A methodological perspective on economic modelling and the global pandemic

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Abstract

A question that recent research on the global pandemic raises is: how do the assumptions underlying epidemiological models and economic models differ?  Epidemiological models we now know have become quite sophisticated (see Avery et al., 2020).  Debate among economic methodologists regarding the nature of modeling has generated a considerable literature as well (Reiss, 2012; Hands, 2013).  Yet these two literatures are largely non-communicating.  Perhaps this is because economics has produced relatively little research on pandemics up to now.  Yet it might still be asked, what might economic models be missing that epidemiological models capture?  And might there be some sort of methodological bias in economics that plays a role in this?  One way, then, one might begin to answer these questions is by identifying the main phenomenon in question, namely, in the case of the pandemic, a particular type of process, and ask what the nature of this type of process is.  Then we may ask whether there is something about this type of phenomenon that places it out of bounds for current economic methodology.  Thus, what sort of phenomenon is a pandemic?

Posted for comments on 19 Apr 2021, 4:40 pm.

Comments (1)

  • Rafael Galvão de Almeida says:

    John Davis’s paper is a meditation on the role of the economist and the philosopher of economics and science in general. It also exposes how interdisciplinary research is important because real life reminds us that the lines between sciences are human creations – very useful human creations, by the way – that reality does not respect in a neat, easy to research and publish way. But that requires economics treating other disciplines as equals, which is unfortunately not the attitude that a lot of economists take. Even if behavioral economics challenged the traditional hypotheses about preferences, most models still take the traditional approach as if it was valid.

    Will the pandemic change that? Well, it did change one thing: compared to one century ago, economists have had a larger reaction (Boianovsky, Erreyguers, 2021), but I consider it is because of greater exposition; if economists had become silent, like one century ago, they would be (even more) criticized. But, as Davis implies, it’s clear it could’ve been better.

    Economics is different from other disciplines, not just because of its hierarchical organization, but also because just observing a “game changing” phenomena does not change its nature (or it’s just too hard to change). The Ptolemaic astronomical model was “killed” not just after Newton’s observations, but also because one of its main propositions – the perfection of the celestial sphere – was disproved by showing how chaotic the celestial sphere really is. The Ptolemaic model is a relic in the history of physics today, nobody uses it to model anymore.

    In economics, however, the situation is more complex. The Great Depression had enshrined the Keynesianism as the way to make macroeconomics and a single explanation behind the causes of the Great Depression, “killing” classical economics. But then Friedman and Schwartz proposed a different cause and the rational expectation “killed” Keynesianism, in the 1970s crisis. Some would say another shift happened in 2008. But through either episodes, (neo)classicals and Keynesians didn’t just “die”. Even Lucas admitted: “now Keynesians are on the defensive about their models (or lack of them). There is no doubt that this advantage will prove transient.” (De Vroey, 2011, p. 16; Goutsmedt et al, 2019). Even today, there is no consensus on what caused the Great Depression or other similar events, and economic theory may fall out of fashion, but there is the chance they might return, since they apparently can’t “die” – and not only that but they may have performative effects as well.

    Therefore, I believe Davis’s reflections are relevant, especially on the necessity of interdisciplinary research. While physics has left the perfection of the celestial sphere, economics needs to grapple better with the problems of the “perfections” of the preferences that Davis talked about. Because, in worst case scenarios, it might even lose its relevance for policy, if they miss the Covid opportunity (Frey, 2021). Maybe, after things settle in the future, a proper systematic review of the “economics of Covid” literature can be done.

    Boianovsky, Mauro; Erreygers, Guido. How economists ignored the Spanish flu pandemic in 1918-1920. Erasmus Journal of Philosophy and Economics, v. 14, n. 1, 2021. https://doi.org/10.23941/ejpe.v14i1.549
    De Vroey, Michel. Lucas on the relationship between theory and ideology. Economics, v. 5, 2011. http://dx.doi.org/10.5018/economics-ejournal.ja.2011-4
    Frey, Bruno. Backward-oriented economics. Kyklos, v. 74, n. 2, p. 187-195, 2021.
    Goutsmedt, Aurélien; Pinzón-Fuchs, Erich; Renault, Matthieu; Sergi, Francesco. Reacting to the Lucas’s critique: the Keynesian’s replies. History of Political Economy, v. 51, n. 3, p. 535-556, 2019.

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