On April 21, economist and econometrician Carl F. Christ died at age 93. He had a good run.

Here’s a quote that Conversable Economist Timothy Taylor reproduced this morning. I think it’s beautiful:

I used to believe that it was possible to build and estimate an econometric model that would represent an invariant law of economic behavior, valid for many places and for long periods of time. I no longer believe this, because I have yet to see an econometric model that continues to describe new data with no change in its parameters. Instead, I believe that economic reality is so complex that the best we can expect of an econometric model is that it may approximately represent the relations among its variables for a limited place and time. Such an approximation may be very useful, and may permit us to make forecasts for short periods into the future. But until we have much more knowledge about human biology and its relation to economic, social, and political behavior I think we will not achieve econometric models that are invariant over wide reaches of space and time.

What then do economists really know? I think we know a great deal. (Remember that this knowledge must be only tentatively accepted.) Most of our knowledge is about equilibrium situations and how they change, rather than about the path followed by the economy on the way to equilibrium. We know some rather simple things that can be stated in nontechnical terms. For example, we know that as incomes rise, a smaller fraction of income is spent for agricultural and extractive products, and a larger fraction for processed goods and for services. We know that increases in a country’s output per person require either more effort per person, more capital per person, or better productive techniques. We know that price ceilings create shortages, and price floors create unsold surpluses. We know that sustained rapid growth in the stock of money is accompanied by rapid inflation and vice versa. We know that government spending must be financed by some combination of taxation, revenue from sales of product, borrowing from private or foreign sources, issuing high powered money, or depleting stocks of government-held assets. We know that excise taxes, tariffs, and quotas reduce economic welfare in the sense that without them the same total resource pool could produce more satisfaction for some people at no cost to others. We know that permitting individuals to own property and engage in transactions with each other freely will benefit the participants and harm no one, provided that everyone is well informed and acts in his own interest, no one has monopoly power, and there are no external diseconomies such as pollution and no external economies such as increases in the value of my neighbor’s real estate if I improve mine. (These are very large provisos, and in some situations they are not even approximately satisfied.) We know that a system of private property and free contract leads to an unequal distribution of income and wealth. We know that social or political attempts to equalize the distribution of income and wealth have perverse incentive effects, so that equalization has a cost in the form of a reduction of total output, and we know a good deal about which kinds of policies are the most perverse in this respect (quotas and price controls) and which are the least perverse (income and inhelitance taxes at moderate rates, and good public education and health programs). We know how to look for long term as well as short term effects, and for indirect and well as direct effects. We also know a great many technical theorems that require mathematics to state clearly and to prove. …

Perhaps the way to sum up this philosophy in the fewest possible words is to say, “Use your head. And use your heart, too.