Krugman’s “How I Work”

I had this little piece written by Paul Krugman bookmarked for a while, and I took some time to read it today.  The most salient part of the piece for me was his “Rules for Research.”  Here are some insightful passages, along with my thoughts:

“I am a strong believer in the importance of models, which are to our minds what spear-throwers were to stone age arms: they greatly extend the power and range of our insight.”

I’ve heard time and again that some of the most contributions to economics involve the formalization of ideas from other disciplines.  For example, Gary Becker opened a new frontier to economics by studying the economics of discrimination.  Krugman’s advocation of “listening to gentiles” acknowledges this but also illustrates the importance of translating what is knowledge from other disciplines into the language of economics.  By creating these economic models, we extend our understanding of the subject by setting our assumptions in a clear manner and studying the full implications.

“If a new set of assumptions seems to yield a valuable set of insights, then never mind if they seem strange.”

I’ve always been quick to criticize material I’ve learned that makes insane assumptions–that all goods are normal, that only one factor of production is used in production, etc….  I was ok with some of the other assumptions of economics such as utility maximization and perfect competition because they at the very least resembled reality.  But really what is important is that these assumptions help build a model that illustrates mechanisms at work in reality.  People often criticize the notion of adding assumptions to perfect a model.  But if they hint at what’s actually going on in reality, maybe it’s worthwhile to study these models.

Fortunately, there is a strategy that does double duty: it both helps you keep control of your own insights, and makes those insights accessible to others. The strategy is: always try to express your ideas in the simplest possible model. The act of stripping down to this minimalist model will force you to get to the essence of what you are trying to say (and will also make obvious to you those situations in which you actually have nothing to say). And this minimalist model will then be easy to explain to other economists as well.

The idea of expressing complex social phenomena in simple terms has always been one that attracted me to economics.  As Krugman says, it is simplicity that allows us to develop an understanding of these phenomena and communicate these ideas to others.

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