Lars P. Syll — Lazy theorizing and useless macroeconomics

Lars Syll chimes in on Paul Romer's article.

In physics it may possibly not be straining credulity too much to model processes as ergodic – where time and history do not really matter – but in social and historical sciences it is obviously ridiculous. If societies and economies were ergodic worlds, why do econometricians fervently discuss things such as structural breaks and regime shifts?

That they do is an indication of the unrealisticness of treating open systems as analyzable with ergodic concepts.

The future is not reducible to a known set of prospects. It is not like sitting at the roulette table and calculating what the future outcomes of spinning the wheel will be.… 

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Lazy theorizing and useless macroeconomics
Lars P. Syll | Professor, Malmo University

Noah Smith — The new heavyweight macro critics

Noah Smith weighs in on the side of Paul Romer.

So what seems to unite the new heavyweight macro critics, besides a lingering annoyance with Bob Lucas and his associates, is an emphasis on realism. Basically, these people are challenging the idea, very common in econ theory, that models shouldn't worry about being realistic. (Paul Pfleiderer is another economist who has recently made a similar complaint, though not in the context of macro.) They're not saying that economists need 100% perfect realism - that's the kind of thing you only get in physics, if anywhere. As Paul Krugman and Dani Rodrik have emphasized, even the people advocating for more realism acknowledge that there's some ideal middle ground. But if Romer, Kocherlakota, etc. are to be believed, macroeconomists aren't currently close to that optimal interior solution.

Maybe ontology is due to make a comeback.

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The new heavyweight macro critics

Noah Smith

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.