Ed Glaeser Leaves Economix

One of the authors at Economix signs off - in a remarkable, must read, post on the role of economics in an imperfect world (NYT):

Positive economics attempts to understand the world as it is; normative economics describes how the world should be. Most economists spend most of their time doing positive economics, but most economics columns advocate particular policies, which is implicitly normative economics.

In the wake of the recent crash and recession, it has become fashionable to deride the quants, whether on Wall Street or in the academy. After all, few of them saw it coming. The critics may be right to criticize excessive overconfidence, but they are wrong to suggest that the fault lies in either formal models or statistical work.

Hubris has been part of the human condition, with or without math, long before the Black-Scholes asset-pricing formula. Mathematical models create discipline. They ensure that we specify our assumption and that our conclusions then follow from our assumptions. Statistics then provide us with indispensable tests of our theories.

But we need to always remember that data and statistical tests never prove a theory. Typically, many different theories can explain almost any observed phenomenon. Data allows us only to reject a theory. The theories that survive are those that haven’t been rejected yet, and that’s a good reason for humility.