Thursday, September 13, 2018

Jason Smith — What do equations mean?


Jason Smith comments on J. W. Mason and Arun Jayadev on MMT and conventional economics from the point of view of scientific modeling in macro.

Information Transfer Economics
What do equations mean?
Jason Smith

40 comments:

Schofield said...

"What do equations mean?" Depends on the assumptions underlying them. For example, the belief government creation of money automatically leads to inflation. Well no empirical evidence would suggest otherwise it's much more complicated than that bald assumption:-

https://mythfighter.com/2018/03/17/what-is-the-complex-relationship-among-inflation-deficits-interest-rates-oil-prices-tax-cuts-and-gdp/

Matt Franko said...

Tom:

“crazy), but I do have a problem with the idea that these policy prescriptions arise from something called "Modern Monetary Theory" purported to be a well-defined theory instead of a collection of assumptions. ”

Sounds like Jason does not know what a “Theory” is no?

This is like the ID people saying “remember it’s just a THEORY of evolution...”

(Jason is Science trained)

Matt Franko said...

Jason :

https://en.m.wikipedia.org/wiki/Theory

Matt Franko said...

“A theory can be a body of knowledge, which may or may not be associated with particular explanatory models.”

Matt Franko said...

“As already in Aristotle's definitions, theory is very often contrasted to "practice" (from Greek praxis, πρᾶξις) a Greek term for doing, which is opposed to theory because pure theory involves no doing apart from itself”

Matt Franko said...

“In modern science, the term "theory" refers to scientific theories, a well-confirmed type of explanation of nature, made in a way consistent with scientific method, and fulfilling the criteria required by modern scienceSuch theories are described in such a way that scientific tests should be able to provide empirical support for, or empirically contradict ("falsify") it. ”

Tom Hickey said...

Jason Smith knows perfectly well what a theory is in science from physics and he is questioning the economic use of the term "theory" as merely a set of assumptions. He has a PhD in theoretical physics.

George H. Blackford explains about theory in the article from Evonomics I posted today.

https://evonomics.com/economists-stop-defending-milton-friedmans-pseudo-science/

In modern science, theories are formulated using assumptions based on data and formalized using math modeling. Then the model is used to generate hypotheses that can be falsified empirically by observation and measurement. Neither the assumptions nor the hypotheses can fail empirically in the case of a "good" theoretical explanation. Models are delimited in their application to explaining events by the scale and scope included in the assumptions.

All the criticisms of procedure in economic theorizing and modeling are correct from that POV.

That POV is based on the standard of science being natural science and physics in particular.

Social science and economics are not very amenable to that method, as Jason Smith has pointed out previously and provided a number of reasons, in particular that there is no framework for generating competing theories as in physics, e.g., conservation. There is also an issue of parameter identification and multiple parameters, making tractability difficult. In addition there are data problems, measurement problems, etc. There are also issues regarding scope and scale. There are also problems with definitions.

He is just saying that if you want to call yourself a "scientist" as the term is used currently in natural science, then you have to conform to the conventionally accepted standards of scientific method and its application as it is done in the natural sciences.

Engineering is not science, it is the application of science to technology. An engineer doesn't have to actually understand the science in terms of the theory to apply it. Same with tradespeople like electricians and plumbers. The difference is that all they need is simple math while calculus is required for more advanced engineering. But engineers only need basic courses in physics and usually have undergrad degrees, while physicists, biologists, economists, psychologists, and social scientists usually have PhDs.

Did a I ever tell the story of how I became an engineer? I had a summer job working for Bechtel, a huge engineering company. I was a rodman for a civil engineer. He didn't show up for work one morning and called in to say he would out of action of a couple of days. The chief engineer on the project came by and asked me if I knew trig. I said I had just finished a course in it. He said, "Good," and handed me a paper. He said, Solve these problems. I'll be back in a hour. He came back and checked my work and said, "Good, you are now an engineer. He assigned rodman to me, and when the former engineer came back, both of us worked on the project together. Of course, he knew a lot more about civil engineering than me but I knew enough to get the job done.

Tom Hickey said...

Here is a short wiki articleh on Jason Smith and his approach to econ.

Tom Hickey said...

Maybe I have not made this clear.

Jason Smith is not saying that the human world cannot be modeled like the natural world. Maybe it can be done. He is trying an approach through information transfer.

What he is saying that is that there are standards for scientific modeling that need to be followed if one is going to come up with something like the natural sciences wrt to the human sciences. Econ is not there yet. This doesn't apply that it cannot be done rigorously but the outcome will be limited by the nature of the subject matter and its susceptibility to rigorous modeling.

BTW, he has looked at SFC modeling and doesn't think it is there yet, from the POV of a natural scientist.

I would like to see more debate among economists about this, not that there have not been physicists among economists. Maurice Allaiswas a physicist that received a "Nobel" in economics, for instance. (He is not well-known in the English-speaking world, since he wrote in French.)

GLH said...

I would like to understand better what Tom Hickey and Matt Franko seem to be disagreeing on recently. I take it that Tom is saying that economics is a science and that Matt is saying that it is an art. Is that correct?

Matt Franko said...

GLH,

Tom doesn’t think methodology matters to education outcomes... I say it does....

There is a big difference between how those trained under a science methodology (like Jason here...) approach topics vs those trained under an Art methodology ...

Tom views this as a distinction without a difference....

Matt Franko said...

“he is questioning the economic use of the term "theory"

Well hate to break the news to him but if you read the wiki on Theory then MMT is using the word just fine....

Matt Franko said...

https://en.m.wikipedia.org/wiki/Dichotomy

Matt Franko said...

“I said I had just finished a course in it.”

What? So then you didn’t ask him where you would get the degrees to compute the angles?

Didn’t ask him where the bin storing all of the hypotenuses was?

Do we have any extra pi to use if I needed it?

Noah Way said...

FRANKO: according to your own often-repeated criteria, a BS in electrical engineering does not qualify you to comment on arts degrees. With a BA or MFA you would be.

Just sayin'

Tom Hickey said...

I would like to understand better what Tom Hickey and Matt Franko seem to be disagreeing on recently. I take it that Tom is saying that economics is a science and that Matt is saying that it is an art. Is that correct?


No. What I am saying is that the subject is much more nuanced and that there is a large body of literature on this. There are longstanding controversies in the field. Matt's position is not one of them and I think it is ill-informed and based on Matt's biases.

But it is an important subject that is worth pursuing.

I am actually working on a paper on the subject of education in another context, since I view education as the most significant factor affecting the level of collective consciousness of a society. Education in a very broad sense is the lever of individual and social change. It is a subject that I have been involved in for fifty years.

Tom Hickey said...

Tom doesn’t think methodology matters to education outcomes... I say it does....

That is your simplistic view, Matt. You seem to have a made-mind and cannot fathom what the issues actually are when I lay them out.

But this is a field a have worked in professionally for years and in which you appear to have no experience other than your own memories of your school years, and your imagination about education in fields you were not educated in.

Tom Hickey said...

Well hate to break the news to him but if you read the wiki on Theory then MMT is using the word just fine....

That is true, Matt. But, words have a variety of meanings and to think that they are hypostatization of essences aka reification is medieval.

Jason Smith is using theory in the accepted sense among natural scientists. Economics is not (yet) a full-fledged science in that view of the meaning of the term, nor are pysch or the social sciences. Althoug they use scietnfic method in studies, they have no framework for generating theoretical models in which the assumptions are data-based, the model formaized mathematically, and the hypotheses test empirically in a way that is rigorous. They are thus proto-sciences at this point. I think that is correct from the point of view of a philosophy of science in which natural science is paradigmatic.

MMT is using "theory" in a much looser sense. I think personally that MMT would have been better called something else. Even Randy Wray has dchanged "Modern Monetary Theory" to "Modern Money Theory."

BTW, the same is true of the term "science."

It means "knowledge" etymologically. Latin scientia translated to knowledge. "Science" in the broad sense significes a body of knowledge. Many try to argue that what they are doing is "science" based on that but most people think the claim is nonsense unless something resembling scientific method is adhered to throughout.

Tom Hickey said...

“I said I had just finished a course in it.”

What? So then you didn’t ask him where you would get the degrees to compute the angles?

Didn’t ask him where the bin storing all of the hypotenuses was?

Do we have any extra pi to use if I needed it?


Actually, this is how some engineers were once trained. My father was not a graduate engineer but he retired as supervisor of an engineering department with over fifty graduate engineers owing to his experience in the field. He rose higher in his profession than an uncle on my mother's side who was a graduate chemical engineer.

My father started as a draftsman at age twelve after school and pick up what he needed to know about engineering, including adding to his high school math, through self-study and experience down the road. That's how a lot of people did it at the time who were from poor immigrant families that could not send their kids to college. Widespread college education is a relatively recent phenomenon in the US. Colleges were not graduating enough people for the jobs that technology was producing.

Matt Franko said...

“BS in electrical engineering does not qualify you to comment on arts degrees.”

Wrong... you’re talking about the discipline again ... I am talking about methodology...

I have been trained under BOTH methodologies but PRIMARILY science...

The Art people have never been trained under science methods...

Tom makes my point pretty well when he points out he was first rigorously trained in trigonometry/analytic geometry then he could work abstractly with the material systems ... he was a ship driver in the Navy then, etc...

Calgacus said...

MMT uses the word "theory" correctly & it certainly is a theory in the sciency sense. A major problem here is that economists use the word "model" very strangely. Larry who comments down at billy blog occasionally mentions this, as does Axel Leijonhufvud, I believe. Almost always, when economists say "model", they mean "theory", not "model of a theory", the proper usage. Though the word "model" - I guess because it sounds sciency - nowadays is uselessly & misleadingly vastly overused - e.g. in school texts to say in several sentences what was once said in one sentence or a phrase.

About science or art or methodology? Aaaargh. A first cut definition of scientist or artist is - someone who doesn't talk about methodology, but just does stuff, just thinks about stuff. Methodology discussions are almost entirely a waste of time. What they are is "method" to avoid the real work, avoid the thinking.

Apart from the logic of science, there is no scientific method.

Jason Smith, as I recall, doesn't understand MMT. Like so many, he tries to shoehorn it into things familiar to him, rather than coming to grips to what it is actually saying. The usual bad, unserious method is this equation looks like that equation - never logically interpreting either, nor even studying application to the real world. Equations are used to hide the not-understanding, not to express the understanding. As Whitehead noted, one has to do this all the time, use "the math" "the equations" as an intellectual tool not examined all the time when it is used. But you have to be able to examine the math and understand it in words to truly say you understand the theory, rather than being a theory user.

If people did study applied MMT, they would note hey - this doesn't work in theory, but it works in practice. That is a step to them understanding that the theory it doesn't work in is merely their theory and then to discarding it and then to studying and understanding MMT theory.

Of course MMT doesn't have a "framework for generating theoretical models in which the assumptions are data-based," Ultimately, nobody in any science or discipline has ever had one. As Einstein said, there is no road from experiment to theory. To the extent that things truly are data-based, they are just repeating and verifying an old theory, not coming up with a "new" one.

What MMT is mainly just saying is things that you have to be insane to disagree with. Like any well-developed scientific theory, it is nothing but definitions and utterly obvious, completely trivial conclusions and observations. Once you understand it, you can no more disagree with it than a mathematical theorem. Defining terms is not the start, but the end of real scientific endeavor. "Understanding these definitions" is what Smith wrongly calls "making assumptions." E.g. fiscal policy affects GDP because that is the way GDP is defined, not because of any "assumption". And the idea of accounting identities, GDP etc developed from Keynes & the Keynesian theorists, the MMT of the day, not vice versa.

But many critics are so used to babbling madly at high speed without understanding a word they are saying that they have forgotten what it means to understand anything. That being said, the question of "what do the equations mean" is of the highest importance. But such inquirers are not going to understand a damn thing if they don't stop and shut up for a while and actually try to hit a book or two, and learn the appropriate history. And stop with the equations. Don't lie to yourself that you understand the equations, no matter how familiar they are to you, until you have stopped with the f--ing equations.

Tom Hickey said...

That being said, the question of "what do the equations mean" is of the highest importance

In physics, the equations often are the explanation. All physicists agree on the equations that constitute QM, for example, but there is no agreed up on explanation and some say there is no further explanation either required or even possible without getting into philosophy. But that is at the Planck scale.

The equations of classical physics are translatable into conceptual models, however, and so are the models of the human sciences, which are at the classical scale.

Balliol Croft, Cambridge
27. ii. 06
My dear Bowley …

I know I had a growing feeling in the later years of my work at the subject that a good mathematical theorem dealing with economic hypotheses was very unlikely to be good economics: and I went more and more on the rules — (1) Use mathematics as a short-hand language, rather than as an engine of inquiry. (2) Keep to them till you have done. (3) Translate into English. (4) Then illustrate by examples that are important in real life. (5) Burn the mathematics. (6) If you can’t succeed in 4, burn 3. This last I did often.

I believe in Newton's Principia Methods, because they carry so much of the ordinary mind with them. Mathematics used in a Fellowship thesis by a man who is not a mathematician by nature---and I have come across a good deal of that---seems to me an unmixed evil. And I think you should do all you can to prevent people from using Mathematics in cases in which the English language is as short as the Mathematical.…

Your emptyhandedly,
Alfred Marshall

http://www.rasmusen.org/zg601/readings/marshall.htm

Matt Franko said...

Calg,

“About science or art or methodology? Aaaargh. A first cut definition of scientist or artist is - someone who doesn't talk about methodology, but just does stuff, ”

Ok you can go talk to somebody about golf for a year and I’ll go play golf for a year then we can play for $100 per hole ok?

Methodology matters....

Matt Franko said...

And it’s not a logical “or” there btw....

Science and (Liberal) Art ARE methodologies...

Matt Franko said...

Calg,

Have you ever in your life tried to teach somebody how to do something?

Matt Franko said...

Not to “know” something but how to DO something????

Calgacus said...

Yes, physicists can talk nonsense too. "Shut up & calculate" is pernicious idiocy, a contradiction in terms, a self-contradictory command. "Equations", "the math" are just words and sentences. The idea that they are something mystically different from other words and concepts is anti-mathematical, anti-physical, anti-philosophy, anti-science. It's completely insane. It is a 20th century return to the pre-Thales viewpoint; that the mystical symbols, "the math", "the equations" will curry favor with the gods who will perform miracles for you. Some equations=concepts like QM may not be understood to ones taste, the theories may not be as good craftsmanship as one wants. That is all.

Of course Marshall is right, but the idea that Newton's work "carry so much of the ordinary mind" could only come after Newton, centuries after. The development of "the ordinary mind" from Thales to Newton was the development of the formal science over millennia. "The mechanical philosophy" or DesCartes' philosophy, however much it seems the ordinary mind to us and to Marshall now, was a revolution in its day. As were Plato & Aristotle & Aquinas.

Calgacus said...

Matt: Methodology matters....

Being serious, which entails reading what other people write is a good methodology. There isn't any other methodology than "being serious." If you read others, and don't assume you disagree without reading, you might find you are actually agreeing with them on some points, like on golf here.

Science and art are not methodologies, but disciplines, provisional ways of carving nature at the joints. Most of what you say about methodology and the difference between science and art and the superiority of one to the other and even the classification of X as Science and Y as Art is foolishness. Science is an art and art is science, anyways. The MMT thinkers approach their subject, economics, a hell of a lot more scientifically than you or Egmont Kakarot-Handtke or Jason Smith or "mainstream econ" does.

Teaching other people to know / do things - they cannot be separated - is how I make part of my living.

Tom Hickey said...

Science and (Liberal) Art ARE methodologies...

To simplistic for me to respond to further. You are on your own, good buddy.

Tom Hickey said...

As were Plato & Aristotle

Thales, often called the father of Western philosophy, marked the beginning of the shift from mythological being dominant toward philosophy being coming dominant. Plato stands on the cusp, and Aristotle standardized the approach of the Western intellectual tradition until science replaced it as dominant.

However, myth as storytelling, and philosophy as conceptual modeling are still widely used in subjects that are not amenable to formal modeling and empirical testing.

Matt Franko said...

“To simplistic for me ”

You’re the one combining them which is more simplistic... I’m breaking them out which is more complex....

Tom Hickey said...

I am saying the combination you are making is simplistic. You refuse to break out of your simplistic views. It is an example of the fallacy of false dilemma aka black and white thinking in psychology.

Black-and-white thinking
See also: Splitting (psychology) and Binary opposition
In psychology, a phenomenon related to the false dilemma is black-and-white thinking. There are people who routinely engage in black-and-white thinking, an example of which is someone who categorizes other people as all good or all bad.[7]


See link about on false dilemma.

Matt Franko said...

It’s not my thinking it is the academe’s ... I’m not making any of this up I am just observing what the academe is actually DOING...

Here:

https://undergrad.wharton.upenn.edu/academics/bs-in-economics/

The academe has pretty well defined the differences in these 2 basic methodologies they do not leave much sloppy about it...

It appears to be a pretty well defined dichotomy in the academe.... producing 2 types of people....

Which method seems to work better when the discipline of interest is material oriented? I say Science. (Again for MATERIAL oriented disciplines only...) non material matters is another story...

Read Marx on this....

Tom Hickey said...

Matt, I started out in a BS program. There was also a BA program. For whatever reason the university decided to fold all bachelors degrees into the BA degree. Did the anything change in the way courses were taught? No.

Matt Franko said...

“Black-and-white thinking”

It’s not Black and white thinking think of it like a 2 x y matrix you have on one axis the discipline and on the other access the methodology...

Matt Franko said...

Tom we’re you at GU undergrad too?

Matt Franko said...

Tom,

Even Marx was on to this stuff:

https://en.m.wikipedia.org/wiki/Reification_(Marxism)


Don’t believe me then ... believe Marx...

Tom Hickey said...

Tom we’re you at GU undergrad too?

Yes, I chose to do my grad work in philosophy there since at the time only two universities specialized in the history of philosophy. Most others were either oriented toward symbolic logic or the problem approach.

Tom Hickey said...

It’s not Black and white thinking think of it like a 2 x y matrix you have on one axis the discipline and on the other access the methodology...

The disciplines and their methodologies are entangled.

All disciplines are about acquiring the necessary for solving problems in the discipline. Some use more formal methods than others, some are more training oriented.

The disciplines are also approached theoretically, based on knowledge, and also based on training in the application of knowledge through skill. Those based more on knowledge also focus on the kinds of modeling appropriate for that discipline.

The ancient Greeks called this the difference between episteme and techne, which translates to science and art (or skill). The difference is between knowing or explaining, on one hand, and doing or making on the other.

Being chiefly technical, engineering is developed as an "art" or "skill," as distinct from being learned didactically as a science like theoretical physics.

Greg said...

"Ok you can go talk to somebody about golf for a year and I’ll go play golf for a year then we can play for $100 per hole ok?"


How does this analogy even relate to what is being discussed. In economic matters, who are the people only talking about golf rather than actually playing golf? Better yet, who are the wise ones in your view who should just be left alone manage this thing free of interference form SJWs, Me too ers, and whatever other crybaby "artists" you deride

The heart of the discussions here, for most of us , seem to be how best to solve the problems of unemployment, rising cost living for the average guy, how to manage a health care system, education system not to mention how to manage our place on a planet with other countries that we are entangled with for better or worse and your answer always seems to be that only people with science background should be listened to in these matters as if its just some engineering problem.

Theres more going on than just a misunderstanding of the nature of money or how to understand an income statement. All that other stuff isn't just sophistry, dialectic artist bullshit..... its life.