Saturday, February 24, 2018

Five types of economic statements

When I think about economics, I divide the discipline into five types of statements. Here are the five types:
  1. Statements about what economic policy should be
  2. Statements about historical economic phenomena
  3. Statements about current economic phenomena
  4. Statements about future economic phenomena
  5. Statements about universal economic phenomena
The first four types have to do with specific real world situations, while the last type has to do with universal theories. Here is an example of each type of statement:
  1. The U.S. government should raise taxes on highest income earners.
  2. On October 24th, 1929, the Dow Jones fell over 11% marking the start of the Wall Street Crash of 1929.
  3. Current inflation in France is estimated to be about 1.3% annualized.
  4. I predict that there will be a recession in the United States starting in the fourth quarter of 2018.
  5. All recessions are preceded by a fall in housing prices.
I believe that an economic model would fall under the fifth type of statement because it describes the exact relationship between variables. A model can be used for prediction in the real world (fourth type), but without data input, a model is merely a statement about abstract variables.

The failure of economists to predict the 2008 financial crisis would fall under the fourth type of statement. In The Big Short by Michael Lewis, hedge fund manager Michael Burry predicted the financial crisis long before anybody else. As early as 2004, Burry was analyzing the subprime mortgage market and made some significant discoveries. This is a great book and I believe it provides a glimpse into how economists can predict the future.

Friday, February 23, 2018

What is a definition?

What is a definition? I agree most with Cambridge Dictionary's definition:
"[A definition is] a statement that explains the of the meaning of a word"
Most words do not have an exact definition. It's impossible to make an exact definition for a subjective word. Definitions are merely our best attempt at describing a word in a concise manner. Only objective words have exact definitions (i.e. numbers). Philosopher John Langshaw Austin once said,
"Faced with the nonsense question, 'what is the meaning of a word?' and perhaps dimly recognizing it to be nonsense, we are nevertheless not inclined to give it up."

What is a concept?

What is a concept? I agree most with Oxford Dictionary's definition:
"[A concept is] an abstract idea"
Concepts are isolated in our minds. When an idea becomes a reality, it is no longer a concept. This is the fundamental difference between things and concepts. Things exist in reality, while concepts exist in our minds.

Thursday, February 22, 2018

What is language?

What is language? Here is my definition:
Language is a system of symbols designed to represent concepts or things
I believe the entire paradigm of knowledge revolves around two concepts: language and reality. Reality is all the nature and phenomena we experience. Language is the abstract system we use to describe reality. Every word is a symbol that corresponds to a concept or thing. When we combine multiple words form a sentence, we can represent a more complex entity.

I believe the philosophy of language is one of the most important disciplines because language is fundamental to knowledge. There is a surprising amount of difficult questions about language. Can subjective descriptions be true? How does grammar work? Is there such thing as a perfect definition? How does reason relate to language?

What is analysis?

What is analysis? I agree most with Oxford Dictionary's definition:
"[Analysis is] detailed examination of the elements of something"
Analysis is all about learning the details of something. Analysis is a heightened form of thinking where we pay more attention. When somebody says 'I analyzed the data', they are saying that they spent a long time looking at the data in various ways. The goal of analysis is to understand something better.

What is philosophy?

What is philosophy? This is a hard question because philosophy is a very abstract idea. Here is my definition:
Philosophy is the study of the fundamental principles of reality or a topic
I believe when people use the word philosophy they are referring to the underlying roots of something. There are many types of 'philosophy'. For example, the philosophy of economics is focused on things like the definition of economics and whether economics is a science. Another example, the philosophy of law has to do with basic concepts like justice, freedom and liberty.

Philosophy in general has to do with epistemology, metaphysics, aesthetics, and ethics. Epistemology has to do with truth and how we acquire knowledge. Metaphysics has to do with the fabric of reality and other dimensions. Aesthetics has to do with beauty. Ethics has do with good and bad. Reality is a very complicated place and philosophy tries to study the fundamental aspects governing it.

Wednesday, February 21, 2018

Philosophy of economics

For this post I organized 13 of my blog post to explain my philosophy of economics. The first section describes what I believe is the goal of economics. The second section describes my philosophy of language and reason. The third, fourth, fifth, sixth and seventh sections have to do with testing economic statements. The last section is an analysis of modern academic economics.

As I write more blog posts, I plan to build on this list. This post was last updated March 4th, 2018.

A. What is the goal of economics?
1. What is economics?
2. Five types of economic statements
3. Testing economic statements

B. Philosophy of language and reason
4. Fundamentals of language
5. Fundamentals of reason
6. Belief analysis: a formal method

C. Normative economics

D. Historical economic phenomena

E. Current economic phenomena
7. Transparency and the world economy

F. Predicting future economic phenomena
8. How to predict a financial crisis
9. March Madness for economists

G. Universal economic theories
10. EconTalk: six part series on econometrics
11. Macroeconomic experiments

H. Analysis of academic economics
12. What's wrong with academic economics?
13. Publishing and promotion in economics