Wednesday, August 29, 2012

Problem-situation and philosophy of sciences

A bit of digression from typical English related stuff.

Competing theories don't answer the same set of questions; they reformulate the questions and answer them. This is how we should understand macroeconomics.

From Bezemer's presentation:

Problem: “During the crisis, agents behaved differently from our assumptions.”
 Challenge: “Can I include that behaviour in my model?”
  Solution: (DS)GE models with information asymmetries, sticky prices, bounded rationality

Problem: “The crisis resulted from interactions which are typical of complex systems, not equilibrium systems.”
Challenge: “ Can I build models so as to capture complexity?”
Solution: Agent-based / computational modelling

Problem: “ 'they' missed the crisis because macro models do not trace flows of credit and debt”
Challenge: “Can I change my model so as to capture financial flows, and their impact on the economy?”
Solution: Stock-flow consistent flow-of-fund models

Three paradigms formulate their questions differently for the same phenomena, answer differently

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