Supply and demand econ is like Newtonian physics - works great until you hit extremes, and if you look really closely the aggregate rules are betrayed by the behavior of subatomic building blocks. Any policy model predicated on a presumption of individual wisdom has the very same flaws as a pricing model based on brownian motion. Hence the advocacy of no policy at all and the Austrian assertion that models are meaningless.
I don't go all the way to Vienna on that one. You identify a certain ideological confusion in my part.
I do enjoy the concept of a theoretical society of rational optimizers. Even the words are lovely.
I find that it isn’t an issue of models being meaningless, but rather that models are applied in situations that exceed their limits. Instead of having a world where Newtonian mechanics explains most visible phenomena, we live in Mr. Tompkins’ world. Many economic models are widely used that simplify away significant pieces of reality or even ignore reality altogether.
I’ve done some research in modeling and simulation. Simulations are very useful for demonstrating consistency of models, or consequences of models, but they do not verify models. This fact is lost on many (most?) scientists who use simulation, independent of the field of research. If the assumptions (models) are known to be incorrect, then the simulation is an exercise in intellectual masturbation (provides some personal satisfaction, but accomplishes nothing).
I didn’t comment with the intent of pointing out your ideological confusion as if it were some sort of flaw. Jeff Miller has stated before (and I paraphrase because I couldn’t find his version) that most of political or economic ideology is about the best way to improve our—everyone’s—lot in life with the understanding that we are imperfect beings. If that’s the case, then purity and certainty in ideology are scary things: an imperfect being’s delusions of perfection. Besides, you’ve admitted your own ideological uncertainty before. Not much of a gotcha.
