In context, Koopmans is making a number of points:
- He is attacking an empirical approach that investigates aggregate, economic phenomena without reducing these to (what we would now call) micro-foundations. This is non-trivial because it not-so-subtly pushes economic research away from understanding complex systemic phenomena on their own terms.
- Koopmans is defending a notion of economic explanation that incorporates policy impact as an essential feature of one's evaluation of the merits of explanation. This is non-trivial because it subtly pushes the notion of economic explanation away from topics that are unrelated to policy interventions.
The mathematical econometric techniques and tools – and more generally inferential technologies that produce univocal and stable figures in calculating the implications of policy alternatives – were promoted within economics and, of course, to policymakers, in part because they would make economists attractive as policy experts (as opposed to say, sociologists, lawyers, anthropologists, and historians). (Recall my treatment on the Alchian move.) To do so Koopmans had to displace a very different vision for economics, one that focused primarily on understanding long-range economic phenomena. Economics has been hugely successful in becoming the indispensable policy science, but it is by no means clear that now, more than a half century later, we really understand long-run economic phenomena much better than the great economists of the eighteenth and nineteenth centuries.
- This second point leads us to the most significant aspect of Koopmans' position: the elevation of the criterion of social usefulness.
Saturday, April 14, 2012
On Econometrics as Policy Science
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1 comment:
Worthwhile read.
I've done a lot of econometrics. I've read a lot about econometrics. That experience has made me deeply suspicious of pretty much everything claimed by everyone about every policy.
It's a useful tool, and a necessary tool. It can also be used inappropriately to create the appearance of causal relationships where there are none and lie to everyone. It's also really, really easy to screw up while acting with the best of intentions.
Importantly, screw this:
He is attacking an empirical approach that investigates aggregate, economic phenomena without reducing these to (what we would now call) micro-foundations. This is non-trivial because it not-so-subtly pushes economic research away from understanding complex systemic phenomena on their own terms.
The economy is a complex, adaptive dynamic system. Trying to break it down to individuals and then working from the ground up has probably held the field back.
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