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January 27, 2005

Good Ideas in Economics: A Classification

A short classification. But what there is of it is choice:

Robert's Stochastic thoughts: My belated appreciation of one of Tilman Ehrbeck’s good ideas (which I will post above) makes me think of the general topic of good ideas in economics. I think they can be classified as follows:

1. Good ideas which you can find if you read The Wealth of Nations carefully. The whole idea that this is a worthwhile field of inquiry has a lot to do with the fact that one of the first books in the field was brilliant.
2. Good ideas which you can find in Marshall’s Principles.
3. Good ideas which are roughly implied by the work of Walras.
4. Good ideas which you can find if you can translate [Keynes's] General Theory into economic theory.
5. Good ideas which you can find if you can translate Schumpeter into economic theory.
6. F. A. Hayek is a reactionary but he had some interesting things to say.
7. This is an implication of standard neoclassical theory, that is, maximization under constraint. Therefore it is to be found in the collected writings of Paul Samuelson.
8. Milton Friendman mentioned it in passing while reflecting on the wonders of the quantity theory of money.
9. This has something to do with game theory. Von Neuman mentioned it to Morgenstern, but it was formalised by Nash.
10. This has something to do with asymmetric information, so check the collected writings of Joseph Stiglitz. He has published five to ten papers based on this idea.
11. Read the collected writings of Robert Solow. As a Spencer Tracy character said of a Katherine Hepburn character “there aint much of it but every bit is cherse (choice)”.
12. This isn’t really economics, it is sociology, Akerlof thought of it.
13. This isn’t really economics, it is psychology, Kahenman, Tversky or Herrnstein (see point 6 above) thought of it.
14. This idea is not found in any of the writings of the authors listed above. It is an excellent idea in economics. Clearly Kenneth Arrow thought of it. You can only hope that he never bothered to write it down.

Posted by DeLong at January 27, 2005 01:32 PM