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Tuesday, February 28, 2012

"Economics and Its Military Patrons"

This is from an interview of Judy Klein on, among other things, the origins of economic models:

 ...I was surprised by the very material origins of models we use in economics and by how limits on computational resources molded modeling strategies. Friedman’s and Cagan’s macroeconomic adaptive expectations model as well as the exponentially weighted moving averages that Box and Jenkins generalized in their time series analysis originated in attempts during WWII to model information flows between gunner and analog computer in the lead computing gun sights of B-17 bombers. Rational expectations was a product of the digital computer age, including Richard Bellman’s development of dynamic programming to solve the Air Force problem in the late 1940’s of how to allocate scare nuclear bombs to competing targets in a potential multistage strike on the Soviet Union.
I was surprised to learn that so much of what was cutting edge when I was in graduate school at the London School of Economics in the early 1970s had its origins in war, including adaptive expectations, the simplex method, and mathematical programming generally.
I was also struck by the irony that a decade-long government planning contract employing Carnegie Institute of Technology economics professors and graduate students underwrote the modeling strategies for the Nobel-prize winning demonstration that the rationality of consumers renders government intervention to increase employment unnecessary and harmful.

    Posted by on Tuesday, February 28, 2012 at 12:24 AM in Economics, Methodology | Permalink  Comments (13)


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