Afternoon Must-Read: Dani Rodrik: Foxes Over Hedgehogs

Dani Rodrik: Foxes Over Hedgehogs: “We live in a complicated world, so we are forced to simplify it….

But, because such ‘mental models’ are simplifications, they are necessarily wrong…. And yet, without these shortcuts we would be either lost or paralyzed. We have neither the mental capacity nor the understanding to decipher the full web of cause-and-effect…. Good social science turns our unexamined intuitions into a map of causal arrows…. In a world of diverse and changing circumstances, social scientists can do real harm by applying the wrong model. Neoliberal economic policies, predicated on well-functioning markets, misfired in developing countries – just as planning models, presuming competent and capable bureaucrats, failed in an earlier era. The efficient-markets theory led policymakers astray by encouraging them to undertake excessive financial deregulation…. So how should we choose among alternative simplifications of reality?… Often we need to make decisions in real time…. Unfortunately, economists and other social scientists get virtually no training in how to choose among alternative models. Neither is such an aptitude professionally rewarded…