City University economics department must be an interesting place

Richard Murphy says:
February 17 2016 at 1:39 pm
Markets as defined by micro economists have never worked

And can’t

It is not humanly possible to deliver their model

That some microeconomists are a bit over enthusiastic, as I am myself, about the glories of market interactions is obviously true. But that all are entirely wrong? That no one single microeconomist has managed to ever describe how real world markets work?

Not even Gary Becker on why second wives might appear? Not even the sourcing of the bacon and eggs for Ritchie’s breakfast?

Sadly I know what is happening here. Let’s say you’re convinced by Steve Keen’s analysis (TLDR version, oligopolistic competition is closer to reality than Econ 101 free markets) you might then say that the standard microeconomic model is not true in all circumstances, even in many or most. But you would have to say that Steve Keen’s doing microeconomics there and thus if he is right then a microeconomist is getting the structure of markets right. Ritchie is entirely leaping over that and insisting that even those producing the critique which he agrees with are wrong. Because, essentially, he’s an idiot.

14 thoughts on “City University economics department must be an interesting place”

  1. I suspect that the problem is that he hasn’t grasped that a model is only meant to be a simplification to show some of the workings of a system; he seems to think a model is meant to be a complete and accurate description of how the system works in practice.

    It’s the difference between a cartoon and the Mona Lisa.

    The problem then is that he takes the fact that the cartoon is not a replica as proof that it is completely worthless.

    My grandfather built steam trains as a hobby. They worked – I still have a small steam engine he gave me as a birthday present. However, I suspect Murphy would say that real steam engines can pull heavily-laden freight trains; as this one can’t (it’s a static one with a flywheel) it could tell the seven-year-old me nothing about how full-size engines work, and so I shouldn’t believe all this stuff about pistons and valves. The model is useless, and it might as well be pixie dust that drives them onwards.

  2. Stupid people often have trouble with the notion that a model might be an “ideal” and that reality can at best approach the model. They obviously didn’t pay attention to the “ideal gas” at school.

    At this point they’d probably expostulate that the free market isn’t ideal at all. At that point all one can do is kick them up the arse.

  3. but the models in econ 101 are not ideals. perfect competition requires goods are perfect substitutes and producers are price takers, nobody thinks that in an ideal world goods would be perfect substitutes. It was a mistake to use the word perfect. Monopolistic competition is the benchmark, where producers have some pricing power.

  4. he seems to think a model is meant to be a complete and accurate description of how the system works in practice

    As do many climate scientists.

  5. He also ignores what happens if you have something approaching the model but not quite there.

    If it’s sort of approaching a free market, things sort of work. If it’s sort of approaching complete State control, things are sort of screwed up.

  6. Luis,

    Similar to why “rational expectations” isnt the right name because the morons keep claiming economists think people need to be “rational”.

  7. “rent seeking” isn’t a very helpful term either, because the general use of “rent” is “payment to borrow something that belongs to the other person”.

  8. All professions and specialisms use language in their own specific way. But a professor of the subject ought to know these things.

  9. This tends to suggest that Murph has never done any shopping or visited a market in his life. It is quite unbelievable even for someone as moronic as Murph to say such a thing. A fruit and veg market is so close to perfect competition that you might as well cite it as an example.

  10. In an ideal world both communism and capitalism work perfectly. Unfortunately the real world have these things called humans(I’ll be gracious and assume Murphaloon is human) which have selfish motivations. If only Murphaloon would use the same critical eye to examine his model of how the world works.

  11. Bloke in North Dorset

    A mechanistic model has the following advantages:
    1. It contributes to our scientific understanding of the phenomenon under study.
    2. It usually provides a better basis for extrapolation (at least to conditions worthy of further experimental investigation if not through the entire range of all input variables).
    3. It tends to be parsimonious (i.e, frugal) in the use of parameters and to provide better estimates of the response
    p. 13-14 as cited in: Andrew Odlyzko (2010) Social Networks and Mathematical Models Electronic Commerce Research and Applications 9(1): 26-28 (2010)

    Remember that all models are wrong; the practical question is how wrong do they have to be to not be useful.

    Essentially, all models are wrong, but some are useful.

    George E. P. Box

    Not that Murphy would take notice of an expert in their field, given he’s such a polymath.

  12. As has been pointed out to me by many an engineering colleague accurate doesn’t mean it’s right, it just means it’s right enough.
    I was going to say they seemed to think an accounting qualification meant a lack of understanding of statistics, data properties and modelling, but Murphy has proven them right in his ignorance. He’s the sort of person who gives a profession a bad name.

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