Lars P. Syll — Kenneth Arrow on knowledge that only comes trailing clouds of vagueness

Sums it up.

Lars P. Syll
Kenneth Arrow on knowledge that only comes trailing clouds of vagueness

The tipoff in neoclassical economics is the use of "natural." Students o philosophers (like me) recognize "natural" as a normative term that used to be used a synonymous with "divine" prior to the scientific revolution, and thereafter "natural' retained its normative authoritative connotation although no longer justified as divine. The normative authoritative connotation is now justified in terms of "laws of nature," with nature playing the role of the divine.

This is evident in 18th century Deism, where the deity is only invoked to start the "clock," which then runs in a deterministic and ergodic fashion, making "natural science" authoritative in the way that "divine" was authoritative  The difference is that scientists became the divines standing in for clerics and theologians.

The 19th century dropped the façade of deity after Feuerbach made the case that deity is an anthropomorphic projection of an imaginary ideal and Nietzsche proclaimed, "God is dead." But "natural" retained the authoritative connotation of "divine" without the divine. Scientists now did the divining based on theory and experiment rather than interpreting scripture as divine revelation.

Neoclassical economic (marginalism) develop in emulation of 19th century mechanics. Adam Smith's invisible hand is reinterpreted as a substitute for the invisible hand of God in the great chain of being that science replaced. Economists "discovered" the "laws of economics," like that of supply and demand in price determination, and proclaimed these "laws" to be "natural" and inviolable. Economics would be ergodic, like natural science, in spite of the fact that no other social science pretended to that level of certainty. In response, economics allied with natural science rather than social science and did not bother to look at its sister sciences but only to its "mother," physics.

The economics profession has not been able to shake this heritage for fear of appearing "unscientific." Therefore the demand for quantitative measurement and math modeling. It's just a hangover of previous superstition based on the great chain of being. Now the great chain is that of unified science, with physics at the base and the rest of the sciences proceeding from this level in rising orders of complexity. The problem arises when the implications of complexity are overlooked or denied.

If economics were the epistemic giant that many in the profession claim it to be, then CEO's would be economists. The reality is that most non-financial firms don't even have economics departments, let alone chief economists.

Where the mistake lies in in thinking that what is normatively authoritative in a model is therefore authoritative in what the model putatively  represents when there is no way of knowing this. Science is always tentative, in that "laws" are hypotheses that can be disconfirmed by evidence. As Kuhn has observed (somewhere in The Structure of Scientific Revolution), disconfirmation of hypotheses are not sufficient to overturn the theory serving as the paradigm for normal science until ad hoc adjustments make it evident that another theory is needed.

In economics, most of the profession have not gotten this message yet and are still busy adding epicycles to account for anomalies like the recent catastrophe that their models missed. And they refuse to look at other ways of seeing because these are not expressed quantitatively in mathematical models. They haven't realized yet that the methodology is the problem. The data is not compatible with the simple models being employed for convenience and tractability because of the uncertainty in social science arising from complexity. Doh.