Home > Uncategorized > On the persistence of science-fiction economics

On the persistence of science-fiction economics

from Lars Syll

9781107763111iObscurantism is sustained by the self-interest of non-obscurantist scholars. To be effective, an attack on obscurantism has to be well documented and well argued. Mere diatribes are pointless and sometimes counterproductive. Yet scholars have a greater personal interest in achieving positive results than in exposing the flaws of others, not only because of the reward system of science, but also because achieving positive results is intrinsically more satisfying. On grounds of self-interest, therefore, many schoars will hesitate to take time off from their main work and hope that someone else will do the cleaning … The highly regarded economist Ariel Rubinstein has offered rare insider criticism of mainstream economics, commenting, for example, on a ‘as-if-rationality’ that “it ultimately became clear that the phrase ‘as if’ is a way to avoid taking responsibility for the strong assumptions upon which economic models are founded” …

When Joseph Stiglitz was asked at a private dinner party how economists can make repeated falsified claims without having their careers terminated, he reportedly answered: “I agree with you, but I don’t understand why you are so puzzled. What you should be assuming is that — as is done by most economists — economics is really a religion. So why should you be puzzled by the fact that they cling to and never give up their views despite frequent falsification?”

Confronted with the critique that they do not solve real problems, mainstream economists often react as Saint-Exupéry‘s Great Geographer, who, in response to the questions posed by The Little Prince, says that he is too occupied with his scientific work to be be able to say anything about reality. Confronting economic theory’s lack of relevance and ability to tackle real probems, one retreats into the wonderful world of economic models. One goes in to the shack of tools and stays there playing with the ‘toy-box’. While the economic problems in the world around us steadily increase, one is rather happily playing along with the latest toys in the mathematical toolbox.

Modern mainstream economics is sure very rigorous — but if it’s rigorously wrong, who cares?

Instead of making formal logical argumentation based on deductive-axiomatic models the message, we are better served by economists who more  than anything else try to contribute to solving real problems.

  1. August 10, 2016 at 5:20 am

    Reality, real problems, and truth seem the center of your critique of mainstream economics. Speaking pragmatically anything knowable must be true. But what does it mean to call a proposition or belief “true?” This is the subject of Williams James’ famous sixth lecture. He begins with a standard dictionary analysis of truth as agreement with reality. James warns, and I agree that pragmatists and intellectualists will disagree over how to interpret the concepts of “agreement” and “reality,” the latter thinking that ideas copy what is fixed and independent of us. By contrast, James advocates a more dynamic and practical interpretation, a true idea or belief being one we can incorporate into our ways of thinking in such a way that it can be experientially validated (the heart of pragmatism). For James, the “reality” with which truths must agree has three dimensions: (1) matters of fact, (2) relations of ideas (such as the eternal truths of mathematics), and (3) the entire set of other truths to which we are committed. To say that our truths must “agree” with such realities pragmatically means that they must lead us to useful consequences. He is a fallibilist, seeing all existential truths as, in theory, revisable given new experience. Since any human being can be wrong about their beliefs, expectations, or their understanding of the world. Human truths involve a relationship between facts and our ideas or beliefs. Because the facts, and our experience of them, change we must beware of regarding such truths as absolute, as rationalists tend to do. This relativistic theory generated a firestorm of criticism among mainstream philosophers and was published in the time period between the publication of Einstein’s Special and General Theories of relativity. So the proper criticism of mainstream economics today is not lack of relevance and inability to tackle real problems and a subsequent retreat into the wonderful world of economic models. The failure of this economics is that it is not fallibilist. It does not and will not accept that truths are relational between facts (observations) and our beliefs about these facts. And as such are changeable based on continuing experiences. And this same problem is shared by many who follow what they believe is the absolute and unchangeable truths of science. So economists are not the only ones who get science wrong!

  2. August 10, 2016 at 2:33 pm

    This reminds me what George Stigler, in last years of his career said, “One attribute of able economists that I learned early is that they seldom admit or correct a mistake. Of course an able economist shouldn’t (and perhaps is not allowed to) make many mistakes, at least the kind of mistakes that are easily correctible, but even the few correctible mistakes are seldom admitted.” In other words, this economics transformed arrogance into a virtue.

  3. August 11, 2016 at 2:35 am

    Science is not some grand adventure or heroes searching for the defending the truth. Physicists like to depict science this way. Even Richard Feynman fell into this trap. It’s an attractive image. But it’s wrong. Science is a roll-up-your sleeves set of activities, like construction work or farming. Scientists are just like other folks. Scientists are not more trust-worthy than others, whether politicians, priests, or self-righteous intellectuals. Trust requires accountability. And accountability requires a community that creates devices and structures to keep everyone, every scientist accountable. So science is largely a way to ensure accountability for factual claims. So the worst science is unaccountable and makes factual claims that serve some special interest(s) or the interests of those who promote these claims. Economists claim that markets are always the best organization for any economy. No accountability. Economists claim all economies seek equilibrium. No accountability. Economists claim marginal pricing always optimally distributes resources. No accountability. It’s difficult to label economics as anything other than a series of unaccountable claims. So the real issue I think is how economists can be made accountable.

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