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Economics Rules: Why Economics Works, When It Fails, and How to Tell the Difference by Dani Rodrik
teokajlibroj's review against another edition
5.0
There is a debate going on over the nature of economics between outsiders who feel economists are out of touch with reality and economists who feel that their way is the only way of doing things. Rodrik walks a fine line between the two, showing what economics is for and why we need models, but also agreeing that many models are unrealistic and the market doesn't always act the way they want it too.
All in all a great and more importantly, informative read.
All in all a great and more importantly, informative read.
jonahbf's review against another edition
3.0
A good insider critique of economics focusing mainly on how economists can go wrong by misapplying models to incorrect contexts. Given that Rodrik frequently writes for left-leaning heterodox outlets like Boston Review, I was frankly a bit surprised by how defensive he ultimately was of the economic establishment. While the book was mostly unobjectionable, I felt like it was superficial quite a bit, and a lot of the most interesting bits (such as how economists can be biased towards advocating for market-based solutions even when their own research contradicts them) weren't discussed with the depth they deserve.
pashtet31's review against another edition
5.0
This is a must read to those concern with economics. The book may be demanding for a noneconomist, but nothing that person with normal IQ can handle.
Nowadays (maybe always) too many people, who should know better, make unfair accusations against economics as a field and based on those critics make accusations recommendations of their own. Most of the time such recommendations are nothing else but selling a snake oil.
It usually works like this (Ukrainian case, this is my example, it comes not from the book):
a) economics is all about free markets
b) free markets can fail
d) let's be open-minded and try something different
c) thus, let's impose trade barriers because history shows that they work
It should work like this instead:
a) economics is not about conclusions, it's about models
b) free markets, incomplete markets, ...... - there are many many different models
c) yes, free markets can fail, economists like this line of inquiry very much
d) sure, let's be open-minded, but let's be rigorous in what we do
e) let's see if trade barriers can help - there are some required conditions for them to work
d) no, empirical test show that trade barriers do not work most of the time in most circumstances
In very short, before you make claims about economics failures, please, take some time and try to understand what economists actually think about this topic.
One of the greatest fragments concerns visible consensus among economists. Rodrik writes that economists quite usually take a one side simplistic approach then they express opinions in public. He calls it the “barbarians are only on one side” syndrome.
The main idea goes like this: general public ("barbarians") knows too little and highly susceptible to myths and consequent manipulations. For example, if the unsophisticated public is known to like the idea of international trade restrictions in 90% of cases, and economists know that this idea works well only in 10% of cases, then economists will publicly say that this is a bad idea and consensus will be quite strong. In this way, economists usually defend free markets in public while in seminar rooms they focus on cases when marks do not work perfectly or do not work at all.
Finally, I think Rodrik summarise the book perfectly be providing 10 commandments for economists and 10 commandments for general public.
10 commandments for economists:
1. Economics is a collection of models, appreciate their diversity
2. It’s “a model”, not “the model”
3. Models should be simple enough to isolate particular casual effect, but not too simple to live out key interactions among causes.
4. Unrealistic assumptions are OK, unrealistic critical assumptions are not OK.
5. World is almost always „second best“
6. To fit a model into the real world you need explicit empirical diagnostics, which is more craft than science.
7. Do not confuse consensus among economist for certainty how the world works
8. It’s OK to say „I don’t know“ about economy or policy
9. Efficiency is not everything
10. Equalasing your values with public values is not OK
10 commandments for general public:
1. Economics is a collection of models without predetermining conclusions, reject any argument otherwise.
2. Do not criticise economics model for its assumptions, ask how results will change if certain problematic assumptions will be more realistic.
3. Analysis requires simplicity, be aware of incoherence wich represent itself as a complexity.
4. Do not let the math scare you.
5. When economist makes specific recommendations – ask what makes him sure that his model applies to this particular case.
6. When economist uses the term economic welfare – ask what she means by that.
7. Be aware that economis may speak differently in public and in seminar among economists.
8. Economists not all worship markets, but they know better than you how they work.
9. If you think that all economists think alike – attend their seminar
10. If you think that economists are rude to noneconomists - attend their seminar.
Nowadays (maybe always) too many people, who should know better, make unfair accusations against economics as a field and based on those critics make accusations recommendations of their own. Most of the time such recommendations are nothing else but selling a snake oil.
It usually works like this (Ukrainian case, this is my example, it comes not from the book):
a) economics is all about free markets
b) free markets can fail
d) let's be open-minded and try something different
c) thus, let's impose trade barriers because history shows that they work
It should work like this instead:
a) economics is not about conclusions, it's about models
b) free markets, incomplete markets, ...... - there are many many different models
c) yes, free markets can fail, economists like this line of inquiry very much
d) sure, let's be open-minded, but let's be rigorous in what we do
e) let's see if trade barriers can help - there are some required conditions for them to work
d) no, empirical test show that trade barriers do not work most of the time in most circumstances
In very short, before you make claims about economics failures, please, take some time and try to understand what economists actually think about this topic.
One of the greatest fragments concerns visible consensus among economists. Rodrik writes that economists quite usually take a one side simplistic approach then they express opinions in public. He calls it the “barbarians are only on one side” syndrome.
The main idea goes like this: general public ("barbarians") knows too little and highly susceptible to myths and consequent manipulations. For example, if the unsophisticated public is known to like the idea of international trade restrictions in 90% of cases, and economists know that this idea works well only in 10% of cases, then economists will publicly say that this is a bad idea and consensus will be quite strong. In this way, economists usually defend free markets in public while in seminar rooms they focus on cases when marks do not work perfectly or do not work at all.
Finally, I think Rodrik summarise the book perfectly be providing 10 commandments for economists and 10 commandments for general public.
10 commandments for economists:
1. Economics is a collection of models, appreciate their diversity
2. It’s “a model”, not “the model”
3. Models should be simple enough to isolate particular casual effect, but not too simple to live out key interactions among causes.
4. Unrealistic assumptions are OK, unrealistic critical assumptions are not OK.
5. World is almost always „second best“
6. To fit a model into the real world you need explicit empirical diagnostics, which is more craft than science.
7. Do not confuse consensus among economist for certainty how the world works
8. It’s OK to say „I don’t know“ about economy or policy
9. Efficiency is not everything
10. Equalasing your values with public values is not OK
10 commandments for general public:
1. Economics is a collection of models without predetermining conclusions, reject any argument otherwise.
2. Do not criticise economics model for its assumptions, ask how results will change if certain problematic assumptions will be more realistic.
3. Analysis requires simplicity, be aware of incoherence wich represent itself as a complexity.
4. Do not let the math scare you.
5. When economist makes specific recommendations – ask what makes him sure that his model applies to this particular case.
6. When economist uses the term economic welfare – ask what she means by that.
7. Be aware that economis may speak differently in public and in seminar among economists.
8. Economists not all worship markets, but they know better than you how they work.
9. If you think that all economists think alike – attend their seminar
10. If you think that economists are rude to noneconomists - attend their seminar.
ihorbook's review against another edition
5.0
In Economics Rules Dani Rodrik presents one of the best defenses of economics. Although insider to the discipline, Rodrik is not orthodox free-market ideologue, as many people imagine most economists; but he isn't far-left "debunker" either.
For Rodrik, economics is a science based on multiplicity of models which apply to the reality under different circumstances. And true economist must not seek the best model, but use many of them and understand their limitations. Models need not be complex, because simplicity allows to grasp only what is the most important for analysis; and it is ok to use math, because math makes thinking behind models clear and easier to test empirically. Apart from defending economics, Rodrik tries to explain how to choose between models (it's not that easy), tells about recent developments that dramatically changed the discipline, and criticizes some of his fellow economists for biased and protective attitude towards markets.
Short and very readable, this book should be interesting both to those who work in economics and strive to become better at it and to all others who just want to know about the current state of social science.
For Rodrik, economics is a science based on multiplicity of models which apply to the reality under different circumstances. And true economist must not seek the best model, but use many of them and understand their limitations. Models need not be complex, because simplicity allows to grasp only what is the most important for analysis; and it is ok to use math, because math makes thinking behind models clear and easier to test empirically. Apart from defending economics, Rodrik tries to explain how to choose between models (it's not that easy), tells about recent developments that dramatically changed the discipline, and criticizes some of his fellow economists for biased and protective attitude towards markets.
Short and very readable, this book should be interesting both to those who work in economics and strive to become better at it and to all others who just want to know about the current state of social science.
haaris's review against another edition
4.0
The book becomes my best suggestion to friends and family when they question what modern Economics is, what is the best the field has to offer, and most importantly, the tendencies that let it become- often rightly so - a target for criticism. Dani Rodrik addresses two broad, arguably (and therefore unfortunately) mutually exclusive audiences - the economists and the non-economists. To the former he advocates humility in the way we use our models and having the openness to talk about the multiplicity of models that, given different critical assumptions, may be applicable for similar questions but with important changes in context. To the non-economists he gives a valuable set of thumb-rules to evaluate economics statements as well as an insight into the possibilities and inherent limitations in any "theory."
It's admittedly a bit dry so the stars reflect a recommendation for those who are curious to know more about how economics operates. A valuable reference.
It's admittedly a bit dry so the stars reflect a recommendation for those who are curious to know more about how economics operates. A valuable reference.
miguelf's review against another edition
3.0
Economics Rules attempts to pull back the curtain on the main tool that Economists use in their discipline which is a model based approach. It’s a warts and all perspective – in other words Rodrik doesn’t try to sugar coat or overly defend the model based approach, but merely attempts to provide a glimpse (just barely) into the sausage making factory of how the models are created and what they attempt to explain. There’s no math involved so there’s still a pretty thick shroud left hanging over the matter, but as he does explain there’s not a one size approach so the criticism on that account is fairly thin. Overall the subject is handled well although again it’s quite on the surface at most times.
jasonfurman's review against another edition
5.0
Any knee-jerk supporter or critic of economics should read Dani Rodrik’s Economics Rules which argues that economics offers a collection of models which are internally coherent because of the discipline of mathematics or empirics but whose external validity depends on the particular circumstances.
pietwombly's review against another edition
4.0
AS a lay person who is deeply suspicious of economics, this helped me to view it as a more legitimate and interesting source of information and opinion. It's short and simple and therefore I am sure lacking in some ways, but it explains why economics is an academically valid pursuit while acknowledging how dangerous it is to take some of its rhetoric too literally in the public sphere. I feel better educated about models and how they are (or should be) used.