|
USING MODELS: In this lesson we will
learn our first MODEL - the budget line. We will study many
MODELS this semster and most models will be represented by
graphs. Why do economists use so many models?
The paragraph below introduces a MOOC
from the University of Michigan called "Model Thinking". I
was a bit surprised that there is a whole couse just on
using models, but it highlights the importance of models in
understanding the world around us.
"We live in a complex
world with diverse people, firms, and governments whose
behaviors aggregate to produce novel, unexpected
phenomena. We see political uprisings, market crashes,
and a never ending array of social trends. How do we make
sense of it? Models. Evidence shows that people
who think with models consistently outperform those who
don't. And, moreover people who think with lots of models
outperform people who use only one
[emphasis added]. Why do
models make us better thinkers? Models help us to better
organize information - to make sense of that fire hose or
hairball of data (choose your metaphor) available on the
Internet. Models improve our abilities to make accurate
forecasts. They help us make better decisions and adopt
more effective strategies. They even can improve our
ability to design institutions and procedures. In this
class, I present a starter kit of models: I start with
models of tipping points. I move on to cover models
explain the wisdom of crowds, models that show why some
countries are rich and some are poor, and models that
help unpack the strategic decisions of firm and
politicians. "
OPTIONAL - More information about the
importance of using models:
|
