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No excellent answer pops into my head, which means I have to look into it more deeply.

One might think that 70+ years after the emergence of a General Theory apparently adequate to the task of explaining a complex economy, and which, by extension, should serve as the foundation of computer based models of the economy, that the failure of the field of economics to provide such an updated theory says something fundamental about the nature of the discipline and the great majority of its practitioners---and that what it says is not flattering.

Three questions present themselves:

1.) Were an updated General Theory capable of making verifiable predictions about the international economy developed and written so that it stands alone, without requiring prior understanding of Keynes's General Theory, generally be used as a text for macroeconomics in undergraduate and graduate courses?   (i.e., would it be commercially viable?)

2.) Could such an updated General Theory be used, (or have such updated theories been used), to generate computer based economic models with significantly more predictive and explanatory power?

3.) If, as seems likely, both 1. & 2. could be done, what does the fact that they have not been done show?

Historian Christopher Hill, in describing the reluctance of the Puritans to execute Charles I, proposed that there had been a "mind stop" in place that made a necessary step unthinkable.  Is that what is happening here?  Would production of such a theory and creation of such a model make the author such a pariah that no one is willing to do it?

Just asking? :-)

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Wed Jun 4th, 2008 at 09:49:52 PM EST
[ Parent ]
1.) Were an updated General Theory capable of making verifiable predictions about the international economy developed and written so that it stands alone, without requiring prior understanding of Keynes's General Theory, generally be used as a text for macroeconomics in undergraduate and graduate courses?   (i.e., would it be commercially viable?)
What you're looking for is a Feynman Lectures on Economics, so to speak, which as you know would have a cult following and hence be commercially viable but would be very unlikely to be used in any courses, graduate or undergraduate.
2.) Could such an updated General Theory be used, (or have such updated theories been used), to generate computer based economic models with significantly more predictive and explanatory power?
I suspect such (explanatory, I don't know about predictive) models could already exist, based mostly on Leontieff's Input/Output analysis. Also things like the model developed by the Club of Rome for the Limits to Growth.
3.) If, as seems likely, both 1. & 2. could be done, what does the fact that they have not been done show?
Are they really likely and to what extent? Bruce says downthread
the General Theory is about those aspects of a monetary production economy for which you can draw a general theory ... rather than, as some people misread it, a "theory about everything in general".
Also, Economics is more like evolutionary biology and ecology and an evolutionary discipline cannot be predictive except in the short term. In this case, the rate of economic innovation is much faster than the rate of speciation which makes "the short term" really short.

When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes
by Carrie (migeru at eurotrib dot com) on Thu Jun 5th, 2008 at 02:30:32 AM EST
[ Parent ]

Also, Economics is more like evolutionary biology and ecology and an evolutionary discipline cannot be predictive except in the short term. In this case, the rate of economic innovation is much faster than the rate of speciation which makes "the short term" really short.

I agree that explanatory is much more likely than predictive.  Predictions in emergent systems are always precarious.  With so many of those able to deal with these questions "in it for the money," for themselves and/or their backers or employers, it would seem that there are massive perverse incentives to keep the discipline as arcane as possible.  These folks would not welcome clarity any more than casinos would welcome a ban on scantily clad women plying gamblers with liquor.  The last thing they want is a level playing field.  The capital markets, especially of the USA and Great Britain, have become the by-product of the activities of casinos we call stock, bond and futures exchanges.  The question is how to build support for a restructuring of this socially destructive system.  

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu Jun 5th, 2008 at 01:09:46 PM EST
[ Parent ]

I suspect such (explanatory, I don't know about predictive) models could already exist, based mostly on Leontieff's Input/Output analysis. Also things like the model developed by the Club of Rome for the Limits to Growth.

I would think such formulations would be most likely to be embedded in the source code of economic models, proprietary and inaccessible to all but those who maintain the model.

What I was getting at was the question of whether there might be some competitive advantage to a better theory that might facilitate adoption of said theory.  If so, this might be a disruptive technology that could be exploited towards beneficial ends.  More likely is that it would immediately be employed to build more profitable casinos.

The current Neo-Classical Economic Mythology seems to be the bastard offspring of Loki and Fortuna.

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu Jun 5th, 2008 at 01:28:17 PM EST
[ Parent ]

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