Concepts: Models in economics

Talking about models is one of the areas where economists often come unstuck. Why do we use models? How do we use them? How can we explain them?

To quote Ragnar Frisch, winner of the first Nobel Prize in Economics “No amount of statistical information, however complete and exact, can by itself explain economic phenomena. ... we need the guidance of a powerful theoretical framework. Without this no significant interpretation and coordination of our observations will be possible.”

Start with aa simple model that focuses on the key behaviours and outcomes - ("All things being equal, the simplest solution tends to be the best" William of Occam).

Think about a map - a simple map is often more useful than a more realistic and complicated map. Consider the London Underground map, it is an abstraction from reality, it is incorrect, but it is much more useful for getting around on the underground than a realistic and detailed map.

Communicating Uncertainty in Policy Analysis

False certainty will lead to bad policy. If policy makers understand the nature of certainty they can make better policy.

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Dismal ignorance of the “dismal science”—a response to Larry Elliot

Orazio AttanasioOriana BandieraRichard BlundellStephen MachinRachel Griffith and Imran Rasul respond to a column in the Guardian column that  reproduced some classic misconceptions about what economists actually do.

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Jacob Clifford

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