Noahpinion:
Out here in the blogosphere, it is common to hear things like the following:
1. "Economics doesn't work; it has no practical applications."
2. "Economic will never discover any stable scientific laws, because human behavior changes."
3. "Economics shouldn't use math, because math can't describe human behavior."
4. "Economics is not a science."
Yeah, but you won't hear that from me.The New Arthurian Economics
Tom?
Yes and Noah
Art Shipman
My response at Art's.
Evidence, please.
Hint: "Complex adaptive systems"Comment either here or there.
And notice, nothing on accounting, where everything that happens "economically" is recorded ex post in terms of actual transaction. Projecting causally from that into the future based on invariance, the basis of scientific law, in a way that is stock-flow consistent? Not so much.
12 comments:
Ah, this is why I woke up at one in the morning :)
My responses to Noah's list:
1. No practical applications? I just dismiss that one. But the reason "economics doesn't work" is that policymakers have it all wrong. Tom I think you and I would agree on that.
2. Can't discover stable laws because human nature changes?? I disagree. I think underlying that statement is a misunderstanding of what a scientific law is. Human nature is like a coffee-cup used as a pencil-holder. There are an infinite number of possible positions for the pencil (human behavior) within the cup. There are *no* possible positions for the pencil outside the cup.
Stable scientific laws allow for all positions within the cup.
3. Math can't describe human behavior? For me, for my economic thinking, I do not wish to describe human behavior. I wish to describe the result of human behavior, in dollar terms. Balances and imbalances, I say. For example: excessive accumulations of debt and savings, and excessive concentrations of wealth and income.
Such extremes of monetary balances ARE THE CAUSE OF extremes in human behavior, pencils jumping out of cups and like that. If you will allow me some economic "theorizing" aka assumptions.
I majored in math, Tom, but I don't claim to know anything about accounting. Except that accounting is mostly a million ways to avoid paying taxes.
But what you seem to be saying at the end of the post is that we must look at the numbers -- and perhaps especially at the extreme numbers, the imbalances. With that I fully agree.
Art, I think that Noah's questions are mostly beside the point because they address rather extreme positions that are but rather naively.
The objections to neoclassical economics and neoclassical synthesis in Keynesianism are much more sophisticated.
If Noah just wants to dismiss the idiots, fine, but I'm not sure that this is his objective.
He needs to be defending neoclassical econ from serious objections that have been mounted.
The math front, Keynes himself rejected the econometric enterprise the way that neoclassical were pursuing it.
Then as numerous authors have observed, neoclassIcal assumptions are based more on computational convenience than reality.
Moreover, methodological individualism assumes that people are like atoms, which is just silly from the point of view of institutionalism, for example. Human being don't make "free choices" among alternatives to maximize utility over time, especially when perfect markets and prefect knowledge is also assumed.
These models may be helpful to some in thinking about economic issues, but they have little if any application to reality in terms of what science is actually about, namely predication. They are not even good explanations in that they are not stock-flow consistent and therefore are wrong based on ex post data.
In addition, we know for sure from the life sciences and social sciences that human behavior is social, therefore, complex and adaptive, if only due to the fact that humans are reflexive and shift their behavior with changing circumstances based on feedback. Neoclassical models do not address this.
As Keynes observed, economics is a logical approach to a "moral science." Human behavior is normative (rule-based) rather than exclusively positive (law-based). Rules are variable. Laws are expressions of invariance. Science is based on discovering invariance. Thus, economics is largely an investigation of how people respond differently within the same structure of very complicated rules, some implicit (culture) and some explicit (institutions). Moreover the rules are shifting, e.g., govt policy.
"Economic will never discover any stable scientific laws, because human behavior changes."
It does not. People will always need housing, food and health care. If economics cannot even understand these simple things, how could it understand something more complex? And is it really even important?
""Economic will never discover any stable scientific laws, because human behavior changes."
It does not. People will always need housing, food and health care. If economics cannot even understand these simple things, how could it understand something more complex? And is it really even important?
"
Kay, Right on. This reality needs to be driven home over and over again.
Looks like Noah is another lost soul that has not yet defined the problem correctly. Another very bright mind wasted chasing bad ideas down rabbit holes.
To get a PhD in economics, one becomes heavily invested in the prevailing paradigm and universe of discourse in which it is expressed. Up and comers realize that heterodox economics is heresy and career-damaging.
Tom, this is so true and something that must be addressed, otherwise we will never escape from crony capitalism.
I read story of a conversation between Paul Krugman and a professor (can't remember his name, teaches at UC Santa Barbara I believe) that was involved in the original design of the Eurozone system but bailed because he could see it wouldn't work.
Krugman told him to stay away from the monetary system or he would never be published and never have a chance at the Economics Nobel.
Kind of says it all.
Ask and ye shall receive:
http://larspsyll.wordpress.com/2012/10/21/touch-the-monetary-system-and-youre-academically-dead/
In summary, I would say that economics as it is presently practiced as a profession is largely advocacy.
I guess that it seems like sort of "quite a jump" to me, to go from:
"In summary, I would say that economics as it is presently practiced as a profession is largely advocacy."
to:
"Hint: 'Complex adaptive systems'"
By which I mean, there is a lot of ground between "economists are salesman and most of them haven't even attempted to approach the problem from a scientific perspective" and "getting any useful understanding of economics is a problem equivalent to studying biological life or creating artificial life".
In other words... are you really sure that there couldn't be "something analogous to thermodynamics" yet undiscovered? I mean, something sort of statistical and mathematically straightforward... obviously it does not give you a complete description of the future of any specific complex system... but it is still quite useful, allowing one to build refrigerators, internal combustion engines, etc.
(I don't know if I'm expressing my question very well, sorry!)
@ neededopenid
What I see in the life sciences, social sciences, and systems thinking in general is pretty conclusive theory and evidence that shows the neoclassical economic program is unrealistic and indeed, dangerous. It is unrealistic in that it is based on a mechanistic view rather than a biological one. Humans are organisms rather than like atoms.
Why is the neoclassical approach dangerous? For one thing, it is based on efficiency, and in complex adaptive systems efficiency is opposed to resilience. The most effective system is not the most efficient one but the most resilient one. The challenge is to make a resilient system as efficient as possible, rather than to maximize efficiency. Resilience requires redundancy and redundancy is inefficient.
Resilience also requires diversity and decentralization, and hierarchy imposes uniformity and centralization. Neoclassical economics is also based on stable equilibrium whereas successful complex adaptive system border on chaos because they thrive on creativity in response to challenge and rapid response.
In other words... are you really sure that there couldn't be "something analogous to thermodynamics" yet undiscovered? I mean, something sort of statistical and mathematically straightforward... "
@neededopenid,
In my view you are on the right track. This has been my approach....based mainly on closed systems but also on conservation of particles.
I believe I have built a working model that is an extension of the sectoral balances identity applied within a closed system (economy) that does what you suggest.
The irony is that it is so simple it will likely be dismissed as trivial...but then the concept of closed systems is trivial as is the sectoral balances identity.
The implications however are non-trivial (in my view)..
I expect to post my model in a week or so here. My goal will be to generate discussion and encourage people to find flaws in the analysis.
Tom, if you are interested in looking at a preview to see if it is worth posting, you have my e-mail (I assume). I would welcome your feedback.
paul, you can send it to me at tom dot hickey at yahoo dot com.
Post a Comment