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09/16/2013

Comments

Christine Pence

The very simplistic model of High Development Theory is attractive but highly unrealistic. Even if we are to take the four assumptions of High Development Theory regarding resources, technology, demand and market structure as true, the theory does not account for the practical restriction of moving from a traditional (mainly agricultural) producing economy to a modern (industrial) producing economy. Said another way, it does not account for the personal human concerns of moving from the land to the city. The “Big Push” is high risk and requires people to accept the completely unknown. There are many things that prevent or deter poor individuals from migrating from rural to urban areas. First, they lack the skills to work modern sector jobs; all they have ever known is farming and most are uneducated. Second, it is unlikely that people will willingly abandon their farms and houses in pursuit of a modern urban life. High Development Theory does not account for practical concerns such as the fate of the immense amount of farmland and the hundreds of thousands of animals that would be abandoned were this shift to occur. Third, children are an immense labor resource on a farm. However, unless they are put into child labor, (which no parent wants) children will be a burden rather than an asset to their parents in a modern sector economy. Fourth, this shift does not account for religious ties that people have to the land on which they have lived for hundreds if not thousands of years. The land has spiritual meaning in many cultures. It is all they have ever known and for subsistence households, it provides almost the entirety of their material needs. People are uncomfortable with change, especially when it involves leaving something that they believe to be holy.

Nick Z.

I agree that the models discussed in the article do not fit the complexities of the real world but I believe that is the whole point of Krugman's argument. The complexities of markets, institutions, people, and the world in general are impossible to represent in a model but models are the way in which economist can make the MOST sense of the world.

Models are just a way in which economist perceive the world within their constraints. Many of the assumptions that come with economic theories are unrealistic and inapplicable to real society but with the constraints economist have it is the best that can be done to reach an understanding.

I have to admit that I was lost as to what the thesis of Krugman's article was in the beginning but by the end I realized that it's about the basics. Sometime we have to revert to the most basic aspect of a problem or we have to revert back to our initial thoughts on a problem to gain any insight. By doing this we can reduce our constraints to economic modeling and advance developmental economics.

Lizzie Weston

I agree that the point of this article was to elaborate on how models don’t and can’t fit the real world with all of its complex factors. I thought it was interesting how Krugman kept describing important economic models as “silly” especially since he describes himself as a social scientist who tries to understand the world using metaphors provided by models. I very much see the importance of models in economics—I wouldn’t have been able to understand introductory principles without them as I am a very visual person. However, Krugman makes a valid point in saying that models create a tunnel vision for what can only be shown through them. This leads to the potential for important ideas to be ignored, as these were discredited. I like how the author doesn’t come down and say that one form of expression is superior and if an economist has a groundbreaking new idea, he or she can try to explain it without models, but it will be much harder to appeal to a large audience.

ShelbyLFlores

What I found most interesting about this article was the creation and development of development economics from the 1940s to the 1970s. During this time, even though economists were thinking about development and had sensible ideas, they couldn't actually express their ideas through existing economic models. As we discussed in class (during last week more than this week), we cannot thoroughly judge the development of a country by simply looking at the number of functioning institutions--the quality of those institutions is a very important factor in determining the level of development in a country.

I believe this original lack of models has benefited the field, not hurt it (like it might in another economic field), and has contributed to the importance of fieldwork in the study. In the beginning, development economists didn't have models because they didn't exist. This lack of models also contributed to theories (like the high development theory) “not so much rejected as simply bypassed” for lack of evidence. Today, in some cases even though one could use a model to explain development in Ghana, the results from that analysis might be completely different from the results of an analysis in the field (we talked a little about this today in class).

Krugman mentions that “the tendency of economists to emphasize what they know how to model formally can create blind spots.” I believe this statement especially pertains to development economics. Models can be very helpful, to an extent, especially in the field of development economics. Today, it seems that fieldwork is just as important, if not more important, to development economists than numbers on a paper. Some of my other economics courses this term are completely focused on theories and models (almost dependent on them, I would say). Maybe the original absence of models has helped development economics progress to a point where economists need to look outside their models and into the actual world in order to obtain answers.

Bayan Misaghi

I am currently enrolled in Econometrics, Microeconomic Theory, International Trade, and of course, Development Economics: it is a beautiful coincidence that Krugman’s article was assigned as one can clearly see how economic methodology can greatly affect the full swath disciplines within the field. I have also had the chance to take a number of science courses at W&L—including physics (which Krugman describes as having a rigorous and formal methodology)— and I found the juxtaposition of the sterile lab experimentation environment in physics to the messy and incomplete data gathering in economics thought-provoking.

The evolution of development economics in terms of its rigor in rigorously developing models in some ways parallels the natural sciences. Sometimes scientists build models that are almost completely metaphorical, and with little math behind them at all. J.J. Thomson proposed what he called the Plum Pudding Model. This was before the discovery of the nucleus, and was completely wrong; yet, it provided context for an invaluable discovery, the electron. Likewise, early development economists spoke in metaphor with questionable legitimacy; yet, they provided the context necessary to uncover valuable insights.

Krugman mentions that Rosenstein and Fleming were development theorists that tried to get as close to a formal model as they could, but were unable to model the key idea of economies of scale in their frameworks. This statement reminds me of the renowned quantum physicist, Niels Bohr. Like Rosenstien and Fleming, Bohr attempted to explain a largely unknown and complex system without the ability of integrating key components to his models. The Bohr Model of the atom is only accurate for the hydrogen atom—not atoms with more than one electron. He, nor his contemporaries, could explain how or why his model broke down with multi-electron atoms. Yet, Bohr still won the Nobel Prize in Physics for his contributions to the science—even though his model didn’t work most of the time! Still, some of Bohr’s fundamental theories are the basis for modern quantum theory. Its stories like these in science that should give economists permission to go out on a limb occasionally, to attempt to describe/explain a phenomena while acknowledging that most of the description could be inaccurate, but communicating important themes. Like physics I think that development economics has its bouts (as Krugman implies)—being largely descriptive at first, and then evolving into a more rigorously modeled and quantifiable field.

Colleen Paxton

Krugman’s writing has helped me better understand economics in the past, and this article is no exception. Just as Krugman lays out ideas in a way that are easier for me to understand, models do the same for development economics. While he points out the limitations of models, whether it’s narrow-mindedness or modeling perfect competition in an imperfect world, models are an extremely valuable, if simplistic way, to gain insight into the world of development.

This article reminded me of the black box we discussed in class on Tuesday. High development theory helps us make sense of economies but it is also dependent on assumptions. As Krugman discussed, physical science welcomes models to represent grander, more complex ideas but many balk at models in social science. The assumptions made in models of development economics are hard to hold onto in the black box between scientific modeling and policymaking. And, as Krugman mentioned, political beliefs can get in the way of analysis.

Reality requires seeing past a myopic view in order for theories to work, or for theories to be adapted to meet the realities of a society. As we discussed in class, this leads to the importance of truly understanding the realities of development economics through field work. It is hard to disagree that 16 months in Ghana would change perspectives and give us a deeper understanding of what models present. The map story showed that “improved technique actually led to some loss in knowledge” and in development economics, filling in the blanks became feared. The blanks are indeed there, and it’s a matter of using models as a starting point to fill them in.

Daniel Molon

In his article, Krugman makes his argument for the invalidity of high development theory. He believes that these theorists took too many assumptions in their musings, which caused their economic models to be too simplistic and, therefore, invalid for true economic considerations. What he does find applicable from high development theory is its consideration of drawing labor from the traditional sector to the modern sector of an economy.

I agree with Krugman, that the early models are not practical representations of real-world economics. However, I do not agree with Krugman that these economists’ simplifications pushed other thinkers to the side for not being able to give straight answers to development issues that were being raised. The complexities of real-world factors are very difficult to account for in mathematical models, for example, there has yet to be a model to interpret the value of a people’s culture. So, I do not believe that these early development economists were deliberately trying to mislead other economists towards oversimplified solutions. Their lack of other factors in their early models was probably their own acknowledgement that there is no proper way to mathematically describe certain factors, and that it is at individual consideration for how to best account for these intricacies in economic policy.

Julia Murray

As Krugman states at the very beginning of his paper, "this is not exactly a paper about Albert Hirschman." This unusual opening statement alerts the reader that this paper is not only not exactly about Hirschman, it is also not exactly about the validity of high development theory. To me, the most important insight of this paper was not whether or not the big push model accurately reflects reality, but the fact that no model will ever accurately reflect reality. As Krugman points out, in Economics or any science, all we have to work with (other than the real world itself) are models, and it is important in this class and any other economics class for us to always keep that in the back of our minds. While a model, like the big push, should not be dismissed because it is too simple or has unrealistic assumptions, it is always necessary to remember what those assumptions are when trying to translate the model into policy. As Professor Casey has said in class, most of these models were not created to advise public policy. They are useful to help us think about how the world actually works using models within our understanding, but they are not a prescription for how policy should be conducted.

Owenandrea

I have found consistent intersections between my readings for Development Economics and Global Communications. My Global Communications readings this week, in fact, studied the media’s role in development and illustrated the current backlash against Cold-War-era theories of development communication. Krugman’s article provides a possible aid to the debate in my readings from GC.

Daniel Lerner wrote in the 50s that countries should use media for development in the same model, as did the Americans. Later, Srinivas R. Melkote wrote that media might play a different role in a country’s development depending on the country’s economic, political, and cultural contexts. However, while Melkote did reject Lerner’s narrower model, he still used different theories and sequences to describe how countries with different contexts might respond to or use media in development. While his essay, “Toward a Communication Theory of Modernization: A Set of Considerations,” only had only one physical diagram, Melkote’s discourse expounded upon different structural frameworks and criteria that can explain media’s role in a country’s development. By their frameworks and criteria, both Lerner and Melkote acknowledge the importance of methodology in argument. But after Krugman’s argument, I think it might be more beneficial for the discussion to have physical models about the possible and previously observed effects of media introduction in developing countries.

It seems that physical models provide a visual structure of theory, a provision that is beneficial for visual learners. But, as Krugman wrote, we sometimes have the tendency to restrict our minds to models and be close-minded. He said, “During the process of model-building, there is a narrowing of vision imposed by the limitations of one's framework and tools.” It is therefore our duty to be considerate and skeptical of a model’s application to a scenario.

Jenny Rea Bulley

As other students have discussed, this paper deals largely with the invalidity of high development theory and models in general. I have been getting in arguments with my friends about the concept of economics being a science. They are pre-med or psychology students. However adamantly I can argue for research economics to be a science (based on the scientific method and drawing from empirical data), I always must concede when it comes to theoretical economics. No matter how well thought out a theory is, there are always assumptions made and exceptions to be had. Theories and models cannot ever truly represent reality because they are not reality. Economists must realize that their models do not always tell the true story. Real life has more than two axis. There often exists many many variables and systems and forces at work to cause something to happen that are not explained by the model. This is why there are half a dozen or so theories of development. They all make sense and they all have examples to support them. So the question now becomes, how do we choose which to apply and where?

Chase Douglas

I was impressed with how Krugman presented his argument in this article. Krugman was very balanced in presenting the side of modelling and metaphorical theory development with regards to high development. I really enjoyed the conclusion of this paper and ultimately agree with his main point, that each method of theory develop has its benefits, and are useful when used in conjunction. However, I believe that Krugman is right to personally favor models regardless of their narrow scope and apparent short comings. Models ultimately give concrete, unchanging results that can (or least should) be repeated. In my mind if a model is correctly constructed, it is hard to argue the concrete results it provides on its specific scope. On the other hand persuasive metaphors represent an argument at a given point in time. The author of these arguments is writing what he believes is correct at a given point in time, and for all intents a purposes he is. But things are ever changing, and what is believed to be right can soon become proven wrong. In the end I believe this was the case with the high development theory

Jspencer

In this article, Krugman illustrates how an idea on economic development was completely disregarded for years by the mainstream discipline because of an unwillingness to think about development from a non-traditional view (e.g. economies of scale).

When I first read this article, I immediately thought of the current global climate situation and people’s views on it. Large contingents of people both don’t understand what’s going on and refuse to attempt to understand the changes in the climate. Another camp thinks they have an idea of what’s going on with the global climate, but lack the necessary empirical data to corroborate their theories.

I love Krugman’s line about making clearly untrue simplifications to get something basic enough to understand. This happens all the time in the sciences. However, the lack concrete proof to back up theories on climate change does not prevent us from designing highly complex models that predict climate change. I also think that the unwillingness to acknowledge climate change is in part due to the fact that we really hadn’t looked at weather models on such a macro scale. Just as mainstream economists in the 50s refused to consider a model that used non-traditional assumptions (e.g. economies of scale), research on climate change was slow to take off because we didn’t have the tools to accurately describe it even though it was apparent to us.

Sagemtimberline

As a pre-med student, I was struck by the contrast between economics and physical sciences that became apparent to me as I read this article.

I agree with Jenny that economics is most definitely a science – like she said, it is based on the scientific method and draws directly from concrete facts and empirical data. What it does not have is the advantage of running REAL-LIFE experiments; including independent and dependent variables, random subjects, and most importantly, CONTROLS. The importance of this had never occurred to me until I read Krugman’s article.

No one in the physical sciences is compelled to write an article like Krugman’s, because there is no question about whether the use of models is a good way to think and research. Krugman himself alluded to this. In physical sciences, hypotheses are developed based on observations and inferences, and then they can be immediately tested. Physical scientists can control their subjects, changing only one factor of their environment at a time to get an accurate picture of what kind of variable invokes what kind of change. Physical scientists can get quick feedback about the validity of their ideas – if they turn out to be valid, they can publish them as “theory”. If they turn out to be invalid, they often have good insight into why, and what needs to be changed. They can remodel, retest, and remodel again until they get it right. Economists, on the other hand, only get to step 1) developing hypotheses based on observations and inferences. No doubt, these models can be re-applied and re-tested in a theoretical fashion, and their validity can be determined based on how well they explain certain real-world situations. But there is still no real-world feedback element similar to the feedback from a physical scientist’s experiment. So no wonder there was a period when economists wanted to step away from the simplifications of models and write long, boring, theoretical papers! They thought that they were finally including all the elements necessary for predicting the complexities of real life.

But like Krugman and many other students have said, models are essential to the progression of economics as a science and its integration into the real world. The simplifications of models allow us to actually study economics, make valuable estimations about society, and efficiently function within our fast-paced world. The fact that economics doesn’t function like a physical science is a disadvantage simply inherent in its nature. I think the best thing we can do is continually retest and redevelop our models, and be aware of their shortcomings.

Tim Werner

I agree with Nick’s thoughts earlier that the global economy cannot be represented accurately with models for a few reasons: variables are often omitted, models require assumptions, and the application of models in econometrics at least is unrealistic since variables are held constant but at the same time variables may interact with each other. Complex models seem to be too complicated in application, which is why I believe simple models are often favored.

The part of this article that really grabbed my attention was in Krugman’s conclusion when he states that “It is hard to know whether economic policy in the real world would have been much better if high development theory had not decayed so badly...” There is no certain evidence that it would have been better or worse if high development theory had prevailed, but this line still left me in a trance of if the undeveloped countries of the world became central parts of the global economy today. Krugman’s point reinforces the idea that economists really do not know what the effect of applying a model will be until it is applied; a theory or model that is successful when applied in one country may not have the same desired or expected outcome as when it is applied to another country.

Annelise Madison

I agree with Krugman that theory should not be divorced from practice in economics. He is right to conclude that models can be used as metaphors, but metaphors should not be used as practical models. As a politics and history major, I believe that we should view economics in light of the political system and modern issues facing a society. There have been many times throughout history where we have isolated economics from reality. For instance, in African Economies and the Politics of Permanent Crisis, 1979-1999, Nicolas Van de Walle explains that the IMF’s “Washington Consensus” policy prescriptions failed in many African countries because they did not have the institutional and human capital to support a contractionary monetary policy and an influx of foreign aid. Between 1979 and 1999 the EU and America fully subscribed to the Domar-Harrod growth module, believing that injecting capital into developing countries via foreign aid would automatically generate GDP growth. Unfortunately, as Van de Walle demonstrates in his book, this foreign aid often went directly into the corrupt regime’s personal bank account and never actually resulted in GDP growth. In some cases, the foreign aid simply served to insulate the country from poor policy decisions and/or economic shocks resulting from a decline in their main export’s market value. In short, foreign aid often served to strengthen the position of the corrupt regime in power, thereby hurting the country’s prospects for long-term, sustainable development. In light of these examples from history, I fully agree with Krugman’s insistence that we do not fully rely upon models with simplistic, unrealistic assumptions and that we listen to economists that have not yet developed models to back their claims. I think the discipline of “political economy,” in which politicians understand and apply basic economic principles and economists analyze their models with the political atmosphere in mind, should be revived again.

Aaron DiGregorio

I’ll admit that at first, I had no idea exactly where Krugman was going with his argument as his thoughts seemed to bounce from place to place without a direct path. Soon, however, like Nick pointed out in his point, Krugman made his point clear by arguing that society must return to the most basic aspects of a problem in order to obtain a long-term solution. If we fail to fix the initial and basic source of a problem, then we as a society will be more likely to revert backwards.
As we discussed in class, models are one of many great ways to illustrate a given economic situation, but they should not be used solely to influence Public Policy. This relates to Krugman’s argument of seeing the big picture, but failing to recognize the basic parts of an economic problem. If decision makers are merely influenced by these models, they will fail to identify the source issues, thus failing to develop the given economy over time.

Greta Witter

Krugman makes clear that Development Economic theory has suffered a validity crisis – the discipline’s implicit reliance on the economies of scale assumption prohibits adequate quantitative models. Academic economics has shifted to focus (almost entirely) on technical rigor. Meaning the introduction of a solid quantitative model is the only way to turn a theoretical story into a respectable mainstream academic topic of discussion. Only then, it seems, a theory will be considered for policy implication and implementation.

The piece ends on a rather pessimistic note – “there’s not much that can be done about the kind of apparent intellectual waste that took place during the fall and rise of development economics. A temporary evolution of ignorance may be the price of progress, and inevitable part of what happens when we try to make sense of the world’s complexity.” Is Krugman suggesting that we have, in fact, taken off the blinders? Bradford Delong in his piece, “Economics in Crisis,” seems to disagree – with economists’ ineptitude at figuring out the global financial crisis as his primary evidence, Delong argues that macroeconomic models are simply not up to the job and are still in dire need of revolution. He claims economists’ assumptions are too broad and the intensive mathematic models are too distracting. As social scientists, economists are ignoring vital political, social, and psychological components of their field.

On another note, I had several questions as I read Krugman’s recount of the history of the discipline: during all this academic theoretical debate, what’s going on in the real world? How are underdeveloped nations progressing? What policies are being applied? What’s the role of the state?

Gyung Jeong

Just like many others have commented, one way I saw in this paper by Krugman was that the models discussed do not actually fit complexities of the real world, due to the fact that many of the key assumptions do not accurately reflect reality. This reminds me of our lecture on Tuesday about Lewis-two-sector and the Big Push by Rosenstein Rodan (Big Push is the example of high development theory that Krugman provides). As Professor Casey pointed out, these theories are meant to be used as tools to guide the policy makers and show possible implications of applying these theories. They are not meant to be used directly to real world situations since they depend on many assumptions to make the complexities of real world economics simple. This reason leads to Krugman’s argument of invalidity of high development theory. The problem with this theory is that it depends on the assumption economics of scale which nobody knows how to put into formal models, the problem of dealing with market structure.
However, as Daniel points out, I think it might be difficult for theories in general to reflect the complexities of real world economics (and the development issues that Krugman raises). Most theories are shown as simplifications of reality and should be used as tools that guide people; they are not deliberately built to mislead people. Unless economists learn how to incorporate every single factor of reality into models, it is impossible for theories to represent reality accurately.

Hampton Ike

I agree with many of the comments before me, and understand the purpose for Krugman writing this article. The comparison of African map accuracy to economic modeling accuracy was spot on, insofar as society has evolved so far technologically that we expect our scientists to be able to model with absolute accuracy. The cultural attitude of scientific fact lead to a backpedalling of sorts in African cartography as well as development economics. Furhermore, Krugman's allusion to the ability of scientists to fairly simply (and accurately) model the weather patterns of earth using a dish tray, some water, and a current lends to the conclusion that regardless of broad sweeping assumptions in models, they can be accurate and helpful tools for understanding the world. Development economics has come a long way since the high development theory, but I believe Krugman mentioned that too this day even there is a lingering since that some models cannot be trusted due to their assumptions and non-traditional viewpoints.

Mac Keers

This article really showed me how young the economics discipline is. People are still trying to figure out the best way to approach problems and what the requirements are to make a claim legitimate. I appreciated Krugman’s sentiment that just because something does not fit today’s definition of valid does not mean it should be cast aside. In about a page, Krugman was able to explain with acceptable theory the high development ideas that had been cast aside. The need for looking at these sorts of theories is especially important as economics continues to grow so that important ideas are not left behind.
I think a lot of the discussion in this thread has had to do with economic theory being invalid because it is based on models. However, this misses the greater point that models are simply a way to think about a problem, rather than an exact science. If a model could perfectly explain every detail of a situation then it would no longer be a model. This relates to our class discussion on policy being created solely based on models. The original theory that capital was needed to compliment labor was simply a way to view developing nations. It was not a policy prescription; rather it was something that policy makers should have considered.

Vincent Kim

While physics and economics both use simplistically false models to provide insight, I think people are more likely to attack simple models used in the economics because they think the stakes are higher for their well-being. Over time, scientific theory and engineering have been fairly stable in providing a higher standard of living. We as humans have gotten better at surviving and living more enjoyable lives by developing models and running experiments to create technology. These discoveries have largely been about how people can better harness the resources of the world around us. Theories can be tested without worrying about people being harmed, and the consequences of having a false or over-simplified assumption usually does not make us worse off than where we were without the assumption.

Economics, however, studies how people make decisions and allocate scarce resources. As others have mentioned, it is harder for experiments to have controls, etc. However, when politicians or bureaucrats use economics to make policy, the consequences may be unemployment, a tax, losing a certain freedom, poverty, or death. These decisions economists study are made by people, so questions of ethics and justice comes into play—both of which make people very passionate. The stem-cell research controversy can attest to this. We as humans struggle with knowing how we make decisions (reason vs. emotion/intuition). This makes it difficult for people to accept theories about decision (psychology faces these difficulties as well). While economic models often describe the real world very well and help countries flourish, they do deserve scrutiny from the public.

Economics is a science that should be driven by useful models, but it is a tool to be used with other areas of knowledge (politics, ethics, mathematics, psychology). Its models may be simplistic, and it is ok that they receive, more scrutiny because it is a relatively new science that will most definitely become even more accurate predictive over time.

Peter Partee

Krugman sees the Rosenstein-Roden, "big push" model as the height of the high development model, using it as an instance to demonstrate a situation in which theoretical economics can come short of pragmatic utility.

The article then turns to an African map-making analogy, recounting the importance of endogenizing economies of scale. Up until this point, formal models for development economics tended to gravitate towards being more qualitative in nature, or more formulaic and less purely quantitative. In order to incorporate economies of scale, economists in the mid 20th Century had to violate perfect competition assumptions.

Krugman circles back to discuss the necessity and difficulty in modeling the social sciences. Humans act irrationally.


"It is easy to give facile advice. For those who are impatient with modeling and prefer to strike out on their own into the richness that an uninhibited use of metaphor seems to open up, the advice is to stop and think. Are you sure that you really have such deep insights that you are better off turning your back on the cumulative discourse among generally intelligent people that is modern economics? But of course you are.

"And for those, like me, who basically try to understand the world through the metaphors provided by models, the advice is not to let important ideas slip by just because they haven't been formulated your way. Look for the folk wisdom on clouds -- ideas that come from people who do not write formal models but may have rich insights. There may be some very interesting things out there."

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