Four quick opinions on economic theory:
- It seems, empirically, that a useful method for making progress in mathematical theory is to make some tractable-seeming assumptions, EVEN IF YOU KNOW THAT THESE ASSUMPTIONS ARE NOT QUITE TRUE, and see where they lead. Provisionally accept those assumptions which (a) seem to 'close to true' or true a lot of the time, even if they are known to be false, (b) taken together, logically imply results which are close to true/true a lot of the time (eg they make good predictions). Then in future years, other theorists can refine these provisional assumptions until perhaps eventually, in the far future, an exact theory is achieved. And in the meantime, the predictions of the 'incorrect' theories can be practically applied in many situations.
- For example, obviously people are not 100% rational actors. Yet it is still useful to build theories which assume that they are.
- As a side-effect of the way hiring, promotion, and other incentives are setup in academia, in any given science there is a bias towards studying the subset of topics about which mathematical results can (currently) be achieved. There are three main reasons: (a) by doing something (math) that is clearly intellectually demanding, you prove your smarts; (b) you can often conclusively demonstrate the rightness of some result (even if the import of this result is small), which means that it is objectively certain that you have contributed something to the field, in contrast to less mathy areas where whether you have even made a real contribution at all is always debatable; (c) some fields of study that have prioritized math have objectively succeeded to a large degree (eg physics), suggesting that their methods are worthy of imitation.
- For example, a lot of research effort in economics is aimed at mathematical pursuits. This is not a failure of ideology or a lack of imagination, but rather, a side-effect of the way academia is structured.
- Macroeconomists cannot yet (or possibly ever) reliably predict the future economy. But this does not invalidate economics, any more than the theory of fluid dynamics is invalidated by the lack of predicatability of the weather.
- Theory is an attempt to learn something which is not yet understood. Since the target of study is not yet understood, it cannot be known in advance what the result of a theoretical effort will be, or how long it will take. The task of theoretical economics is to understand economic phenomena. It may (or may not) take centuries to significantly increase our understanding of economics (if it is possible to do so at all).