The story is a bit misleading and I might have gotten a little too excited - you were right! But seriously, thanks for posting!!


Here it is in its entirety: http://www.imf.org/external/pubs/ft/...14/sdn1402.pdf


Ok, so as for basic models being useless - clearly not in all disciplines, and in many cases I would agree that keeping it simple is a good thing. However, when getting into economic models, simple is way too straightforward.

I mean all I ever hear here in KS is that everyone wants smaller government. "Were we to have less government, we would be more wealthy." And they are working at it!

On the surface that is very true. Less gov = less tax (to a degree). You don't even need a model to understand that - its intuitive. What's not intuitive is that large government is a function of civilization. The more people, the more specialized we all get, the more gov we need to look out for us. Regulation, as expensive as it is, reduces many negative externalitys that on the surface, one might not grasp intuitively. Hence, I was really excited about this story because I thought they might actually be starting to use "larger" computer software to actually model some of those things that aren't "intuitive" but measurable all the same. Because in my world - they are just as important.

Anyway, back to the point - take econ 101 models that show how regulation stifles growth. On its face, sure it does. The cost of doing business goes up when you have government body's (or any body you pay into) regulating. But what those simple models don't show is how much those regulators produce in terms of negating negative externalitys.

Personally - when I hear people going off about how they want less and less government and how they want to pay less tax, I always ask, "And do you expect to inspect all your food? Do you intend to go over to the nuclear power plant and make sure they aren't throwing hard water into the lake where you fish?" A more efficient government is a different story.

Of course those are simple examples - I am sure you get how complex a model would need to be in order to truly understand the benefits of wage distribution and taxes.