Saturday, August 30, 2014

Lars P. Syll — Original sin in economics

Tony Lawson on the ontological poverty of rationalism as the conflation of the logical and the real, the abstract and the concrete, the sign as symbol and what it symbolizes.

Lars P. Syll’s Blog
Original sin in economics
Lars P. Syll | Professor, Malmo University

Ludwig Wittgenstein, Philosophical Investigations:
109. Philosophy is a battle against the bewitchment of our intelligence by means of language. 
133. It is not our aim to refine or complete the system of rules for the use of our words in unheard-of ways. 
For the clarity that we are aiming at is indeed complete clarity. But this simply means that the philosophical problems should completely disappear 
The real discovery is the one that makes me capable of stopping doing philosophy when I want to.—The one that gives philosophy peace, so that it is no longer tormented by questions which bring itself into question. Instead, we now demonstrate a method, by examples; and a the series of examples can be broken of.—Problems are solved (difficulties eliminated), not a single problem. 
There is not a philosophical method, though there are indeed methods, like different therapies. 
255. The philosopher's treatment of a question is like the treatment of an illness.
In Lawson's analysis of economic methodology, the rationalistic approach of constructing mathematical models involves modeling possible worlds. The scientific question is how closely does the model fit the actual world of experience.

Based on results there seems to be discrepancy between modeled worlds and the actual world. How does do these discrepancies arise? Is it due to measurement, for instance, or does it arise from assumptions not being semantically true?

On one hand, measurement can be an issue if an unrealistic degree of precision is assumed, or poor data selection or construction resulting in GIGO.

On the other hand, conflation of thought and reality may lead to false assumptions about the method itself, e.g., stock-flow inconsistency or ignoring complexity, or methodological assumptions, such as a presumption of individual choice independent of institutional influences and other system relationships.

This is often based on at least a tacit assumption of essentialism, in which intuition is presumed to capture the essence of things so that the thought is identical with the essence of reality and therefore necessarily reflects reality. The praxeology of Ludwig von Mises is an explicit assertion of this relationship between thought and reality on Kantian assumptions.  In the absence of empirical warrant, it would appear that neoclassical assumptions based on logical pedigree are similarly rationalistic, although tacit.

One of the knottiest issues is that of causality, especially since Hume's challenge to provide an empirical basis for assuming causal connections, in order to avoid the post hoc ergo propter hoc fallacy, for example, or mistaking a residual effect for a cause, like the so-called money multiplier.


Jan said...
This comment has been removed by the author.
Jan said...

Nice and intelligent by Lars and Tom as always! By the way i noticed Paul Krugman

I am just little confused reading him.Does he bit by bit try to incorporate MMT into his New Keynsian model?He mention sovereign currency etc in a way that point in that direction.

Jose Guilherme said...

The correct link for Krugman´s paper is the following one:

I´d say Krugman´s position is similar to Willem Buitler´s at Citibank: they are sufficiently realistic to recognize that a) monetary sovereignty makes the occurrence of Greek-style crisis an extremely unlikely event and b) helicopter drops are really a very efficient form of fiscal policy.

However, since they need to remain "credible" they must disguise their reasoning under complex math and utility functions to then arrive at these quite obvious conclusions, so clearly formulated by MMT ages ago.

And also, they must never - never! - quote or refer to the papers written by MMT writers on said topics.

Apart from this, however, it´s still great to have "reputable" economists, with some access to the corridors of power, defending rational analysis and policy precriptions for the battered economies of the developed world.

Calgacus said...

I object to this characterization (of Syll's extract from Lawson). It gets important things backwards. The dominant current in Anglo-American philosophy is and has for a very long time been some kind of "analytic philosophy", "empiricism" etc. This is opposed to "continental" "rationalism". Grosso modo, mainstream "economics", which mainly emanates from the Anglosphere fits hand in glove with centuries of trends in A-A "empiricism"/ analytic philosophy. The opposition, like MMT / Institutional / Marxist / Keynesian fits with, stems from, the continental / rationalist French & German tradition. (In spite of the influence of Moore on Keynes)

Most here agree that modern mainstream / neoclassical "economics" is essentially trash. But why? Not for hi-falutin philosophical reasons. It's trash because it is dishonest trash. A piece of intellectual work can be good if it is internally consistent, if it makes logical arguments, the paradigmatic example being mathematics. Or even if it "sins against logic", it may be good because it aptly describes something which we take to be the real world. But much economics essentially ignores both logical rigor and empirical applicability. Often it is just word/math salad, merely pretending to the first. It is propagated because it panders to the rich. No other reason.

There is nothing a priori wrong with using lots of math in economics - if it is either (a) Real Math= math that mathematicians understand = is in a "Pure Math" tradition or (b) has obvious empirical applicability (is in a genuine "Applied/Mixed Math" tradition). The notion that there is some mystical, a priori reason to not use mathematics in economics is allied to the notion that economics cannot be a science, that it is too much like philosophy (which we all know is just a collection of blowhards' opinions), that because it is a human/social discipline it is unlike the natural sciences which can be Real Sciences. This notion was a foolish or thoughtless "modern prejudice" in the early 19th century and except for now being universal to the point of invisibility, it remains one now. To the extent the neoclassical mainstream disagrees with this subKantian prejudice that "knowledge is impossible" - good for them. They're right.

To get hifalutin again - it is the rationalist side, often derided as "metaphysical" that tended to carefully examine the thought versus the world problems, while the A-A AP empiricist just ignores them or assumes them away.

In other words, while many/most recent "continental" philosophers/philosophy have been poseurs and charlatans, in essence the speculative/rational/dialectical tradition is alive and true & has obvious relevance to economics. In spite of the great amount of good work done in the analytic/empirical tradition, it has been done in spite of, not because of, the impoverished, empty, stillborn essence of analytic "philosophy".

Matt Franko said...

"Philosophy is a battle against the bewitchment of our intelligence by means of language. "

I love this quote... two metonyms that need to be stricken from our lexicon:

1. "money"

2. "church"