Thursday, January 21, 2016

Dismal science


Just finished going through an economics paper Levine and Rennelt (1992), "A Sensitivity Analysis of Cross-country Growth Regressions".  To paraphrase, what they found was that a whole battery of papers that preceded them in trying to empirically correlate economic growth of countries with various factors were not rigourous enough, and that pretty much nothing could be found that could consistently explain the GDP of nations. This reinforces my notion that the world is far beyond what economists today are able to meaningfully describe. And yet the world goes on and gets more complex and (economic) decisions need to be made. So what to do ? The heuristics I can think of are:
 
- whatever you do, implement with high quality
- be pragmatic and change if things are not working. That requires good measurement
- Keep learning from what other people and countries have tried and found to work 
- be a 'systems thinker' and use ideas from different disciplines

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