Home > Uncategorized > The ‘deductivist blindness’ of modern economics

The ‘deductivist blindness’ of modern economics

from Lars Syll

Scientific progress … is frequently the result of observation that something does work, which runs far ahead of any understanding of why it works.

aimageNot within the economics profession. There, deductive reasoning based on logical inference from a specific set of a priori deductions is “exactly the right way to do things”. What is absurd is not the use of the deductive method but the claim to exclusivity made for it. This debate is not simply about mathematics versus poetry. Deductive reasoning necessarily draws on mathematics and formal logic: inductive reasoning, based on experience and above all careful observation, will often make use of statistics and mathematics …

The belief that models are not just useful tools but are capable of yielding comprehensive and universal descriptions of the world blinded proponents to realities that had been staring them in the face. That blindness made a big contribution to our present crisis, and conditions our confused responses to it.

John Kay

The ‘deductivist blindness’ of mainstream economics explains to a larger extent why it contributes to causing economic crises rather than to solving them. But where does this ‘deductivist blindness’ of mainstream economics come from? To answer that question we have to examine the methodology of mainstream economics.  

The insistence on constructing models showing the certainty of logical entailment has been central in the development of mainstream economics. Insisting on formalistic (mathematical) modeling has more or less forced the economist to give upon on realism and substitute axiomatics for real world relevance. The price paid for the illusory rigour and precision has been monumentally high

wrong-tool-by-jerome-awThis deductivist orientation is the main reason behind the difficulty that mainstream economics has in terms of understanding, explaining and predicting what takes place in our societies. But it has also given mainstream economics much of its discursive power – at least as long as no one starts asking tough questions on the veracity of – and justification for – the assumptions on which the deductivist foundation is erected. Asking these questions is an important ingredient in a sustained critical effort at showing how nonsensical is the embellishing of a smorgasbord of models founded on wanting (often hidden) methodological foundations.

The mathematical-deductivist straitjacket used in mainstream economics presupposes atomistic closed-systems – i.e., something that we find very little of in the real world, a world significantly at odds with an (implicitly) assumed logic world where deductive entailment rules the roost. Ultimately then, the failings of modern mainstream economics has its root in a deficient ontology. The kind of formal-analytical and axiomatic-deductive mathematical modeling that makes up the core of mainstream economics is hard to make compatible with a real-world ontology. It is also the reason why so many critics find mainstream economic analysis patently and utterly unrealistic and irrelevant.

Although there has been a clearly discernible increase and focus on ’empirical’ economics in recent decades, the results in these research fields have not fundamentally challenged the main deductivist direction of mainstream economics. They are still mainly framed and interpreted within the core axiomatic assumptions of individualism, instrumentalism and equilibrium that make up even the ‘new’ mainstream economics. Although, perhaps, a sign of an increasing – but highly path-dependent – theoretical pluralism, mainstream economics is still, from a methodological point of view, mainly a deductive project erected on a foundation of empty formalism.

  1. February 17, 2017 at 2:49 pm

    Economics is an Enlightenment science consciously built upon the work of Isaac Newton. Newtonian causation is deterministic and therefore susceptible to deductive reasoning.

    Unfortunately, Newton’s science turned out to be limited to a narrow field that does not including living things. Charles Darwin completely superseded Newton in the life sciences.

    Just as Aristotle’s “ladder of life” persisted for centuries despite being flat wrong, so to does Newtonian economics. Most so-called “heterodox” approaches are just as Newtonian as the orthodox and therefore wrong for the same reasons. One cause of the persistence of flagrant wrongness is the fact that nothing is more Newtonian than Marx, and yet Marxism remains the dominant critique of the orthodox.

    The argument will never progress as long as both sides share the same fundamental wrongness.

    • February 17, 2017 at 4:07 pm

      Actually in my view its a mistake nowadays to equate economics, or marxian economics, or even newtonian mechanics/dynamics with determinism.

      Marx asked Darwin if he could dedicate his book to Darwin—who declined. (said best wishes, but i dont know anything about economics).

      Goodwin made a math model of marxism using some well known equations from ecology (used by Steven Keen as well—lotka volterra predator prey model). There is nothing non-darwinian about that model, nor non-newtonian either—except you need more nonlinearities to get evolution. In mathematical biology, evolution means ‘bifurcation’—discontinuous changes. Alan Turing may have written the first such model.

      One can frame all these into the same ‘newtonian’ (hamilton-jacobi) or ‘Lagrangian’ formulation as Newtonian mechanics. Its ‘quasi-Newtonian’ and the Lagrangians are ‘stochastic Lagrangians’–the basic idea is you make a stochastic (nondeterministic) system look formally like a determinstic lagrangian.

      Newtonian mechanics effectively was never determinstic anyway. Once you deal with something like a newtonian 3-body problem, its chaotic. The only way you can study that is via statistics (statistical mechanics). H Poincare noticed this around 1910.

      Einstein’s general relativity is a determinstic theory which replaced Newton’s. There is now a statistical formulation—entropic gravity—controversial but created by a well respected string theorist. . (he created this theory when his computer was stolen at an airport—-so he just tried a simple paper/pencil approach. Now that is the new theory).

      My view is their is deductivism (eg axiomatics), intuitionism (some added decisions one uses which do not come from nor are in axioms) and empiricism (the external or real world beyond intuitions, superstitions, and arbitarily chosen axioms).. The main thing lacking in most empirical studies is they only study small subsets of empirical reality. (Piketty would be an example. Income, IRS, census data are only part of empirical reality. You have to live it to know it. Humans cant live everywhere or every life, and much of empirically lived do not show up in any census data).

      • February 18, 2017 at 11:02 pm

        I’m a dilettante, but it seems you’ve gone backwards from math to science. Rather than math as a tool used by science.

        You seem to be using a lot of math jargon to be claiming some sort of reductivist vision of unified science. But my sense is that view has yet to be well defended in the philosophy of science.

      • February 19, 2017 at 1:25 pm

        Thornton, I thought Mart made his point rather well in his usual off-hand fashion. I find visual forms help, particularly Bhaskar’s DREI(c) and RRREI(c) characterisations of basic and applied science. What unifies is the method of using our brains. The traditional labels for the different types of thinking are however misleading. Science as I have experienced it starts from a problem leading to a normal cycle of Reduction, Retroduction, Deduction and Induction: research narrowing the problem, reasoning backwards to a solution concept, translating that back into practical form and not proof but quality control of experiments allowing decision on what works well enough and what needs a further round of research. Kuhn’s “revolutionary” science occurs when repeated failure in practice suggests the real problem is a solution concept and a gestalt switch reveals an alternative of wider scope at a more abstract level, this being re-evaluated initially against work already done.

  2. February 17, 2017 at 4:16 pm

    ps–actually the story that marx asked to dedicate his book to darwin may be a hooax. it may be true that marx sent darwin his book

  3. February 17, 2017 at 10:17 pm

    I do not think there should be any sustained critical effort at showing how nonsensical is the embellishing of a smorgasbord of models founded on wanting (often hidden) methodological foundations..

    That has wasted time for well over a hundred and fifty years already.

    A sustained critical effort is needed to reconstruct economics as a useful way of looking at human behavior within economies … with particular emphasis upon monetary economies. That reconstruction begins with putting human beings back into economic thinking; with constructing how we practice budget formation in a world where nominal incomes and prices matter a great deal to budget formation; to showing conclusively that changes in prices lead to mixed, not unique, ranges of consumer reaction to those changes; to showing conclusively that there is no such thing as a demand function, individual or group, in the absence of budget formation decisions … and that it is impossible to derive such functions if budget formation decisions are constrained, among other matters, by human needs to provide for themselves, not to mention others.

    It is, in short, time to stop navel gazing about problems with micro and macro theory to construct something — a scientific economics based on observation, induction, and deduction — that matters.

    Are you interested in that?

    • February 18, 2017 at 6:46 pm

      “Are you interested in that”? Larry, I sure am. It has needed “sustained critical effort”, because scientific insights can take years to emerge from the fog of observation, ignorant criticism and experimental deduction. However, a scientific economics is falling into place more or less along the lines you suggest.

      The key is indeed people and the way they vary continuously in the manner of complex numbers or directions on a map (read up on Myers-Briggs), but we can only know what already exists: what is shown on our maps, not what is happening there. How we will practice budget formation in the future will not be the same if we use “credit cards” repaid by good work rather than banker’s credit notes hired and repaid with credit notes obtained in exchange for our own or other people’s work. Pricing for profit would then no longer be necessary, people can keep down their nominal debts by buying only what they need, need and companies can re-supply only what has sold, not having to worry about profits lost by machines lying idle and nature regenerating.

      • February 19, 2017 at 6:55 pm

        I note that critical realism is presented as a philosophy of social science. As such, it still seems to suffer from the same problem as all these economic arguments: it treats physics as identified with science writ large and therefore takes as proven the reducability of biology to physics, a fact that does not obtain in reality.

        The key to all of this, in my opinion, is Lakoff’s work on how metaphors are pervasive in language and shape thought. To the extent that critical realism is applied to economics, it seems to be linguistically and therefore conceptually trapped in the notion that physics *is* science.

        I don’t get the feeling people here are familiar with the irreducible nature of biology.

        https://plato.stanford.edu/entries/reduction-biology/

      • February 19, 2017 at 8:37 pm

        Sorry, Thornton, you are misinformed about critical realism. It posits emergence, not reduceability. Time flows only one way.

  4. February 19, 2017 at 6:47 am

    There are at least two big problems with observational economics. One, observing requires the observer choose something to observe, a time and place to observe it, and the mechanics of how to carry out the observations. Mart is correct, observation can never be complete or total. To do any of this economists must admit they don’t know what economics is, who and what are economic actors, and which actions are economic vs. non-economic. Economists have to become students; looking for knowledge and understanding from observing actors. Blindly searching for answers, answers from the creators of economic actions and structures. Most of whom are not economists. Two, doing all of the above also requires economists to admit and accept that a perfect and balanced economic world where strict and knowable laws determine all events. That would not only contradict the model of science at the heart of standard economics but would bring into question the stated goals of the discipline of economics to explain all economic events and solve the economic problems that laypersons find difficult to comprehend or solve. In simpler terms, depending on observations as the foundation of economics doesn’t just remove economists from the center of attention as the all seeing, all knowing seers of the economy but also makes economics just one among many social sciences. Neither of these “failures” are tolerable for the economists I know.

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