[lordnacho]

Wow, this was the article I was looking for, it summarizes a number of thoughts about economics that I'd been having since the undergraduate days:

- There's an authority about the field that really isn't deserved. The models are not made properly, and there's a lot of hand-waiving. I studied economics with a class of engineers and everyone pointed this out.

- The pop-sci version of economics is a bunch of easy quips. Friedman's "everywhere a monetary phenomenon", Keynes "In the long run".

- The econ 101 version of economics is dominant in popular thought. You see it everywhere in newspapers. A more nuanced version of economics does exist, but the appeal to authority is strong in the field, because there's no real reasonable arguments, it's actually politics.

- Inflation is more interesting in a disaggregated view, for reasons mentioned. You can't look at it as a single figure.

- Relative price changes are what matter in society, because they represent changes in negotiation terms between different actors. Post-pandemic and Ukraine, we should expect to see more shortages as well as more strike action. Various groups like the RMT union will decide they need to flex their muscles. Chip shortages will cause negotiation positions to change across a wide variety of affected sectors like cars, meaning push will come to shove for certain lines of business.

[onlyrealcuzzo]

The article talked a lot about winners and losers.

It's interesting that there's no mention of debtors and creditors.

The biggest winners in hyperinflation are people in massive debt. It's inflated away to nothing. The biggest losers are creditors for the opposite reasons.

When inflation is just abnormally high (~8%), your debt doesn't get deflated to nothing, but you're getting a ~6% discount.

[ryathal]

Debtors only benefit from inflation if their pay actually goes up. If you were making $15/hour 1 year ago and still making $15/hour now, you just get fucked.

[lamontcg]

This is why the headlines to focus on are the ones not about inflation, but about wage increases and unionization happening right now.

> Consumer spending climbs sharply again — and not just because of inflation > Rising incomes partly cushion Americans against high inflation

https://www.marketwatch.com/story/consumer-spending-climbs-s...

But rising wages and the threat of a wage-price spiral and the effect on debts is precisely why the Fed is indicating they're going to crash the economy.

[brabel]

My car loan just increased the interest rate I have to pay due to "increased costs". I had no idea they could do that (yeah, didn't read the fine print). I'm pretty sure consumer goods' creditors are doing just fine with rising inflation!

[helen___keller]

> When inflation is just abnormally high (~8%), your debt doesn't get deflated to nothing, but you're getting a ~6% discount.

That’s only true for fixed rate debt, which is common to think about for Americans due to the popularity of the 30 year fixed rate mortgage but in many countries ARMs are more popular or most popular.

In theory, fixed rate debt products should be priced in to reflect interest rate risk as well, so it’s hard to say the creditors are losers per se.

[lesam]

Creditors definitely do lose money when they price debt at 2% but inflation runs at 7%.

Talking about mortgages misses the larger fixed rate bond market (government and company long term debt).

[helen___keller]

Yes but what I’m saying is all fixed rate debt prices in interest rate risk. Any one creditor could be in a bad spot, but a creditor holding lots of fixed rate debt can / should be hedging against that risk.

When we’re talking about institutions with billions of dollars (and not joe lending Bobby $20), I wouldn’t call them a loser unless they specifically failed to properly hedge their positions.

[lesam]

How would you hedge interest rate risk on trillions of dollars in US treasuries? Who takes the other side of that trade, and why? I don’t think that sort of hedge exists.

[helen___keller]

I don’t really know what specifically you’re referring to. I’m not aware of anybody trying to hedge trillions in treasuries in one trade. I’m not aware of anybody even holding trillions in treasuries except maybe a few foreign countries.

Hedging is done at the portfolio level using derivatives. This allows you to move your unwanted exposure to interest rate risk (or just about any kind of risk) to someone else in exchange for a premium. Whoever is taking that risk off your hands probably has a more diverse portfolio and wants the premium (ie their risk profile is different). In this manner, large fixed-rate creditors shouldn’t be largely exposed to rising interest rates, because they’ve been hedging that risk all along.

[onlyrealcuzzo]

Isn't this the point of TIPS?

[geoduck14]

This makes me wonder if Fannie Mae and Freddie Mac have hedged all of the fixed rate mortgages they have lent money for.

[helen___keller]

I don’t know about “all”, but Fannie and Freddie do indeed trade derivatives as part of risk management

[lordnacho]

With hyperinflation yes, because then there are only real incomes, prices (and debts) become meaningless. A plumber can fix the toilet for a carpenter who makes a doorframe for the plumber, they don't need a number if they can agree those services are worth the same. Thus real incomes are still real.

With merely high inflation you still have insecurity. Many salaries are not inflation indexed (I struggle to think of anyone I know), so the only way to maintain your budget is to get a new job. For many lines of work, especially at the lower end of the scales, that's utterly unappetizing, and people would rather pressure their union to push up salaries.

[yxhuvud]

The most common reason for hyperinflation is that the productive capabilities of society has gone down the crapper. That mean everyone is a loser. Some more than others, but even the debtors are losers in that situation.

[dragonwriter]

> The most common reason for hyperinflation is that the productive capabilities of society has gone down the crapper. That mean everyone is a loser.

Correction: The most common reason for hyperinflation is that the productive capabilities of the local economy has gone down the crapper. That mean everyone entirely dependent on the local economy is a loser. But, in the places where hyperinflation has occurred, it's not uncommon for elites to have significant foreign investments.

[onlyrealcuzzo]

I don't know if Argentina counts as hyperinflation. But that's not really the case there. Nor was it in Zimbabwe. Venezuela's hyperinflation was just due to the price of oil dropping ~50%, and the government being completely irresponsible.

Where else was this the case beside Germany?

[gpderetta]

Only if you never need to refinance a debt.

[frankfrankfrank]

The thing that has nagged at you as it has me, is the simple fact that not only was “economics” conjured and molded by and for the interests of the upper echelon of society, to control the language and thoughts about its terms; but that at the core of it, it’s nothing more than fraud, deception, con artistry.

That’s all inflation is too, fraud that if you would commit it, e.g., you added filler to some product you delivered or forged signatures on delivery paperwork, you would be punished for.

You are given currency coupons in exchange for your work, and then more of those coupons are just forged than correspond to actual work having been done, thereby defrauding you out of the value of your work, also commonly called theft of service.

[throw0101a]

> You are given currency coupons in exchange for your work, and then more of those coupons are just forged than correspond to actual work having been done, thereby defrauding you out of the value of your work, also commonly called theft of service.

All currency is made up. Even gold, or bitcoin, or giant rocks:

* https://en.wikipedia.org/wiki/Rai_stones

The only thing that has "inherent" value to humans is air/oxygen, shelter, water, and food. Everything else is psychological projection for convenience.

See The Power of Gold: The History of an Obsession by Bernstein:

* https://www.goodreads.com/book/show/249245.The_Power_of_Gold

* https://en.wikipedia.org/wiki/Peter_L._Bernstein

And Money: The True Story of a Made-Up Thing by Goldstein:

* https://www.goodreads.com/en/book/show/50358103-money

* https://en.wikipedia.org/wiki/Jacob_Goldstein

[achenatx]

>>The only thing that has "inherent" value to humans is air/oxygen, shelter, water, and food. Everything else is psychological projection for convenience.

This isnt really true. If you put someone in solitary confinement for long enough they will go insane.

People commit suicide for a variety of mental health reasons.

Mental health is absolutely as important as physical health and it isnt obvious where to draw the line for required vs. convenient.

There is also health/medicine/medical care/sanitation.

There are also secondary requirements that enable the production capacity for the above stated requirements.

[Turing_Machine]

> All currency is made up. Even gold, or bitcoin, or giant rocks

Yes, but gold, bitcoin, and giant rocks can't be inflated at will, which is what the OP was complaining about.

Simulated pieces of green paper can.

Even with the formerly-used real pieces of green paper, there's a physical limit to how fast printing presses can run.

With simulated pieces of green paper, you can just type some numbers into a computer and suddenly there are twice as many of them as there were before. Or a hundred times as many. Or a trillion times as many...

[orwin]

Okay, but creating money at will is not a bug, its a feature.

I know there is this myth of the "no crisis ever during the gold standard era", but this is false. We had a crisis every ten years or so, sometime way bigger than the 2008 crisis despite the economies being less interconnected. And those crisis sometimes were entirely disconnected from production issues, unlike 2008 that is clearly linked with the conventional oil/gas peak. Because having liquidity that allow easy trading of ressources actually help recover faster and avoid made up crisis like the 1893 one in the US.

[stevesearer]

From my limited knowledge, I don’t believe hard money advocates would say there are never any crises, but instead that they are shorter lived and not as large.

[throw0101a]

> […] but instead that they are shorter lived and not as large.

Which of course does not match the historical record:

* https://www.theatlantic.com/business/archive/2012/08/why-the...

* https://archive.ph/FWKcL

[orwin]

They are even more wrong than i thought then. The longest crisis was caused directly by hard money, it lasted more than twenty years.

And it was NOT a production or energy crisis. That what people seems to not understand. Yes, 2008 was a bubble, but a lot of bubble bursted since the 70s and none of the burst created a depression like 2008. The only reason 2008 was this big is because it was an energy crisis, almost four time worst than the oil crisis of the 70s (which is also the first energy crisis). The gold/silver standard manufactured crisis (not helped with fractionnal banking tbh) that had no reason existing at all. Just made people poorer by design. This wasn't even caused by a famine or a war.

Here is my advice: unless the expert/advocate is an historian specialist of the 19th century (or even better: specialist of foreign trade or economics during the 19th century), do not believe anything he said. Don't believe me either, but "Those who cannot remember the past are condemned to repeat it", so look it up, just read on how interesting where the time of hard metal, how easy it is to raise interest rate without impairing trade when you have a gold standard. 19th century financial crisis in the western world despite the huge production boost from pillaging colonies workforce and ressources...

[goodpoint]

> creating money at will is not a bug, its a feature

Despite the stupid downvotes, this is true.

Of course the mechanism can be abused by printing money that are not backed by real growth (like in the US), but most countries don't do that.

[audleman]

In reality, only 13% of our planet’s population is born into the dollar, euro, Japanese yen, British pound, Australian dollar, Canadian dollar or Swiss Franc. The other 87% are born into autocracy or considerably less trustworthy currencies. 4.3 billion people live under authoritarianism, and 1.2 billion people live under double- or triple-digit inflation. [https://bitcoinmagazine.com/culture/check-your-financial-pri...]

Since 1920, at least 55 hyperinflation events have taken place, destroying savings and creating economic hardship. [https://assets.website-files.com/614e11526f6630959fc98679/61...]

A stable currency and strong property rights are the exception, not the rule.

[throw0101a]

> Yes, but gold, bitcoin, and giant rocks can't be inflated at will, which is what the OP was complaining about.

Governments have been fiddling with metal-based currencies going back to Ancient Rome and Han China:

* https://en.wikipedia.org/wiki/Seigniorage

Never mind what the general public has done as well:

* https://en.wikipedia.org/wiki/Methods_of_coin_debasement#Coi...

See Bernstein.

> With simulated pieces of green paper, you can just type some numbers into a computer and suddenly there are twice as many of them as there were before. Or a hundred times as many. Or a trillion times as many...

Yup, and that's how private banks create loans and mortgages:

* https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/m...

Central banks do not create the money that the public uses in the economy, and the only money that the government creates is coins and bills via the their mints.

Also, have you ever asked what happens when there isn't enough money?

* https://en.wikipedia.org/wiki/Great_Slump_(15th_century)

* https://en.wikipedia.org/wiki/Great_Bullion_Famine

* http://www.nber.org/chapters/c11482

And it's not like 'hard money' brings any more stability:

* https://www.theatlantic.com/business/archive/2012/08/why-the...

* https://archive.ph/FWKcL

[Turing_Machine]

"Fiddling with" is not the same as "can create arbitrarily without limit". You're still not addressing the OP's actual complaint.

[kqr]

Governments can (and has!) "created arbitrarily without limit" metal currencies too. Given their monopoly on violence, they can just say "this coin now pays for ten pigs, not one, as you thought before". (Of course, they'd also decrease required tax payments correspondingly to maintain stable inflation.)

[lordnacho]

> The thing that has nagged at you as it has me, is the simple fact that not only was “economics” conjured and molded by and for the interests of the upper echelon of society, to control the language and thoughts about its terms; but that at the core of it, it’s nothing more than fraud, deception, con artistry.

Yeah this true, but I wonder if it's as straightforwardly sinister as that. I'm sure there are a lot of economists, esp in the mid 20th century, who would have liked to turn economics into physics. Some of those ideas are of no real merit after further inspection, but are kept alive by political interests.

You do come across a lot of thought pieces by think tanks, which seem to be more political than science.

> You are given currency coupons in exchange for your work, and then more of those coupons are just forged than correspond to actual work having been done, thereby defrauding you out of the value of your work, also commonly called theft of service.

The problem with that is there are legitimate reasons for printing more coupons, they're just mixed in with less legit reasons.

If people want to exchange more, they need more coupons. Otherwise everyone would have to wait for their income to arrive before sending it on, and while they wait some of the opportunities will vanish. A little bit of creation isn't so bad.

[ekianjo]

> f people want to exchange more, they need more coupons.

thats a fallacy. nothing prevents you from exchanging more even if you had a fixed number of coupons. you would just have to consider that the value of each coupon becomes more, not less, over time, so you need to use subdivisions of coupons more.

Inflation, even at low levels, is ultimately value destruction over time.

[klipt]

> the value of each coupon becomes more, not less, over time

Deflation has historically been a bad thing every time it's happened.

[ibeckermayer]

Nonsense. Sure, deflationary shocks can be calamitous, like the Great Depression or the GFC. But steady deflation over time is logically the natural and good outcome of improvement over time—as technology advances and we get better at producing things, they should get cheaper, on average.

Instead, our savings are buying us LESS over time, so that government can buy votes, fund wars, bail out defense contractors, pharma companies, financial institutions, and other cronies, etc. Inflation via the printing press, which is now just considered by many a normal phenomenon, is actually legalized wealth transfer from the savings of ordinary citizens into the coffers of giant government bureaucracies and the large corporations that feed off them.

[simonh]

Devaluing in-the-mattress savings is a good thing, hence all the many government schemes to incentivise small scale productive investment. Here in the UK that's through tax free consumer savings accounts like ISAs, but also pensions. Savings that are invested do work in the economy fund businesses, promote economic activity and aid job and wealth creation. Stuffed mattresses are a boat anchor on the economy.

Having said that, deflation isn't always the awful spectre of doom it's sometimes made out do be, especially if it's due to technological improvements or increased supply. As the article we're all notionally discussing explains, inflation in a reasonably well managed economy is generally differential and reflects shifts in the structure of the economy.

[mrow84]

Goods getting cheaper broadly means that supply is going up relative to demand - we call this deflation.

If the supply of money goes up relative to demand then we call that inflation.

It seems like you are conflating the two categories.

[someguydave]

Yeah that decreasing price for silicon chips over the past decades has been a real disaster.

[actionablefiber]

There's a difference between decreases in the price of specific goods that comes about due to technology, and deflation that comes about due to monetary policy.

That I can think of, the obvious difference is that the second one almost definitionally means a steady decrease in nominal wages. This seems like a perverse incentive - if I sock away my first paycheck flipping burgers under my mattress and do nothing with it for 50 years, a deflationary regime means I can take it back out and buy a lot more with it than someone with their first paycheck flipping burgers today.

[ekianjo]

Says every governement that promotes inflation. Funny hey?

[flybrand]

> straightforwardly sinister

If the impact is sinister, then debating the motive just extends the duration of the pain experienced.

Motives matter at the time of trial - when the action and pain are over. Until then, debating motive is just a distraction from stopping the unjust activity.

[simonh]

So you seem to be adding your voice in support for the article which, er, directly contradicts your views about money printing and current inflation.

Right now we know for a fact that current inflation is a genuine global shortage of actual stuff. Crude oil, cooking oil, wheat, Chinese products. Plus American government overspending, to be fair, but that's just a US phenomenon.

Of course that's inconvenient if you really desperately want to complain that you specifically are being cheated. After all if you have less, it must be because somebody else has more, right?

If we're all screwed, who do you blame? Putin and Xi are far away and broadly hated already, so there's no satisfaction to be had blaming anything on them.

[bko]

> Plus American government overspending, to be fair, but that's just a US phenomenon.

That's not true. US spent the most, but Europe spent €3.2 trillion. US spent $12 trillion but they had to "shore up" a lot of global banks because that's just what they do. About half went into asset purchases and liquidity measures.

I take a simple approach. What would you expect to happen if you just created trillions out of thin air and distributed it? Arguing nothing would happen is the economic equivalent of a perpetual motion machine. It just doesn't pass the smell test to me because you can just create global wealth from changing some numbers in a computer with no repercussions. It's alchemy. Can I "prove" that there are negative consequences that in the long run outweigh the benefits? No. But I can say that I cannot find a single case of high inflation that did not coincide with government printing money. Printing a lot of money doesn't always cause inflation, but any time there is inflation there has been a lot of money printing.

Sure what happens may not be predictable, but its obvious that you're messing with a complex system and effects aren't instantaneous or uniform. That's why you see things like product X is going up 50% while product Y is going up 5%. And the people that point this out think they're debunking something.

With complex systems its best to keep things simple. You can get lost in the data from all the noise and overconfidence will bite you in the ass. Which is why it's not a smart idea to increase the money supply by 30+% in a year and dump it into the market.

https://www.weforum.org/agenda/2020/04/european-union-financ...

https://www.covidmoneytracker.org/

[kqr]

> Printing a lot of money doesn't always cause inflation, but any time there is inflation there has been a lot of money printing.

In fact, you can even argue that inflation causes a lot of money printing! When the government has trouble affording things that have gotten more expensive, they have to print more money to be able to buy the services they need!

(Of course, any responsible government would then also provide a drain for the corresponding amount of excess money -- e.g. tax it back out of existence shortly thereafter -- but somehow it's much easier to get elected when you promise to buy things, and not so much when you promise to tax the money away again...)

[simonh]

The excess inflation in the US (above that in Europe) isn’t due to pandemic spending or increased money supply, it’s demand driven due to the Biden infrastructure bill. The supply side can’t meet the increased demand, leading to excess inflation.

Look, I’d have voted for him too given the options, and probably still would, but his economic policy is ill advised.

[1ncorrect]

My current thesis, from a position of absolute agnostic ignorance, is economics is what filled the void in society vacated by religion after the enlightenment.

They’re functionally indistinguishable, with mythology replaced by mathematics, and God replaced with GDP. Similarly, they’re both arbitrary rules; conjured, imposed, and protected from scrutiny by the ruling class.

That’s not to say it’s not useful, but I find it baffling that an imaginary concept is unquestionably granted veto over tangible and visceral phenomena.

[achenatx]

the difference between economics (or science) and religion is that economics is used to predict the future. When economics fails to predict the future, the models are changed until they can predict the future.

religion tells you what goals you should have and how you should live a life, passing judgement and establishing morality.

They are orthogonal to each other.

[lukifer]

"Economists have successfully predicted nine of the last five recessions."

[lukifer]

I've used to think the Reagan-era political coalition (persisting to this day) made no sense: the values and worldviews of evangelicals and economic libertarians have terribly little in common. Then it clicked, the common belief that united them: https://en.wikipedia.org/wiki/Just-world_hypothesis

[perfecthjrjth]

Also, note that mainstream monasteries are at Harvard, Yale, Princeton, Stanford, etc. That's where these secular priests 'corrupt'/preach the next generation of elites.

[pjc50]

> then more of those coupons are just forged than correspond to actual work having been done

Is this Karl Marx's critique of inflation?

[specialist]

> The models are not made properly...

Yes and: This OC refers to the empirical data.

Friedman (et al) rejected empiricism. I was gobsmacked when I finally figured out what that meant. Like, wtf are they even arguing about if they reject reality?! (Ya, I am a slow learner.)

So agree or not with Nitzan's thesis, at least critics can have constructive debates about it.

[tjader]

I think it's better to think of it not as a complete rejection of reality, but recognizing the limitations of empirical methods. Mainstream economics today is arguably too focused on indicators, just collecting a bunch of data and finding correlations, then jumping to causation from that.

[barry-cotter]

> The econ 101 version of economics is dominant in popular thought. You see it everywhere in newspapers.

If only. Rent control wouldn’t exist. Policies that couldn’t pass any sane cost benefit trade off would be abolished. There would be a smooth, graduated marginal tax schedule. There would be congestion taxes on traffic.

The world would be incredibly different if Econ 101 was widely understood.

[achenatx]

not necessarily. One of the things Ive come to understand is that economic efficiency is not always the top priority. In many cases people want reduced variance. In return they are ok with less efficiency.

Economics can predict the outcome, but cannot make a value judgement between two options.

I used to think some people were irrational (especially when they disagreed with my logical viewpoint). It turns out that everyone is irrational, they simply have different opinions of the relative priority of values. For example it might be worth it to them to trade off long term economic efficiency for short term reduction in variance.

Nationalized health care, social security, and rent control are all examples of policies that reflect this value system.

"Freedom" is not a universal value. In fact many people are willing to trade freedom for security (or reduction in variance). They are not wrong or bad people, they just have a different opinion of priorities.

[marcosdumay]

Get some popcorn and enjoy the discussion.

The real point is that "inflation" is a badly defined term, and everybody uses a different meaning. So one person using the number measured by averaging the prices of a few real items says it's not purely monetary, while another using the value that converts monetary unities into real goods on the macroeconomic equations yells "what do you mean it's not purely monetary? It's defined that way, any real data was removed" (as a hint, you can't even measure that one).

If you get tired of this, there is a related discussion about the Keynesian investment multiplier. It's just as fun.

[lamontcg]

Inflation also ignores asset bubbles entirely by focusing on them as a separate class as not as too few houses or too few financial instruments being chased after by way too much money in the hands of the upper 90%/99%.

And this article barely mentions wages, unionization and wage-price spirals.

[FabHK]

I thought the article made a lot of noise about very little.

Sure, inflation reports the change in price of an average basket, and some prices in the basket might have gone up a lot, and some down a lot. But that is a different issue, and not inflation.

The basket is carefully constructed to mirror what the average consumer consumes. Thus, the inflation of the basket measures how much more the average consumer has to spend on his consumption. That is certainly a useful number.

To your further points:

- [...] The models are not made properly, and there's a lot of hand-waiving.

I'd disagree, you must have come across the wrong models. Theoretical economics has many beautiful models precisely laid out. For example, the Arrow-Debreu equilibrium model [1] utilises "the Kakutani fixed-point theorem on the fixed points of a continuous function from a compact, convex set into itself." I doubt that any engineer can find fault with the specification of that model. Similarly, the Heckscher–Ohlin model of international trade is well specified and yields five informative theorems [2].

To which extent those models reflect, or can be applied to, the real world is an entirely different question of course.

Then there is empirical economics, a whole different ball park. But if you look at national accounts [3], for example, all those measurements are defined in excruciating detail, and there are books just dedicated to define the terms correctly.

- The pop-sci version of economics is a bunch of easy quips

Agreed. Some of them are more informative than others.

- The econ 101 version of economics is dominant in popular thought.

Yes, and that is quite bad, and is often exploited particularly by the political right, the business-friendly laissez-faire libertarians. James Kwak calls this Economism, and he has a great book about it [4].

- Inflation [...] can't look at it as a single figure.

Again, to the extent that it reflects the price increase for the consumption basket of an average consumer: yes, it is an interesting and important number, and in particular, it is one number. Obviously, with more numbers a more nuanced discussion is possible.

- Relative price changes are what matter in society.

Sure, they matter. But inflation in itself really matters also, per se.

By the way, Keynes pointed out that inflation need not be a bad thing. One thinks it is obviously bad because the average consumer has to pay more for his basket, thus can afford less of it. However, if there was, for example, a fiscal stimulus in the wake of a recession, and that leads to everyone having more money at their disposal, and aggregate demand rising, then there will be a new equilibrium with more demand, more supply, and higher prices (=inflation), but the average consumer having more of their basket than before. Good, not bad.

[1] https://en.wikipedia.org/wiki/Arrow–Debreu_model

[2] https://en.wikipedia.org/wiki/Heckscher–Ohlin_model#Conclusi...

[3] https://en.wikipedia.org/wiki/National_accounts

[4] https://economism.net/

[lordnacho]

> I'd disagree, you must have come across the wrong models. Theoretical economics has many beautiful models precisely laid out. For example, the Arrow-Debreu equilibrium model [1] utilises "the Kakutani fixed-point theorem on the fixed points of a continuous function from a compact, convex set into itself." I doubt that any engineer can find fault with the specification of that model. Similarly, the Heckscher–Ohlin model of international trade is well specified and yields five informative theorems [2].

There's a lot of theorems in economics that I basically think of as math theorems. Arrow's Impossibility Theorem for instance. Various things in game theory as well, just about all of Tirole's book (IO? Can't remember).

But I think of them as math, with the very particular term "theorem" precisely because they are defined like math problems, with very specific assumptions.

They are really math theorems that are dressed in economics words like "demand function" in the same way that you can have a theorem in physics, eg the Bubble Theorem about what angles arise. Or that theorem that says you can't balance a magnet statically.

> To which extent those models reflect, or can be applied to, the real world is an entirely different question of course.

That's what engineers tend to care about though.

Now about averages, I think the point really does matter that the person who spends the average basket isn't representative. The guy in the 1% just doesn't care much at all about his beans and rice getting expensive. The family in the bottom 1% may well end up not eating for a day. Sweeping everything into one number causes some real problems with our decision making.