Who Were the Sea Peoples?

Start here . You can work backwards from that post to earlier ones in the conversation, if you would like to do so. What to make of all this? First of all, philosophically speaking , Mises is correct: acts of valuation are not measuring anything. If I part with $40 for a steak dinner, I have not "measured" the value of the dollars or the dinner. I have made a judgment that I prefer the dinner to the $40, but a judgment is not a measurement. (I can of course, make judgments about measurements: "I think Bill is twice as tall as Joe." But that is not a measurement itself either.) In fact, I think we can go further, and declare we have no particular reason to endorse Mises' claim that acts of choice place "all values on a single scale." Consider Socrates, sitting in his cell awaiting death, with the opportunity to escape before him. Mises' claim seems to imply that if Socrates had merely been offered enough olive oil and retsina, he would h...

Let's say I have two friends, call them Bab and Jesiah. One day I contact Bab, and I say, "That guy Jesiah, he's taunting us on Twitter all the time. Here's what I suggest: I have hold of this new virus that can wipe things off the Internet. Remember [this is all just made up for this example, mind you] that terrible public bet you made a few years back? I can wipe out all evidence of that... if you take out Jesiah when he visits you next month." Now, in the kind of simplistic view found here , "without a doubt this [offer] is making its participants better off!" After all, I wouldn't have made the offer if I didn't prefer to make it. And Bab can turn the offer down, and be in the same situation he was in before I made it, or take the offer... in which case he must think it makes him better off. But the fact is that my offer is evil, and makes me worse off just by having made it, whether or not I "prefer" to do so. And while Ba...

In Excel, posted to GitHub . Right now I have: A real growth vs. nominal growth vs. inflation spreadsheet A Keynesian Cross spreadsheet; and A Production Possibility Frontier spreadsheet. All of them are built on a minimal data entry paradigm; for instance, for the Keynesian Cross, you only need enter autonomous consumption, marginal propensity to consume, and intended investment, and the whole kit and caboodle recalculates from there. For the PPF, you just enter a maximum number of units, and everything recalculates: great for showing a collapsing or expanding PPF.

Noah Smith complains : "And to make it worse, most of the macro theories that economists take halfway seriously are too hard for intro kids, so they end up learning silly stuff like Mundell-Fleming and Keynesian Cross that no one even halfway believes." But, believing is something one should never do with one's models: they are just models, and as abstractions are necessarily falsifications of the full reality being modeled. A road map is just lines on a piece of paper: it never follows each twist of a road, it doesn't show dangerous potholes, it doesn't let us know the road is now blocked by a slow-moving garbage truck. (Of course, interactive maps may show red dots when a road is backed up, but the basic point stands.) This was a point we made when I was a partner in an asset-trading firm: our models were something we used, not believed, and as soon as they ceased to be useful, we abandoned them, and sought another useful model, without any silly concer...

The World in the Model , is now available at The Review of Austrian Economics .

Some thoughts: 1) Models are constructed. 2) They are made of distinct parts. (E.g., "a supply curve, a demand curve, an x-axis, a y-axis," or "red lines for highways, black lines for local roads, dashed lines for dirt roads.") 3) The parts are made to fit together. (The supply curve is measured in the same units as the demand curve, and crosses it somewhere. The roads are laid out on the same grid, using the same scale.) 4) We can adjust those parts, either purely mentally, or with our hands (as with an architectural model), or a pencil and eraser (a mechanical drawing), a computer (a weather model), and so on. (In using a map, we actually adjust a "part" we will in: where we are. Sometimes, this part is represented by our finger, as we trace a route, or the mark of a highlighter.) 5) Adjusting the parts produces an "answer" of some sort from the model: "Oh-oh, if we move that wall there, the stairs won't fit," or "If t...

Nick Rowe is simply one of my favorite, favorite economists alive today. When he generates a macro-economic model, I spend as long as it takes to grok it, and the time is always well repaid. And sometimes it takes me hours to get what Nick is saying in a model that probably took him minutes to knock off. In other words, in general, I am in awe of Nick's depth of understanding of the macro-economy. But... On OLG models and government debt, he is simply stuck on one model , and can't see that we can easily model the exact opposite result! Yes, debt can have inter-generational distributional implications: but it can have them in either direction, or it can be completely neutral in this regard! I can be walking down the street, whistling, and 1) Shooting random people nearby. Or I can be walking down the street, whistling, and 2) Handing out sandwiches to needy people. The fact that I can create a model in which 1) occurs no more proves that whistling causes mass sho...

As I am finishing up my review of Mary Morgan's book , as well as reflecting back on several months of fairly intensive agent-based modeling, I find myself thinking that the use of models in the social sciences is much like its use in engineering: the model allows us to answer questions such as, "If the assumptions that went into building the model are true, then what will happen if we introduce this change?" In either field, the assumptions are always only more-or-less true, and may be wildly off: the engineer, for instance, may be mistaken about how strong the effect of the wind will be on a bridge he is building: To understand the analogy I am making, consider that the above can also be taken as a visual representation of what happened to Murphy's macroeconomic model following 2007 . (We kid because we love, Bob!)

Here . Lego people are the wrong size to be humans. They have no nose or ears. Their legs are columns, their hands often hooks. Their "skin" feels nothing like human skin, and they are room temperature... I'm sure you could keep going. And yet they function as model people, so well that very young children ( by 20 months ?) are able to recognize them as such and play with them. How does this work?

Here is the Newly-Phillips machine , which was itself a simulation, simulated. (Hat tip TheArthurian.)

I formulated this principle when I was programming mathematical models of financial markets. I noticed that my colleague who generated the models (that I then implemented) was never particularly attached to them. He would run them so long as they were indicating profitable trades, and then abandon them when they stopped. I was also writing Economics for Real People at that time, and grappling with the issue of the relevance of mathematical models in the economic world. Noticing the modelers attitude, one day I asked him, "Would you say that our practice is to use our models, rather than to believe in them?" "Absolutely," he replied. Mary Morgan's book reaches a similar conclusion.

"Writing down a model and manipulating it allows economists to think through in a consistent and logical way how a number of variables might interrelate, and to find solutions to questions about such systems. This habit of making and using models extends the powers of the mind to ask questions and explore the answers in complicated cases." -- Mary Morgan, The World in the Model , p. 258

I actually had an economist tell me the other day that "utility" is a real "thing" out there in the world, and not just a theoretical construct to help economists understand it! Mary Morgan, in The World in the Model , has some good quotes explaining how this sort of thing happens: "(The triumph of modelling) has created a perspectival change in the way economist view their field: they began by looking at the economic world through the lens of their models and ended by seeing their models in the world" (379). "in the process, those small world models of their science became so familiar to economists that now, when economists look at their small mathematical models they see the real world, and when they look at that big real world they see it is a sequence of their small models" (409). You know how when you spend enough time staring at a white circle on a black page, and then look away, you see an after-image as if it is out there in the re...

Through the most difficult part, I think: the agents trade their goods until they reach an equilibrium. Here is the Python code that does this, formatted by Blogger, which seems to always want to reduce two spaces to one: """ edgebox_model.py An Edgeworth Box model where two agents trade goods. """ import logging import entity import spatial_agent TRADE = "trade" WINE = "wine" CHEESE = "cheese" GAIN = 1 LOSE = -1 Accept = True Refuse = False def util_func(qty):     """     Later, we want to be able to pass in arbitrary util funcs for each good-trader combo.     """     return 10 - .5 * qty class EdgeboxAgent(spatial_agent.SpatialAgent):     """     Agents who attempt to trade goods to achieve greater utility.     We are descending this from SpatialAgent, because later on we want     traders who can detect local prices but may not know ...

So I'm making a model of agents who might exchange goods. The initial idea is to have utility function for each good they might have or obtain, as well as a present endowment of each good (which may be zero). Now, for an Edgeworth Box, my initial price model, this is easy: we only have two goods, and we know what they are in advance. But eventually, we would like to have agents discover goods on the market that they know nothing about before encountering a potential seller. So how can they have a utility function for a good before they know it exists? (I have not solved this problem in my model, although I have ideas.) In fact, this reflects a problem that actual market actors face: how can they know how much they want of, or what price to pay for, a good they have never encountered before? As my mentor Israel Kirzner has noted, markets inherently involve discovery.

I am currently reviewing Mary Morgan's book, The World in the Model . (An excellent book, by the way, and one that shows the value of the history of economic thought for the practice of economics: economists who read it will, I think, have a much better understanding of what modeling is all about.) At the same time, I am busy building agent-based models. It is propitious that these two things are happening at the same time: my own modeling makes me appreciate Morgan's insights much better. In particular, she notes that models are away to explore how the world possibly works by exploring how the model works. The nature of models as something to explore has, I think, been underappreciated. I am fascinated, in working with my model of Adam Smith's theory of fashion, to see how much the results coming out of the model change based on tweaking the assumptions going into it. For instance, changing the amount of time that agents will tolerate a fashion scene not to their liking...

Here . Indra is an agent-based modeling system written in Python and available for download. I just finished coding Adam Smith's fashion model using it, and one of my students is going through Schelling writing up his models using it. Contact me if you would like to try the system, and I will help you get going.

By default, Google maps on my iPhone offers me a satellite picture of the place I am trying to get to. I find this a ridiculous default choice: I am not interested in how tree covered the property in question is! I just want to see black lines on white space so I can figure out how to get there. And yet there is no doubt that the satellite view is more realistic than a typical street map.

"Economists (just like their astronomer forebears) understand that a model stands in for their economic universe to enable them to explore certain properties of that world represented in the model." -- Mary Morgan, The World in the Model , p. 33 (emphasis mine) The models of physics are no different: they stand in for certain properties of the real world, and allow us to study them in abstract isolation.

Mary Morgan, in her book The World in the Model , likens models to caricatures, and offers the following graphic during her discussion: That this process of caricature is interesting and informative I do not doubt: I am no critic of caricatures or of models! Seeing Louis Philippe as a pear, and seeing the world as simply an interrelated system of mathematical equations, are each interesting perspectives. But if someone asks me if caricature of Louis Philippe as a pear is perhaps not the actual cause of the real Louis Philippe, who is a sort of cognitive illusion, I must admit I am so flabbergasted that I hardly know how to reply. I spent several years modeling options in the financial markets. The programs I wrote to do that made a fair number of traders a good deal of money. but imagine their surprise if, one day when their actual trading lost money, I told him that this was of no regard: my models were the real thing, and those models had made money, and the traders' f...