Heard the one about the physicist, the chemist, and the economist on a desert island? If you work here you have; it’s been our favorite joke this year.
Goes like this:
A physicist, a chemist, and an economist are stranded on a desert island. One can only imagine what sort of play date went awry to land them there. Anyway, they’re hungry. Like, desert island hungry. And then a can of soup washes ashore. Progresso Reduced Sodium Chicken Noodle, let’s say. Which is perfect, because the physicist can’t have much salt, and the chemist doesn’t eat red meat.
But, famished as they are, our three professionals have no way to open the can. So they put their brains to the problem. The physicist says “We could drop it from the top of that tree over there until it breaks open.” And the chemist says “We could build a fire and sit the can in the flames until it bursts open.”
Those two squabble a bit, until the economist says “No, no, no. Come on, guys, you’d lose most of the soup. Let’s just assume a can opener.”
GET IT?
You can’t just assume a can opener and have it appear, obviously. But economists regularly rely on analogous assumptions of conditions that don’t actually exist in the real world. This is one of the fundamental ways in which economics differs from the hard sciences, even though economists often seek to present their views with the certainty of, say, a physicist or chemist.
In The Assumptions Economists Make, Jonathan Schlefer digs into this manner of assumption-based economic modeling that leads opposing economists to come to drastically different conclusions. It’s kind of like an outsider’s guide to economic thought, meant to help us understand just how ideologically determined an economist’s work can sometimes be, and also how shockingly wrong, as we all learned the hard way when the bottom fell out of the economy in 2008.
To Schlefer, it’s his own position outside the field that helps him to explain its workings:
Be warned: as a card-carrying political scientist, I may entertain a certain smoldering envy toward the imperialistic powers of the social sciences—namely, university economics departments. But my outsider’s perspective has its uses, since I am duly startled by features of the economics landscape that economists barely notice, so inured have they become to them. Moreover, I’m curious about economics. You need curiosity to write about anything you might criticize, because otherwise you never spend the energy and thought to figure out what it says in the first place. And sometimes when you figure out what it says, criticisms you thought you had evaporate, strengthen, or otherwise change.
Luckily for other curious outsiders, the book isn’t too technical, and it assumes (ha) no mathematical skill on the part of readers. But that doesn’t mean it’s overly simplified:
There are no mathematical requirements for Assumptions, but there are thinking requirements. The book is about what economists do in their secret lives as economists, when they aren’t dashing off op-eds to tell everybody else what to believe, pulling the wool over undergraduates’ eyes in textbooks, or otherwise engaging in public relations. What economists otherwise do is make simplified assumptions about our world, build imaginary economies based on those assumptions—otherwise known as models—and use them to draw practical lessons. In fact, we all do much the same thing less formally when we think about economies, since the real world is way too complicated to understand in all its multitudinous detail. I explain the structure of models in words because nobody disputes the math, and readers of this book don’t need to be dragged through it. But grasping the intuitions that good models capture still demands thought. And the real disputes arise about assumptions that underlie a model, how to interpret it (what might this abstraction legitimately be interpreted as implying?), and whether it is at least not wildly inconsistent with experience. Where these disputes arise, my approach is not to simplify but to roll up my sleeves and explain.
You can read more about The Assumptions Economists Make at the Harvard Business Review blog, or you can assume yourself on over to the Harvard Book Store TODAY at 3pm for a Friday Forum conversation with Schlefer.
Oh, and, incidentally, no word on how economists feel about the desert island joke, but the soup people got so tired of it that they went and added those pull tabs to the tops. True story.
