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Why Economic Models Can’t Provide a Realistic Picture of Human Behavior
May 26th 2021, 4:17 pm
Mises: The experience with which the sciences of human action have to deal is always an experience of complex phenomena. No laboratory experiments can be performed with regard to human action.
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While in the natural sciences a laboratory experiment can isolate various elements and their movements can be followed through, there is no equivalent in the economic discipline.
The introduction of econometrics and model building is an attempt to produce a laboratory where controlled experiments can be conducted.
The idea of having such a laboratory is very appealing to economists and politicians, since once the model is built and endorsed as a good replica of the economy, politicians can evaluate the outcomes of various policies.