How Far Can You Throw an Economist?

"Remember," a good friend of mine who is an investment adviser said the other day, "that economics is a behavioral  science."  This observation was born out the very next day by all the blogging activity triggered by Princeton economist’s Uwe Reinhardt’s New York Times blog, "Can Economists Be Trusted?"  Many of the  points made in these responses clustered around the various motivations for tinkering with variables and probabilities, but I found particularly interesting an exchange between the University of Oregon’s Mark Thoma and Columbia statistician and political scientist Andrew Gelman. 

Thoma and Gelman are concerned with the pathways of reasoning in economic analysis.  They highlight the crucial point that this reasoning can–and often does–start from either end of the analytical process and, accordingly, run forward or–policymaker beware!–backward.  The same is true of mathematical modeling–whether it be for decision evaluation,  risk analysis, or neural network prediction–when it is deployed to support policy recommendations.

The behavioral factor in any kind of quantitative analysis is assumption.  Analysts face all-to-human temptations to alter the inputs in their Microsoft statistics worksheets.  But because, as Gelman points out, policy decisions are always made under uncertainty with a particular set of assumptions, the findings of analysts with different political goals can still be useful when considered together.

So the answer to Thoma’s question, "How far can you throw an economist?" is "How many of them are you going to throw?"

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