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Problem analysis vs. Problem solutions January 26, 2009

Posted by larry (Hobbes) in economics, Logic.
Tags: , , ,
4 comments

Unfortunately, there is no necessary logical connection between the analysis of a problem and its solution. The two are essentially independent. So, someone could analyze a problem correctly but provide incorrect proposals for solving said problem. In accepting Roubini’s assessment of the problem, we do not need to accept his ideas on how it can be solved or what he thinks might be poor solutions, as his philosophical/theoretical stance will largely determine what he believes to be viable.

This is a problem with a lot of discussions in economics. Lots of assumptions not made either explicit enough or at all. Others introduce ideas that they think are new but have actually been around for years. For example, Soros’s introduction of the notion of reflexivity (a kind of feedback loop in economic behavior) has been a known problem in philosophy and parts of social science for over 50 years. Yet most economists fail to acknowledge this except for Soros and a few others. Neoclassical economists like Stigler and Friedman ignored it completely and possibly weren’t even aware of the issue. Keynes was aware of this problem though he didn’t discuss it in these terms.

Since a solution of a serious economic problem invariably involves a political (policy) dimension, economists aren’t very good at incorporating socio-political policy considerations into their analyses, hence their solutions should be inspected closely.

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