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Friday, November 20, 2020

Lars P. Syll — Paul Samuelson and the ergodic hypothesis


Paul Samuelson deserves a lot of the blame for what happened owing to his influence on economic methodology. But it did not begin with Samuelson. Keynes criticized Tinbergen's econometrics, for example, and Alfred Marshall, whose Principles was as influential at the time as was Samuelson subsequently, also warned about overextending the use of mathematics.

The rigor of scientific method in causal explanation stems from balancing intuition in discovery, mathematical formalism in theory construction, and empirical data as the basis of evidence in testing hypotheses.

Formalists lost the plot, which is providing naturalistic causal explanation of natural phenomena (objects and events). They conflated science with modeling and overly minimized the significance of interpreting of theory in terms of data. They also ignored the influence of institutional arrangements, which MMT has attempted to correct regarding the relationship of economics, finance, accounting, law, and policy.

This was disastrous for economics since the subject matter of social science, and also life science to a great extent, is fundamentally different from the subject matter of natural science. The subject matter of natural science is ergodic and social science is non-ergodic for reasons Lars Syll cites in the references he provides in the post. 

Time makes a difference in social science. As Karl Marx emphasized, economics is historical.

See Ole Peters. The ergodicity problem in economics. Nature Physics volume 15, pages1216–1221(2019)
Abstract
The ergodic hypothesis is a key analytical device of equilibrium statistical mechanics. It underlies the assumption that the time average and the expectation value of an observable are the same. Where it is valid, dynamical descriptions can often be replaced with much simpler probabilistic ones — time is essentially eliminated from the models. The conditions for validity are restrictive, even more so for non-equilibrium systems. Economics typically deals with systems far from equilibrium — specifically with models of growth. It may therefore come as a surprise to learn that the prevailing formulations of economic theory — expected utility theory and its descendants — make an indiscriminate assumption of ergodicity. This is largely because foundational concepts to do with risk and randomness originated in seventeenth-century economics, predating by some 200 years the concept of ergodicity, which arose in nineteenth-century physics. In this Perspective, I argue that by carefully addressing the question of ergodicity, many puzzles besetting the current economic formalism are resolved in a natural and empirically testable way.
Lars P. Syll’s Blog
Paul Samuelson and the ergodic hypothesis
Lars P. Syll | Professor, Malmo University

See also

The Radford Free Press
“A Primer For the Perplexed”
Peter Radford

9 comments:

  1. “ 1870s
    Ergodicity was first introduced by the Austrian physicist Ludwig Boltzmann in the 1870s,”

    ie after 1860...

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  2. Was it Joan Robinson who said she studied economics just so she could see through all the nonsense?

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  3. Philosophers and other advocates of the dialogic method talk as if Ergodicity has been around since Socrates and Plato... when in reality it was created by scientists AFTER the formal establishment of the scientific methodology in the academe in 1860 in opposition to the failing dialogic methodology...

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  4. Tom is Lars an Economics person or a Philosophy person do you know?

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  5. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4343082/

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  6. “ Ergodicity was first introduced by the Austrian physicist Ludwig Boltzmann in the 1870s, following on the originator of statistical mechanics, physicist James Clark Maxwell. Boltzmann coined the word ergodic—combining two Greek words: ἔργον (ergon: “work”) and ὁδός (odos: “path” or “way”)—to describe his hypothesis. Although some formulations of his hypothesis were not completely accurate, his ideas seeded an important set of principles and tools.”

    This was all post Darwin...

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  7. “ combining two Greek words: ἔργον (ergon: “work”) and ὁδός (odos: “path” or “way”)”

    Or literal ‘work-way’ ... iow we would say today it’s “the way that works”...

    As opposed to the dialogic ‘way’ which obviously doesn’t f-ing work..

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  8. is Lars an Economics person or a Philosophy person

    Both.

    Lars holds PhDs in both economics and economic history. He is active in current debates in philosophy of economics and economic methodology, advocating for critical realism versus instrumentalism, Bayesian epistemology, and methodological formalism. His position is basically that science aims at (realist) causal explanation. The realist challenge is to get beyond the formalism. nominalism, and subjectivism while avoiding Humean reductionism that leads to skepticism about causality being ontological. One could say that this approach is neo-Aristotelian. It is one of the enduring questions in philosophy since ancient times. The difficulties arise with respect to specification.

    Where this makes a difference is in approaching how modeling works in science, which is different in the natural, life and social sciences owing to difference in subject matter. Lars has written on this in terms of the use of math in modeling, for example.

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  9. Thx.. biochemistry Discipline is looking well ahead of Economics Discipline in this conversion/adjustment..

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