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Noah Smith — ill-informed and misleading

from Lars Syll

Yours truly is far from being alone in criticising Noah Smith’s article on heterodox economics and mathematics (on which I commented yesterday). Tom Palley writes:

(1) Pretty much everything Smith charges heterodox economics with can be said about orthodox economics. That’s OK, but in that case we should open the classroom and op-ed pages to a variety of points of view and abandon the neoclassical monopoly.

IGLTA-misinform(2) Smith’s views on mathematical models come close to fetishism. Models have use value but they do not define economics (think of a paper with just math and no words vs. a paper with just words), and models are easily pushed into the realm of “negative” marginal returns.

Furthermore, Smith appears ignorant of the fact that mathematical modelling is very widespread in heterodox economics.

(3) Smith’s comments about predicting the crisis are facile. It’s not about predicting “dates”, but about having a sense of imminent developments and a sense of the deep-seated nature of the problems (i.e. demand shortage, income inequality, financial fragility, and tendency to stagnation). If orthodoxy had anticipated a fraction of what heterodoxy has, it would be trumpeting its achievements.

(4) In sum, this is an ill-informed article that aims to defend the economics status quo with unwarranted claims about the weaknesses of heterodox economics and strengths of orthodox economics.

  1. jlegge
    August 16, 2016 at 11:17 am

    Mathematical modelling is very addictive. Heterodox economists aren’t immune; their biggest difference from orthodoxy is the use of partial differential equations; i.e., accepting results than can’t be “proven” analytically. All that this really establishes is that heterodox economists (or at least some of them) are more open to interpreting history than certified orthodox ones.

    Those heterodox economists who have acquired some knowledge of chaos and complexity on board know that they CAN’T make valid predictions for the medium and long term, although they can forecast disaster. If I learn of a young man, high on a mixture of crystal meth and alcohol, driving a motor car at 160 Km/h down a bush track I can predict a bad outcome; but I refuse to be criticised for not pointing out which tree he will hit when he finally loses control.

    Keen and a couple of others observed a vast debt bubble inflating and predicted that it would burst eventually. At the time orthodox economists were claiming that the problem of crises had been solved. It is a weak criticism of Keen to point out that he didn’t name August 9, 2007 as the date on which the global financial crisis would start.

  2. August 16, 2016 at 12:16 pm

    There’s a basic misunderstanding, perhaps deliberate, perhaps not at the base of Noah Smith’s article. Prediction of events in human communities is generally impossible beyond a very short time horizon and regarding only the simplest events and decisions. To do otherwise one would need to know with certainty all the factors involved and their importance (sometimes mathematically assessed, sometimes (and most frequently) assessed through observation and history) at each of the points in time of concern. Generally we have neither. Organizational thinkers and operations researchers have worked at this task for over 70 years now. They’ve developed some useful techniques and a vast archive of historical data and their work has proven of practical value again and again. Check out “Transformative Scenario Planning” by Adam Kahane, “Scenario Planning in Organizations” by Thomas Chermack, “The Art of the Long View” by Peter Schwartz, “Scenarios: The Art of Strategic Conversation” by Kees van der Heijden. The title from van der Heijden is particularly instructive. Scenarios are merely conversations ending with a story (a model) that can be used to monitor and prepare for potential events and decisions. The story is important but the real focus is the conversation as a means to summarize what may happen and assess its significance. The conversation and the story change as events intervene. After all the purpose of the work is to use the story and conversation to help us understand better and prepare for potential future events.

  3. August 16, 2016 at 8:19 pm

    Comment on Lars Syll on ‘Noah Smith — ill-informed and misleading’

    Noah Smith is only partly correct. The whole truth is that Walrasianism, Keynesianism, Marxianism, Austrianism is PROVABLY false, i.e. materially and formally inconsistent. It is not just about Orthodoxy and Heterodoxy. The ultimate reason for the all-round failure is the scientific incompetence of economists (including Noah Smith, of course).

    For more details about the actual state see ‘The scientific self-elimination of Heterodoxy’
    and cross references

    Egmont Kakarot-Handtke

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