I've recently read two big-think piece about new paradigms for economic theory - this one by evolutionary biologist David Sloan Wilson, and this one by venture capitalist and activist Nick Hanauer and speechwriter Eric Liu. Is economic theory due for a paradigm shift? Maybe, but I don't think we know what the new paradigm will be yet.…
But I think that more important than any of these theoretical changes - or the evolutionary theory suggested by Wilson - is the empirical revolution in econ. Ten million cool theories are of little use beyond the "gee whiz" factor if you can't pick between them. Until recently, econ was fairly bad about agreeing on rigorous ways to test theories against reality, so paradigms came and went like fashions and fads. Now that's changing. To me, that seems like a much bigger deal than any new theory fad, because it offers us a chance to find enduringly reliable theories that won't simply disappear when people get bored or political ideologies change.
So the shift to empiricism away from philosophy supersedes all other real and potential shifts in economic theory. Would-be econ revolutionaries absolutely need to get on board with the new empiricism, or else risk being left behind.
To simplify Thomas Kuhn's view of paradigm shift, it's the anomalies. As results that counter the normal paradigm build up, or results that the normal paradigm cannot explain, interest grows in finding a new paradigm instead of either ignoring the anomalies or patching up theory ad hoc.
Economics seems to be approaching that point after the inability of the normal paradigm to foresee the onset of the GFC and its subsequent inability to recommend effective policy for recovery. Now the existing paradigm is trying to account for a "new normal," and many are getting restless over it.
According to Kuhn, such are the conditions under which paradigm shift is likely to occur — if creativity can be summoned to develop a new framework as a better way of asking questions and getting answers that not only compute but are corroborated.
Noahpinion
New paradigms in economic theory? Not so fast.
Noah Smith | Assistant Professor of Finance, Stony Brook University
New paradigms in economic theory? Not so fast.
Noah Smith | Assistant Professor of Finance, Stony Brook University
"Would-be evolutionary economists should realize that the measure of their success will be quantitative prediction."
ReplyDeleteDoes Smith not know that evolution is rationalist science and not empirical science?
There is no empirical evidence of evolution... see Shapiro's work...
There is rationalist evidence of evolution...
Evolution cannot say: "here, this species evolved into that species and here is how it happened...."
We need more empiricism for sure but you cant get there by looking at evolution as a guide evolution is not empirical in the first place...
"natural selection" is a figure of speech...
This comment has been removed by the author.
ReplyDeleteIn the old days, the economic orthodoxy at the time, used to measure the number of human sacrifices required across various city states to generate rain globally. It was an objective exercise, that didn't include any assumptions, just measuring reality and making predictions. They found that lots of sacrifices during dry years lead to wetter subsequent years. A wise bunch noticed that so many sacrifices were being made, that the world risked causing precipitation change globally. But the ignorant masses ignored their warnings until so many sacrifices were made that floods washed away everyone and then a guy named Noah made a boat and brought us to the modern era. Eventually two survivors were so impressed by that boat, they named their son Noah, and taught him to measure economics using physics and here we are today reading his work. If only the masses had abandoned their philosophy, the empiricists, could have changed history and we wouldn't be reading Noah's work.
ReplyDeleteEmpiricism doesn't exclude philosophy from economics. If they measure something innocuous like unemployment and job ads, or even the price of integrated semiconductors then develop policy prescription they are implicitly adopting a certain philosophy of economy that implicity rejects all solutions that don't include eliminating unemployment or worlds that don't use semi-conductors that seem implausible but may be accurate none-the-less. Economics is always and everywhere arbitrary and capricious. To pretend otherwise is dangerous. Orthodoxy wants to regain the mantle of being "neutral" so they can once again make policy prescriptions that are for the "common good." Never again, I hope, they've caused enough destruction.