Stephen Monrad

I think economists should start with the assumption that human behavior is erratic. I don’t mean that human behavior should be assumed to be random. That would actually be easier to deal with. People change how they think and act in complex ways. People’s goals and aspirations shift without clear logic. Most importantly, changes in how people behave can spread rapidly. We are all listening to the same news and stories. Economists can’t count on people behaving sensibly. They can’t even count on people being sensible on average.

Economic systems need to be analyzed in terms of how they evolve over time. Equilibrium isn’t relevant when people’s behavior is erratic. Economic systems should be evaluated on how well they function as a system. Criteria should be developed to evaluate the ability of economic systems to achieve basic societal goals. For example, everyone needs food, clothing, and shelter. Does the economy deliver these things to everyone?

Economists should be explicit about what exactly people need to be able to do to make their systems work properly. If economists think people should be able to set prices rationally, I want to see them explain how people are supposed to do it. How exactly do people compare the relative value of goods and services? If economists can’t explain how, take the assumption off the table.

I think the best tool for studying economic systems is computer simulation. Modelers need to program exactly how people behave in their models. It is much easier to allow for complexity in a computer simulation than in a mathematical model that needs to be solved analytically. It is also easier to do “what if” scenarios in computer models to see if an idea is sound.

While some economists use simulation, most still focus on mathematical models. The mathematical models yield clearer answers and are easier to understand. I think we should tolerate more ambiguity and grapple with the complexity that simulations produce.