How Economics Should Be Done
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How Economics Should Be Done

Essays on the Art and Craft of Economics

David C. Colander and Huei-Chun Su

David Colander has been writing about economic methodology for over 30 years, but he goes out of his way to emphasize that he does not see himself as a methodologist. His pragmatic methodology is applicable to what economists are doing and attempts to answer questions that all economists face as they go about their work. The articles collected in this volume are divided, with the first part providing a framework underlying Colander’s methodology and introducing Colander’s methodology for economic policy within that framework. Part two presents Colander’s view on the methodology for microeconomics, while part three looks at Colander’s methodology for macroeconomics. The book closes with discussions of broader issues.
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Chapter 6: Applied policy, welfare economics, and Mill’s half-truths

Essays on the Art and Craft of Economics

David Colander

Extract

The argument in this chapter is a simple one. It is that sometime around the 1930s the economics profession's use of models in thinking about economic policy changed. The result has been a tendency to draw unwarranted policy implications from models and theory, such as occurred in the recent financial crisis. The chapter argues that to prevent such misuse of models from occurring, the economics profession needs to return to the earlier methodological approach, which recognized the complexity of the economy and the relative simplicity of our formal models.

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