
Ask HN: How to understand economics - econconfusion
I&#x27;ve recently been trying to understand economics, but I have very little grasp of the general ideas.<p>I&#x27;ve come across this:
http:&#x2F;&#x2F;nbviewer.jupyter.org&#x2F;url&#x2F;norvig.com&#x2F;ipython&#x2F;Economics.ipynb<p>Why this simulations here are far from reality, they notebook does a very good job of explaining an idea using a simple model. Are there similar approaches for other economic ideas?<p>I&#x27;m aware that understanding the economy as a whole is well beyond the grasp of simple models like this, but I&#x27;m curious just how far it is possible to get using simple models.<p>Most economic text books I&#x27;ve looked at either take a too wordy approach to descriptions, or a far too detailed mathematical approach.
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Nicholas_C
Hey OP, like another poster said I think an introductory college
macroeconomics textbook would be great. Most use a model based approach
without bringing in crazy math to do so. A book I used in college that I think
would be good is "Principles of Macroeconomics" by Gregory Mankiw. No need to
buy the latest edition, the content doesn't change too much.

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rajacombinator
Go read a basic micro 101 book, discard everything else. Especially scientism
gobbledegook written by physical science wannabes.

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lordCarbonFiber
That's not terrible advice from the perspective of forming an academic
foundation, but otherwise falls pretty short. If economics was as trivial as
an introductory freshman course there wouldn't be a contested field attempting
to build models.

Relevant comic and all that jazz: [http://www.smbc-
comics.com/?id=3117](http://www.smbc-comics.com/?id=3117)

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brudgers
_Wealth of Nations_ :

[https://en.wikisource.org/wiki/The_Wealth_of_Nations](https://en.wikisource.org/wiki/The_Wealth_of_Nations)

 _Das Kapital_ :

[https://en.wikisource.org/wiki/Das_Kapital](https://en.wikisource.org/wiki/Das_Kapital)

~~~
Nicholas_C
I read a good portion of these in college for an economic history class and I
would not recommend these to OP. These books are extremely dense and foster
qualitative discussion, not really the model based approach to economics that
OP seems to be searching for.

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Matheo05
You can start here:
[https://www.youtube.com/watch?v=PHe0bXAIuk0](https://www.youtube.com/watch?v=PHe0bXAIuk0)

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econconfusion
While I really like the video, it's not quite what I'm looking for.

I'd be interested in an attempt to take these simple ideas: credit, debt, etc
and created a simple model that shows how credit leads to cycles, where I can
play with parameters and see exactly what affacts what.

For example, why cycles? Why should credit across multiple people synchronize
into cycles? why not just average out? Exactly what assumptions go into this?

~~~
notahacker
Sounds like what you really want is an introductory macroeconomics textbook
that will give you an explanation of the standard models mainstream economists
use.

But your example - why business cycles occur - is really more of a debate than
a generally understood phenomenon. That's part of the reason _why_ they occur.
(part of the explanation is straightforward: people are less likely to borrow
if they think that problems in the economy might make repayment difficult, and
optimism/pessimism about the future tends to be shared by large proportions of
the population. But the dynamics aren't universally agreed upon.)

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qubex
Mathematical economist/game theorist here (applying daily in the role of CEO
of family firm founded three generations ago).

Firstly... and I do not mean this to sound like hurt pride, but... a
discipline would need to be quite trivial to be ‘understood’ by cursorily
surveying a few online texts. There's a corpus of several centuries of
findings, derivations, and unresolved controversies precisely _because_ it is
nontrivial. (Side note: the existence of controversies that divide different
schools of thought does not mean that everything is in question and that
absolutely anything goes because, hey, we can always argue with words by
distancing ourselves from observable reality — that makes for religion not
science, albeit even the dismal kind.)

Second: the general idea is that there exists a dynamic, complex system
constituted of agents (people, sometimes aggregated into firms and/or nations,
being almost always simultaneously consumers of something in need of
everything except that which they are suppliers of, be it labour, materials,
knowledge, time in the form of lending money, whatever) each doing their best
to maximise the enjoyment (utility) of what they have by interacting in a
series of ‘markets’, which for the sake of analysis we generally are forced to
assume are in ‘equilibrium’ (i.e. We're at the “end of history“ where no
external bumps or surprises are leaking into the market and nudging it in any
direction) but in truth we know to be in perpetual disequilibrium as
information percolates in, surprises happen, and generally guesstimates of
everybody involved are shown to right at best on average. An equilibrium price
comes to exist where supply and demand cross and we spend many a happy hour
calculating that and then trying to figure out how a ‘shocked’ system returns
to equilibrium if we jolt it.

Thirdly: money is (surprisingly enough, for the public which seems to conflate
economics and accounting) not necessarily the domain of economics. As a whole
the discipline deals with incentives (most usefully and generically regarded
as differences in subjective utility) and responses thereto (utility
maximising strategies). Money is at best something that serves as a
denominator to give everything a common unit and, at worst, an irksome
distortion. This is one of those “school of thought” controversies I mentioned
above: there are monetarists within the domain of economics and there is the
separate domain of finance, somewhere between accounting and economics, and to
which ‘risk’ (uncertain future outcomes) is an essential ingredient — and
governmental fiscal policy (taxation and public spending)... that's yet
another thing.

For the sake of reading I suggest (no offence intended) Managerial Economics
For Dummies, The Origin Of Wealth (Eric Beinhocker), and The Social Atom (Mark
Buchanan).

P.S. On mobile so I've had to edit this a few times... sorry if you caught me
in flux but it's great to have a chance to mention stuff that amuses me once
in a while.

~~~
econconfusion
Maybe I was too broad when I said "understand" \- I had no intention of
trivializing economics. I'm interested in it because it's both complex and
relevant. I just want to know more than I know now.

If I were to look at physics, I can model simple systems in classical physics
quite easily using a computer. In biology I can model population dynamics.
Doing so helps me learn, and I find it gives me a deeping understanding as it
forces me to be clear about exactly what is going into a model.

I'm aware that economics is a much softer science, but other than Peter
Novig's example I can't find much in the way of modelling as a learning tool
(rather than a research tool).

Does that approach exist anywhere?

~~~
qubex
In computational physics you model situations by creating some particles,
placing them in some initial configuration, and defining the manner in which
position and proximity of other particles creates forces acting upon each
particle, and then you calculate acceleration, and thus eventually the
position of those particles after a single temporal step. When all the
giggling stops you've hit your system's final configuration given the initial
conditions and subject to the forces defined (up to the numerical precision
afforded by whatever affects your simulation's precision).

Analogously in economics you'd want to define the agents, the inventory of
what they have, what they want, and the medium (market) through which they
will trade to become as happy as they can. When nobody sees any point trading
anymore you have a “Pareto optimal” end-state and you're basically in
equilibrium.

Back when I used program simulations I used Mathematica, and I am still deeply
tied to that specific platform, but there's several introductions to doing
much the same with less exotic (and expensive) tools such as Python:
[https://www.researchgate.net/profile/Michael_North/publicati...](https://www.researchgate.net/profile/Michael_North/publication/221529231_Tutorial_on_agent-
based_modeling_and_simulation_part_2_how_to_model_with_agents/links/02bfe50d0c1189755a000000.pdf)

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qubex
Oh well, so much for that.

