keynesian) school argues for endogenous causes. These may also broadly be classed as "supply-side" and "demand-side" explanations: supply-side explanations may be styled, following Say's law, as arguing that "supply creates its own demand", while demand-side explanations argue that effective demand may fall short of supply, yielding a recession or depression. Wikipedia: Business cycle
  • This debate has important policy consequences: proponents of exogenous causes of crises such as neoclassicals largely argue for minimal government policy or regulation (laissez faire), as absent these external shocks, the market functions, while proponents of endogenous causes of crises such as Keynesians largely argue for larger government policy and regulation, as absent regulation, the market will move from crisis to crisis. This division is not absolute – some classicals (including Say) argued for government policy to mitigate the damage of economic cycles, despite believing in external causes, while Austrian School economists argue against government involvement as only worsening crises, despite believing in internal causes. Wikipedia: Business cycle
  • Economic agents may collectively choose to increase the amount of savings they hold, thereby reducing demand but not supply. Wikipedia: Say's law
  • According to Keynesian economics, fluctuations in aggregate demand cause the economy to come to short run equilibrium at levels that are different from the full employment rate of output. These fluctuations express themselves as the observed business cycles. Keynesian models do not necessarily imply periodic business cycles. However, simple Keynesian models involving the interaction of the Keynesian multiplier and accelerator give rise to cyclical responses to initial shocks. Paul Samuelson's "oscillator model"[52] is supposed to account for business cycles thanks to the multiplier and the accelerator. The amplitude of the variations in economic output depends on the level of the investment, for investment determines the level of aggregate output (multiplier), and is determined by aggregate demand (accelerator). Wikipedia: Business cycle
  • One alternative theory is that the primary cause of economic cycles is due to the credit cycle: the net expansion of credit (increase in private credit, equivalently debt, as a percentage of GDP) yields economic expansions, while the net contraction causes recessions, and if it persists, depressions. In particular, the bursting of speculative bubbles is seen as the proximate cause of depressions, and this theory places finance and banks at the center of the business cycle. A primary theory in this vein is the debt deflation theory of Irving Fisher, which he proposed to explain the Great Depression. A more recent complementary theory is the Financial Instability Hypothesis of Hyman Minsky, and the credit theory of economic cycles is often associated with Post-Keynesian economics such as Steve Keen. Wikipedia: Business cycle
  • For Marx, the economy based on production of commodities to be sold in the market is intrinsically prone to crisis. In the heterodox Marxian view, profit is the major engine of the market economy, but business (capital) profitability has a tendency to fall that recurrently creates crises in which mass unemployment occurs, businesses fail, remaining capital is centralized and concentrated and profitability is recovered. In the long run, these crises tend to be more severe and the system will eventually fail. Wikipedia: Business cycle
  • Some Marxist authors such as Rosa Luxemburg viewed the lack of purchasing power of workers as a cause of a tendency of supply to be larger than demand, creating crisis, in a model that has similarities with the Keynesian one. Indeed, a number of modern authors have tried to combine Marx's and Keynes's views. Henryk Grossman[61] reviewed the debates and the counteracting tendencies and Paul Mattick subsequently emphasized the basic differences between the Marxian and the Keynesian perspective. While Keynes saw capitalism as a system worth maintaining and susceptible to efficient regulation, Marx viewed capitalism as a historically doomed system that cannot be put under societal control. Wikipedia: Business cycle
  • The American mathematician and economist Richard M. Goodwin formalised a Marxist model of business cycles known as the Goodwin Model in which recession was caused by increased bargaining power of workers (a result of high employment in boom periods) pushing up the wage share of national income, suppressing profits and leading to a breakdown in capital accumulation. Later theorists applying variants of the Goodwin model have identified both short and long period profit-led growth and distribution cycles in the United States and elsewhere.[63][64][65][66][67] David Gordon provided a Marxist model of long period institutional growth cycles in an attempt to explain the Kondratiev wave. This cycle is due to the periodic breakdown of the social structure of accumulation, a set of institutions which secure and stabilize capital accumulation. Wikipedia: Business cycle
  • Economists of the heterodox Austrian School argue that business cycles are caused by excessive issuance of credit by banks in fractional reserve banking systems. According to Austrian economists, excessive issuance of bank credit may be exacerbated if central bank monetary policy sets interest rates too low, and the resulting expansion of the money supply causes a "boom" in which resources are misallocated or "malinvested" because of artificially low interest rates. Eventually, the boom cannot be sustained and is followed by a "bust" in which the malinvestments are liquidated (sold for less than their original cost) and the money supply contracts. Wikipedia: Business cycle
  • Adherents of the Austrian School, such as the historian Thomas Woods, argue that these earlier financial crises were prompted by government and bankers' efforts to expand credit despite restraints imposed by the prevailing gold standard, and are thus consistent with Austrian Business Cycle Theory. Wikipedia: Business cycle

Identify perverse incentives, vicious cycles, systemic abuses of power

  • Verden: Businesses protect their existing capital investments and employ excessive credit, leading to depressions and increasing military expenditure and war through business control of political power. History of economic thought

Track commodity movements and their volatility

  • Locke develops his theory of foreign exchanges, by which in addition to commodity movements, there are also movements in country stock of money, and movements of capital determine exchange rates. He considers the latter less significant and less volatile than commodity movements. John Locke

Analyzing timing of fluctuations

  • There is often a close timing relationship between the upper turning points of the business cycle, commodity prices, and freight rates, which is shown to be particularly tight in the grand peak years of 1873, 1889, 1900 and 1912.[27] Hamilton expressed that in the post war era, a majority of recessions are connected to an increase in oil price. Wikipedia: Business cycle
  • Economic indicators are used to measure the business cycle: consumer confidence index, retail trade index, unemployment and industry/service production index. Wikipedia: Business cycle

Distinguish short-term, medium term and long term evolution

  • Business cycles are usually thought of as medium term evolution. They are less related to long-term trends, coming from slowly-changing factors like technological advances. Further, a one period change, that is unusual over the course of one or two years, is often relegated to “noise”; an example is a worker strike or an isolated period of severe weather. Wikipedia: Business cycle

Note how economic roles develop and diverge

  • This theory explains the nature and causes of economic cycles from the viewpoint of life-cycle of marketable goods.[55] The theory originates from the work of Raymond Vernon, who described the development of international trade in terms of product life-cycle – a period of time during which the product circulates in the market. Vernon stated that some countries specialize in the production and export of technologically new products, while others specialize in the production of already known products. The most developed countries are able to invest large amounts of money in the technological innovations and produce new products, thus obtaining a dynamic comparative advantage over developing countries. Wikipedia: Business cycle

More...

Using statistical analysis to detect and uncover hidden features

  • Recurrence quantification analysis has been employed to detect the characteristic of business cycles and economic development. ... The said index has been proven to detect hidden changes in time series. ... Last but not least, it has been demonstrated that recurrence quantification analysis can detect differences between macroeconomic variables and highlight hidden features of economic dynamics. Wikipedia: Business cycle

Ultimate goal of inclusion

Analyzing the growth or decline in economic activity understood as a measure of well being

  • Business cycles are intervals of general expansion followed by recession in economic performance. The changes in economic activity that characterize business cycles have important implications for the welfare of the general population, government institutions, and private sector firms. There are many definitions of a business cycle. The simplest defines recessions as two consecutive quarters of negative GDP growth. More satisfactory classifications are provided by, first including more economic indicators and second by looking for more data patterns than the two quarter definition. In the United States, the National Bureau of Economic Research oversees a Business Cycle Dating Committee that defines a recession as "a significant decline in economic activity spread across the market, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales." Wikipedia: Business cycle
  • Business cycles are not merely fluctuations in aggregate economic activity. The critical feature that distinguishes them from the commercial convulsions of earlier centuries or from the seasonal and other short term variations of our own age is that the fluctuations are widely diffused over the economy – its industry, its commercial dealings, and its tangles of finance. The economy of the western world is a system of closely interrelated parts. He who would understand business cycles must master the workings of an economic system organized largely in a network of free enterprises searching for profit. The problem of how business cycles come about is therefore inseparable from the problem of how a capitalist economy functions. Wikipedia: Business cycle
  • Justification for the stockholder’s existence thus depends on increasing distribution within the American population. Ideally the stockholder’s position will be impregnable only when every American family has its fragment of that position and of the wealth by which the opportunity to develop individuality becomes fully actualized. History of economic thought
  • Wikipedia:growthism (productivism) - everyone must work.
  • Wikipedia:The Growth Imperative - growth is necessary.
  • Degrowth - work toward reducing destructive growth - all these are considering aspects of growth in their calculations).
  • In classical economics, Say's law, or the law of markets, is the claim that the production of a product creates demand for another product by providing something of value which can be exchanged for that other product. ... Some maintain that Say further argued that this law of markets implies that a general glut (a widespread excess of supply over demand) cannot occur. If there is a surplus of one good, there must be unmet demand for another: "If certain goods remain unsold, it is because other goods are not produced."[2] However, according to Petur Jonsson, Say does not claim a general glut cannot occur and in fact acknowledges that they can occur.[3] Say's law has been one of the principal doctrines used to support the laissez-faire belief that a capitalist economy will naturally tend toward full employment and prosperity without government intervention.Wikipedia: Say's law

Unsorted examples

Dimensions to consider

Andrius: The questions below are based on Leland Beaumont's investigative approach Money – The Fundamentals. He supposes that the purpose of money is to solve the problem How can we foster exchange of goods and services? Then he consider various options in designing money.

For the purposes of our investigation above, I am restating these as questions. I am curious how they may come up in our collection of the ways economist figure things out. How will they compare with what we find? The list below is surely helpful to make sure we're comprehensive. Thank you, Leland!

What are the expectations of reciprocity?

  • none, optional, personal, barter, communal, private, public, immediate, deferred, material, symbolic, or reputational, …

What is the context for the value exchanged?

  • now, or promised future repayment, intrinsic value, symbolic value, good will, barter

What is the role of record keeping?

  • There is no record of the transaction, or
  • There is a record of the transaction
    • Private, our (the parties) memories only
    • Private, my written record only
    • Shared, we both get a copy of the written record.
    • Exchange takes place in public, creating many witnesses to the exchange.
    • Third party retains a written record (privately)
    • Public record of the transaction

How is the money supply created?

  • Tokens are earned, found, extracted, or manufactured
  • Near money is also created. "Near money refers to non-cash assets that can be easily converted to cash." https://www.investopedia.com/terms/n/near-money.asp
  • Fiat money – Authority generates tokens. Various distribution protocols are possible
  • M1, M2 - M5 are different parts of the money supply and so can be created differently e.g. by banks, by central banks, by individuals, by states, by interstate bodies
  • Chartalist position led to MMT (Modern Monetary Theory) https://www.investopedia.com/terms/c/chartalism.asp

What are destructive behaviors and how are they controlled?

  • theft, counterfeit, modifying records, delinquent repayments, externalities, (tragedy of) the commons,

What is the significance of ownership and stewardship of public goods?

What is the concern for future generations?

  • none, our sense of duty, environmental action, young people, proportional representation
  • How can future generations be fairly represented in today’s decision-making forums?

How is wealth transferred?

  • none, anything goes, regulated e.g. will and testament, by custom and practice e.g. farming families pass farm on to children

How is wealth stored?

  • none, increases in value, fee for storage, constant value NB Money illusion - money loses value over time

How are shared goods and services paid for?

  • Voluntary contributions, charity, philanthropy
  • Tax, tithe
  • Usage fees e.g. a village hall that is rented out for functions

Questions asked by Raimundas. How to determine:

  • What is just payment for work?
  • What is a just price for a good?
  • What taxes should citizens pay to the state?
  • How should shared or collective property be managed?

Andrew Pashea: Some key thinkers/traditions/concepts I think are lacking from the site:

  • topics which have been employed by various camps for different ends, e.g., liquidity (crucial), scarcity (the "fundamental economic problem" for various thinkers, eternal for some, surpassable for others), externalities (which can be used to justify taxation, or a way to merely tax rather than illegalize activities like pollutive practices, ....), consumption-oriented thought (which can be used for arguing for social welfare... or, for a laissez-faire consumer capitalism with heavy marketing...), preferences ("fixed" for some, highly mutable and speculative for others), information (for some asymmetries of access to information are what produce "profit", for others information is assumed transparent for the sake of model simplicity), double-entry bookeeping (not just establishing credit/debit systems, but implies that some entities maintain/record this information), modelling (from building/justifying theories to making forecasts that inform decision-making and policy, including all the issues of which factors to include/exclude from the model as well as the accuracies/inaccuracies of the data utilized if it is utilized, this cannot be ignored today)
  • Three-sector and dual-economy models, especially impactful in "development economics" (which can be used from multiple perspectives, and has been used to justify various activities from foreign aid to hegemonic influence)
  • French regulation school (Michel Aglietta & André Orléan, who have written significantly on the functions, properties, and roles of money and credit; this might be of interest to others given the topic last Tuesday regarding commons/sharing systems without currency)
  • "political economy" as a root tradition from which the later field of "economics" was stripped, i.e. a later attempt to divorce political concerns/systems from an assumed standalone economics
  • Socialist/communist thinkers seem absent (Proudhon, Marx, ...), as do
  • "free market" proponents (Hayek, Friedman, the "Chicago School" generally which arguably has been taking over the world both secretly and aggressively as in the case of the coup in Chile during Allende's adminstration......),
  • Keynesianism (including post-Keyesnian, New Keynesian). Many economists by training -- granted "theory" courses are less of a requirement today than ever before -- have to engage with at least some of these thinkers at some point. I appreciate the move to avoid having western thought dominate your montage here, but I will say many economics students globally have to contend with these westerners' texts at some point or another.

- more recent thinkers (Mazzucato, Stiglitz, Acemoglu, ...) who speak on more recent topics, e.g., technology, automation.

note there are other perspectives e.g. Peasant economics