In the natural sciences, a laboratory experiment can isolate various elements and their movements. There is no equivalent in the discipline of economics. The employment of econometrics and econometric model building is an attempt to create a laboratory where controlled experiments can be conducted.

Building an Economic Model

The idea of having such a laboratory is very appealing to economists and politicians. Once the model is built and endorsed as a good replica of the economy, politicians can evaluate the outcomes of various policies.

Riots against police have not only occurred in the US. Two events have spurred a public debate in Germany recently. On the night of June 20, police officers in Stuttgart stopped a 17-year-old to check for drugs in an area popular with young partygoers. Two to three hundred people in the crowd of bystanders sympathized with the young man and attacked the police. The situation escalated into riots and lootings.

Progressive politicians repeatedly tell us that capitalism is a system rooted in the wealthy’s exploitation of the poor. To convey this in an emotionally resonant way, they employ images of “sweatshops” in the developing world. While some people labor away in factories, often in terrible conditions, the owners of Walmart and Nike rake in profits, enjoying their luxurious penthouses in Manhattan. Many find this compelling.