Friday, 30 August 2013

Economath - what is it?

Sturgeon’s Law definitely applies to economics, and when it comes to elaborate mathematical models you probably want to up the percentage.

There was an old tradition arguing that increasing returns made the case for infant-industry protection, underlying this tradition was the intuitive notion that increasing-returns industries are the “good stuff” you want to get, and keep away from other countries.

But that was not at all the point of New Trade Theory, which ended up suggesting that concentration of production due to increasing returns is generally beneficial to importers as well as exporters of increasing-returns goods, that it generally reinforced the case for open trade, rather than undermining it.

All that said was, there is a lot of excessive and/or misused maths in economics, plus the habit of thinking only in terms of what you can model creates blind spots.

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