Sumitra Shah makes a good point to challenge the view that "government
intervention" caused the financial meltdown.  More generally, the very term
"government intervention" presumes a strange worldview, indigenous to
Ayn-Randian economics and politics, in which a market economy preexists, or
could preexist, independent of government. Property in land, for example, is
a creation of governments.  So, not long ago, was property in human flesh;
so was Emancipation along with the Reconstruction Amendments that tried to
give it meaning; so, a century later, were the Warren Court decisions that
gave it more meaning. Laws against crime, and military actions against
piracy are government "interventions" in the law of the jungle.  So are
enforcement of contracts, and laws against trespass. One could go on ad
tedium. Begone, please, with this strange locution and mindset in which
"government intervention" is something inherently illegitimate imposed on
inherently benign free marketeers.

Mason Gaffney

-----Original Message-----
From: Societies for the History of Economics [mailto:[log in to unmask]] On
Behalf Of Sumitra Shah
Sent: Monday, April 11, 2011 3:59 PM
To: [log in to unmask]
Subject: Re: [SHOE] SHOE: DeLong on Econ Ed

Roy Weintraub has a legitimate reason to find it remarkable that some of his
fellow list members may be confused about the subjcet of economic models.
For a lively discussion about models and some other subjects, the videos
posted by Pedro Garcia Duarte of the mini-symposium held in São Paulo,
Brazil last summer, are very interesting. I am sure they are in the list
archives.
But what I found remarkable is just how confusing economics itself can be.
Consensus is hard to come by. When Pat Gunning says in his comments about
the financial crisis:

"What needs to be studied is the effect of government intervention on what
Mises and Hayek called economic calculation --" I am struck by his
conviction/presumption that government intervention is the main or sole
cause of this financial meltdown. An expansion of the monetary base
certainly played a role, but many prominent economists have also blamed
deregulation of the financial sector in the 1990s for making it possible to
wreck havoc on the economy. The sophisticated tools and mathematically
arcane techniques used by the "whiz kids" on wall street surely played a
part because they were exempt from any meaningful scrutiny. Behavioral
assumptions will help tell us how incentives work in a particular case, but
making such behavior opaque is certainly possible only if it is allowed to
be so. Efficient markets and markets as ultimate solution have their
problems in the messy real world.

Sumitra Shah
________________________________________
From: Societies for the History of Economics [[log in to unmask]] On Behalf Of E.
Roy Weintraub [[log in to unmask]]
Sent: Monday, April 11, 2011 2:04 PM
To: [log in to unmask]
Subject: Re: [SHOE] SHOE: DeLong on Econ Ed

On Mon, Apr 11, 2011 at 1:06 PM, Pat Gunning <[log in to unmask]> wrote:
> What I find remarkable about the DeLong's comment that Humberto posted is
> his implicit view that students should learn MODELS. The real lesson of
> recent events, it seems to me, is that in spite of 50 years of teaching
> models; there is no model that matches the reality that was experienced.
>

What I find remarkable is that Pat Gunning, and perhaps some others on
this list, have a view of "models" that is hopelessly confused and at
least a quarter century out of date.

For a short reading guide, Pat and others might consult:


Models as Mediators: Perspectives on Natural and Social Science by
Mary Morgan and Margaret Morrison (eds.) 1999
"Models" (2008) by Mary S. Morgan in The New Palgrave Dictionary of
Economics, 2nd edition, eds: S.N. Durlauf and L.E. Blume (Palgrave
Macmillan), online.
Models: The Third Dimension of Science by de Chadarevian and Hopwood (2004)
Science Without Laws: Model Systems, Cases, and Exemplary Narratives
by Creager, Lunbeck and Wise (eds.) 2007

Since Morgan is a past President of HES, one would have thought that
her work was fully known by all in HES, but I guess not.

--
E. Roy Weintraub
Professor of Economics
Fellow, Center for the History of Political Economy
Duke University
www.econ.duke.edu/~erw/erw.homepage.html