What Can Economists Do? Appreciative Theory, Market Design, and Open Systems

29 Pages Posted: 16 Nov 2018

See all articles by Glenn Furton

Glenn Furton

Department of Agricultural and Applied Economics; Texas Tech University

Adam G. Martin

Texas Tech University - Free Market Institute

Date Written: November 1, 2018

Abstract

F.A. Hayek argues that the best that economics can hope for is “explanation of the principle” of complex economic systems, arguing against the feasibility of precise prediction and thus of successful economic planning. However, subsequent work in economics, often under the heading of Market Design, has claimed some ability to design the contours of action situations for success. This essay attempts to resolve this apparent contradiction. We argue that Hayek is essentially correct about the limits of knowledge about broad-scale economic systems, but that local conditions are often close enough to closure to allow for more specific predictions and thus control. The distinction between the open system level and the somewhat closed local level is roughly analogous to the distinction between general equilibrium and partial equilibrium. We then distinguish between economic knowledge that is useful for experts and that which is useful for citizens.

Keywords: open systems, closed systems, methodology, market design

JEL Classification: B41, B50, B53, D47

Suggested Citation

Furton, Glenn and Martin, Adam G., What Can Economists Do? Appreciative Theory, Market Design, and Open Systems (November 1, 2018). Available at SSRN: https://ssrn.com/abstract=3276897 or http://dx.doi.org/10.2139/ssrn.3276897

Glenn Furton (Contact Author)

Department of Agricultural and Applied Economics ( email )

Box 42132
Lubbock, TX 79409-2132
United States

Texas Tech University ( email )

2500 Broadway
Lubbock, TX 79409
United States

Adam G. Martin

Texas Tech University - Free Market Institute ( email )

Box 45059
Lubbock, TX 79409-5059
United States

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