economics economics a dismal science? a dismal science? Few - - PowerPoint PPT Presentation

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Oct 30, 2023 10 likes •141 views

economics economics a dismal science? a dismal science? Few people rely solely on any social science for their pleasures, and attaining a suitable level of ecstasy involves work. It is a nuisance, but God has chosen to give the easy

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economics economics a dismal science? a dismal science?

SLIDE 2

Few people rely solely on any social science for their pleasures, and attaining a suitable level of ecstasy involves work. … It is a nuisance, but God has chosen to give the easy problems to the physicists. Lave and March (1995)

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what is economics? what is economics?

economics is what economists do
study of economic interactions of human

beings

core concept is exchange
integral to all life (“second nature”)

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what is economics? (cont’d) what is economics? (cont’d)

physics chemistry biology social sciences economics economic imperialism the real world (?) physics chemistry biology social sciences

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the origins of economics the origins of economics

developed out of moral philosophy
adam smith:

“an inquiry into the nature and causes

f the wealth of nations”, 1776

→ “positive” v. “normative” science

leon walras, gerard debreu:

“the theory of value”, 1959 → neo-classical school of economics → “macro” model with microfoundations

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core concepts core concepts

general equilibrium

– homo oeconomicus – invisible hand/walrasian auctioneer

game and contract theory

– rationality – common knowledge

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current trends current trends

evolutionary economics
behavioral economics
experimental economics ☺
cross-disciplinary research ☺
econophysics

(the good, the bad, the ugly)

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the future: is econ becoming a science? the future: is econ becoming a science?

questions asked
scientific methods

– measurement problem – modeling problem (e.g., path dependence) – methodological v. institutional individualism (“situational analysis”)

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differences between physics and econ differences between physics and econ

open v. closed systems
recurrence
stationarity
coupling
heterogeneity of “actors”
principal observer problem

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some observations and some observations and candidate explanations candidate explanations

small world networks in trading
price taking v. price making
volatility clustering and long-memory effects
crashes

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continuous double auction continuous double auction

rders
rders
rder book
rder book

transactions transactions size quantity dynamics depth granularity spread price volatility

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liability networks liability networks

exchange results in connection between buyer

and seller → complex network of assets and liabilities → entanglement → path dependence

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the principal observer problem the principal observer problem

social sciences deal with behavior

→ information ─ knowledge ─ action

behavior is a process
time runs from the future into the

present and then back into the future again

“price taker” v. “price maker”
r:
principal is observer is principal …