President Elect Joe Biden recently unveils his economic team. There are some heavy hitters included so it appears there will be a grander out rolling of new policies at some point in the not so distant future. Janet Yellen is a familiar face in economic news and her policy approaches are known. That doesn't mean she won't break her mold a little but she has certain philosophical underpinnings that help guide her policy decisions.
The pandemic created a novel situation and no matter what economic plan the team develops it can't be cookie cutter because the economic situation and fundamentals have shifted. In other words, our current theories have some predictive validity (i.e. if the government does this it leads to that) but the accuracy of those predictions has gone down since Covid-19
We never lived through a pandemic or its economic repercussions at a time in history where technology is fundamentally changing just about everything we know about life. The data we are collecting now on a worldwide scale will open our eyes to how we function as a species. Because all economic theories relate to human behavior the advent of the Information Age (Big Data) will provide more information about human behavior but adjust many of these behavior patterns (rooted in the physical world) to center around the tools and products of an online world (We have come a long way since using a stick to get ants out of a log 😕).
What often happens is that new phenomenon change highlight the need for additional study and research. If old theories don't explain something well the intellectuals of society go out and look for other theories that seem to explain activities more accurately. It gets confusing so just I think of it like.....
1. Theories are explanatory so they explain a phenomenon based on the information we have. When a theory appears to be accurate it explains something in our world and can predict (with some statistical accuracy) a similar event/phenomenon. When a theory is useful it can be applied across a set of phenomenon with similar characteristics.
2. Models are precise and descriptive that can be used to support the validity of a theory. While a person can create a model based on an unsupported theory that model must be tested to see if it accurately describes how something works or functions. From a practical standpoint, a model should have some elements that can be broken down and tested through specific measurements.
These definitions are based in philosophy so different people will use the terms differently. It can get confusing which one is which because the words are often interchangeable. To me a model is transaction oriented and descriptive while a theory explains and predicts phenomenon. An applied theory will need at least one functional model to be used in industry.
From a research stand point one could break theories down and study them in a form of a model (i.e. something like I'm doing with Delta County). I suspect it is also possible to build a model from observation and create a general theory. Those models are then can be tested in other places to see if they are generalizable to other times and locations. If they are you have a working and functioning theory that somewhat accurately (I say somewhat because we are not "all knowing" so we will always need to adjust at some point until we have perfect knowledge.) explains and predicts events.
There appears to be a lot of knowledge in that room so let's just watch and find out what is going to happen in the near future.
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