Ask HN: How to understand economics | Hacker News Reader

Ask HN: How to understand economics

I've recently been trying to understand economics, but I have very little grasp of the general ideas.

I've come across this: http://nbviewer.jupyter.org/url/norvig.com/ipython/Economics.ipynb

Why this simulations here are far from reality, they notebook does a very good job of explaining an idea using a simple model. Are there similar approaches for other economic ideas?

I'm aware that understanding the economy as a whole is well beyond the grasp of simple models like this, but I'm curious just how far it is possible to get using simple models.

Most economic text books I've looked at either take a too wordy approach to descriptions, or a far too detailed mathematical approach.

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Hey OP, like another poster said I think an introductory college macroeconomics textbook would be great. Most use a model based approach without bringing in crazy math to do so. A book I used in college that I think would be good is "Principles of Macroeconomics" by Gregory Mankiw. No need to buy the latest edition, the content doesn't change too much.

Go read a basic micro 101 book, discard everything else. Especially scientism gobbledegook written by physical science wannabes.

That's not terrible advice from the perspective of forming an academic foundation, but otherwise falls pretty short. If economics was as trivial as an introductory freshman course there wouldn't be a contested field attempting to build models.

Relevant comic and all that jazz: http://www.smbc-comics.com/?id=3117

Wealth of Nations:

https://en.wikisource.org/wiki/The_Wealth_of_Nations

Das Kapital:

https://en.wikisource.org/wiki/Das_Kapital

I read a good portion of these in college for an economic history class and I would not recommend these to OP. These books are extremely dense and foster qualitative discussion, not really the model based approach to economics that OP seems to be searching for.

Reading Marx’s Capital Volumes I, and II with David Harvey. He has been teaching Karl Marx's Capital for over 40 years.

- http://davidharvey.org/reading-capital/

You can start here: https://www.youtube.com/watch?v=PHe0bXAIuk0

While I really like the video, it's not quite what I'm looking for.

I'd be interested in an attempt to take these simple ideas: credit, debt, etc and created a simple model that shows how credit leads to cycles, where I can play with parameters and see exactly what affacts what.

For example, why cycles? Why should credit across multiple people synchronize into cycles? why not just average out? Exactly what assumptions go into this?

Sounds like what you really want is an introductory macroeconomics textbook that will give you an explanation of the standard models mainstream economists use.

But your example - why business cycles occur - is really more of a debate than a generally understood phenomenon. That's part of the reason why they occur. (part of the explanation is straightforward: people are less likely to borrow if they think that problems in the economy might make repayment difficult, and optimism/pessimism about the future tends to be shared by large proportions of the population. But the dynamics aren't universally agreed upon.)

Mathematical economist/game theorist here (applying daily in the role of CEO of family firm founded three generations ago).

Firstly... and I do not mean this to sound like hurt pride, but... a discipline would need to be quite trivial to be ‘understood’ by cursorily surveying a few online texts. There's a corpus of several centuries of findings, derivations, and unresolved controversies precisely _because_ it is nontrivial. (Side note: the existence of controversies that divide different schools of thought does not mean that everything is in question and that absolutely anything goes because, hey, we can always argue with words by distancing ourselves from observable reality — that makes for religion not science, albeit even the dismal kind.)

Second: the general idea is that there exists a dynamic, complex system constituted of agents (people, sometimes aggregated into firms and/or nations, being almost always simultaneously consumers of something in need of everything except that which they are suppliers of, be it labour, materials, knowledge, time in the form of lending money, whatever) each doing their best to maximise the enjoyment (utility) of what they have by interacting in a series of ‘markets’, which for the sake of analysis we generally are forced to assume are in ‘equilibrium’ (i.e. We're at the “end of history“ where no external bumps or surprises are leaking into the market and nudging it in any direction) but in truth we know to be in perpetual disequilibrium as information percolates in, surprises happen, and generally guesstimates of everybody involved are shown to right at best on average. An equilibrium price comes to exist where supply and demand cross and we spend many a happy hour calculating that and then trying to figure out how a ‘shocked’ system returns to equilibrium if we jolt it.

Thirdly: money is (surprisingly enough, for the public which seems to conflate economics and accounting) not necessarily the domain of economics. As a whole the discipline deals with incentives (most usefully and generically regarded as differences in subjective utility) and responses thereto (utility maximising strategies). Money is at best something that serves as a denominator to give everything a common unit and, at worst, an irksome distortion. This is one of those “school of thought” controversies I mentioned above: there are monetarists within the domain of economics and there is the separate domain of finance, somewhere between accounting and economics, and to which ‘risk’ (uncertain future outcomes) is an essential ingredient — and governmental fiscal policy (taxation and public spending)... that's yet another thing.

For the sake of reading I suggest (no offence intended) Managerial Economics For Dummies, The Origin Of Wealth (Eric Beinhocker), and The Social Atom (Mark Buchanan).

P.S. On mobile so I've had to edit this a few times... sorry if you caught me in flux but it's great to have a chance to mention stuff that amuses me once in a while.

Maybe I was too broad when I said "understand" - I had no intention of trivializing economics. I'm interested in it because it's both complex and relevant. I just want to know more than I know now.

If I were to look at physics, I can model simple systems in classical physics quite easily using a computer. In biology I can model population dynamics. Doing so helps me learn, and I find it gives me a deeping understanding as it forces me to be clear about exactly what is going into a model.

I'm aware that economics is a much softer science, but other than Peter Novig's example I can't find much in the way of modelling as a learning tool (rather than a research tool).

Does that approach exist anywhere?

In computational physics you model situations by creating some particles, placing them in some initial configuration, and defining the manner in which position and proximity of other particles creates forces acting upon each particle, and then you calculate acceleration, and thus eventually the position of those particles after a single temporal step. When all the giggling stops you've hit your system's final configuration given the initial conditions and subject to the forces defined (up to the numerical precision afforded by whatever affects your simulation's precision).

Analogously in economics you'd want to define the agents, the inventory of what they have, what they want, and the medium (market) through which they will trade to become as happy as they can. When nobody sees any point trading anymore you have a “Pareto optimal” end-state and you're basically in equilibrium.

Back when I used program simulations I used Mathematica, and I am still deeply tied to that specific platform, but there's several introductions to doing much the same with less exotic (and expensive) tools such as Python: https://www.researchgate.net/profile/Michael_North/publicati...

Oh well, so much for that.

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