An economics, investment, trading and policy blog with a focus on Modern Monetary Theory (MMT). We seek the truth, avoid the mainstream and are virulently anti-neoliberalism.
"Peter in seriousness we actually DO need QUALIFIED/COMPETENT economists"
Until the word 'economist' is seen in the same light as the 'n' word and we come up with a new term for those that are competent I don't think we're going anywhere.
Economists are religious politicians. I wouldn't want to be smeared with the term.
Matt, what can an useful economist bring to the table that a well trained statistician, mathematician, accountant, historian or engineer can't?
There is simply no area of expertise that economists can claim for themselves AFAIK. It's all a con, and more often than not they don't understand/know what they are talking about, as they conflate the REAL with the MONETARY all the time and pretend they don't.
If anyone can make a good case for economists within the current KNOWLEDGE BODY, I would like to read it, but until then it's a glorified profession that can self-justify as "experts" to dictate policy bases on some dubious knowledge body.
Until economics has passed it's proto-scientific stage it shouldn't hold such responsibilities pretending they hold the keys to some secret knowledge.
They are not trained in systems theory to an adequate level...
This is why you see the Wall Street firms poaching people graduating in the other disciplines (engineering, bio-chemistry, some mathematics, etc...) which are the the places in the academe where students get the heaviest doses of training in the systems theory...
I can speak for engineering from experience you get math (calculus) for 2 years running along side a physics progression of Newtonian > Electricity > Electro-magnetism .... THEN... you do a year of Linear Systems Theory as applied in your specific discipline (Electricity/Chemistry/Dynamic Mechanical/etc..) this takes 3 years +....
Believe me you come out of that with PERMANENT cognitive effects... all the dogma and subjectiveness is OUT no place for it...
I dont think the economics people get this or even an effective fraction of it.... yet what they are training to be able to work in is a system... our economic system...
so I think the name is good, ie "economics" its from oiko-nomos or 'house-law' or 'house-conventions' which is good but it seems to me the training is just plainly inadequate in the academe...
They need to add 2 years of calculus and physics at the start of the baccalaureate program and proceed from there.... less liberal arts stuff....
Ignacio, it's probably no coincidence that Smith and Marx were first and foremost philosophers. Or that Keynes was a strong mathematician, and probably because of this knew enough not to force mathematics into his economic theorizing where it was inappropriate or merely false precision. Kalecki had an engineering background, which I think really shows in his thinking. Of the dead economists, these are probably the most important IMO and they all had backgrounds other than economics. Some would throw Ricardo in there -- to which I wouldn't object -- and exclude one or more of the ones I mentioned (most likely Marx and/or Kalecki). But to me these four had sweeping conceptions yet were able to cut to the core of what they saw as fundamental to an understanding of the economy as a whole, including in its dynamic aspect.
The best theory often seems simple in retrospect, but it is very tough to conceive of in the first place. In contrast, much of economics seems to be concerned with over-complicating already silly conceptions for no purpose other than to publish in a journal. It is false precision par excellence. Approaches such as MMT and circuit theory buck this trend. The insights are both simple and powerful and the implications far-reaching, but until you see them you are often in the dark, conceptually speaking.
As far as macro goes, Keynes and Kalecki gave some great building blocks. I would say Marx too. The degree to which Marx's theory is a truly macro one is often underestimated, IMO. In some ways, Kalecki re-framed Marx into the "bourgeois" categories without many people noticing quite the extent to which he had done so. The full force of the ideas of Keynes and Kalecki (and Marx, obviously) were strongly resisted by the profession. The same could be said now for MMT, circuit theory and various other approaches that are kept on the fringe of the discipline. (continued below …)
(continued from above …) Within the mainstream, there is a cutting edge that tries to work in some of the fringe ideas. The opportunity to do so without being immediately banished to the sidelines varies with the political climate of the day. At the moment we see Krugman and Stiglitz and a few others trying to raise issues of power and distribution -- in a way of course that makes it appear as if the ideas have always been part of the mainstream and that there has been no contribution to those ideas from the fringe. It's easy to be critical of these guys, but the reality is probably that if they "overstepped the mark" -- which appears to include even citing the work of a living heterodox economist - they will be immediately banished to the fringe as well.
Similar issues of power afflict the economics profession itself. If you are really good, you might just be able to make a career for yourself as an MMTer these days, but your MMT research will only be publishable (and sometimes not even then) in journals that according to neoliberal funding processes are low in ranking. Until recently, you would have most likely been blocked by gatekeepers even of the low-ranking journals.
And the difficult position of an MMTer is possibly somewhat privileged compared to that of a Marxist economist, especially one who wishes to reject the standard interpretation of Marx that makes his value theory at best redundant and at worst incoherent.
I think to be a heterodox economist, there are basically two avenues. Either you can have zero regard for an academic career and just develop your ideas outside of academia (as Marx did, or Warren M). Or you can develop two broad lines of research -- one "respectable" and aimed at high-ranking journals, and the other your chosen research interest. For example, a Marxist might find an academic job in a different discipline and then devote some research time to economics. It's very difficult to take this approach, because nearly everyone else pursuing respectable research is doing that alone rather than as a way of paying for their real research. Bill M, for instance, published in high-ranking journals in a different discipline. Bill could do that, because he's a genius (as is Warren M).
As a trained philosopher and logician, I see most conventional economists presuming a "natural" system that is too complex to model tractably and trying to isolate pieces of it based on simplified assumptions and stylized facts that economists realize are too limited, but "it's the best that can be done." They conceptualize of the social order represented by the economy as a statistical "run" converging on a mathematical probability in the long run but with fluctuating short runs that are unpredictable, like throwing a lot of dice, all of which are independent of each other. Then they look for simple relationships of variables that exhibit correlation and assume some causation without being able to divine the mechanics.
Then some of them, and many of the these are the most prominent and influential not only in the field but also socially and politically, go on to make the rhetorical but illogical move of claiming that their simplified model must hold in the real world because it is internally consistent.
This is contemporary form of nativism , which is development of Innatism, or "Platonism," that stands in contrast to empiricism or "Aristotelianism." Plato held that knowledge of universals is within and Aristotle that the mind is a blank tablet until informed from without, universals being know through intellectual intuition. While these theories were later dropped, the pattern has remained the same in the ensuing argument over epistemological foundations, and it is still undecidable based on compelling criteria.
The argument of conventional economists is that predictions derived from the model must necessarily be true owing to correspondence between reality and mind instead of predictions being hypotheses to be confirmed or disconfirmed by testing. This is essentially what their claim that the methodological debate is settled means. It is settled politically by the dominant party, which is a form of dogmatism.
This view is not only a huge presumption, that is, unstated assumption, but it is also one that many if not most scientists would either deny at anti-scientific, and which philosophers and logicians would question with respect to grounds.
In contrast, the really great social philosophers such as Smith, Marx, Keynes, Weber, Durkheim, etc, elaborated world views based on a combination of analysis and synthesis, logic and experience, insight and observation, that attempt to draw the outline of a big picture as a framework for investigation. These were conceptual models based assumptions and criteria instead of presuming a natural system.
The great cosmologists have done the same thing, although the nature of the subject matter allows for greater formalization and quantification. The great life philosopher-scientists like Darwin stand between the social and natural philosophers. Their great contribution is understanding of complex adaptive systems, reflexivity, and emergence.
The great thinkers were system thinkers and system thinking began with the early philosophers who speculated by a naturalistic system in contrast with the prevailing supernaturalistic mythologies of their day. BTW, most of the early thinkers did not dismiss the value of the mythologies but look for a different kind of explanation. It is said about Aristotle, one of the great early naturalists, that he spent his advanced years working with the myths. What this translates to today is that the overarching system is greater than meets the eye and the teaching stories are attempts to capture and express this poetically, that is, to go beyond the limits of conceptual modeling through art.
Today, the focus is on conceptual models that can be formalized and, ideally, quantified as well. As Thomas Kuhn observes, most scientists work in terms of a normal paradigm that has been elaborated as a framework by the creators of the big pictures in the various field, with an overarching goal of synthesizing them in one grand picture that explains "everything." Those pursuing normal science fill in the details of the picture and applied scientists use this knowledge practically. The outstanding results are engineering that has produced technology and medicine that has eradicated much disease and extended life spans along with greater wellbeing.
But the successes have been more modest with cognitive and social science. The problem with both the cognitive sciences and the social sciences is that there is no agreed upon framework within which to develop a big picture. While there are scientific way of going about working in these fields, there is no systematic body of knowledge comparable to the physical sciences or the life sciences. They therefore share aspects of natural science and speculative philosophy, and the applied sciences based on them have not yet produced anything that can rival the results of technology and medicine.
This is a natural course of development, however. It's not that cognitive and social science have failed as much as they are works in progress. Where things go wrong is when some particular view becomes dominant not on its merits but owing to academic politics. This affects economics big time. But it was also the case in psych when B. F. Skinner's reductionist behaviorism based on S-R dominated the field until the humanistic and transpersonal revolt led by Abraham Maslow. Econ is still awaiting its Maslow.
Thanks for the answers Peter (and Matt). It's funny nowadays some of the most interesting work on economics is not being done by economists but by biologists, physicists and neuroscientists and psychologists.
The problem Matt is that IMO there is not enough knowledge about the knowledge that would be required for successful economics curriculum yet or at least a consensus on it. This is no alien to academics as there is always sociological aspects of science and academics impacting the teachings, but in economics is just too much, that the content being teach varies wildly depending on the dominant political forces in the historical moment, even within "democracy" we have seen this rapid changes in the last century or two.
This is a strong signal that economics is yet proto-scientific, and it may as well stay like that for a while because it ultimately deals with how society organizes and power, and there are a lot of vested interests of controlling the dominant ideas. It may very well be that our ultimate success as a species depends precisely on an objective and scientific assessment of economics, but the obstacles to reach that point are phenomenal.
For these reasons and as Peter has described I believe we would be better off without any economics at all (not a realistic desire though, of that much I'm aware). Macro will be off-limits, because as said, macro deals with the power levers itself. So economics is being used as a weapon, rather than a science.
There is hope for economics in many micro issues, and progress is being done, but as I said, funny enough the progress is being done by non-economists more than economists. I would be happy to relegate economists to those things, and change the curriculum appropriately (there is an urgent need to teach economists about some applied psychology and neuroscience, ecology, thermodynamics, and stochastic calculus (with the necessary discrete mathematics foundations, IMO more important than calculus for this discipline, a couple courses on chaotic systems and complexity would help shape the minds, and an objective and critical history of economic ideas with points and counterpoints to see that there is nothing set in stone).
It's an eclectic discipline which right now belongs more to the realm of philosophy than other thing. Peter, Schopenhauer said that no one could practice philosophy within the academe (vested interests and sociology of philosophy), this probably applies to economics too, and in many regards both are similar because both deal with how humans act (or are supposed to act) and organize themselves. Unfortunately it will have to be "one funeral at a time"...
Well Ignacio it might just be better to train the mind using math and physical sciences FIRST... then go into to economics field...
iow there is a saying "you dont play sports to get in condition... you get in condition to play sports..."
Again all I can draw from is my personal experience but I didnt take engineering courses in the beginning they had me take math and physics which were not in the College of Engineering where I went those subjects were administered by the College of Science.... (I went to a University comprised of multiple Colleges...) so for probably the first 2 years of the bacculaureate program I was basically in the College of Science.... heavy immersion in Math/Physics/Chemistry...
so if you want to be a scientist you have to lay the groundwork in the actual sciences.... learn the scientific method, how to use mathematics, systems training, etc... THEN go over into the economics realm...
It shouldnt be too hard imo to modify the institutional arrangements.... iow this would not require 'inventing' something.... its all already there...
11 comments:
"And he repented for ever having created economists, and swore never to do so again."
LOL...
Peter in seriousness we actually DO need QUALIFIED/COMPETENT economists... (like you!)
Thank you for that gem :)
"Peter in seriousness we actually DO need QUALIFIED/COMPETENT economists"
Until the word 'economist' is seen in the same light as the 'n' word and we come up with a new term for those that are competent I don't think we're going anywhere.
Economists are religious politicians. I wouldn't want to be smeared with the term.
Matt, what can an useful economist bring to the table that a well trained statistician, mathematician, accountant, historian or engineer can't?
There is simply no area of expertise that economists can claim for themselves AFAIK. It's all a con, and more often than not they don't understand/know what they are talking about, as they conflate the REAL with the MONETARY all the time and pretend they don't.
If anyone can make a good case for economists within the current KNOWLEDGE BODY, I would like to read it, but until then it's a glorified profession that can self-justify as "experts" to dictate policy bases on some dubious knowledge body.
Until economics has passed it's proto-scientific stage it shouldn't hold such responsibilities pretending they hold the keys to some secret knowledge.
Ignacio for me it gets back to the training...
They are not trained in systems theory to an adequate level...
This is why you see the Wall Street firms poaching people graduating in the other disciplines (engineering, bio-chemistry, some mathematics, etc...) which are the the places in the academe where students get the heaviest doses of training in the systems theory...
I can speak for engineering from experience you get math (calculus) for 2 years running along side a physics progression of Newtonian > Electricity > Electro-magnetism .... THEN... you do a year of Linear Systems Theory as applied in your specific discipline (Electricity/Chemistry/Dynamic Mechanical/etc..) this takes 3 years +....
Believe me you come out of that with PERMANENT cognitive effects... all the dogma and subjectiveness is OUT no place for it...
I dont think the economics people get this or even an effective fraction of it.... yet what they are training to be able to work in is a system... our economic system...
so I think the name is good, ie "economics" its from oiko-nomos or 'house-law' or 'house-conventions' which is good but it seems to me the training is just plainly inadequate in the academe...
They need to add 2 years of calculus and physics at the start of the baccalaureate program and proceed from there.... less liberal arts stuff....
Ignacio, it's probably no coincidence that Smith and Marx were first and foremost philosophers. Or that Keynes was a strong mathematician, and probably because of this knew enough not to force mathematics into his economic theorizing where it was inappropriate or merely false precision. Kalecki had an engineering background, which I think really shows in his thinking. Of the dead economists, these are probably the most important IMO and they all had backgrounds other than economics. Some would throw Ricardo in there -- to which I wouldn't object -- and exclude one or more of the ones I mentioned (most likely Marx and/or Kalecki). But to me these four had sweeping conceptions yet were able to cut to the core of what they saw as fundamental to an understanding of the economy as a whole, including in its dynamic aspect.
The best theory often seems simple in retrospect, but it is very tough to conceive of in the first place. In contrast, much of economics seems to be concerned with over-complicating already silly conceptions for no purpose other than to publish in a journal. It is false precision par excellence. Approaches such as MMT and circuit theory buck this trend. The insights are both simple and powerful and the implications far-reaching, but until you see them you are often in the dark, conceptually speaking.
As far as macro goes, Keynes and Kalecki gave some great building blocks. I would say Marx too. The degree to which Marx's theory is a truly macro one is often underestimated, IMO. In some ways, Kalecki re-framed Marx into the "bourgeois" categories without many people noticing quite the extent to which he had done so. The full force of the ideas of Keynes and Kalecki (and Marx, obviously) were strongly resisted by the profession. The same could be said now for MMT, circuit theory and various other approaches that are kept on the fringe of the discipline. (continued below …)
(continued from above …) Within the mainstream, there is a cutting edge that tries to work in some of the fringe ideas. The opportunity to do so without being immediately banished to the sidelines varies with the political climate of the day. At the moment we see Krugman and Stiglitz and a few others trying to raise issues of power and distribution -- in a way of course that makes it appear as if the ideas have always been part of the mainstream and that there has been no contribution to those ideas from the fringe. It's easy to be critical of these guys, but the reality is probably that if they "overstepped the mark" -- which appears to include even citing the work of a living heterodox economist - they will be immediately banished to the fringe as well.
Similar issues of power afflict the economics profession itself. If you are really good, you might just be able to make a career for yourself as an MMTer these days, but your MMT research will only be publishable (and sometimes not even then) in journals that according to neoliberal funding processes are low in ranking. Until recently, you would have most likely been blocked by gatekeepers even of the low-ranking journals.
And the difficult position of an MMTer is possibly somewhat privileged compared to that of a Marxist economist, especially one who wishes to reject the standard interpretation of Marx that makes his value theory at best redundant and at worst incoherent.
I think to be a heterodox economist, there are basically two avenues. Either you can have zero regard for an academic career and just develop your ideas outside of academia (as Marx did, or Warren M). Or you can develop two broad lines of research -- one "respectable" and aimed at high-ranking journals, and the other your chosen research interest. For example, a Marxist might find an academic job in a different discipline and then devote some research time to economics. It's very difficult to take this approach, because nearly everyone else pursuing respectable research is doing that alone rather than as a way of paying for their real research. Bill M, for instance, published in high-ranking journals in a different discipline. Bill could do that, because he's a genius (as is Warren M).
As a trained philosopher and logician, I see most conventional economists presuming a "natural" system that is too complex to model tractably and trying to isolate pieces of it based on simplified assumptions and stylized facts that economists realize are too limited, but "it's the best that can be done." They conceptualize of the social order represented by the economy as a statistical "run" converging on a mathematical probability in the long run but with fluctuating short runs that are unpredictable, like throwing a lot of dice, all of which are independent of each other. Then they look for simple relationships of variables that exhibit correlation and assume some causation without being able to divine the mechanics.
Then some of them, and many of the these are the most prominent and influential not only in the field but also socially and politically, go on to make the rhetorical but illogical move of claiming that their simplified model must hold in the real world because it is internally consistent.
This is contemporary form of nativism , which is development of Innatism, or "Platonism," that stands in contrast to empiricism or "Aristotelianism." Plato held that knowledge of universals is within and Aristotle that the mind is a blank tablet until informed from without, universals being know through intellectual intuition. While these theories were later dropped, the pattern has remained the same in the ensuing argument over epistemological foundations, and it is still undecidable based on compelling criteria.
The argument of conventional economists is that predictions derived from the model must necessarily be true owing to correspondence between reality and mind instead of predictions being hypotheses to be confirmed or disconfirmed by testing. This is essentially what their claim that the methodological debate is settled means. It is settled politically by the dominant party, which is a form of dogmatism.
This view is not only a huge presumption, that is, unstated assumption, but it is also one that many if not most scientists would either deny at anti-scientific, and which philosophers and logicians would question with respect to grounds.
In contrast, the really great social philosophers such as Smith, Marx, Keynes, Weber, Durkheim, etc, elaborated world views based on a combination of analysis and synthesis, logic and experience, insight and observation, that attempt to draw the outline of a big picture as a framework for investigation. These were conceptual models based assumptions and criteria instead of presuming a natural system.
The great cosmologists have done the same thing, although the nature of the subject matter allows for greater formalization and quantification. The great life philosopher-scientists like Darwin stand between the social and natural philosophers. Their great contribution is understanding of complex adaptive systems, reflexivity, and emergence.
continued
continuation
The great thinkers were system thinkers and system thinking began with the early philosophers who speculated by a naturalistic system in contrast with the prevailing supernaturalistic mythologies of their day. BTW, most of the early thinkers did not dismiss the value of the mythologies but look for a different kind of explanation. It is said about Aristotle, one of the great early naturalists, that he spent his advanced years working with the myths. What this translates to today is that the overarching system is greater than meets the eye and the teaching stories are attempts to capture and express this poetically, that is, to go beyond the limits of conceptual modeling through art.
Today, the focus is on conceptual models that can be formalized and, ideally, quantified as well. As Thomas Kuhn observes, most scientists work in terms of a normal paradigm that has been elaborated as a framework by the creators of the big pictures in the various field, with an overarching goal of synthesizing them in one grand picture that explains "everything." Those pursuing normal science fill in the details of the picture and applied scientists use this knowledge practically. The outstanding results are engineering that has produced technology and medicine that has eradicated much disease and extended life spans along with greater wellbeing.
But the successes have been more modest with cognitive and social science. The problem with both the cognitive sciences and the social sciences is that there is no agreed upon framework within which to develop a big picture. While there are scientific way of going about working in these fields, there is no systematic body of knowledge comparable to the physical sciences or the life sciences. They therefore share aspects of natural science and speculative philosophy, and the applied sciences based on them have not yet produced anything that can rival the results of technology and medicine.
This is a natural course of development, however. It's not that cognitive and social science have failed as much as they are works in progress. Where things go wrong is when some particular view becomes dominant not on its merits but owing to academic politics. This affects economics big time. But it was also the case in psych when B. F. Skinner's reductionist behaviorism based on S-R dominated the field until the humanistic and transpersonal revolt led by Abraham Maslow. Econ is still awaiting its Maslow.
Thanks for the answers Peter (and Matt). It's funny nowadays some of the most interesting work on economics is not being done by economists but by biologists, physicists and neuroscientists and psychologists.
The problem Matt is that IMO there is not enough knowledge about the knowledge that would be required for successful economics curriculum yet or at least a consensus on it. This is no alien to academics as there is always sociological aspects of science and academics impacting the teachings, but in economics is just too much, that the content being teach varies wildly depending on the dominant political forces in the historical moment, even within "democracy" we have seen this rapid changes in the last century or two.
This is a strong signal that economics is yet proto-scientific, and it may as well stay like that for a while because it ultimately deals with how society organizes and power, and there are a lot of vested interests of controlling the dominant ideas. It may very well be that our ultimate success as a species depends precisely on an objective and scientific assessment of economics, but the obstacles to reach that point are phenomenal.
For these reasons and as Peter has described I believe we would be better off without any economics at all (not a realistic desire though, of that much I'm aware). Macro will be off-limits, because as said, macro deals with the power levers itself. So economics is being used as a weapon, rather than a science.
There is hope for economics in many micro issues, and progress is being done, but as I said, funny enough the progress is being done by non-economists more than economists. I would be happy to relegate economists to those things, and change the curriculum appropriately (there is an urgent need to teach economists about some applied psychology and neuroscience, ecology, thermodynamics, and stochastic calculus (with the necessary discrete mathematics foundations, IMO more important than calculus for this discipline, a couple courses on chaotic systems and complexity would help shape the minds, and an objective and critical history of economic ideas with points and counterpoints to see that there is nothing set in stone).
It's an eclectic discipline which right now belongs more to the realm of philosophy than other thing. Peter, Schopenhauer said that no one could practice philosophy within the academe (vested interests and sociology of philosophy), this probably applies to economics too, and in many regards both are similar because both deal with how humans act (or are supposed to act) and organize themselves. Unfortunately it will have to be "one funeral at a time"...
Well Ignacio it might just be better to train the mind using math and physical sciences FIRST... then go into to economics field...
iow there is a saying "you dont play sports to get in condition... you get in condition to play sports..."
Again all I can draw from is my personal experience but I didnt take engineering courses in the beginning they had me take math and physics which were not in the College of Engineering where I went those subjects were administered by the College of Science.... (I went to a University comprised of multiple Colleges...) so for probably the first 2 years of the bacculaureate program I was basically in the College of Science.... heavy immersion in Math/Physics/Chemistry...
so if you want to be a scientist you have to lay the groundwork in the actual sciences.... learn the scientific method, how to use mathematics, systems training, etc... THEN go over into the economics realm...
It shouldnt be too hard imo to modify the institutional arrangements.... iow this would not require 'inventing' something.... its all already there...
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