But There Is Not A Can Opener!

There is this economics joke that goes as follows:

An engineer, physicist, and an economist are stranded in the desert with only a can of beans but no can opener. How do they open the can? The engineer suggests to hit the can with a rock. The physicist suggests to build a fire to create pressure, thus opening the can. The economist thinks and then says, “Assume that there is a can opener.”

This is a joke that is widely said if you are involved in economics circles. And if you have not heard it before, well now you have. But when I hear this joke, I am not sure how mainstream economists interpret this.* I know in the view of radical subjectivism, or of the heterodoxy in general, this joke is ‘funny’** because to assume a can opener is absurd and does not help the situation one bit. If we assumed the can opener and considered that our solution,  then they would die from starvation in the long run, of course, assuming that the three do not find food later.

All economists know, or they should know, that in order to make neoclassical models work, we have to assume certain things, even if they are not realistic assumptions. And economists know that some, if not most, assumptions are not realistic but they try to justify the assumption anyway, usually by saying something like, “But this model best illustrates point X under these certain conditions. Thus they help us better understand the economy.” But do assumptions (especially unrealistic one like rational expectations) help us better understand the economy? I do not think so, I think these assumptions are just as useless as the can opener assumption.

* Ironically, this is a joke told by mainstream economists. I think they seriously shoot themselves in the foot by saying this joke.

** It is not really a funny joke but you see my point.

– Isaac Marmolejo

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5 responses to “But There Is Not A Can Opener!

  1. Useful assumptions eliminate a known variable, that’s really all there is to it. Unfortunately Milton Friedman didn’t seem to understand this, and effectively ended up advocating any methodology whatsoever because of it.

      • In economics?

        Obviously closed economy is a sound assumption. Flexible prices are OK as it’s easy to see the impact they have on the analysis. Even rational self maximisation is OK, as it’s easy to incorporate ‘satisficing’ and add things like loss aversion.

        But homogeneity, perfect information, perfect mobility etc. are just nuts. I don’t even know what impact they have on the analysis.

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