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> issues like inequality, globalization, and the most efficient ways to tackle climate change...

> groups of students demanded an overhaul in how economics was taught, with less emphasis on free-market doctrines and more emphasis on real-world problems.

> in many cases this material comes after lengthy explanations of more traditional topics: supply-and-demand curves, consumer preferences, the theory of the firm, gains from trade, and the efficiency properties of atomized, competitive markets

This is very concerning. If you don't understand things like supply and demand curves and relative advantage, you can't understand economics. There's very good reason Mankiw starts with these basics.

If the math gets thrown out for ideological reasons, then economics will become the next sociology.

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> If the math gets thrown out for ideological reasons, then economics will become the next sociology.

I've got bad news for you buddy....

Economics has been nothing more than a pseudoscience for the past few decades, driven by political pandering.

> If you don't understand things like supply and demand curves

I am not an economist, but I disagree strongly. The concept of supply and demand is a plague of economics theory, especially in the aggregate. It's a terrible idea, which should have been obsoleted years ago, and has much nicer alternatives. The basic (but not only) problem with it is that you're looking at one side of equation at a time.

There is a much nicer alternative treatment in J.M.Blatt: Dynamic Economic Systems, which uses Leontief matrices. Also, if you want to know where my criticism is coming from, read Steve Keen's Debunking Economics. And even he doesn't list all the issues with supply/demand analysis, although he hints at them in other chapters.

> Leontief matrices

These are commonly called IO models in econometrics (for input-output). There are a number of successful IO models. Characterising these as "competitors" to supply-demand curve drawing is silly since they share common themes and complement each other. IO models need lots of data and underperform in situations where the market computes the table for you, i.e. where prices are clear, e.g. for commodities or liquid financial assets.

> IO models need lots of data

To draw supply and demand curves to just find the equilibrium also requires quite a lot of data. And if you aggregate, then it's not even clear what these curves are and what is the equilibrium.

> where the market computes the table for you

I am not sure what you mean by that. How is supply-demand model better? What it gives you in those situations?

Also, I should add: Blatt's IO model (if you want to call it that) is not an econometric (meaning statistical) one. I am not familiar with IO econometric models, so I cannot say how it is different. And it's kinda underdeveloped, too, unfortunately though understandably.

> I am not sure what you mean by that. How is supply-demand model better? What it gives you in those situations?

It yields better predictions with fewer inputs. For simple calculations of optimal pricing or optimal production quantities given input costs, a simple table of volume versus price beats a matrix. IO models become interesting when observing entire industries. (That is why the DoJ uses the HH metric [1], an IO-derived metric, to measure competitiveness.) But they're macroeconomic, not microeconomic, models. Macro has a worse track record than micro, which starts with simple regressions of volume and price that we call supply and demand.

These kinds of matrix models are deeply embedded into the IMF's approach, by the way. Many are critical of the IMF's over reliance on such difficult-to-intuit models.

[1] https://en.m.wikipedia.org/wiki/Herfindahl_index

Again, I think you're talking about statistical model, which I don't object to. I object to supply-demand model as a phenomenological model, as taught in the economics textbooks. What they are doing is not regression.

Basic rules like "if you decrease supply the price will go up" are true in more cases than they aren't. I agree, however, that entry-level students tend to overfit their models. If they never receive later training, they go into the world with a faulty view. Those same people then find those models failing in places we've known, for decades, they fail (in some cases, in a predictable way) and then come back to blame the models.

In particular, one big issue I personally have with supply/demand model is that I don't know how to take two markets and their respective supply/demand curves and equilibria and combine them into supply/demand curves and equilibrium for the common market, under whatever additional assumptions you want to have. And I tried, it was one of the first things I tried to do when learning economics (it's tricky, because the equilibrium has to match).

And I have never seen an economic textbook do that, either. But they all magically jump to aggregate demand and supply, where you have millions of products. They cannot even aggregate two!

Someone mentioned physics here. So that's what you do in physics, you analyze one thing first, then two things, then millions of things in aggregate. With supply and demand model, the 2nd step is simply not done, and for a good reason - the model will fall apart (as far as I can tell) at that point.

That's because of the nontrivial math. It will be found in general equilibrium section toward the end of introductory microeconomics, or at the beginning of a graduate course in macroeconomics.

Page 182 of this excerpt from Acemoglu's Economic Growth discusses aggregation and the possibility of a representative household. http://users.econ.umn.edu/~guvenen/DaronBook1.pdf

Aggregation of firms (and production functions) works quite nicely theoretically. Unfortunately, the same is not true for household / demand aggregation. The Debreu-Mantel-Sonnenschein Theorem aka. the "anything-goes" theorem gives a stark negative result. Utility functions are just too idiosyncratic to aggregate in every possible case.

However macroeconomists still do this for purposes of tractability. We know that sometimes aggregation is possible, if utility functions take certain forms. This is only one of many dimensions modern macroeconomic models are far from realistic. This is no secret to anyone.

This is a big problem, which is enough to kill the model, in my view, but not the only problem, and not the one I alluded to. (And IMHO it affects supply as well.) The problem I alluded to is that how you aggregate supply and demand curves so that the equilibriums (the points where they intersect) match in some reasonable way.

Supply and demand curves are such an unsalvagable mess, in my opinion. Economists should just stop drawing them.

If the supply curves of both markets are expressed as functions that accept Price and return Quantity, then the supply curve of the combined market is the sum of these two functions. I.e. for each price the combined quantity of supply is the sum of the two supplies. Same with demand. Then the equilibrium of the combined market is the intersection of combined supply and combined demand. Am I missing something?

To be honest, my memory is really hazy about this, but the problem is, how do you interpret the aggregate price in aggregate equilibrium, then? Is it what you would expect it to be?

I just did a quick calculation - based on your suggestion - with linear demand/supply curves and what I got as the aggregate price is a weird combination of the two prices. It's not any kind of (weighted) average of the two, as far I can tell. In particular, it seems to me that the aggregate price will differ if, for one of the markets, we change either demand curve or supply curve but keep their intersection at the same point. That's wildly counter-intuitive, I don't know why should aggregate price behave this way.

Maybe I am wrong, and you can make it work. If you do, write it up! It really should be in textbooks, it's embarrassing they don't discuss this case.

And this is a case of two (presumably) completely independent markets with linear curves. It gets much more hazier when you have a relationship between the two markets (for example, one is a substitute for the other).

I don't think you can get an exact aggregate supply/demand model if you are aggregating over non-interchangeable products. To combine the models for different products, you'd need vector-valued price, supply, and demand. That could lead to strange interactions, which wouldn't be captured by lower-dimensional models.

Disclaimer: I've never even taken Econ 101, so I might completely misunderstand something. If that's the case, please downvote and tell me where I'm wrong.

This is kinda the conclusion that Steve Keen's Debunking Economics arrives at too, although amazingly enough, through a different path (avoiding breaking the monotonicity assumptions on supply and demand curves). Basically, any aggregate supply/demand model has a single consumer and a single product. Which makes them pretty much useless, and they just need to go.

I haven't read the book, but I think your fears are somewhat unfounded. Skimming through it, chapter 8 discusses Supply and Demand (in fact, that's the title of the chapter). And it's certainly not devoid of math.

I haven't read it either, just skimmed. Maybe I'm overly concerned. It's not devoid of math, but it's certainly very light on math. And the supply and demand isn't until chapter 8 while inequality is 1.1.

But much more concerning is "1.9 Capitalism, causation and history’s hockey stick".

It starts off questioning whether capitalism actually did cause the great hockey stick. It then presents the German case study pretty fairly but then ends: "We cannot conclude from the German natural experiment that capitalism always promotes rapid economic growth while central planning is a recipe for relative stagnation."

While it's true that one case study isn't conclusive (and the absolute term "always" was used to weaken the hypothesis), the closing paragraph leaves the reader with the impression that we only have one data point so we're not that sure which approach works better.

Edit: On the other hand, it is honest about price controls. And it does actually incorporate supply and demand curves in later sections where appropriate.

The important aspect is competition. If you have multiple central planners that compete with each other then maybe it could work out as well.

So, similar to how capitalism does it?

Capitalism isn't about markets. Capitalism is defined as private, not state, ownership of property. Nothing in capitalism's basic theory requires markets.

It's just that capitalism, sans monopolies, and markets are a natural fit for each other. Capitalism with monopolies is the late 1800s US, which was an economic disaster for many and why we saw a rise of unions and socialist groups at the time.

Sure. But if one central planner is better than two, because price controls would work better without competition, then it should stand to reason that even more than two planners would be even more effective. If the entire market were involved in price-setting, it should be optimal. Sure, there's probably a point of diminishing returns on how many people are needed to make price controls more efficient, but it seems likely that the point of diminishing returns isn't proximally close to 2.

A newfangled med school could conceivably lecture on "Smoking, causation and the cancer of old age" in the intro course, and still turn out great doctors.

But it should raise some questions about who backs the school.

Supply and demand curves don't follow closely with most, if any, markets. Agriculture and some commodity markets follow the models but the rest don't. You literally couldn't model your restaurant's business finances on the basis of micro-economic models.

Even models regarding scales of economy don't fit any firm anywhere on the planet. Firms that produce electronics don't bother with such models and theoretically overshoot scales of economy all the time but make up for it by the fact they can sell their electronics at a price that offsets their costs (i.e. they set the price for the revenue they want, not what the market will bear).

> You literally couldn't model your restaurant's business finances on the basis of micro-economic models.

If a restaurant lowers the price for a given quality of food, will it increase demand for its services? Probably

If a restaurant provides discounted prices for items during certain low demand hours (happy hour), will it be able to increase demand for its services? Probably

If other restaurants decrease prices during low demand hours, will it decrease demand for its services? Probably

> they set the price for the revenue they want, not what the market will bear

If the price they set for the revenue they want is not what the market will bear, then they lose money. Done long enough, they go bankrupt.

Am I arguing that this is always 100% perfectly true? No. Is it true more often than not that it can be demonstrated with evidence? Yes.

You keep using that word, probably, as if it's a quantifiable number by which a firm can and will make their business model upon in such a manner which they can bank on gains/losses to actually turn a profit which they can model precisely (hint: they don't actually do this, I've worked in a restaurant). Seriously, making cute micro-econ models isn't science, it's phrenology. If you want to construct something with known quantities with known and repeatable events in a model then I'll listen. If you're going to give me Friedman's plucking model then I'm going to just put my headphones and ignore anything you have to say.

It's disingenuous to argue that because these simple models do not spit out a specific price that businesses can't and don't make use of them. Most of the time they're implied when reasoning about things. Plenty of data and evidence exist to demonstrate economics is a useful tool. Choosing to ignore empirically grounded knowledge makes you no more clever than a flat earther.

If your restaurant decided to drop the prices on their meals to $1, without changing anything else, would demand increase or decrease? I've worked in a restaurant too, but even if I hadn't I could give you an answer.

You provided no evidence to refute any of them except to make a weak claim of authority based on having worked in a restaurant. These are simple models that make predictions about real world outcomes that can be tested. That is, using observation we can prove or disprove hypotheses that I've mentioned. Provide evidence or move on.

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