How to Build an Economic Model in Your Spare Time
by
Hal R. Varian
UC Berkeley
December 1994
Current version: June 11, 1997
Abstract. This is an essay for Passion and Craft: Economists at Work, edited by Michael
Szenberg, University of Michigan Press, 1997.
Keywords.
Address. Hal R. Varian, Dean, School of Information Mangement and Systems, UC
Berkeley. Web page ~
How to Build an Economic Model in Your Spare Time
Hal R. Varian
Most of my work in economics involves constructing theoretical models. Over the years, I
have developed some ways of doing this that may be worth describing to those who aspire
to practice this art. In reality the process is much more haphazard than my description
would suggest---the model of research that I describe is an idealization of reality, much
like the economic models that I create. But there is probably enough connection with
reality to make the description useful---which I hope is also true for my economic models.
1. Getting ideas
The first step is to get an idea. This is not all that hard to do. The tricky part is to get a
good idea. The way you do this is e up with lots and lots of ideas and throw out all
the ones that aren’t good.
But where to get ideas, that’s the question. Most graduate students are convinced
that the way you get ideas is to read journal articles. But in my experience journals
really aren’t a very good source of original ideas. You can get lots of things from journal
articles---technique, insight, even truth. But most of the time you will only get someone
else’s ideas. True, they may leave a few loose ends lying around that you can pick up
on, but the reason they are loose is probably that the author thought about them a while
and couldn’t figure out what to do with them or decided they were too tedious to bother
with---which means that it is likely that you will find yourself in the same situation.
My suggestion is rather different: I think that you should loo
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