Economist’s work will be foundation for others

Re: “Economist ‘discovered’ what we all know,” letter, Oct. 14.

The critique of Richard Thaler’s recent Nobel prize somewhat misses a key point about economics (and “science” for that matter) — that it is not chiefly concerned with “discovering” some universal truths, as is sometimes claimed (somewhat dubiously) on behalf of physics and chemistry.

It is about constructing the most reliable models possible, models that can be used to make the best possible forecasts, and hence ground actionable decisions. In economics, this relates to difficult but critical matters such as: total federal government revenue to be expected in 2018-19, or future impacts on local economic activity of a change in tax structure, or in central bank rates, or due to bridge construction, etc.

What Thaler has done is illustrate one way to incorporate complex considerations such as “systematic human biases” and “misjudgments” into such forecasting models.

The letter is correct in the limited sense that we can only hope that (perhaps in less than 20 years) some group will follow up by showing how to construct pragmatically usable economic forecasting models that will incorporate some of the other social research and “non-economic” variables he mentions. However, it is highly likely that any such models will build on Thaler’s work, which is why he won the prize in economic sciences (which has also been won by other economists, such as Paul Krugman, who can hardly be accused of providing “apologia for those benefiting from the current economic system”).

Bob Adams Brentwood Bay