Thursday, January 12, 2017

Philip Pilkington — To What Extent Is Economics an Ideology and to What Extent Is It a Useful Theory?

Short lead in to forthcoming book.

Naked Capitalism
To What Extent Is Economics an Ideology and to What Extent Is It a Useful Theory?
Philip Pilkington
Crossposted at PPs blog, Fixing the Economists


Andrew Anderson said...

The great thing about posting NC's articles here is that one can comment on them without having them go into moderation or having one's self banned simply for disagreeing with Yves in a polite way.

Neil Wilson said...

Philip is about right, but unfortunately he's wrong when he says the future lies with Macro.

It doesn't. Macro ends up becoming a set of data mining and curve fitting exercises where correlations are extrapolated into causation based upon 'empirical data' collected under a set of policy conditions.

As soon as you change the policy conditions the data becomes near worthless and the policy changes affect individuals not macro units.

So you get great curves and equations, neither of which are any use in determining what policies we need to apply to individual entities to get an aggregate effect.

The Lucas Critique still applies. We need to know what individuals are doing, and we need to know how that aggregates. You don't understand any of that with your head in the clouds.

John said...

Neil, do you literally mean individuals? I can't see how that can work. The old Kaleckian idea of "classes" seems to have worked better. There is no reason for not disaggregating classes further. But disaggregation down to the individual? How would that work?

PS. Good luck with the snow! Oh, and don't get into the kind of trouble that will require a hospital bed! As you're more aware than anybody, we've maxed out the national credit card and we're now out of money...especially since committing suicide by leaving the EU...

Andrew Anderson said...

especially since committing suicide by leaving the EU... john

Come now. The British understand banking better than anyone, I'd say, since the BoE was one of the first central banks, because the Brits were first to leave the gold standard during the GD, because of Keynes, a Brit, and because of encouraging noises from the BoE the past few years.

I've just about given up on the US wrt to monetary reform but am encouraged by Brexit, i.e. why should Britain be shackled to monetary morons?

But if you wish to stay healthy: Psalm 103, etc.

John said...

Andrew, that was a joke that Neil would have understood as we're both anti-EU Brits.

The barrage of pro-EU propaganda that we've had to endure is in a league of its own. It's worse than the propaganda about Iraq's WMD.

We have our own monetary morons at the BoE, who aren't altogether dissimilar to the ECB's monetary morons, but at least we can do something about them. Although perhaps they're not as moronic as they seem. There may be good reason to believe that they are aware of the destruction they wreak. They just have different goals than the rest of us: the BoE exists to help private banks, not the country. By that measure, they're not doing too badly.

Any new EU Constitution should include Psalm 102: "In my distress I groan aloud and am reduced to skin and bones."

Andrew Anderson said...

John, I should have caught your sarcasm ("we're out of money"). Sorry.

I've been on the receiving end of Yves Smith's "winning" a debate by having the last word and then banning her opponent and am not in a good mood.

Neil Wilson said...

"Neil, do you literally mean individuals?"

Policy works on individuals and individual entities. It affects all choices in different ways - often linked via network effects that are not apparent until you activate the network (people talk to each other and influence each other - and these days that is not geographically constrained or a top down process).

That's the main reason for the Lucas Critique of the Keynesian 'macro' framework. The arrogance was then that the classicals could somehow divine the 'deep' parameters that were unchanging in the face of policy. They can't because the system is dynamic and chaotic.

If you want to know what the world will do you have to experiment on the world.

Or build a new world and see what people do in that. Which in modern time isn't actually as hard to do as it sounds.