The World in the Model: How Economists Work and Think

by Mary Susanna Morgan

During the last two centuries, the way economic science is done has changed it has become a social science based on mathematical models in place of words. This book describes and analyses that change – both historically and philosophically – using a series of case studies to illuminate the nature and the implications of these changes. In format, it offers a tourist guide to economics by focusing chapters on specific models, explaining how economists create them and how they reason with them. It is not a technical book; it is written for the intelligent person who wants to understand how economics works from the inside out. This book will be of interest to economists and science studies scholars (historians, sociologists and philosophers of science). But it also aims at a wider readership in the public intellectual sphere, building on the current interest in all things economic, and in the recent failure of the so-called economic model, which has shaped our beliefs and the world we live in.

Genres: Economics, Nonfiction, Business, History, Philosophy

445 pages, Hardcover

First published August 15, 2012

About the author

Mary Susanna Morgan FBA FRDAAS, is Professor of the History of Economics in the London School of Economics since 1999.

She graduated from the London School of Economics a Bachelor of Science (BSc) in Economics in 1978 and a Doctor of Philosophy (PhD) in 1984. From 1992 to 2002, she worked part-time as Professor of the History and Methodology of Economics in the University of Amsterdam.

Morgan has made important contributions to the history of economic thought, especially with regard to the history of econometrics, the historical development of measurement in economics, and the evolution and methodological implications of the use of economic models.[citation needed]

Since 2002, she has been a foreign member of the Royal Netherlands Academy of Arts and Sciences.

--From Wikipedia

Reviews

[Frank Stein · Rating 3 out of 5]

I was at first pleasantly surprised that a philosophy book, a book on epistemology no less, could present such a sympathetic and even original look at how economists use models and math. While many liberal arts types are dismissive of the whole enterprise, Morgan takes economic work seriously, and shows how models and numbers can be stimuli to creative thought in the economic sciences. Nevertheless, the philosophical passion for over-explanation, hair-splitting, and insupportable claims eventually reveals itself, and much of the book is therefore taken up with turgid examinations of the obvious. Thankfully, that still leaves a residue of interesting mini-histories in economic thought and a few thoughtful gems of insight.

Morgan convincingly shows that the abstract and purely hypothetical models that economists use can be used both like tools and experiments. As tools these models can be manipulated to reveal aspects of economics previously unimaginable, such as when Paul Samuelson at MIT revealed how small differences in inputs in a Keynesian-type model created wildly different outcomes. As experiments, manipulating these models can create new situations, as when David Ricardo showed with his imaginary "model farm" how more laborers would lead to increased profits for landlords and less for capital. Morgan also shows how more concrete models could provide real insights by analogy, such as William Philips famous hydraulic economic machine, an actual machine from the late 1940s that pushed colored water around tanks labeled as "Government Capital" or "Foreign Held Balances," which showed how "stocks" and "flows" (or stable and mobile) aspects of an economy could be incorporated in the same model, in a way purely mathematical expositions couldn't match.

Sometimes her insights are truly groundbreaking. In her history of "homo economicus," the much maligned rational calcuating man at the heart of many models, Morgan shows how varied and how limited such claims actually have been. From the beginning, when John Stuart Mills in 1836 creates the first "economic man," Mills notes that no "political ecnomist was ever so absurd as to supposee that mankind are really thus constituted," yet still economists are faulted for ignoring this simple fact. Morgan shows it was always just a useful abstraction, and that it changed depending on the writer. The idea moves from Mills wealth and leisure maximizing man, to William Jevons 1871 "utility maximizer" (he narrowed the man down from Bentham's seven dimensions of utility), to Frank Knight's man with universal knowledge of circumstances (the "slot-machine" man) to Lionel Robbins belief (garnered through Austrian economics) that economists can't and shouldn't try to understand the impulses behind a person's action, they should just note the effects. As he said in 1932, "So far as we are concerned, our economic subjects can be pure egoists, pure altruists, pure ascetics, pure sensualists or - what is much more likely - mixed bundles of all of these impulses." As Morgan shows this is a long way from mere rational egotistical calculators, and shows how open-minded such a "home economicus" models can be.

Thus this book did get me thinking about economic models, their origin, and their value (as well as their history, Morgan notes that the practice of formal mathematical "models" of a whole economy didn't start until Ragnar Frisch in 1933, and the name "models" didn't come over from physics until Jan Tinbergen used it in 1939). If you can ignore much of the verbiage, there is some real worthwhile stuff here.

[Gerry · Rating 5 out of 5]

Outstanding work showing the development of models in economics over three centuries while at the same time covering much of economic theory.

Mary Morgan keeps to the centre of the road in not endorsing any of the various sects in the discipline while keeping in the same space in the debate between economic qua science or economics qua art.

The book raises interesting questions about the philosophy of economics and the use or abuse of economics by policy makers, but overall an extrememly high level of scholarship.

[Vysloczil]

Don't expect this to be a "bashing" of (neo-classical) economic models!

The beginning gives a highly readable overview of the history of economic thought from a somewhat philosophical perspective on theoretical modelling.
Especially from chapter 3 on it gets more and more philosophical in its arguments.