Economics and Reality
AbstractThis paper is a non-technical and somewhat philosophical essay, that seeks to investigate the relationship between economics and reality. More precisely, it asks how reality in the form of empirical evidence does or does not influence economic thinking and theory. In particular, which role do calibration, statistical inference, and structural change play? What is the current state of affairs, what are the successes and failures, what are the challenges? I shall tackle these questions moving from general to specific. For the general perspective, I examine the following four points of view. First, economics is a science. Second, economics is an art. Third, economics is a competition. Forth, economics is politics. I then examine four specific cases for illustration and debate. First, is there a Phillips curve? Second, are prices sticky? Third, does contractionary monetary policy lead to a contraction in output? Forth, what causes business cycles? The general points as well as the specific cases each have their own implication for the central question at hand. Armed with this list of implications, I shall then attempt to draw a summary conclusion and provide an overall answer.
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Bibliographic InfoPaper provided by Becker Friedman Institute for Research In Economics in its series Working Papers with number 2011-006.
Date of creation: 2011
Date of revision:
Other versions of this item:
- A11 - General Economics and Teaching - - General Economics - - - Role of Economics; Role of Economists
- A14 - General Economics and Teaching - - General Economics - - - Sociology of Economics
- B13 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Neoclassical through 1925 (Austrian, Marshallian, Walrasian, Stockholm School)
- B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
- B41 - Schools of Economic Thought and Methodology - - Economic Methodology - - - Economic Methodology
- D40 - Microeconomics - - Market Structure and Pricing - - - General
- E - Macroeconomics and Monetary Economics
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-01-03 (All new papers)
- NEP-CBA-2012-01-03 (Central Banking)
- NEP-HME-2012-01-03 (Heterodox Microeconomics)
- NEP-HPE-2012-01-03 (History & Philosophy of Economics)
- NEP-MAC-2012-01-03 (Macroeconomics)
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