Tuesday, September 16, 2008

The Engineer and The Scientist

Arnold Kling illustrates the difference between "model jockeys" and academic economists.
A model jockey might ask, "What will be the effect of the stimulus proposal on GDP?" You have an equation, estimated using past data, that predicts how much consumption will go up for a given increase in disposable income. You interact that with a bunch of other equations, and out comes your answer. That is how the engineers look at macro.
Kling also explains how the time horizon selected (shorter or longer) can affect the result found. ATSRTWT

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