Unpicking the anti-neo-classical “hairball”, so that what we are for is not defined by what we are against
from Bruce Edmonds
Neo-classical economics (NCE) defines the view of the contributors to this blog/discussion!
It does so by defining what people are against. NCE has dominated economics for such a period and with such intolerance that it has polarised the debate to such a degree that the only significant fact about individuals’ viewpoints is which of the two broad camps do they belong. Thus two undifferentiated clusters of approaches have developed – what I call the Neo-Classical and Hetrodox “Hairballs“. These Hairballs are summarised in the following table.
| Neo-Classical Hairball | Heterodox Hairball | |
|
Politics |
Right-wing, free market, capitalist | Left-wing, progressive, mixed economy |
|
Academic Style/Inclination/Training |
Hard science | The humanities |
|
Approaches to Representation |
Formal models | Natural language, statistics |
|
Academic Labels |
Neo-classical economist, micro-economics, etc. | Sociology, heterodox economics, macro economics etc. |
|
Types of Data |
Macro-quantitative | Macro-statistical, micro-qualitative |
|
Generality |
Law-like generality | Some context-dependency, general critique |
Thus, although there are individual exceptions, the vast majority of the posts only take characteristics from the right hand column of the above table. Such polarisations are common where there are groups battling for power/recognition. They are good for focusing effort and critique but also have severe disadvantages, for example by “turning off” those who do not buy into the Hetrodox Hairball in its entirety, even though they are exploring fresh approaches to the study of economic phenomena. Although I am a fervent critic of NCE I am becoming increasingly uneasy with the uniformly left-wing & humanities tone of the contributions to this blog (even though my personal politics is left-of-UK-centre).
This polarization is unfortunate, since (I think) progress towards a new, relevant and scientific Economics needs a more various and flexible approach. It needs to escape the dead hand of NCE and explore a multitude of approaches, approaches that might “pick and mix” characteristics from the two competing columns specified above.
In particular…
- Although politics can never be completely divorced from dealing with social issues of economic importance, that we should seek to separate out political statements (what the goals of economic policy/study should be) from scientific ones (how to best understand economic phenomena). This blog does not do this separation and frequently conflates the two broad (and correct) criticisms of NCE – that it is (a) politically biased and (b) simply bad science. Critique of the biased conclusions of NCE will be stronger if it comes from a source that attempts not to assume the opposite conclusion.
- I continue to argue that formal models in the form of simulation models that represent what people are observed to do (as opposed to should do according to any particular model of economic rationality). Agent-based models are ideal for representing such “procedural” rationality (Simon). One should no more exclude approaches that come from the natural sciences because it does not fit one’s personal preference (which may lie within the humanities), than it is sensible to ignore broader and more discursive approaches just because one is of a scientific bent. Economics crosses the humanities/science divide so we need inputs from both of these approaches.
- A fundamental rule of science should be “Don’t ignore any evidence unless you have a very good reason“. Thus we should take heed of qualitative and statistical evidence, but also the time-series that NCE love. Compared to the complexity of our subject matter we are starved of data, let us not make it any worse.
Don’t let yourself be defined by NCE, even in opposition to it!
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Bruce:
This is a vital issue, one that requires us to step back and ask what we are seeking to accomplish.
Your critique seems confined to this forum and the “uniformly left-wing & humanities tone of the contributions to this blog”. I agree, there is a decidedly left of center drift here, but I believe that is unavoidable when the status quo or the mainstream is decidedly right of center. We could, of course, encourage contributions from a wider variety of sources in order to move towards the more eclectic set of contributions you appear to advocate, but that is not the task of the contributors. It is an editorial decision. One that I would support. As far as I am aware no one is preventing ardent NCE advocates from commenting. That they do not is, again, not the fault of those who do take the time to comment.
The deeper point, beyond this forum, and one that I think you are driving at, is that the divide within economics is now so large that the discipline has effectively fractured. The conversation has ended. There is no longer “an economics”, but there are several, each of which is making claims to some element of “truth”. The evident failure of NCE – I realize that is a contentious statement – has surfaced this fragmentary nature of the subject, one that always existed, but which was masked by the successful hegemony established by NCE over that past few decades. In the power vacuum left subsequent to its unmasking we are witnessing a seemingly chaotic and unhealthy struggle to establish a new hegemony. Voices are bound to be shrill. The stakes are high. Whole careers will be exposed as having been in vain.
There are those who reject the notion that a new hegemony will, or should, arise. My own view is that the intellectual void left by the demise of NCE leaves too fertile a ground that a rival is bound to establish itself as a leader, at least for a while. So the current apparently chaotic melange of alternatives is only a transitory state. Something will emerge. The argument and debate along the way will be, by its very nature, both intense and periodically difficult. But we should not shy away from that effort.
The question is what will emerge?
None of us know. What we can do is to provide the space to encourage such emergence. I believe this was the intent behind the recent creation of the World Economics Association, which is shortly launching new journals dedicated to encouraging the re-establishment of exactly the conversation we lost during the years of NCE dominance.
On a more personal note: I agree that the risk to economics of not having that conversation is that the subject will slip further into irrelevancy. Economics appears to have followed a very arduous path into a dead end. Brilliant and stringent. Yet largely pointless. Intent on itself. Disengaged from actual economies. To borrow from biology: we have found ourselves on a sub-optimal fitness peak. Climbing all the way down and then back up a better peak is an extraordinary undertaking. During that transition we have to question everything. We must assume nothing. Our past heroes may not be heroes at all. Our methods must change. Our modes of expression too. We must break the mould, else risk slipping backwards.
That is inherently divisive. Or potentially thus.
So: yes, I would welcome more constructive engagement and a wider variety of views expressed here. Just as long as we all are focused on the reconstruction that lies ahead. My fear is that those with whom we need to engage still reject to notion that reconstruction is necessary. As for those put off by the tone or bias here: change it by joining in. How else are we to be expected to learn?
Look. The differencew between NCE and Keynes’s GT (not neoclassical synthesis Keynesianism nor New Keynesianism) is, as Keynes noted on page 16 of his GT, Keynes threw out some fundamental axioms of NCE.
AS I have pointed out numerous times the axioms that Keynes threw out to get his General Theory [since a general theory will have fewer specific axioms] are (1) the neutral money axiom, (2) the ergodic axiom and (3) the gross substitution axiom. [See my book THE KEYNES SOLUTION: THE PATH TO GLOBSAL ECONOMIC PROSPERITY (Palgrave, New York, 2009) for an explanation of these axioms].
So there is none of these weasal wordings of hair ball differences!; the differences are dramatic and clear once one understands the axioms on which any theory is based.
Paul Davidson, Editor , Journal of Post Keynesian Economics.
The problem is simply that NCE is apologetic of the economic system as it should have been be in the minds of some XIX century positivist. The heterodox people are two different things: those that are NCE but try to find a way out, not yet found (as many of the environment scholars); and those that are not NCE and feel that building a new complete theory is difficult. I know that in the US Pasinetti is almost unknown, but both him and others are trying, in many years of solitary work, at reconciling Keynes and Sraffa. In any case, and in addition to Davidson’s axioms, may I say that the one basic difference with NCE is that macro does not necessarily result from micro, while micro may often result from macro?
The problem is simply that NCE is apologetic of the economic system as it should have been in the minds of some XIX century positivist. The heterodox people are two different things: those that are NCE but try to find a way out, not yet found (as many of the environment scholars); and those that are not NCE and feel that building a new complete theory is difficult. I know that in the US Pasinetti is almost unknown, but both him and others are trying, in many years of solitary work, at reconciling Keynes and Sraffa. In any case, and in addition to Davidson’s axioms, may I say that the one basic difference with NCE is that macro does not necessarily result from micro, while micro may often result from macro?
Points well made Bruce. I agree it is essential to separate understanding the mechanisms of an economy from political/social views of what sort of society we should live in. I have perceived there is much more of the latter than the former on this site, perhaps as you suggest because many participants are from the humanities.
I am a scientist who has made a couple of guest appearances here (https://rwer.wordpress.com/2010/08/02/how-to-build-a-narrative-linking-the-various-heterodoxies-part-2/, https://rwer.wordpress.com/2011/03/14/the-value-of-simple-models-with-examples-of-economic-dynamics/). I wrote a book, Economia (http://betternature.wordpress.com/booksanddownloads/economia/), when I perceived that I could usefully critique the neoclassical theory as a scientist, rather than just dispute its values, as many other critiques do. NCE dismisses the latter with contempt (however valid it might be). In my contributions here I have tried to indicate how to get a foothold on the problem of understanding how economies really work – the scientific part of the problem.
I would make a few other points.
I don’t think the Left-Right dichotomy is useful. There are many more possibilities in the world than socialism and old-style capitalism (there have already been several varieties of capitalism, so it’s not even a well-defined term). My considered scientific conclusion is that markets are powerful but need to be managed, like wild horses. My political view is that we’d be smart to limit concentrations of wealth and power, because they subvert democracy. A more equitable, market-based society is neither left nor right, it’s on a different axis (if you insist on axes). Nor is it social democracy (a mix of big public and big private enterprises), nor the “Third Way” (putting a few bandaids on the wounds inflicted by neoliberalism).
I don’t think Bruce’s call necessarily implies more “right-wing” views, and it certainly need not imply more NCE views on this site. The abstractions of the neoclassical theory are laughably irrelevant to real economies, as is its central conclusion of a general equilibrium. It’s a complete waste of time debating anything about it. Look at real economies and figure out how they work. Step off the one-dimensional socialist-capitalist, left-right line – there are vast territories out there to be explored.
I agree economics crosses the (traditional) science-humanities divide, but it is possible to do science with qualitative information, as well as quantitative, as Bruce indicates. Many have an emotional reaction to (parodies of) the other discipline (humanities are waffle, science is brutal), but this is unnecessary. We can seek to understand our world, with our brains serving our hearts.
Peter mentions a contest for hegemony. This (political) power struggle needs to be distinguished from the scientific enquiry (how do economies work?), in which one should always be open to challenge.
By all means contest NCE’s stranglehold on power, and don’t wait for the next grand theory to emerge. Your average shop keeper would do a better job than the present lot of deluded and corrupt managers.
As an anthropologist and historian, an outsider in other words, I see all of the disciplines of economics as lost. A science should be lead by its subjects of study. The job of every scientist is to try to understand and describe those subjects and what they do. Often that process is messy and confusing, but no matter. The methods and theories developed by scientists must follow, not lead their subjects. Otherwise it’s not science, just manipulation and engineering. Not that manipulation or engineering of the world is inherently bad. Only that it is not science. From that vantage the job of economists is to try to understand and describe all the actors, interactions, and associations involved in creating economies and economic actions. A big job. One that most scientists fail at, including economists. The problem I see with economists, NCE and others is they never really accepted the job of being scientists. They would rather tell their subject what comes next, how to act, what their motivations are, what is important and what is not, rather than simply being the servant of their subjects in giving full voice and descriptions to the world construction of those subjects. For the scientists whose subjects are the associations and actions in which they themselves are involved and can play an active part the job is more difficult. Physicists are not involved in the Sun’s actions or the way atoms behave. They observe and describe these as best they can from the outside. Being inside makes the job of so called social scientists more difficult, then. But the job is not different from that of the physicist, only more difficult. Economists seem to want to build the economic world, sometimes showing a strong desire to replace what economic actors have or might build. They show little or no respect for or sensitivity to the economic construction work of actors who are not economists. I often feel this is the result of an over developed sense of their own importance in the scheme of things and a belief, mostly unstated that economies could not function without them. They are in error on both accounts.
Great stuff Bruce. I too have become increasingly uncomfortable with the diminishing range of economic ‘schools’ represented in this forum. Why should left or right and NCE or some form of Keynesianism be the only choices. Some ‘Keynesian’ contributors to these blogs, who seem to think that you can borrow your way out of any situation, are as absurd as any NCE ideologue. To me, idealized NCE models have only limited use because they take no account of real human behaviour. That doesn’t necessarily mean they are totally useless. Consider how physicists find both particle and wave models of light useful, in different contexts of course.
Consider the words of ecologist Edward O. Wilson:
“First rule of the history of science: when a big, new, persuasive idea is proposed, an army of critics soon gathers and tries to tear it down. Such a reaction is unavoidable because, aggressive, yet abiding by the rules of civil discourse, this is simply how scientists work. It is further true that, faced with adversity, proponents will harden their resolve and struggle to make the case more convincing. Being human, most scientists conform to the psychological Principle of Certainty, which says that when there is evidence both for and against a belief, the result is not a lessening, but a heightening of conviction on both sides.”
I think these words apply more to economics than science, where completely new paradigms are more readily accepted.
I don’t know that the boards have become that restricted. It seems that there are still some Austrians and some Georgists that show up every once in a while, in addition to the usual mix of radicals, New Keynesians, Institutionalists, etc. Is it possible that there is a certain amount of common ground in these non NCE branches that can lead one to believe in a narrowing? Seems possible to me. It seems possible also because in the process of dialogue almost everyone learns something. Sometimes they (and I especially!) lean something new about ourselves and our world view. Sometimes even a consensus can emerge.
The trick is to convince some that NCE is only applicable to a much narrower set of problems than its most vocal adherents believe.
However, there is also the stumbling block of what constitutes a heterodoxy. On methodological grounds most Austrians would stand opposed to much NCE. On ethical grounds, in terms of the support for capitalism as a system, many Austrians and conservative NCEs stand united.
I also see the struggle to within NCE every now and then. There is some really good work by some labor economists, and there probably is no better place to start a review of the intertwining of education and job markets that Haveman and Wolfe’s 1995 article, “The Determinants of Children’s Attainments: A Review of Methods and Findings.” that appeared in the December 1995 issue of the Journal of Economic Literature.
Your equivocation is based on a fallacy of distinction. Theoretical lineages in economics have distorted and obscured more than clarified; and more often than not it is to serve a purpose other than explanation in scientific terms. The science is in the truth values not the theories and the truth values are in the empirical realities (Polanyi; Keynes) that are empirically played out while you argue with the “class” theories.
(1)
http://topdocumentaryfilms.com/shock-doctrine/
(2)
http://topdocumentaryfilms.com/lifting-the-veil/
Incidentally, I am also a cultural anthropologist and no strager to cross cultural systems and systemics of survival and subsistence. Sustaining class structure and the state requires differential apologies for what goes for theory in economics but actually represent very specialized versions of subsystem political economies run as “business” over a tweeked and churned industrial system of exploitation. Your class and classical theoretical presuppositions are posited upon ideological bias and the supremacy of monetary rationing. The primary purpose of too big to fail is a smoke screen for a political finance system that serves a discretionary and selective economy of power. The magnitude of “AWE” is actually a system of self preservation and monumental fortification that protects, serves and preserves the systemic power and monetary domination itself. It is incredibly inefficient and the “lexicon” of economic evaluations are centered upon a teleological maze of tautologies that give the appearance of complexity to survival itself. In truth it only serves to sustain the upper scale of domination. If mob rule is hierarchical than so is finance in that regard. but there is no hierarchical continuity in this system…that is a total illusion. Instead you have small groups aligned and in collusion that tweek and churn the system even as they define it and “capture” its power positions to shape it towards their interests. In effect, the system is one of grand scale inefficiency serving the base desires of a power elite that justifies and legitimates its own existence by laying claims to structural survival. Your “economic” paradigm is a bad dream trying to right itself!
Take a look here: and LEARN !
http://www.sprword.com/videos/zeitgeistmovingforward/
Zeitgeist: Moving Forward
Directed by Peter Joseph
Zeitgeist: Moving Forward, by director Peter Joseph, is a feature length documentary work which will present a case for a needed transition out of the current socioeconomic monetary paradigm which governs the entire world society.
This subject matter will transcend the issues of cultural relativism and traditional ideology and move to relate the core, empirical “life ground” attributes of human and social survival, extrapolating those immutable natural laws into a new sustainable social paradigm called a “Resource-Based Economy”. (Excerpt from main website)
http://www.sprword.com/videos/zeitgeistmovingforward/
Please visit the official website for more information:
http://www.zeitgeistmovingforward.com
Bruce,
I take your critiques very seriously. I happen to believe that exploitation exists on a grand scale, and that that is an empirical reality that I can’t avoid. And in some ways I DO equivocate, because I acknowledge that my own knowledge MAY NOT be completely true.
As to the supposed “superiority of monetary rationing” I again have my qualms, given what I said in the first sentence. But seems to me that any society can give rise to a dominant class (for lack of a better word?) But we need to investigate the world as it is, monetary domination, consumerism run amok, bread and circus of professional sports, financialization, economic predation of the non-industrialized nations, and the associated ecological disasters. Call me a Marxist . . . or a cynic.
And the paradox is that without power nothing changes, but power corrupts, so we are always running the risk of setting off forces or people that would destroy what you or I might want to build.
@ Jeff Z
“..we need to investigate the world as it is… ” [agreed]
see: (“in economics” (I dare say), …here;s how it’s been done in comprehensive & contemporary terms and contexts.
It is definitely worth taking the time to read the individual comments on Ha-Joon Chang’s two works provided with the editorial reviews at Amazon. The comments on both books should be published themselves). Regards: Bruce E. Woych
(1)
(2)
(3)
And on the Western front of Economic Realism:
My main problem with NCE is that it is not scientific enough! It avoids the facts and replaces them with assumptions – at least as it is played out in New Zealand, the land of the neo liberal experiment. Let’s have more science I say!
A few quick responses to some of the comments above:
1. My views are indeed left-of-centre and I am not calling for more right wing views, but, depending on exactly what is being discussed, for a separation of the critique of NCE for bias politics and the critique for bad science. If one is discussing how a policy or institution is to be judged this is political, if one is simply trying to understand how a system works, this should not be policital.
2. I am all for a variety of views, I was arguing that formal approaches (in my case simulation approaches) need to be included, it is easy to use a tool wrongly – distorting the phenomena to fit the tool (as happens in NCE), but this does not mean the tool can’t be useful.
3. I agree nobody is excluding me from contributing (indeed I am and have), but that does not alter the fact that an apparent consensus of views/styles WILL signal to others that this is not a forum for them, regardless of whether that is the intention. After all, it is *precisely* this “herd” effect that I did not like – academics (me included) are quick to define themselves as a group for/against things without having to make it explicit, and other academics can detect this.
Bruce
Well, I agree that alternative economist should use so called “hard science”, including mathematical modeling. But I would argue that the neoclassical economists’ hard science is just a fake. They use surreal assumptions and simply declare them axioms. They use counterfactual assumption just to hold on to their “models”. If you use mathematical modeling like the neoclassical economists, you can never be falsified, which effectively excludes you from the realm of scientific research.
I certainly agree that NCE’s hard science is fake – actually just bad science. However not all mathematical modelling is unfalsifiable (which indeed would exclude one being science). But if one values mathematical tractability above its relevance (as NCE do) then one is only doing obscure and irrelevant maths (as you point out). The trouble is one needs both relevance AND rigour for good science.
Elsewhere (another topic) I argue for a staged abstraction from definite observables/evidence from multiple representations of data/evidence, to complex simulations THEN maybe these are themselves abstracted, but this way each abstraction stage is checkable against the one below. One might (eventually after a lot of work) reach simpler models one can solve, but after an upwards and traceable chain of abstraction.
I absolutely agree. When I said “If you use mathematical modeling like neoclassical economists …” I actually meant “if you use mathematical modeling the way NCE use it …”.
I am very much for a rigorous and logical argumentation. Just, like you say, the assumptions need to be related to the real world for the argumentation to be “relevant” as you call it.
(Instead of the word “relevant” I prefer to use the word “false” because the models of NCE have the pretension to explain the real world, whereas they certainly do not.)
“relevant” ^= “true”
“irrelevant” ^= “false”
(Sometimes it would be great to be able to edit posts ;))
I do not know of another discipline as subversive of the ethos of science as neoclassical economics as practiced in recent decades. Here are some words of others that pertain to this intellectual disaster.
“. . . by ‘scientism’ we mean a tendency to ape, in the field of social science, what are supposed to be the methods of the natural sciences . . .” (Karl Popper, The Open Society and Its Enemies, Volume 1, p. 286)
“. . . it is not what the man of science believes that distinguishes him, but how and why he believes it. His beliefs are tentative, not dogmatic; they are based on evidence, not on authority or intuition.” (Bertrand Russell, History of Philosophy, p. 514)
“All mathematical propositions mean the same thing, namely nothing.” (Ludwig Wittgenstein)
“. . . mathematics as such is incapable of saying anything about . . . things of reality.” (Albert Einstein)
“In so far as the statements of mathematics refer to reality, they are not certain, and insofar as they are certain, they do not refer to reality.” (Albert Einstein)
Suggested further reading:
Michael Hudson, “The use and abuse of mathematical economics”, real-world economics review, issue no. 55, 17 December 2010, pp. 2-22, http://www.paecon.net/PAEReview/issue55/Hudson255.pdf
Wolfgang Drechsler, “Understanding the problems of mathematical economics: A ‘continental’ perspective”, real-world economics review, issue no. 55, March 11, 2011, pp. 45-57, http://www.paecon.net/PAEReview/Drechsler56.htm/
@ Edward Fullbrook:
Michael Hudson’s article is a gem and right on the money (as they say). It is highly recommended reading for anyone who would seek not only a truthful science of economy, but as a source link to the myriad composition of presuppositions (undeclared) in the matrix of institutionalized academic and market based economics.
The critical question is what exactly does “economics” represent is the real “hairball” of economic theory, …not the utilization of instrumental theory that simply validate the undercurrents of selective “appropriations” as such.
The second link would not operate to source, so I could not open the article from here.
Thank you for your valuable reference and;
My compliments to you!
Bruce E. Woych
(cultural anthropologist)
You could add (my favourite) by Alan Freeman (professor at Greenwich): «economics is a mathematically pure ideology» in «The Psychopathology of Walrasian Marxism» available at MPRA or Munich Personal RePEc Archive… Greetings!
May I offer a perspective as a ‘lay’ observer (engineer by qualification) who has been voraciously reading economics blogs for some months? (I have a smattering of economics off an MBA program, so at least many terms are not alien in my endeavours.)
Probably the thing that has shocked me most about the financial crisis is the almost complete lack of analysis of what caused it filtering thru’ into the mainstream. Coming a close second is apalling mess that passes for ‘solutions’ (that aren’t), particularly in the eurozone (where I live).
I’m beginning to get a sense of where things stand. The underlying political economy seems to be best described (to me) in Michael Hudson’s various writings on the subject. The powerful and wealthy elites are hell bent on continuing to run things in their narrow self interest regardless of the effects on ordinary citizens & even, most arrogantly, regardless of existential threat of climate change or other ecological damage on the way. I can’t help drawing the conclusion either that some at the top of the tree regard driving the world off the cliff of serious resource depletion, particularly fossil energy, as little more than a windfall profit opportunity.
Besides near complete capture of politics and mainstream media, it appears much of mainstream economics is likewise captured. Populations largely remain the bewildered herd. The situation is incredibly serious. It’s hard to see where the various immense changes to society needed can possibly come from in the neccesary timescales.
However, whilst the root causes of the financial crisis remain hidden to most, it’s serious effects have not. People are angry, and many have begun to question the ‘staus quo’. To me, this represents a huge window of opportunity to offer a vision of a sustainable future. And a sound monetary and economic system needs to be at the core of that sustainability.
What I would say to the core members/contributors of this blog is that I ‘get’ that the scientific & academic rigour of challenge to, lets call it ideoligical economics, is vital, but there’s an urgent need put forward and get behind a workable & just economic system. And to promote & explain such a system to the wider public.
For example, Prof Werner of Southampton University (UK), positivemoney.org & New Economics Foundation have put forward a radical proposal to the UK Independent Commission on Banking. It comprises a full reserve banking system with MMT fiscal management principles. It appears to address both the out of control financialisation & provide a means to both reduce unemployment & put public investment into solutions to the energy & climate change issues.
Click to access NEF-Southampton-Positive-Money-ICB-Submission.pdf
Is this, or a similar proposal, something that could be supported by a significant number of non-mainstream (for want of a better description) economists?
Mike – brilliant comment. I agree “economics” has been captured. But economics is not the sole science that should own policy direction and this is what so worries me – that senior economist positions in financial institutions cross bred to treasury economics and government advisory roles are having the say for the rest of the economy. Its who the current economic paradigm exludes that really worries me.
My own suggestion (expressed in a recently published book) is that while studying and discussing economic matters we should start by separating three different layers of analysis: (1) the layer of «values» (the interaction of mankind with Nature in a mercantile setting); (2) the layer of «prices» (as instruments of «value gathering and accumulation») and (3) the layer of «governance» (where «economics» really becomes «political economy»)…
The first and basic (fundamental) layer is to be treated almost as a «physical science» using objective (measurable) units such as «time and effort spent». Economists of all persuasions (including «Marxists») don’t seem to have a clue about this. It is a subject left to production engineers and labor sociologists (yours truly…
The second and intermediate layer seems to be the exclusive field or prerogative of «conventional economists» and the «sciences of management».
It is in the third and most superficial (in the sense of being most visible…) layer that discussions and confusions arise about «economics» as a possible «hard science» and «political economy» as a field of discussion about citizens choices.
The other fundamental issue is the issue of dynamics versus comparative statics… Most (if not all) «conventional economists» seem to be absolutely incapable of thinking in terms of «the economic PROCESS» and the respective and all pervasive feedback mechanisms…
In finance we have an extremely sophisticated sector related directly to risk assessment that can get quite intricately detailed in regards to assurance and insurance in monetary terms.
Price/Cost to value assessment is not done on a cultural-ecological construct of loss, and conservation is not registered as a gain. Values become substrates to systemic survival where even subsistence systems are allowed to go to complete degeneration while “gains” are measured in the “grid” of certainties being measured.
A true critique of economics would lift it from the “silo” version or “business model” of the human condition and replace it with a multilateral cost of qualitative set of standards against a measure of multi-lineal expansions rather than isolating unilateral or uni-lineal growth/gains as universal value bases. Until such a scale index of standards are established there are no true benchmarks for a human economic science.
The initial measure is lost to any degree of a baseline which does not begin with ecological resource measures and assesses modern civilization as a “production” number ultimately assessed by monetary abstraction even to the point of pure fiction.
The contemporary distortion begins in utilizing historically generated class values as the initial baselines of economy, and the political structures descending from royal, libertarian, mercantilist, finance monopolies and human exploitations as an “industrial system” and attempting to pretend this is all one universal “systems capacity” rather than a fragmented and factionalized retro-dynamic of competing interests over values/costs/price/distribution/redistribution and regulatory restraints, boundaries or constraints. This distortion is then abridged by dividing the “systems capacity” into micro and macro realms of “economic” proportion and never measuring them back up again. Statics (stasis) at odds with dynamics. The rest is pure self serving interests pretending to have the purity and virtue of a disciplined scientific method, when in fact it is nothing more than tautologies and teleological certainty. The armchair support goes to status quo and the unsettled reconstructions critiques go to the disenfranchised.
Guilherme da Fonseca-Statter:
PLEASE INCLUDE THE TITLE OF YOUR PUBLICATION FOR US.
Sorry about that: it’s in Portuguese and I thought that most probably visitors of this site are unable to read that language. But, in any case, the title is «O PREÇO DAS COISAS – Conversas à volta de um café». In English the title would be «THE PRICE OF THINGS – Conversations around a coffee».
I have prepared the book in order to explain to my colleagues in the doctorate program in Complexity Sciences (at ISCTE – Lisbon University Institute) the intrinsic logic of the capitalist system, using Marx’s analytical tools as well as the Georgescu-Roegen ecological perspective . Most of my colleagues come from engineering, mathematics and biology so I tried to get to the essence of the system’s logic with a view of developing an «Agents Based Model» of the system.
Economics is not different from chemistry or physics; its that people care about what economists say (raise taxs, cut social security) while most of what chemists and physicists say no one cares about (I mean, how many arguments do you get about neutrino oscillations ? or the Hubble constant ?)
But as soon as any of the hard sciences goes into an area people care about (nuclear power, climate change, etc) science becomes no different from economics, and thats because people are people
Actually, although I understand your point, I disagree. There are a number of ways in which economics is different from physics or chemistry. To name but a few:
1. In physics and chemistry the micro-foundations are well-understood, in economics they are not (i.e. the behaviour of its parts, the people)
2. In physics or chemistry is a model disagrees with data the data wins, in economics the same kinds of model have been kept for decades even though they have failed to match data, i.e. evidence is king not theory
3. In physics or chemistry there is a relatively large amount of data (compared to the complexity of their phenomena), and disputes as to whose model is better can be (eventually) settled
4. Physicists or chemists are relatively honest about their ignorance, they don’t pretend to be able to advise people about systems they dont understand, economists do this all the time
5. In physics or chemistry if one kind of model fails, they try another kind of model – one is far less hide-bound by tradition
Unfortunately economists copied only the shallow elements of physics: analytic modelling and the idea of an equilibrium.
This – my «reply» – is more of a comment than a «contentious reply».
I am thinking here in a reflection by Wallerstein when considering that, in the social sciences – and «economics» or «political economy» is a historical and social science – the difficulty in the scientific debate will be to determine whether you can actually and truly overcome or establish a relationship between, on the one hand, the false debate between the particular and the universal and, on the other hand, the debate between the ideographic and the nomothetic, by using a methodology that might effectively describe diachronic systems which, by definition, happen to have an “arrow of time”. To illustrate the problem faced here, I refer to a meeting organized at the initiative of economists of world class reputation and attended by a mixed audience, including some Nobel prize wining physicists. The goal of that meeting (at the beginning of the Santa Fe Institute) was precisely to discuss the issues of methods of study and research, and one of the participants had the occasion to draw attention to the fact that in the case of economics, the «particles» whose activities were the object of study, do have emotions, memories and ambitions…
Bruce,
Although I disagree with the statement by Ezra Abram that «Economics is not different from chemistry or physics», I am also not entirely in agreement with the way you present some of your points, most particularly «the micro-foundations are well-understood, in economics they are not»…The «homo economicus» fiction is a theoretical construct but, like so many other theoretical constructs, is of significant importance in explaining many economic phenomena and the behavior of economic agents. To me it is not wrong, it is simply insufficient.
In what regards, your point 3. (on the availability of data), I would stress the ideological filtering of that data. We have huge amount of financial records, but it is extremely difficult to access data on «number of hours spent on the production of whatever»… The bias here being that economists do not think in terms of «value» (to them that is a concern for sociologists and production engineers) but in terms of prices.
I do agreed with your points 4 and 5.
There is a wide-spread view that homo economicus is not wrong but is only insufficient. I fundamentally disagree, but this needs to be the subject of a new thread I think!
I’m glad this discussion has been resurrected, as it is an important one and I missed it.
Bruce, in your paper you say
“we should seek to separate out political statements (what the goals of economic policy/study should be) from scientific ones (how to best understand economic phenomena). This blog does not do this separation and frequently conflates the two broad (and correct) criticisms of NCE – that it is (a) politically biased and (b) simply bad science”.
The first sentence here looks to be good advice (though I’m not sure the second is true), but how to go about it?
Why I’m dubious about the criticism is that political economy is two-dimensional, like a complex number. The fact that you can discuss the latter in terms of “so much up, so much across” doesn’t alter the fact that it represents directed motion, the graph of which (like what one is trying to achieve in a comment) is the shortest path to the X,Y point: the hypotenuse of a triangle, not its two sides.
Incidentally, whether or not it is politically biassed, much of the bad science is down to mathematical misconceptions at this sort of level: true or false logic, reducing the complex to the simple (e.g. in Bayesian statistics) and – in the other direction – using Grassman hyper-complex coordinates and numerical quantification instead of Hamilton’s quaternions and logical quantification. Those guys need to study the development of mathematics before they start waffling on so uneconomically about economics.
I’ve said enough for now, but I’ll take issue even with you for your complete lack of awareness of the significance of Shannonian science (to coin a word on the model of Newtonian science), which is not about little green apples but about putting things right.
I have been meaning to post here a general comment in response to Bruce Edmonds original comment, but more urgent «academic» matters have prevented me from doing so.
To put matters openly on the table I start my declaring that I consciously use Marx’s «analytical categories» (the ontology, if you will…) such as the concepts of «value» (in contrast and complement to the concept of «price»…) and the EXPLANATION (I do not know how to underline a word or sentence here…) provided by Marx to the infamous Ricardian problem of the «transformation of values into prices». That «problem» was what caused Ricardo to abandon the classical «labor theory of value»… Marx’s EXPLANATION of that social process of transforming «values» into «prices» was allegedly debunked by Bohm-Bawerk in what I have termed ((and explained – in my book «The Errors of Marx and the Blundres of Others» – being translated, very slowly…)) as «the greatest blunder of all blunders written about Marx’s economic analysis».
I do not consider myself as a «conventional – or orthodox – Marxist», in the sense that I would go as far as considering that Marx would easily integrate NCE into his analysis and could therefore also be considered – with some stretching of those concepts (I admit) – as a «neoclassical», a «marginalist» and/or a «utilitarianist».
In this context, to me the really crucial difference between NCE and other approaches, namely Keynesianism and the German Historical school or the American institutionalists, is the ARROW OF TIME….
NCE tries to replicate some kind of Newtonian mechanics, applied to market phenomena. It is probably the result of a Bergsonian «cinematographical illusion», a metaphor Bergson used to refer to the apparent human need to believe that reality is a succession of fixed structures; and that «economic experiments» can be repeated in a manner not too dissimilar from Physics or Chemistry.
Most conventional economists (those that happen to look into «Das Kapital»…) accuse Marx of «thinking dialectically». That was precisely the accusation formulated by Okishio when trying to disprove the «falling tendency of the rate of profit» (already noted by Adam Smith and «merely» explained – insufficiently, it seems – by Marx). Okishio demonstrated that there is no «falling tendency» but that, on the contrary, there is a «growing tendency». The algorithm that I developed, many years ago, proves just that: both Marx and Okishio are rigth.. The paradox comes from Okishio thinking in NCE terms (comparative statics) whereas Marx thought in «dialectical terms» (historical evolution of one particular variable: the rate of profit). What I did – having been a computer programmer – was to include in that algorithm a feed-back mechanism taking productivity growth into account.
For the record, in doing that, I was merely elaborating (and expanding) on an exercise on that issue by the late Prof. Ronald Meek.
“… the really crucial difference between NCE and other approaches, namely Keynesianism and the German Historical school or the American institutionalists, is the ARROW OF TIME…”. [Arthur Eddington’s term].
@ #32. There is a wide-spread view that homo economicus is not wrong but is only insufficient. I fundamentally disagree, but this needs to be the subject of a new thread I think! [Bruce Edmonds].
Good to see this, Guilherme. I’ve always wondered if Ronald Meek was the young man who taught me engineering drawing in my teens.
Anyway, Eddington’s Arrow (in the context of serial/parallel computer logics and their programming) is where I started c.27 years ago to explain my theory of Complex Truth and how it applies to economics. Given my conclusion below, hopefully others will understand this as well as you. Selecting an object leaves a context, with both needing names if we are to discuss them. Reality includes all four.
In Figure 2 of “The Nature of the Physical World”, the path from Past to Future represents the Process generating the way things have been up to now, and will be in the future. Eddington’s ever-shifting Now coordinate represents a snapshot of how things really are now, but his Arrow pointing to their intersection in the Here and Now represents how this is Seen-Now (the reality only of our REPRESENTATION of reality), given that information takes time to reach us). What is not obvious in the cosmological context is that the Seen-Now can protrude a little into the future, as when a look-out on a ship can see danger approaching.
Eddington used this to correct the static time-frame of his location of cosmological events, but the captain of a ship proceeding to a future port provides a compass enabling the steersman correct directional deviations from his course as soon as they occur, a sextant (or these days a Sat-Nav “recalculating”) to correct the aim of his course to allow for positional drift in the past, and posts a look-out to avoid errors in the future. This complex process is perfectly general: we use it all the time steering our cars and in other control systems reliant on information rather than force. Eddington was fashionable when Keynes developed his General Theory and proposed a method of correction for investment aiming at the wrong thing. In retrospect, Marxist Dialectic and genetic Darwinian evolution can be interpreted as primitive examples of it. Since as long ago as 1948, by when it had become understood that logic – the relating of words about reality – was performed by switching information circuits (if not in a computer then in the brain of the logician), this “macro” form of error-correcting logic has had the Greek name Cybernetics, meaning steersman. Summarily, its developed form is a PID servo.
Yes, Bruce, that’s what’s in the supposedly “black-box” brain of Homo Economicus!
Everyone is crying out for a new paradigm for economics. It has been staring them in the face! The economic profession, keeping its eye firmly on mathematical embroidery, has failed to see it, being thereby hoist by its own petard: “the advantages of specialisation”.
A ship can be directed to any off-set from compass North, but the logic of its getting there applies to the direction of any motion. Being general purpose, theoretically complete and demonstrable simple, it can and should be been taught to those charged with directing the processes of the economy and correcting its habitual paths.
Thanks, Dave, for your enlightening comments on Eddington’s term of «arrow of time»…
Not being a physicist (even if a frequent reader of books on such matters aimed at general audiences…) I used that term without knowing its other ramifications – which makes all the sense to me, now.
And yes, I agree that «In retrospect, Marxist Dialectic and genetic Darwinian evolution can be interpreted as primitive examples of it.»…