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.
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Tuesday, May 19, 2015
Jason Smith — Prescott and Lucas aren't Romer's problem
A physicist explains what's wrong with a lot of economics "as science," and it is not just "mathiness."
The PS is very good. I've been following theoretic particle physics, from a layman point of view, for a few years. It has been a sociological disaster, but the LHC has started to destroy the old paradigm. That's the good thing about science: there is no space for bullshit, if data doesn't back you up.
I was trained as neuroscience psychologist, psychology has gone through a fair deal of proto-science phases, and still is to a big extent. But methodology has been always a focus of critics in psychology and later on neurosciences, and it still is, the discipline still has problems but those are presented and there is debate about the merits of each aproach. Certain schools may be more dominant during certain periods of time, but certainly they don't last centuries, like freaking economics.
When is this Copernican revolution going to come to economics? Mathematical tools, no matter how arcane, obscure or simple (most mathematics in economics are kind of a joke, high school level) a science does not make. Science is made with data, data, and more data.
If you are dealing with complexity you will have to use tools to analyse that complexity, there are whole branch of mathematics devoted to that. Engineering has made an extensive use of those tools for a while. But you don't start from the tools, you start from ideas, usually given by observation of (wait for it) data, and try to make hypothesis based on that.
Economists go the other way around, they make their own models, complex or simple, and try to 'fir' reality on models. OFC serious scientists will laugh on economists, and they won't be able to remove the physics-envy stigma. For starters through, they should not look at physics, but at other 'soft' sciences and/or engineering, because we are not even close to the knowledge required to deal with economics as we deal with physics. Lucky for economists, though, this is very much extensible to almost any discipline.
In other words: is time for economists to grow up and stop playing with toys in the sand.
I think it boils down the believe that economics is really a natural science rather than a social science. I think that Keynes sums it up in his criticism of Tinbergen in his letter to Roy Harrod (10 July 1938):
I also want to emphasise strongly the point about economics being a moral science. I mentioned before that it deals with introspection and with values. I might have added that it deals with motives, expectations, psychological uncertainties. One has to be constantly on guard against treating the material as constant and homogeneous in the same way that the material of the other sciences, in spite of its complexity, is constant and homogeneous. It is as though the fall of the apple to the ground depended on the apple’s motives, on whether it is worth while falling to the ground, and whether the ground wanted the apple to fall, and on mistaken calculations on the part of the apple as to how far it was from the centre of the earth.
Instead of "moral science" we would now say "social science". Conventional economists don't want economics to be considered a social science, or even a life science, including psychology. They apparently think sciences that aren't like natural science aren't "real science" or are second-class sciences. Their goal seems to be a general theory of the economic world that can be expressed in a set of equations.
According to most heterodox economics, the fundamental mistake of neoclassical economists and those that accept some variation of it is this assumption of economics being a natural science operating iaw "natural" laws that can be discovered and modeled econometrically. The assumption doesn't fit the type of subject matter.
Then question becomes whether this approach is based chiefly on "physics envy" or just plain old ideology, namely, the economics of classical liberalism as the only alternative.
The PS is very good. I've been following theoretic particle physics, from a layman point of view, for a few years. It has been a sociological disaster, but the LHC has started to destroy the old paradigm. That's the good thing about science: there is no space for bullshit, if data doesn't back you up.
ReplyDeleteI was trained as neuroscience psychologist, psychology has gone through a fair deal of proto-science phases, and still is to a big extent. But methodology has been always a focus of critics in psychology and later on neurosciences, and it still is, the discipline still has problems but those are presented and there is debate about the merits of each aproach. Certain schools may be more dominant during certain periods of time, but certainly they don't last centuries, like freaking economics.
When is this Copernican revolution going to come to economics? Mathematical tools, no matter how arcane, obscure or simple (most mathematics in economics are kind of a joke, high school level) a science does not make. Science is made with data, data, and more data.
If you are dealing with complexity you will have to use tools to analyse that complexity, there are whole branch of mathematics devoted to that. Engineering has made an extensive use of those tools for a while. But you don't start from the tools, you start from ideas, usually given by observation of (wait for it) data, and try to make hypothesis based on that.
Economists go the other way around, they make their own models, complex or simple, and try to 'fir' reality on models. OFC serious scientists will laugh on economists, and they won't be able to remove the physics-envy stigma. For starters through, they should not look at physics, but at other 'soft' sciences and/or engineering, because we are not even close to the knowledge required to deal with economics as we deal with physics. Lucky for economists, though, this is very much extensible to almost any discipline.
In other words: is time for economists to grow up and stop playing with toys in the sand.
I think it boils down the believe that economics is really a natural science rather than a social science. I think that Keynes sums it up in his criticism of Tinbergen in his letter to Roy Harrod (10 July 1938):
ReplyDeleteI also want to emphasise strongly the point about economics being a moral science. I mentioned before that it deals with introspection and with values. I might have added that it deals with motives, expectations, psychological uncertainties. One has to be constantly on guard against treating the material as constant and homogeneous in the same way that the material of the other sciences, in spite of its complexity, is constant and homogeneous. It is as though the fall of the apple to the ground depended on the apple’s motives, on whether it is worth while falling to the ground, and whether the ground wanted the apple to fall, and on mistaken calculations on the part of the apple as to how far it was from the centre of the earth.
Instead of "moral science" we would now say "social science". Conventional economists don't want economics to be considered a social science, or even a life science, including psychology. They apparently think sciences that aren't like natural science aren't "real science" or are second-class sciences. Their goal seems to be a general theory of the economic world that can be expressed in a set of equations.
According to most heterodox economics, the fundamental mistake of neoclassical economists and those that accept some variation of it is this assumption of economics being a natural science operating iaw "natural" laws that can be discovered and modeled econometrically. The assumption doesn't fit the type of subject matter.
Then question becomes whether this approach is based chiefly on "physics envy" or just plain old ideology, namely, the economics of classical liberalism as the only alternative.
Philip Mirowski argues for the former in More Heat Than Light. then second is set forth in More ideology than heat – Mirowski’s “More Heat Than Light” revisited.
Probably some combination of the two.