Andrew Gelman — Our hypotheses are not just falsifiable; they’re actually false.

On the practical side of philosophy of science. Adding nuance to Karl Popper on falsification.

Further argument for the view that theories are useful but not "true." This may seem to contradict the realist view that theories are general descriptions of causal relationships. But I don't think that this is what is is implied. Rather, useful theories can be viewed as fitting the data because they reveal underlying structures that are not observed directly but only indirectly. 

There is a often a tendency to transfer simple analogies too complicated and complex situations and events. Some causal relationship are observable, as it a hammer driving a nail, with the physical theory explaining it in terms of simple variables related in a function. 

But most interesting issues are much more complicated and nuanced and may be complex, e.g., subject to emergence owing to synergy. There may a constellation of factors involved, and this may be difficult to order in a hierarchy. Some factors may be catalysts that are necessary for an operation but do not themselves enter into it. These may be presumptions that are hidden assumptions.

In addition, statistics is by definition "inexact" in that it deals with probabilities, unlike deterministic functions in which the variables are all known and measurable, and are expressible in terms of a simple function.

While physics is mostly tractable other than at the edges, life sciences are less so, and social sciences and psychology even less. Economics combines social science and psychology, especially macroeconomics and political economy. Economic sociology and economic anthropology take this into account, global economic history also demonstrates it.

This is coming to the fore now as some critics of MMT, the Green New Deal, and "socialism" demand to see data-based model that "prove" proposed solutions have worked in the past. Of course, the record is important, but the demand for "proof" requires a degree of stringency that is not applied in social science and psychology because it is unattainable. Nor is this standard applied to conventional economics either, its econometric approaching being based on formalism rather than being empirically based.

Another important point that Andrew Gelman makes is the futility of pitting theories against each other. That is a recipe for disagreement in that the party that determines the framing wins. Whose assumptions are going to set the criteria? Why?

And, no, I don’t think it’s in general a good idea to pit theories against each other in competing hypothesis tests. Instead I’d prefer to embed the two theories into a larger model that includes both of them.

This is a good suggestion but it is general. Often, the disagreement is over fundamental criteria that determine a frame of reference. This should be obvious in the different approaches to economic theory and economic practice., e.g., econometric and institutional, static and dynamic, simple and complex, natural and historical.

Obviously, a short post like this can only suggest matters that need deeper reflection, open inquiry and sincere debate aimed at solutions to pressing design problems. This is no long just "theoretical." Humanity has to get this right to survive, let alone prosper. We have seemingly dug ourselves into a hole based on policy that is has turned out to impractical in the extreme, such as socializing negative externalities that have led to environmental degradation and threaten ecological collapse if not addressed successfully in a timely fashion. So, let's get with it.

Statistical Modeling, Causal Inference, and Social Science
Our hypotheses are not just falsifiable; they’re actually false.
Andrew Gelman | Professor of Statistics and Political Science and Director of the Applied Statistics Center, Columbia University

Kenneth L. Pearce — George Berkeley and the power of words

John Locke's epistemological realism versus George Berkeley's linguistic constructivism. Subsequent findings favor Berkeley's view. Human's participate in the construct of their reality through the way they express themselves about it and their relationship to it.

Short and worth a read.

OUPblog — Oxford University Press's Academic Insights for the Thinking World
George Berkeley and the power of words

Kenneth L. Pearce | Ussher Assistant Professor in Berkeley Studies (Early Modern Philosophy) in Trinity College Dublin

James W. Carden — The Fear of Hillary’s Foreign Policy

The Bill Clinton presidency was characterized by the ascendence of liberal interventionist. Hillary's record is one of bringing together liberal interventionists, neocons, and hawks. Garden goes light on her.

Consortium News
The Fear of Hillary’s Foreign Policy

James W. Carden

Katehon — Neo-Marxism (The Third Paradigm)

Immanuel Wallerstein on international relations (IR).

Important in understanding the global economy and liberal globalization under capitalism.

According to I. Wallerstein, the World-System is today reaching the limits of its development. The economic, social, cultural, informational, and technological codes of globalization are deeply penetrating the periphery and have no more space for further expansion. This means that global capitalism is nearing its historical disappearance, having appeared under certain historical circumstances only to later meet the apogee of its realized model. Nowadays, the entire “World-System” is in the throes of a dangerous crisis and the liberal ideology forming its base has disappeared along with other ideological alternatives (represented in the past by communism).

Wallerstein says that “the structural constraints of endless capital accumulation processes which control our world have reached their end and are now acting as functional brakes…They now create a chaotic situation…Fifty years later, this chaos is to create a new world order.”

Thus, modern globalization is not the beginning of a new process, but the end and termination of an old one whose end will inaugurate a “transitional era” which Wallerstein does not specify, admitting that we are faced with uncertainty.…

Katehon
Neo-Marxism (The Third Paradigm)

If you are not already familiar with it, Ralph Peters Constant Conflict is relevant for a Western military POV. The revolution has already begun and TPTB are aligning to suppress it.

See also

Empire  and Multitude: War and Democracy in the Age of Empire by post-Marxist philosophers Antonio Negri and Michael Hardt

Richard Sale — Ideology and Hillary’s Foreign Policy

It's about much more than Hillary.

Sic Semper Tyrannis

Ideology and Hillary’s Foreign Policy

Richard Sale

Lars P. Syll — ‘Deep parameters’ and microfoundations

Lars continues on the offensive.

Lars P. Syll’s Blog
‘Deep parameters’ and microfoundations
Lars P. Syll | Professor, Malmo University

Simon Wren-Lewis — Heterodox economists and mainstream eclecticism

The gloves are off.

I think that SWL misses the point. The objection is to "our way or the highway."

And Lars was right. The original post that got this debate going reflected that by the limits that SWL put on eclecticism in the choice of his example, which were different approaches with respect to economic formalism with a disregard for realism.

Oh, and SWL accuses Lars of being "angry," when it is SWL who clearly is angry.

Mainly Macro
Heterodox economists and mainstream eclecticismSimon Wren-Lewis | Professor of Economics, Oxford University

Lars P. Syll — Why experimental economics is no real alternative to neoclassical economics

Platonists versus Aristotelians.

Lars P. Syll’s Blog
Why experimental economics is no real alternative to neoclassical economics
Lars P. Syll | Professor, Malmo University

Jason Smith — Noah is stealing my material

More on econ as science.

Noah says to prove the assumptions are wrong. Lars says show that they are correct. Who has the better case?

The issue is how well a theoretical model works. Assumptions are always simplifications for economy and tractability of explanation. 

There is nothing inherently wrong about assumptions not being precise. They only need to be precise enough to yield results within an acceptable degree of tolerance.

The proof of the pudding is though hypothesis testing more than verifying assumptions, although if assumptions are not reasonably correct, then the model is questionable as an explanation that is generalizable. 

It is possible that a dodgy model can sometime yield positive results (pace Friedman's instrumentalism), as broken clock is correct twice a day. The test of theory is how well the model performs as an explanation of how things stand over time, that is, taking change into account. Theoretical models that don't reliably predict as not generalizable explanations. They are only generalizable in terms of restrictive assumptions that may or not hold in specific cases. That is to say they are models of special cases. 

I would say that scientific method is applicable in econ as it is in other social sciences and also in philosophy, since even speculation must take established truths into account. The question really is whether econ is a natural science like physics, a hybrid science positioned between natural science and life and social sciences, a narrative explanation of occurrences like history, or speculation based on principles grounded in intuition, like speculative philosophy. 

I would say that econ as practiced is some of each, and all approaches make their own contributions to the field. Defenders of econ as science can cite examples to make their case, and opponents can do likewise.

Jason Smith has written on this previously, to which I have linked here at MNE.

Is human agency Noah's big unchallenged assumption?

Falsifiabilité, simplicité, succès ... ou la mort

On the use of hypotheses: or, what do you get when you assume non-ergodicity?

Prescott and Lucas aren't Romer's problem

What does the AD-AS model mean?

There are more posts there, but these are representative.

The title,  Is human agency Noah's big unchallenged assumption?,  hits the nail on the head. The social sciences are about human agency, and so are behavioral psychology and motivational psychology and some other branches of psychology. So is theory of history. And in philosophy, so are theory of man, ethics, theory of action, and social and political philosophy.

Economics is based on a theory of man and theory of action. The theory of man and of human action are not subjects of study in the field of economics, or at least not exclusively so (pace Ludwig von Mises).

There is no agreed upon general theory of man or of human action in either the sciences or philosophy. Why? Foundational disagreement is often due to lack of criteria that are agreed upon, or failure of agreed upon criteria to determine a definitive result. It is also possible that data or method are insufficient. 

As a result, general agreement is usually limited to quite specific cases under particular conditions that are not generalizable, that is, special cases. As a result, the case method is generally used in business schools, for instance, that than theoretical economics.

Information Transfer Economics
Noah is stealing my material
Jason Smith

Max Schröder — Chessonomics – The Case for Formalism in Economics

Fun.

Glasgow University Real World Economics Society
Chessonomics – The Case for Formalism in Economics
Max Schröder

See also

Severin Reissl, Loanable funds – 75 years later

Lars P. Syll — Economic methodology

More commentary from Lars about economic assumptions including methodological, pointing out that this is really not about economics as such, but rather about scientific method, or better, its misuse in order to convey the impression of objective truth. This is not only "mathiness" but also "truthiness." It's a rotten foundation for formulating economic policy that will affect the lives of millions domestically and billions internationally.

Lars P. Syll’s Blog
Shackle on rational expectations

Solow on the need to filter nonsense economicsLars P. Syll | Professor, Malmo University

Mark Buchanan — In Economics, What Calculates Isn't Always Right

This mathematical-purist approach came from a rather odd place. As Roy Weintraub relates in his excellent book "How Economics Became a Mathematical Science," Debreu took his perspective from a secret group of French mathematicians who, starting in the 1930s, worked under the pseudonym “Nikolas Bourbaki.” The Bourbaki group thought mathematics should have an almost religious purity, refined and unsullied by contact with the practical. Educated in Paris, Debreu came under their influence, and then shifted from mathematics to economics. 

Weintraub argues that Debreu played a decisive role in transforming economics -- “not only the field's self-image, but its concept of inquiry itself.” Ever since, economic math has been Bourbakian, primarily concerned with formal structure. Practitioners downplay the need for realistic assumptions, as Paul Fleiderer noted in his brilliant essay on chameleons. They use highly dubious suppositions to generate a result, which they then use as a foundation for giving advice to policy makers. This is pretty much the opposite of good science. 

Scientists generally enlist mathematics only as a tool, and ultimately value practical understanding above theoretical rigor. They care deeply about the plausibility of the assumptions used in any model. Models, of course, are always oversimplified -- one might say “wrong” -- but it's what they get right that matters. A sphere is a good model for the Earth not because it lacks any geographical detail, such as mountains or valleys, but because it gets the rough shape right. 

The Bourbakian influence in pure mathematics actually caused a rift between physicists and mathematicians back in the 1980s. The formal and pure Bourbakian approach seemed useless to the physicists, whose more practical approach seemed suspect to the mathematicians. Since then, that rift has disappeared as math has moved on. Economics apparently hasn't recovered yet.

Good article on how conventional economics got where it is. 

It's all in the head.

Bloomberg View
In Economics, What Calculates Isn't Always Right

Mark Buchanan

See also

Lars P. Syll’s Blog
Anti-Romer
Lars P. Syll | Professor, Malmo University

Chris Dillow — "Consistent with"

In discussing Paul Romer's wonderful concept of mathiness*, Peter Dorman criticizes economists' habit of declaring a theory successful merely because it is "consistent with" the evidence. His point deserves emphasis. 

If a man has no money, this is "consistent with" the theory that he has given it away. But if in fact he has been robbed, that theory is grievously wrong. Mere consistency with the facts is not sufficient.….

The difference between causes and reasons. Reasons are not necessarily causes. "The dog ate my homework."

There may be different plausible explanations for — reasons consistent with — the same data. 

Science is about establishing causal explanation in terms of "mechanism" or "transmission."

Otherwise, it is handwaving.

So, how can we guard against the "consistent with" error? One thing we need is history: this helps tell us how things actually happened. And - horrific as it might seem to some economists - we also need sociology: we need to know how people actually behave and not merely that their behaviour is "consistent with" some theory. Economics, then, cannot be a stand-alone discipline but part of the social sciences and humanities - a point which is lost in the discipline's mathiness.

Stumbling and Mumbling
"Consistent with"
Chris Dillow | Investors Chronicle

See also

Lars P. Syll’s Blog
Consistency and validity is not enough!
Lars P. Syll | Professor, Malmo University

Fyodor Lukyanov — The What-Not-To-Do List

If the West really wants to build a new relationship, then it has to understand Russia much better than it does today. Here are a few recommendations on what to avoid when patching up relations with Moscow.

Berlin Policy Journal
The What-Not-To-Do List
Fyodor Lukyanov

Also

Vox
There's a big debate in Moscow over whether to support the Iran nuclear deal

Max Fisher interviews Fyodor Lukyanov

Vasilis Trigkas — Chimerica in Decline?

China’s resilient authoritarianism – or at least Beijing’s continued adherence to a distinctively non-Western polity – has for the moment refuted the democratic “end of history.” Still, the first part of Fukuyama’s polarizing thesis, the liberal part in the “liberal democracy” declaration, has been celebrated by political pundits around the world as the irreversible path of humanity.

The term “Chimerica” has been the epitome of the wishful thinking of liberal intellectuals around the world who deterministically infer that U.S. and Chinese economic interdependence ensures a peaceful hegemonic transition. According to this argument, as both Washington and Beijing engage in a positive sum economic relationship and enhance their material position ad infinitum, the Gates of Janus will be sealed by two prosperous societies who prefer commerce to conquest; consumption to cannons; goods to gunboats. Neither American nor China will dominate the 21st century the liberals ardently declare. Instead, Chimerica – a hybrid state – governed by the invisible hand of the market or by the very visible hands of cosmopolitan business elites will create perpetual prosperity and peace.

Realists have long challenged this liberal orthodoxy. China and the U.S. are on a collision course, they argue, and both states engage in comprehensive balancing – economic, military, technological and diplomatic. Chimerica is a phantom that defies reality and fails to observe the unabated securitization trend in Sino-U.S. relations, realists declare.

Testing the validity of the Chimerica thesis demands a thorough investigation of the three liberal indicators, the fertilizers of interdependence between China and the United States; that is, the very forces that annihilate the nation state, turn boundaries obsolete, and dictate policies based on interstate rather than intrastate conditions. What are these indicators? Dependence on the Chinese market, supply chain dependence, and cosmopolitan business elites.

Worth reading the whole post.

The Diplomat
Chimerica in Decline?
Vasilis Trigkas is a research fellow at the Center for China-EU relations at Tsinghua University and a non-resident Handa Fellow at the Pacific Forum CSIS.

Peter Radford — Coase and Reality

Another screed on why conventional economics is unrealistic from Peter Redford, this one based on Ronald Coase.

In his introduction to a collection of his own work, Ronald Coase tells us:

‘Becker points out that: “what most distinguishes economics as a discipline from other disciplines in the social sciences is not its subject matter but its approach”’.

He then goes on:

‘One result of this divorce of the theory from its subject matter has been that the entities whose decisions economists are engaged in analyzing lack any substance. The consumer is not a human being but a consistent set of preferences. The firm, to an economist, as Slater has said, “is effectively defined as a cost curve and a demand curve, and the theory is simply the logic of optimal pricing and input combination”. Exchange takes place without any specification of its institutional setting. We have consumers without humanity, firms without organization, and even exchange without markets.’ 

All true, too true.

A philosopher would say that the chief difference between economics and the other social science is the level of abstraction. Economics is so abstract that it is difficult to connect with reality through actual behavior, in spite of the demand of conventional economics for "microfoundations" based on methodological individualism as a foundational assumption. 

In conventional economics, the individual, either "representative agent" or representative firm," is an imaginary construct rather than an observable. When agents and firms are observed, they do not match the characteristics of the methodological abstractions that represent them in conventional economic models. There is no homo economicus to be found, only homo socialis. Homo Socialis is the subject of study of the social sciences. 

The result of economists pursuing the "trail"of a non-existent homo economicus is something that resembles metaphysics more closely than physics, which is the opposite of what conventional economists are aiming for. The result is dogmatism rather than science.

Or maybe it is just snark hunting.

The Radford Free Press
Coase and Reality
Peter Radford

Edward Fulbrook — “Is there anything worth keeping in standard microeconomics?”

For me three economists stand out historically as having been the most effective at building resistance to the dominance of scientism in economics. Keynes of course is one, and the other two are Bernard Guerrien and Tony Lawson, Guerrien because he was the intellectual and moral force behind Autisme Economie which, among other things, gave rise to the RWER; and Lawson because his papers, books and seminars have inspired, joined and intellectually fortified thousands.

It is notable that all three of these economists were or were on their way to becoming professional mathematicians before switching to economics. When still in his twenties, Keynes’ mathematical genius was already publicly celebrated, most notably by Whitehead and Russell, and he had already published what was to become for his first discipline a classic work. Guerrien’s first PhD was in mathematics, and Lawson was doing a PhD in mathematics at Cambridge when its economics department lured him over in an attempt to boost its mathematical competence.

The significance for me of Keynes, Guerrien and Lawson being mathematicians first and economists second is that it meant that they were not even for an hour taken in or intimidated by the aggressive scientism of neoclassical economists, and this has enabled them to write analytically about the dominant scientism with a quiet straightforwardness that is beyond the reach of most of us.

RWER Blog
“Is there anything worth keeping in standard microeconomics?”
Edward Fulbrook

Jason Smith — All models are wrong, but some are tedious

All models are wrong is properly taken as a rallying cry against tedium. Macroeconomists should not be adding variables and complications to their models because there simply isn't enough data to warrant doing so. Read Nate Silver on overfitting -- there are only about 200 quarterly observations of economic data in the post-war US economy where data is relatively good, which implies that a model should at most have about 10 parameters (some DSGE models have 40 parameters or more!). Noah Smith likes to say that macro data is uninformative. Really what that means is that economists have ignored Box: they shouldn't have so much overparameterization. With fewer parameters, the data isn't uninformative ... if you just have two parameters, the data is actually completely informative.

Information Transfer Economics
All models are wrong, but some are tedious

Jason Smith

Lars P. Syll — ‘New Keynesian’ haiku economics

A lot of mainstream economists out there still think that price and wage rigidities are the prime movers behind unemployment. What is even worse — I’m totally gobsmacked every time I come across this utterly ridiculous misapprehension — is that some of them even think that these rigidities are the reason John Maynard Keynes gave for the high unemployment of the Great Depression. This is of course pure nonsense. For although Keynes in General Theorydevoted substantial attention to the subject of wage and price rigidities, he certainly did nothold this view.… 

So, what Keynes actually did argue in General Theory, was that the classical proposition that lowering wages would lower unemployment and ultimately take economies out of depressions, was ill-founded and basically wrong. 

To Keynes, flexible wages would only make things worse by leading to erratic price-fluctuations. The basic explanation for unemployment is insufficient aggregate demand, and that is mostly determined outside the labor market.… 

People calling themselves ‘New Keynesians’ ought to be rather embarrassed by the fact that the kind of microfounded dynamic stochastic general equilibrium models they use, cannot incorporate such a basic fact of reality as involuntary unemployment!.... 

The final court of appeal for macroeconomic models is the real world, and as long as no convincing justification is put forward for how the inferential bridging de facto is made, macroeconomic modelbuilding is little more than “hand waving” that give us rather little warrant for making inductive inferences from models to real world target systems. If substantive questions about the real world are being posed, it is the formalistic-mathematical representations utilized to analyze them that have to match reality, not the other way around. 

To Keynes this was self-evident. But obviously not so to haiku-rule-following ‘New Keynesians’.

Lars P. Syll’s Blog
‘New Keynesian’ haiku economicsLars P. Syll | Professor, Malmo University

Lord Keynes — Are all Facts Theory-Laden?

Yes, facts are theory-laden. Ludwig Wittgenstein elucidated how this so through his investigation of logic, both scientific language in the Tractatus and ordinary language in the Investigations. Sociologists and anthropologists have also shown how reality is socially constructed.

Kant had suggested and cognitive science further suggests that humans project what they sense in addition to receiving it as data through the subliminal process of data organization of which the subject is unaware. This often accounts for why there are often disputes of fact even among experts. Individuals and groups organize the world differently, based on subjectivity and the process of social construction, including the logic of the language they employ in mentation and communication.

Lord Keynes presents a particular view of this in opposition to Mises apriorism. I am in general agreement with this criticism in that this is the dominant paradigm in the scientific community at present and it is based on the way the majority of people construct reality. 

But I am more agnostic from the philosophical point of view. 

The worldview that LK outlines is a relative worldview that characterizes a way of seeing the world at a particular historical moment for a particular vantage which falls under the general category of "realism" in philosophy. The way it is stated is known as "naïve realism" in that it assumes that "what you see is what you get" without epistemological explanation. 

There is a considerable controversy over epistemological explanation and simply asserting realism is considered to be an expression of the "commonsense" viewpoint that is socially dominant at this historical moment in this geographical location. The point of rigorous inquiry is that common sense has often proved wrong. It is a reason that science was developed along with the issues associated with supposedly self-evident principles of philosophy.

Social Democracy For The 21St Century: A Post Keynesian Perspective
Are all Facts Theory-Laden?
Lord Keynes