Patrick's Diary - 1/12/2016

Coming back home past 7:00 pm, I had a quick dinner and went to bed to fall into semi-sleep until 2:00 am on this Wednesday morning. Turning off the rooflight but on lamp on nightstand, I resumed reading Chapter 2 - The Science of Economic Modeling of Economics Rules and finished it an hour later. After another 2 hours and a half sleep in dark, I got up and took shower under barely warm water because my dad had used a lot of hot water earlier, which caused the water in the tank much colder than normal. However, I want to write up my review for this chapter before going out:

Economists call Economics a science because they claim they put forward a hypothesis first, then build a model to prove it. Per author, actually, the new model is built because the old models are not able to have the hypothesis proved. The First Fundamental Theorem of Welfare Economics may be the foundation of modern economics model, which proves the theory of the perfect competitive markets. It also verifies Adam Smith's "Invisible Hand". Combined with David Ricardo's Principle of Comparative Advantages, both of them signify the role of models to have economics hypothesis proved. 

Intuition doesn't always work in the world of economics. For instance, one industry goes down domestically because of its growth in other countries, workers in that industry seem losing jobs or getting lower pays, however, the fact is the global growth stimulates the economic growth domestically as well. Highly skilled workers in this sunset industry can find jobs in new areas with even higher pays. The General Theory of Second Best proves this very well.

The very important and inspiring point the author raises is that seniority, hierarchy and authority don't work in the world of Economics as they do in other social sciences because the role of scientific modeling enables anyone to challenge existences, establishments and precedences. Yes, Economics is a science, closer to physical or natural science than social science. Oh, this is my comment.

Due to a thought earlier on Tuesday, I recall that I ever considered Multivariate Nonlinear Regression Model an universal model for any economic issues. The process may be:

• Lock the issue;
• Define the variables;
• Collect the data of each variable;
• Formulate a Multivariate Nonlinear Regression Equation through depicting the collected data;
• Test the validities of the equation through thousands sets of equivalent data;
• Formalize the model through a full documentation process.

I will keep developing this economic thought going forward.

Of course, I remember Seahawks to be in Charlotte on Sunday...