ravinomics

Every discipline has its own terminology, which can be daunting for the outsider. This is especially so for mainstream economics that is now expressed through mathematics. Economics is by far the most quantitative of the social sciences, and the training involved is intensive. Mainstream economics is in some ways akin to classical music. A classical pianist cannot become a great interpreter of Beethoven without years of training in technique. Similarly, economists must become fluent in mathematics before they can be truly creative in theory and applied work (usually econometrics); it is the student economist's equivalent of the musician practicing the scales on the piano day in and day out. Like the best classical musicians, the best economists use their technique in novel ways, stretching the boundaries of the technique—without ever departing from its fundamentals.

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To get a great answer, you must first ask a good question!

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Microeconomics is what economists know about. But macroeconomics is what they want to know about. That's what makes it so interesting.

— Benjamin Friedman (quoted in Fisher, 1993)

I have found out what economics is; it is the science of confusing stocks with flows.

— Michal Kalecki, c. 1936 (verbal remark, as cited by Joan Robinson, “Shedding Darkness,” Cambridge Journal of Economics, 6(3), September 1982, 295–6)

Isn’t it a pleasure to study and constantly apply the lessons that you’ve learned? Isn’t it a joy to have friends visit from afar? Isn’t it the mark of complete virtue to remain unconcerned when others take no note of you?

— Confucius, Analects, 1.1

In theory, theory and practice are the same. In practice, they are not.

— Anonymous

For every complex problem there is an answer that is clear, simple, … and wrong.

— Henry Louis Mencken

It is my view that most individuals underestimate the uncertainty of the world. This is almost as true of economists and other specialists as it is of the lay public. To me our knowledge of the way things work, in society or in nature, comes trailing clouds of vagueness … Experience during World War II as a weather forecaster added the news that the natural world is also unpredictable. An incident illustrates both uncertainty and the unwillingness to entertain it. Some of my colleagues had the responsibility of preparing long-range weather forecasts, i.e., for the following month. The statisticians among us subjected these forecasts to verification and found they differed in no way from chance. The forecasters themselves were convinced and requested that the forecasts be discontinued. The reply read approximately like this: ‘The Commanding General is well aware that the forecasts are no good. However, he needs them for planning purposes.’

— Kenneth Arrow, in Eminent Economists: Their Life Philosophies (Cambridge University Press, 1992)

A guide to econometrics:

1. Thou shalt use common sense and economic theory.
2. Thou shalt ask the right question.
3. Thou shalt know the context.
4. Thou shalt inspect the data.
5. Thou shalt not worship complexity.
6. Thou shalt look long and hard at thy results.
7. Thou shalt beware the costs of data mining.
8. Thou shalt be willing to compromise.
9. Thou shalt not confuse statistical significance with substance.
10. Thou shalt confess in the presence of sensitivity.
11. Thou shalt never report unweighted statistics.

— Lars P. Syll (commandments 1–10); the 11th is my own addition.

Bias means nothing else than that your estimates don’t mean what you think they mean. So there are two ways of addressing bias: either you change interpretation of the results so that the interpretation corresponds to the estimate, or you change your estimate so that it measures what you think it does. Another consequence of this is that there is no such thing as a biased estimate per se: you always need to specify what the estimate is a biased estimate of.

— Maarten Buis

Suppose someone sits down where you are sitting right now and announces to me that he is Napoleon Bonaparte. The last thing I want to do with him is to get involved in a technical discussion of cavalry tactics at the battle of Austerlitz. If I do that, I’m getting tacitly drawn into the game that he is Napoleon. Now, Bob Lucas and Tom Sargent like nothing better than to get drawn into technical discussions, because then you have tacitly gone along with their fundamental assumptions; your attention is attracted away from the basic weakness of the whole story. Since I find that fundamental framework ludicrous, I respond by treating it as ludicrous—that is, by laughing at it—so as not to fall into the trap of taking it seriously and passing on to matters of technique.

— Robert Solow, quoted in Arjo Klamer, Conversations with Economists (1983), p. 146