Home > The Economics Profession > Discussion of the week: Patch, Knibbe and Radford on history vs. science and Krugman’s claim of originality

Discussion of the week: Patch, Knibbe and Radford on history vs. science and Krugman’s claim of originality

David Ruccio‘s post Economics: history vs. science  has generated extensive, give-and-take, quality discussion.  Here is a sample. 

  • Patch
    September 11, 2010 at 10:17 am This whole “history vs. science” debate is nothing else than a distraction, wasting resources (time) of critical minds. “History” enters science at two stages: First you have to get a topic to write about and an idea of what to write – that’s where actual events and experience (“history”) will play the biggest role. Then you build a model (or theory or whatever). And stage 3 is that you check if your model fits the data (“history”). For step 2, you formally don’t need history, but in fact all three stages are intertwined. One extreme fraction of economists acts as if real-world frictions and institutions did not have to be built into the models (the Chicago fraction), but even they need the data to be able to say: See, folks, we can simulate real-world data with our slim model and that’s enough, go and ask Mr. Occam (http://en.wikipedia.org/wiki/Occam%27s_razor). The biggest fraction are those economists that use all three stages and at least try to explain what happens in the world and how and why it does (of course, there are different ways to this, and that’s why there are different “schools of thought”). The third stage now seems to be those that like to use “history” as an excuse for not being able to explain general patterns in consistent theory, but for telling unspecific things that explain everything and nothing. It is not legitimate to act as if this kind of “history economics” is equivalent to heterodoxy. Or if is, then I don’t need heterodoxy.
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  • Patch
    September 11, 2010 at 10:22 am | Ah and by the way, Krugman wrote good things about that: http://www.princeton.edu/~pkrugman/aag.pdf
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  • Merijn Knibbe
    September 11, 2010 at 8:29 pm First principles sometimes come second.

    I’ve read the Krugman article. It’s about the ‘new economic geography’. Basically, it states the next things:

    1. Krugman is fabulous and it is his model of geographical specialization
    2. But the model stinks when it comes to explaining modern societies (I’m not making this up, he states this even twice M.K.)
    3. Still, economists use it a lot as it is phrased in the language economists have learned to love (first principles, micro economic foundations, rigorous, somewhat simple).
    4. It might do a better job to explain geographical specialization in the U.K. and the USA around 1900 and in present day China.
    5. Economist should read more on ‘traditional’ geography

    A serious flaw in the article is Krugman’s statement that GDP per capita in present day China is about as high as in the USA around 1900. China is in the phase of a fast growth of the number of car’s and (cell-)phones. This makes it comparable to the USA around 1920. Considering the amount of television sets, people per house, health care and those kinds of things, 1920 may be a conservative estimate. My guess: 1924.

    Another flaw: Krugman states that his 1991 book on the subject launched the field of new economic geography. However. One of the books on his list of literature is:
    Brakman, S., Garretsen, H. and Marrewijk, C. (2009), The New Introduction to Geographical Economics. These are economists from Groningen University, also my Alma Mater. Brakman and Garretsen still work there. It’s not a coincidence that a book from Groningen economists is cited: when I started there in 1979, Jan Oosterhaven was already working very hard on all kind of economic and econometric models which tried to explain regional differences in economic specialization – the work of Krugman seems to be a little less original than he suggests. I do not know if Oosterhaven launched the field (probably there were a whole bunch of others doing this kind of work) – but Krugman surely did not do it.

    The data he shows (not his own, by the way) do however suggest that there are different phases of development when it comes to regional specialization. This is consistent with my findings for the Netherlands and the findings of Brakman, Garretsen and the Jong for an earlier periods (Knibbe, M. (2010), ‘regionale verschillen in urbanisatiedynamiek in Nederland, 1795 – 1850′ in: Collenteur, G. e.a. (eds.), STAD EN REGIO (Groningen) pp. 323-332; Brakman, S., H. Gerritsen en H.J. de Jong (2010), ‘Urbanisatie in het premoderne Italie, 1300 – 1861. De dynamiek van urbanisatiepatronen’ in: Collenteur, G. e.a. (eds.), STAD EN REGIO (Groningen) pp. 333-344.

    This last one, which also gives an overview of theories on specialization and mentions Krugman as only one in a long list, is also available in a longer version in english with M. Schramm (but I did not read that one): ‘Ports, plagues and politics: explaining Italian city growth 1300 – 1861′, European Review of Economic History 12 (2008) 97 – 131.

  • Patch
    September 12, 2010 at 10:31 am |

  • Okay, so maybe I should have been more explicit about which part of the Krugman paper is concerning the debate “economics: history vs. science”. I’ll just cite it:

    “Models and metaphors

    Many economic geographers proper were furious at the rise of the new geographical economics. That was predictable: near the end of that 1990 monograph I foretold the reaction, and also explained why I was doing what I was doing:
    ‘The geographers themselves probably won’t like this: the economics profession’s simultaneous love for rigor and contempt for realism will surely prove infuriating. I do not come here, however, to fight against the sociology of my profession, but to exploit it: by demonstrating that models of economic geography can be cute and fun, I hope to attract other people into tilling this nearly virgin soil.’

    … Martin (1999) has argued that “economic geography proper” involves “a firm commitment to studying real places (the recognition that local specificity matters) and the role of historico-institutional factors in the development of those places.” And it involves a rejection of abstract models in favor of “discursive persuasion.”

    So how do I respond to that critique? I have no problem with people investigating local specificity and engaging in discursive persuasion. But the new economic geography was designed to attract the attention of mainstream economists. And mainstream economics decided long ago that devising abstract models is an essential part of being a useful profession.

    When and why was that decision taken? The answer, although not many people realize this, is that the Great Depression was the dividing line. Until the 1930s and to some extent into the 1940s, institutional economics, with a strong emphasis on ‘historico-institutional factors’, was a major force in American economics. But when the Depression struck, there was a desperate need for answers – and the answers wanted were to the question, ‘What do we do?’, not ‘How did we get here?’. Faced with that question, the institutional economists couldn’t deliver; all they could offer was, well, persuasive discourse on the complex historical roots of the problem.

    The person who did deliver was John Maynard Keynes. … The General Theory of Employment, Interest and Money, despite occasional historical asides, essentially presents an abstract, ahistorical model of the economy; at its core is a little two-equation equilibrium model of the level of employment. And here’s the thing: Keynesian economics, unlike institutional economics, was able to answer the question about what to do …

    More broadly, what mainstream economists want is the ability to answer ‘what if’ questions: if something were different, how would that change the economic outcomes? That’s a kind of question that’s almost by definition impossible to answer if your approach emphasizes the uniqueness of each individual case and the specifics of history. But it’s very much the kind of question that the new economic geography was intended to answer. Indeed, what I saw as the big result in Krugman (1991b) was precisely the model’s implication that the geographical structure of the economy depended on a few key parameters: transportation costs, economies of scale, and factor mobility.

    To be honest, I don’t understand the mindset of those who disdain the search for general conclusions about geography (or anything else) on principle. Surely the goal of all scholarship is ultimately to provide an understanding of the principles that govern the world, which necessarily means developing models on which one can perform thought experiments, asking ‘How would things be different if X happened instead of Y?’ What I can appreciate is the argument that attempts at general modeling are premature, that we need an accretion of detail before we can get to the abstract modeling stage. But I realize that this instrumental view of ground-level scholarship, the idea that it’s all about paving a road to some higher abstraction, isn’t something everyone shares. So be it.”

    The whole point of science is explaining the things in a way that everyone can understand how you got to your conclusions. Saying “See, it’s history and everything is quite complex” would not be helpful. If someone says, for example, the debt level in society is too high (a point that mainstream economists usually don’t even consider) and that will lead to a crisis, then it’s totally legitimate to ask why that should lead to a crisis (that’s just an example and I do not doubt that debt-level research is fine). Still he’ll need a generalizable model or theory.

  • Peter Radford
    September 14, 2010 at 7:11 pm Patch: one of the problems I see with the obsession with math is that it has displaced the very thought process you indicate as a necessary prior activity to model building. Certain economists have become so math based that they fail to articulate the purpose and goal of the models they are constructing. They have conflated “model building” with “doing economics”. Many of the greats throughout the development of economics were sufficiently adept at math that they also saw the need to leave it to one side when articulating their theories. Edward points us to Keynes, we could cite Marshall as well. With this in mind I am always suspicious of economists who plunge straight into math. I wonder whether they have a clear vision of what the problem is that they are trying to explore.

    Finally: I take your point with respect to history as a source of data, but with one caveat: I feel that we all too frequently collect only that data we seek and are able to model. History is replete with regularities requiring explanation, yet which yield data only with difficulty. Such regularities seem always to end up less explored, and frequently dismissed as unimportant. I think this is why orthodox economics has narrowed its compass to allocation and constrained optimization. In other words the ability to apply math has helped define both the data we collect and even the way in which we define the subject matter of economics. The result is an impoverished view of what economists do.

  • Patch
    September 15, 2010 at 2:11 pm | Thanks for your comments, Peter. I indeed believe you’re right if you point to the problem that we often see the world through some kind of filter and of course this filter can be just the methods that we have learned to handle. That fits perfectly well with what I wrote. Up to now I don’t think there is a catch-all solution to this – abandoning maths or “science” is not, but whenever building a model or doing economics in any other way and especially when doing economic policy, we should stay highly self-critical.

    One thing about Keynes. There is now 74 years history of “what did Keynes really mean?” (from the Quarterly Journal in 1936 to for example, well, Michael Emmett Brady, Jochen Hartwig, Mark Hayes etc). I think Keynes could have avoided a lot of that if in his main book he had written more clearly, using more, not less, explicit maths. He uses maths, but leaves out intermediate steps, jumps between behavioral functions and equilibrium outcomes and criticizes things he uses later in the book (or at least it seems so).

    1. s h a r o n
      September 18, 2010 at 4:11 pm

      History is a construct

      Period.

    2. September 18, 2010 at 6:18 pm

      This three stage model of science is already setting to one side what makes it scientific: the attempt to offer cause and effect explanations of what is going on. Even if those attempting to do so only come up with a few “can’t happen” conclusions, that is still superior to a “model” which is built on long falsified assumptions about human behavior.

    3. Avner Offer
      September 18, 2010 at 10:20 pm

      The implicit assumption of this three stage model is that the modeled relations are permanent and can be replicated. This may be true of physics, but in history nothing comes back twice, and any regularity is likely to be short lived. Hence the economics project has an inappropriate model of science. But its standards of empirical testing are low and do not expose the model to a proper reality test.

    4. Peter T
      September 19, 2010 at 9:31 am

      The “science” label is surely unhelpful. We use the word in many ways, and often “It’s not scientific” means no more than something like “the thinking is loose”.

      If economics does not describe an objective physical reality then it’s not “scientific” in the sense that physics or chemistry or anatomy are. So these are not appropriate models. What could be? I suggest history could be. At its best, history looks for explanations, uses whatever method seems to shed the most light, pays careful attention to context, motivation and level of explanation and is scrupulous about sources. And the outcome is not an ability to exactly predict, but a feel for the shifting play of circumstance within the constraints of basic forces.

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