As someone who has an interest in the field and how it may be used productively to frame and address societal issues, I have an idea that I wish to throw out there. I’ve just started to read the book and notice that the moment when Prof. Raworth is confronted with the question of what the aims of the profession are came when in a class on development economics where the class was a bit more concerned with the means of determining metrics for how effective different policy approaches were. This suggests to me that the study of development economics is more concerned with practical applications and less with theory, willing to try various approaches leading to greater investment for those that prove promising, while pruning back those that don’t. Also, due to the less developed nature of developing nations, they lend themselves to being designed in much different ways than has traditionally been the case in industrialized nations. We already see signs of this in China. Consequently, economists may have a better time building models for the world consistent with the doughnut either in the developing nations or by taking the field of development economics and applying it to the impoverished communities of industrialized countries. If you follow my logic here, my thoughts boils down to this: would a person such as me who wishes to study and acquire the skills of an economist for the purpose of doing good for the world be better off studying development economics? Would I find that I could or would study more behavior economics and other concepts and tools that are useful for real world applications, perhaps sidestepping much of the theory of “rational economic man” and better preparing myself for the work that I would ultimately aim to do? Would I find that after completing such a course that I would in fact have many such opportunities?
It is curious that we supposedly have this “rational economic man” but no one suggests mandatory accounting in the schools even though double-entry accounting is 700 years old.
As an undergraduate, I actually studied accounting. But even if everyone took accounting, there would be so much else that people would have to understand to make “rational” decisions. No one has perfect perspective or all the relevant facts.
This brings up an issue regarding government regulation in a technological society. This “caveat emptor” business may have worked for the Romans. I worked for IBM. One aspect of evaluating computer performance is with some ‘benchmark’ program that measures a machine’s capability. I never saw the word on any documentation while I was there. I had to write two programs to test a computer for myself compared to its replacement.
So how are we to evaluate all of the junk that is manufactured and keep from wasting the planet’s resources if mandatory testing is not required of manufacturers? But then the government makes a big deal about standardized tests for students. LOL
Indeed our subject of macroeconomics should become more scientific. But the information in Doughnut Economics is only descriptive and true science includes the means for logical and numerical analysis, so as to prove and demonstrate how it works. That is why when I set out to solve this dilemma I used the engineering approach as if our social system was a man-made means for evolutionary progress outside of our skins. My 310 page e-book on this subject is free to those who wish to see how macroeconomics is a true science which has the means for analytic searching to determine the most ideal policy for any situation. write to me for a free e-copy email@example.com
Doughnut Economics doesn’t have to use heavily quantitative methods, in part because it’s not trying to present any concrete solutions, but only to identify glaring faults in the way that economics has developed and continues to be taught in a society that has grown so much more sophisticated. Economics is a piece of an open social system, and our abilities to truly understand and describe that system in quantitative terms is limited. Biology lends itself much more easily to being understood through rigorous scientific methods, yet defies our complete understanding, because of its complexity. One element that contributes to that complexity is something that gets discussed at the very beginning, BIO 101 – emergent properties. These properties escape our current abilities to understand them. A simple example is that table salt is composed of the highly reactive, soft metal sodium and poisonous gas chlorine. So far as I know nobody has yet explained how that particular transformation occurs. And this sort of transformation from more fundament elements to poorly explained or completely unexplained phenomena at only the next step up continues, for instance in the formation of proteins that have a limited number of elements much like our alphabet but form a tremendously complex array of compositions that we rely on for basic functions. Those elements get joined together in strings much as our words are formed, but they go through the further process of folding in ways determined by the sequence but also affected by the structures of alpha helixes and beta pleated sheets that form before that folding takes place. Economics can make significant advances through the use of mathematics and rigorous logical reasoning. But the complexity still limits those efforts, and our ability to observe society, including the behavior of economists, as Kate Raworth has done shouldn’t be stymied by those who insist that this is all reductive. I would recommend Richard Thaler’s book, Misbehaving. It, too, takes aim at the economics profession for its hubris, while showing what more can be understood by understanding actual human behavior.
What’s the title of your book?
Can you get it on Amazon?
As an engineer myself, I agree using ‘system’ engineering approach adds tremendous value to see the interaction between the various things going on in our economy.
I believe Kate’s addresses this approach as well.
Good luck with your studies.
My suggestion is to become active in social media helping people understand basic economics.
I also recommend contacting people in the media who lack basic economic knowledge and often repeat politician’s press releases that mostly present the ‘benefit’ but not the ‘cost’ of their policies.
So wouldn’t everyone doing their accounting mean keeping track of the Depreciation of Durable Consumer Goods? What do American consumers lose on the Depreciation of automobiles every year. The number of cars reached 200,000,000 in the US in 1994. What about TVs, air conditioners, stereos, etc. Stuff gets added to GDP and eventually thrown away but not subtracted.
Our “subject of macroeconomics” doesn’t need to “become more scientific.” That train left the station back in 1947 with Paul Samuelson’s book Foundations of Economic Analysis. Ever since there has been a steady flow of students from areas such as mathematics, physics, and engineering going into the profession to describe any number of things with elegant formulas. And I don’t wish to discount the value of this approach entirely, only to point out, again, that this is a social science. There is a reason why Daniel Kahneman, a psychologist, won the Nobel Prize in Economics as did Richard Thaler, an economist whose own work was highly influenced by the body of work of developed by Kahneman and Amos Tversky. There are plenty of approaches to economics that can be taken, while following scientific rigor that don’t limit it to mathematical equations. I certainly feel that our understanding of biological systems can contribute significantly to the way that we view the larger economic system. For instance where tax policy is concerned I don’t believe that taking a system designed to extract from those with limited resources to shower those with many leads to some indirect benefit to those with the few enabling them to blossom. It makes much more sense take readily available resources from regions of the economy that already thrive and deliberately direct it to those who need it to enable them to contribute meaningfully to their own development. Just to be clear, I intend this to describe in a sense a kind of farming model. Individuals need certain fundamental resources if they are to succeed. The attitude that the individual is to “pull themselves up by their bootstraps” is as practical as the literal interpretation of that term actually suggests.
jbbulger: I hope this answers the same person with whom I began a conversation here. The title of my book is “Consequential Macroeconomics–Rationalizing About How Our Social System Works”. It is on Amazon (rather costly) having been published in 2015. If you write to me at firstname.lastname@example.org I will gladly send you an e-copy.
The answer to complexity is in my paper SSRN 2865571 “Einstein’s Criterion Applied to Logical Macroeconomics Modelling”. This takes aggregate values of large groups of similar data.This paper is on the internet.
If macroeconomics does not need to become more scientific since 1947, then how are we to better understand it now compared with then? There are a lot of words being used to try to explain it but none of them are sufficiently accurate to REALLY show how it works, which needs a model and some numbers if not a few algebraic symbols. Actually this is not so difficult as you might think and the maths is merely a kind of short-hand for the complications that result from the many words.
I never meant that we should not continue to use mathematics to understand economics, only that placing all the focus on that endeavor severely limits what can be done in more practical terms. It is my understanding that the study of economics is for the purpose of improving the general welfare of the world’s population. FDR took an approach of trying many proposed solutions to societal problems, seeing what worked and what didn’t, then providing greater investment to those programs that paid off, while pruning back those that didn’t. As a social science, economics should be interested in taking note such results even as it strives to explain them. In his book Misbehaving, Richard Thaler says that the idea of perfectly rational individuals and the formulations that they may inspire are a good starting point. But it’s incomplete, because people are not perfectly rational, as his research has shown. I do think that the development of quantum computing will contribute significantly in drawing together the whole picture. The example I gave of the folding of protein molecules is an example pointed to by those in the field as such a problem for quantum computing to solve. So, my point is that the system is complex and we are just barely on the doorstep of attaining the necessary sophistication for truly calculating and thus quatifying such things as microfoundations, not just in some theoretical fashion but as they actually exist. In the mean time, it isn’t necessary for us to perfectly understand how systems work for us to make useful determinations by drawing comparisons, using analogies and learning from trial and error, based of course on our best estimations.
Making Macroeconomics an Exact Science
Today macroeconomics is treated as an inexact topic within the humanities, because at a first look it appears to be a very complex and easily confused matter. But this attitude does not give it fair justice–we should be trying to find a good way to approach and examine the subject that avoids these problems of complexity and confusion. Suppose we ask ourselves the question: “how many different KINDS of financial transactions happen within our society?”, then the answer is that only a limited number of them is possible.
Although our society comprises of many millions of participants, to answer this question properly we should be ready to take aggregates of all the various kinds of activities (no matter who performs them) and then idealize them so that they fall into more general terms for the expression of a small number of the different specific social functions. Here, each activity is found to apply between its particular pair of entities—with the expression of its individual properties. Then the author finds that to cover the whole social system of a country (excluding foreign trade), it takes only 19 mutual flows of money for the purchase and payment of/for goods, services, access rights, taxes, credit, investments, valuable legal documents, etc. Also these flows are between only 6 different representative entities. .
The analysis that led to this unexpected result was performed by the author and it may be found in his working paper (on the internet) as SSRN 2865571 “Einstein’s Criterion Applied to Logical Macroeconomics Modeling”. In this model there are these 19 double flows of money verses goods, etc. They are found to pass between only 6 kinds of role-playing entities. (There are of course a number of configurations that are possible for this type of simplification, but if one tries to eliminate all the unnecessary complications and sticks to the basic activities, these particular quantities are the most concise result of this simple yet satisfactory and comprehensive analysis.)
Surprisingly, past representation of our social system by this kind of an interpretations model has not been properly examined nor presented before. Other partial versions have been previously modeled, but they are inexact due to either their being over-simplified, or in the case of econometrics, too complicated. These are the two reasons for the earlier non-scientific confusion by many economists and their failure to obtain a good understanding about the way the whole system works. The model being described here is unique, in being the first to include, along with some additional aspects, all the 3 factors of production of Adam Smith’s “Wealth of Nations” book of 1776. The three factors of production are Land, Labor and Capital and along with their returns of Ground-Rent, Wages and Interest/Dividends respectively, which are all parts included in this presentation diagram.
The diagram of this model is in my paper and also may be viewed in Wikipedia, Commons, Macroeconomics as: DiagFuncMacroSyst.pdf , which needs enlargement to get all of the aspects included in one view–for a mention of the related teaching process (see also my short working SSRN 2600103 “A Mechanical Model for Teaching Macroeconomics”). With this model the various parts and activities of the Big Picture of our social system can be properly identified and defined. Subsequently by analysis, the way the system works can then be properly calculated and illustrated.
It is done by the mathematics and logic that was devised by Nobel Laureate Wassiley W. Leontief, when he invented and introduced the important "Input-Output" matrix methodology (but he applied it to the production sector only). This short-hand method of modeling the whole system replaces the above-mentioned block-and-flow diagram. It enables one to really get to grips with what is going-on in our social system. It is found that it is the topology of the matrix which actually provides the key to this. The math is not hard and is suitable for high school students who have been shown the basic properties of square matrices.
Developments of these ideas about making our subject more truly scientific (thereby avoiding the past pseudo-science being taught at universities), may be found in my recent book: “Consequential Macroeconomics—Rationalizing About How Our Social System Works”. Please write to me at email@example.com for a free e-copy of this 310 page book and for additional information.
Although individuals do not necessarily behave in a logical way, our subject of macroeconomics is better related to how large numbers of similar kinds of people react to changes in the system. This is much closer to being consistent because it depends on average not individual reactions. So what is claimed above is nothing like the whole story.