Facts, fallacies and echo chambers

November 12, 2019 Leave a comment

from Iconoclast

The above discussion “The new minds of young people will be open to the new empirical evidence.” illustrates the difficulties encountered by heterodox thinkers. Orthodox thinkers share a dogma, or at least a set of a priori assumptions, and usually a methodology. In essence, this makes orthodox thinking an echo chamber where basic ontology is never questioned. When the heterodox argue, as in the economically heterodox here, the argument eventually descends (or ascends?) into metaphysics; into ontology and epistemology. This is both the benefit and drawback of thinking and arguing from any kind of heterodox position.

While we are all drawn here by our rejection of orthodox economics, each of us has a particular perspective. That perspective is drawn from our enculteration and areas of study. That perspective is a kind of filter through which we see and interpret the world. Our only commonality appears to be a rejection of orthodox economics. Thus I suppose, in theory, if we pooled our arguments of disagreement with orthodox economics, searched for commonalities there and then backtracked or “reverse engineered” our way to the implied ontologies and epistemologies of such disagreements with orthodox economics, we might then begin to find common ground. Read more…

The tyranny of meritocracy

November 11, 2019 4 comments

from Blair Fix

Like many Canadians, I grew up with a faith in meritocracy. Do your best, I believed, and the world would reward you.

In school, this idea seemed self-evidently true. I worked hard, and was rewarded with good grades and praise from teachers. And those students who didn’t get good grades? Well they had less skill — less merit — than me. Or so I thought.

In hindsight, I cringe at my naivety. Like many successful people, I was blind to something important. There is no objective standard by which we judge merit.

Instead, merit is judged in a social context. What counts as deserving merit is what other people think deserves merit. This social context is why meritocracy can be a tyranny. If you’re good at something that isn’t valued by other people, you won’t be rewarded.

Wait … jazz musicians aren’t well paid?

y first hint that some skills are less valued than others came in my early 20s. At the time, I was devoted to becoming a professional musician — a jazz drummer. My thinking was simple — if I practiced hard enough and become a good enough musician, the world would reward me.

Boy was I naive. Read more…

The essence of neoliberalism

November 10, 2019 25 comments

from Lars Syll

800x450The neoliberal utopia evokes powerful belief – the free trade faith – not only among those who live off it, such as financiers, the owners and managers of large corporations, etc., but also among those, such as high-level government officials and politicians, who derive their justification for existing from it. For they sanctify the power of markets in the name of economic efficiency, which requires the elimination of administrative or political barriers capable of inconveniencing the owners of capital in their individual quest for the maximisation of individual profit, which has been turned into a model of rationality. They want independent central banks. And they preach the subordination of nation-states to the requirements of economic freedom for the masters of the economy, with the suppression of any regulation of any market, beginning with the labour market, the prohibition of deficits and inflation, the general privatisation of public services, and the reduction of public and social expenses. Read more…

Income levels and emissions

November 9, 2019 4 comments

Global income growth and inequality, 1980–2016

November 8, 2019 1 comment

Why validating assumptions is so important in science

November 8, 2019 1 comment

from Lars Syll

valAn ongoing concern is that excessive focus on formal modeling and statistics can lead to neglect of practical issues and to overconfidence in formal results … Analysis interpretation depends on contextual judgments about how reality is to be mapped onto the model, and how the formal analysis results are to be mapped back into reality. But overconfidence in formal outputs is only to be expected when much labor has gone into deductive reasoning. First, there is a need to feel the labor was justified, and one way to do so is to believe the formal deduction produced important conclusions. Second, there seems to be a pervasive human aversion to uncertainty, and one way to reduce feelings of uncertainty is to invest faith in deduction as a sufficient guide to truth. Unfortunately, such faith is as logically unjustified as any religious creed, since a deduction produces certainty about the real world only when its assumptions about the real world are certain …

Unfortunately, assumption uncertainty reduces the status of deductions and statistical computations to exercises in hypothetical reasoning – they provide best-case scenarios of what we could infer from specific data (which are assumed to have only specific, known problems). Even more unfortunate, however, is that this exercise is deceptive to the extent it ignores or misrepresents available information, and makes hidden assumptions that are unsupported by data …

Despite assumption uncertainties, modelers often express only the uncertainties derived within their modeling assumptions, sometimes to disastrous consequences. Econometrics supplies dramatic cautionary examples in which complex modeling has failed miserably in important applications …

Sander Greenland

Yes, indeed, econometrics fails miserably over and over again.  One reason why it does, is Read more…

The United States is the world’s second largest economy: when it comes to climate change, it matters

November 7, 2019 4 comments

from Dean Baker

The New York Times has an article on the Trump administration’s decision to pull the United States out of the Paris Agreement on climate change. The first sentence wrongly describes the United States as “the world’s largest economy.” Actually China passed the United States as the world’s largest economy early in the decade. According to the I.M.F. its economy is now more than 25 percent larger than the U.S. economy. It is projected to be more than 50 percent larger by 2024.

This matters because China actually has moved aggressively to adopt clean energy. It is now by far the world leader in the use of solar and wind power and electric car sales. The fact that the Trump administration is determined not to cooperate in efforts to reduce greenhouse gas emissions is unfortunate, but the fact that the world’s actual largest economy is taking big steps to curb emissions is hugely important.

The US vs. Western Europe 1980 – 2016

November 6, 2019 4 comments

In 1980 the bottom 50% of the population in the US received 20% of the national income and 23% in Western Europe. By 2016 the share of the bottom 50% of the US population received declined to 13% while in Western Europe the bottom 50% held on to 22% of the national income. The top 1% in Western Europe increased their share to 12% in 2016. Meanwhile in the US the top 1%increased their share of the national income from 10% in 1980 to 20% in 2016.

A key question is what policies and forces are at play in Western Europe that maintained the bottom 50%’s share?

top 1% vs. bottom 50% national income shares in the US and Western Europe 1980-2016: diverging income inequality trajectories

Read more…

Confusing statistics and research

November 5, 2019 2 comments

from Lars Syll

140113.bigdataCoupled with downright incompetence in statistics, we often find the syndrome that I have come to call statisticism: the notion that computing is synonymous with doing research, the naïve faith that statistics is a complete or sufficient basis for scientific methodology, the superstition that statistical formulas exist for evaluating such things as the relative merits of different substantive theories or the “importance” of  the causes of a “dependent variable”; and the delusion that decomposing the covariations of some arbitrary and haphazardly assembled collection of variables can somehow justify not only a “causal model” but also, praise a mark, a “measurement model.” There would be no point in deploring such caricatures of the scientific enterprise if there were a clearly identifiable sector of social science research wherein such fallacies were clearly recognized and emphatically out of bounds.

Dudley Duncan

Wise words well worth pondering on. Read more…

Map of CO2 emissions per capita by country

November 5, 2019 1 comment

“It doesn’t feel like a boom yet”

November 5, 2019 7 comments

from David Ruccio


Across American universities, corporations, and financial institutions, researchers are honing computer models designed to predict the winner in the November 2020 presidential election in which Donald Trump will face a Democratic candidate still to be determined.

Read more…

Game theory — a scientific cul-de-sac

November 4, 2019 17 comments

from Lars Syll

Back in 1991, when yours truly earned his first PhD​ with a dissertation on decision-making and rationality in social choice theory and game theory, I concluded that “repeatedly it seems as though mathematical tractability and elegance — rather than realism and relevance — have been the most applied guidelines for the behavioural assumptions being made. On a political and social level, ​it is doubtful if the methodological individualism, ahistoricity and formalism those guidelines imply are especially valid for explaining real-world decision-making.”

This, of course, was like swearing in church. My mainstream colleagues were — to say the least — not exactly überjoyed.

Half a century ago there were widespread hopes game theory would provide a unified theory of social science. Today it has become obvious those hopes did not materialize. This ought to come as no surprise. Reductionist and atomistic models of social interaction — such as those mainstream economics and game theory are founded on — will never deliver sustainable building blocks for a realist and relevant social science. That is also — as yours truly argues in this article — the reason why game theory never will be anything but a footnote in the history of social science. Read more…

CO2 emissions per capita by country

November 2, 2019 6 comments

World – CO2 emissions per capita 1960 to 2014

November 2, 2019 Leave a comment

The experimental dilemma

November 1, 2019 26 comments

from Lars Syll

resissWe can either let theory guide us in our attempt to estimate causal relationships from data … or we don’t let theory guide us. If we let theory guide us, our causal inferences will be ‘incredible’ because our theoretical knowledge is itself not certain … If we do not let theory guide us, we have no good reason to believe that our causal conclusions are true either of the experimental population or of other populations because we have no understanding of the mechanisms that are responsible for a causal relationship to hold in the first place, and it is difficult to see how we could generalize an experimental result to other settings if this understanding doesn’t exist. Either way, then, causal inference seems to be a cul-de-sac.

Nowadays many mainstream economists maintain that ‘imaginative empirical methods’ — especially randomized experiments (RCTs) — can help us to answer questions concerning the external validity of economic models. In their view, they are, more or less, tests of ‘an underlying economic model’ and enable economists to make the right selection from the ever-expanding ‘collection of potentially applicable models.’ Read more…

Mark Zuckerberg is a rich jerk

November 1, 2019 10 comments

from Dean Baker

Last week, New York Times columnist Timothy Egan had a piece headlined “Why Doesn’t Mark Zuckerberg Get It?” The piece then goes on to document how Facebook has become a medium for spreading lies and nonsense all over the world, that many ill-informed users have come to believe.

This is what Egan wants Zuckerberg to “get.” While it would be nice if Zuckerberg understood the problems created by Facebook, and took effective measures to address them, the problem with Egan’s piece is that there is no reason to expect that Zuckerberg would get this point.

Zuckerberg is not a political philosopher concerned about the public good. There is a zero evidence he is a deep thinker of any sort. He is a Harvard boy who stumbled into a good idea and had the necessary connections to get very rich from it: end of story. Read more…

Top 10% income shares across the world, 1980–2016: Rising inequality almost everywhere, but at different speeds

October 30, 2019 4 comments

Where economics went wrong

October 29, 2019 10 comments

from Lars Syll

colDavid Colander and Craig Freedman’s Where Economics Went Wrong is a provocative book designed to inspire economists to serious reflection on the nature of economics and how it is practiced. It is a book to that seeks to stimulate discussion about the current state of the discipline; it should be read by anyone who categorizes what they do as applied policy work. I agree with much – though not all – of what Colander and Freedman’s write … Reliance on mathematics has obscured much of the assumed structure that economists work from, leaving us unable to clearly articulate assumptions or identify our often normative precepts. Adoption of the scientific method has resulted in the belief that economic theory can deliver useful, practical knowledge. However, this belief has not been tempered by a corresponding understanding of the limits of theory in a complex world where people do not always behave as rational actors, but are influenced by culture, society, history, and government structure. In this review essay, I explore some aspects of the Chicago-School story to illustrate why shifting the profession to Colander and Freedman’s vision of a Classical liberal attitude is likely to be a difficult task – and why the effort is valuable.

Marianne Johnson

Read more…

The Great Transformation of economic theory

October 29, 2019 28 comments

from Asad Zaman

In the Origins of Central Banking, we discussed how the Bank of England was created in 1694 to provide funding for a war with France. The success of this institution was noted, and it was replicated across Europe, so that Central Banks came into existence to finance the nearly continuous wars between European powers that characterized the 18th Century. The 19th Century was unusual in that European powers set aside differences to create a Hundred Years of Peace (1814 to 1914), in order to go on a spree of global colonization and conquest. The transition from war to peace also created a transformation in economic theories from Mercantilism to Free Trade. Some aspects of this transition are discussed below.

The Root of All Evil

An essential aspect of the Great Transformation from traditional, paternalistic societies to market societies involves re-engineering human motivations. The lust for money does not normally rank high as a driver of human behavior.   read more

The pitfalls of econometrics

October 28, 2019 11 comments

from Lars Syll

Ed Leamer’s Tantalus on the Road to Asymptopia is one of my favourite critiques of econometrics, and for the benefit of those who are not versed in the econometric jargon, this handy summary gives the gist of it in plain English:


Read more…