Economics: The ebb and flow of constant change
“Real people have trouble with long division if they don’t have a calculator, sometimes forget their spouse’s birthday, and have a hangover on New Year’s Day.” — Richard H. Thaler, “Nudge: Improving Decisions About Health, Wealth, and Happiness.”
Once upon a time, people could use the phrase “the more things change, the more they stay the same,” without giving it much thought. Then, two years ago, the reality of COVID-19 disrupted the pattern of daily life. Individuals, states, and the federal government were forced to act. Modeling, defined as “the generation of a physical, conceptual, or mathematical representation of a real phenomenon that is difficult to observe directly,” is often used. Economics is a field of study that relies heavily on analysis through modeling, a process that we can benefit from.
“In economics hope and faith coexist with great scientific pretension and also a deep desire for respectability.” — John Kenneth Galbraith, economist.
In 1883, Charles Stanley Devas, using the term Homo Economicus or economic man, theorized that humans would engage in markets with “perfect rationality.” Similar to Adam Smith’s “invisible hand,” each person pursuing their own well-being, will benefit all, the assumption has been the foundation of economic modeling since. It has remained in place and unquestioned as economists use mathematics and statistics, in their research, often being disdainful of the unquantified conclusions of social scientists.
Richard H. Thaler, who won the Nobel Prize for Economics in 2017, broke ranks with his colleagues and incorporated psychology into research that demonstrated humankind is emotionally irrational in making choices. This approach is called behavioral economics to distinguish it from the classical school. His book advocates simple and subtle methods of encouragement to get people to make better choices. He illustrates with the example of Schiphol Airport in Amsterdam that etched the image of a fly in the men’s urinals, having something to aim at kept gallons of urine off the floor. Thaler’s contribution is obviously more important than that.
Since 2010 the World Health Organization has urged the academic community to address issues from an inter-disciplinary and inter-professional approach. In the past 50 years, new opportunities have been emerging in what the Harvard Review once called the “sexiest profession of the modern era” — Data Science. The data professional needs to understand the capabilities of computing, relationship, and influence of factors, then be able to tie all together as a storyteller.
“One of the most predictable things in life is there will be change. You are better off if you can have a say in the change. But you are ignorant or naive if you do not think there will be change, whether you want it to or not.” — Julius Erving, basketball player.
New Year’s is a time to take stock of our behaviors and relationships; being less presumptuous and more thoughtful would be a start. We all have the capacity to create a model of attributes of an issue; all it takes is to do the “Noodle Dance!”
“Noodle, use your noodle, do the noodle dance! Solve a problem, it is no strain, use your noodle, that is your brain! There is an answer you can find, use your noodle, that is your mind!” — Peanut, Jelly, and Baby Butter, Playhouse Disney.
Tom Brindley grew up in Iowa, and studied journalism and accounting. He is a retired controller from Alpena Community College and has been active in local nonprofit organizations. He can be reached at firstname.lastname@example.org. Read him here the first and fifth Thursday of each month.