Home > Uncategorized > On testing and learning in a non-repetitive world

On testing and learning in a non-repetitive world

from Lars Syll

marquesThe incorporation of new information makes sense only if the future is to be similar to the past. Any kind of empirical test, whatever form it adopts, will not make sense, however, if the world is uncertain because in such a world induction does not work. Past experience is not a useful guide to guess the future in these conditions (it only serves when the future, somehow, is already implicit in the present) … I believe the only way to use past experience is to assume that the world is repetitive. In a non-repetitive world in which relevant novelties unexpectedly arise testing is irrelevant …

These considerations are applicable to decisions in conditions of radical uncertainty. If the actions that I undertake in t0 will have very different consequences according to the eventual state of the world in t1, it is crucial to gather reliable knowledge about these states. But how could I evaluate in t0 my beliefs about the state of the world in t1? If the world were repetitive (governed by immutable laws) and these laws were known, I could assume that what I find out about the present state is relevant to determine how the future state (the one that will prevail) will be. It would make then sense to apply a strategy for gathering empirical evidence (a sequence of actions to collect new data). But if the world is not repetitive, what makes me think that the new information may be at all useful regarding future events? …

Conceiving economic processes like sequences of events in which uncertainty reigns, where consequently there are “no laws”, nor “invariants” or “mechanisms” to discover, the kind of learning that experiments or last experience provide is of no use for the future, because it eliminates innovation and creativity and does not take into account the arboreal character and the open-ended nature of the economic process … However, as said before, we can gather precise information, restricted in space and time (data). But, what is the purpose of obtaining this sort of information if uncertainty about future events prevails? … The problem is that taking uncertainty seriously puts in question the relevance the data obtained by means of testing or experimentation has for future situations.

To yours truly, Marqués’ book is especially important since it shows how far-reaching the effects of taking Keynes’ concept of genuine uncertainty really are.

treatprobAlmost a hundred years after John Maynard Keynes wrote his seminal A Treatise on Probability(1921), it is still very difficult to find economics textbooks that seriously try to incorporate his far-reaching and incisive analysis of uncertainty, inductive inference and evidential weight.

The standard view in economics and statistics — and the axiomatic probability theory underlying it — is to a large extent based on the rather simplistic idea that ‘more is better.’ But as Keynes argues – ‘more of the same’ is not what is important when making inductive inferences. It’s rather a question of ‘more but different.’

Variation, not replication, is at the core of induction. Finding that p(x|y) = p(x|y & w) doesn’t make w ‘irrelevant.’ Knowing that the probability is unchanged when w is present gives p(x|y & w) another evidential weight (‘weight of argument’). Running 10 replicative experiments do not make you as ‘sure’ of your inductions as when running 10 000 varied experiments – even if the probability values happen to be the same.

According to Keynes we live in a world permeated by unmeasurable uncertainty – not quantifiable stochastic risk – which often forces us to make decisions based on anything but ‘rational expectations.’ Keynes rather thinks that we base our expectations on the confidence or ‘weight’ we put on different events and alternatives. To Keynes, expectations are a question of weighing probabilities by ‘degrees of belief,’ beliefs that often have preciously little to do with the kind of stochastic probabilistic calculations made by the rational agents as modelled by ‘modern’ social sciences. And often we “simply do not know.” As Keynes writes in Treatise:

If different wholes were subject to different laws qua wholes and not simply on account of and in proportion to the differences of their parts, knowledge of a part could not lead, it would seem, even to presumptive or probable knowledge as to its association with other parts … In my judgment, the practical usefulness of those modes of inference … on which the boasted knowledge of modern science depends, can only exist … if the universe of phenomena does in fact present those peculiar characteristics of atomism and limited variety which appears more and more clearly as the ultimate result to which material science is tending.

Science according to Keynes should help us penetrate to “the true process of causation lying behind current events” and disclose “the causal forces behind the apparent facts.” Models can never be more than a starting point in that endeavour. He further argued that it was inadmissible to project history on the future. Consequently, we cannot presuppose that what has worked before, will continue to do so in the future. That statistical models can get hold of correlations between different ‘variables’ is not enough. If they cannot get at the causal structure that generated the data, they are not really ‘identified.’

How strange that writers of economics textbooks do not even touch upon these aspects of scientific methodology that seems to be so fundamental and important for anyone trying to understand how we learn and orient ourselves in an uncertain world. An educated guess on why this is a fact would be that Keynes concepts are not possible to squeeze into a single calculable numerical ‘probability.’ In the quest for quantities one puts a blind eye to qualities and looks the other way — but Keynes ideas keep creeping out from under the carpet.

Robert Lucas once wrote — in Studies in Business-Cycle Theory — that “in cases of uncertainty, economic reasoning will be of no value.”  Now, if that was true, it would put us in a tough dilemma. If we have to consider — as Lucas — uncertainty incompatible with economics being a science, and we actually know for sure that there are several and deeply important situations in real-world contexts where we — both epistemologically and ontologically — face genuine uncertainty, well, then we actually would have to choose between reality and science.

That can’t be right. We all know we do not know very much about the future. We all know the future harbours lots of unknown unknowns. Those are ontological facts we just have to accept. But — I still think it possible we can go for both reality and science, and develop a realist, relevant, non-ergodic economic science.

  1. March 3, 2018 at 4:56 am

    @Lars Syll: our views are closely aligned on most issues. It is with respect to your last sentence, that I have come to differ. I believe that “science” and “humanities” have distinctly different methodologies — science deals with particles subject to laws which are invariant with respect to time and space. Humans have free will, so radical uncertainty attaches to human behavior — we cannot predict future by looking at past patterns. Studying human beings and human societies requires thinking in ways not available in scientific methodologies. In many of my writings, I have expressed the idea that the “Deification of Science” as the sole route of access to knowledge has had disastrous consequences in terms of loss of understanding of human behavior. Most recently, see my talk/post on Economics for the 21st Century:

    • Frank Salter
      March 3, 2018 at 6:47 am

      I believe Lars Syll’s final sentence is true.

      Asad Zaman quotation:
      I believe that “science” and “humanities” have distinctly different methodologies — science deals with particles subject to laws which are invariant with respect to time and space. Humans have free will, so radical uncertainty attaches to human behavior — we cannot predict future by looking at past patterns.

      In this statement, two mutually incompatible views are conflated. Conclusions are then drawn which detract from understanding. A narrow point is made but broad conclusions are drawn. I agree that radical uncertainty may be attached to some human behaviour but most will continue just as before — so we can presume future behaviour by looking at past patterns”.

      Human economic actions exist in the real world which is subject to the laws of physics. “[T]he future,…, is already implicit in the present” (Initial paragraph of blog). Consider the building of a production plant. If it is commissioned and brought into use, a likely future pattern of production is to be expected. Its characteristics are established by the design of the plant. Yes, it is possible to arbitrarily cease production of a single plant — “radical uncertainty”. However the majority of all production plants will continue to produce as predicted! Even in times of recession, much economic activity continues as before.

    • Rob Reno
      March 4, 2018 at 10:05 pm

      I believe that “science” and “humanities” have distinctly different methodologies — science deals with particles subject to laws which are invariant with respect to time and space. Humans have free will, so radical uncertainty attaches to human behavior — we cannot predict future by looking at past patterns. Studying human beings and human societies requires thinking in ways not available in scientific methodologies. (Asad Zaman, 3/3/2018, RWER Blog, https://rwer.wordpress.com/2018/03/03/on-testing-and-learning-in-a-non-repetitive-world/#comment-133114

      You raise, at least for me, old questions I have long pondered. What is science? What are the limitations of science? What is the nature of the science as a human endeavor? How is it different from philosophy or religion? Among the books I am currently reading is one you might find interesting. It is Cents and Sensibility: What Economics Can Learn from the Humanities:

      [W]hen economists pretend to solve problems in ethics, culture, and social values in purely economic terms they are spoofing other disciplines, although in this case people most readily deceived are the economists themselves. … [U]nderstandably enough, it earns economists a bad name among those who spot the spoof. (<a href=" http://a.co/fGQEMui"Morson and Schapiro 2017, 2, in Cents and Sensibility: What Economics Can Learn from the Humanties)

      I am not sure I agree with your definition of science, which I find a bit to narrow it seems. Your definition of science as dealing with “particles subject to laws which are invariant with respect to time and space” may define certain aspects of physics, for example, but it leaves out much that science has shed light upon throughout its history. It leaves out for example biology, which cannot be reduced to the mere study of “particles subject to laws,” for example. I believe there are different methodologies for different domains of study, and that attempts of one domain to spoof the other (e.g., the claim that mind is merely an epiphenomena of matter, or that religion is reducible to mere psychology or brain states, etc.) is unwarranted by the evidence human mind can ascertain via science, philosophy, and religion.

      Truth is holistic in my view and can be synthesized across all three domains of science (material fact), philosophy (intellectual meanings), and religion (spiritual insight-values). Wisdom is more than mere knowledge; it is knowledge plus spiritual insight, and is the only means in my view of truly integrating and harmonizing these diverse levels of reality.

      We cannot even do physics without doing philosophy, as Weinert cogently states:

      The reason for the everlasting interaction between science and philosophy transpires clearly. The human mind musters an admirable ability to think up equations for physical systems. But equations need to be interpreted in terms of physical models and mechanisms. Science requires conceptual understanding. This understanding employs fundamental philosophical notions. (….) The scientific enterprise comes with philosophical commitments, whether the scientist likes it or not. The scientist needs philosophical ideas, simply because amongst the experimental and mathematical tools in the toolbox of the scientist there are conceptual tools, like fundamental notions. The despairing scientist may ask: ‘Will we ever get an answer?’ The philosopher replies: ‘Not a definitive answer, but a few tentative answers.’ Recall that the philosopher (and the scientist qua philosopher) works with conceptual models. At any one time only a few of these models are in circulation. They cannot provide the definitive answers of which the scientist is fond. But this is typical of models even in the natural sciences. (Weinert 2004, 278-279, in The Scientist as Philosopher: Philosophical Consequences of Great Scientific Discoveries.)

      Even our personal spiritual experience is mediated by mind and subject to our own human limitations. Yet, I do believe that wisdom is spiritual gift, however imperfect perceived within our mortal minds, that allows us to gain insights into reality that transcend mere materialistic thinking. My idea of the positive role that religion can play in these times is to cultivate the best wisdom each tradition can muster to bring to bear upon the pressing needs of humankind; to elevate those values of truth, beauty, and goodness that stabilize society while we move from one level or state of civilization to another. Religion does have a role to play I think, given the forgotten role that religion played in establishing economics a field of study in the first place (see Nelson’s Economics as Religion, for example, or Leonard’s Illiberal Reformers).

      If progressive minded religionists of various faith traditions join together in a dialogue on how religion can contribute to rethinking economics there might well be something this generation of thinkers can offer that previous generations have been able to see?

  2. March 3, 2018 at 9:50 am

    Those who claim that economics is not science are forgetting that the present state of natural science is the result of long historical development. In the time of Classic Greece, the physics was still in an embrionic stage. It could treat some topics of statics and optics and some others. Dynamics was out of their reach. It took more than 2000 years before the physics became a modern science. It took more than 2000 years for physics to be able to tell how the solid body falls. Those people who wants to talk uncertainty and history are forgetting that economics also develops. Please reflect how the physics was when it was in Classic Greece. Please compare physics of Classic Greece and economics of the 21st century. Don’t forget history!

  3. March 3, 2018 at 12:25 pm

    The world doesn’t change – except we should perhaps say educated people today are hitting a new collective low in world history (not only the economic profession). The logic of fiat money is eternally true. Sociology has the same logic in Egypt 2000 years ago as it can show all over the world today. The humanities are teaching people about the world and about people behaviour, and we can learn as much and the same things from literature in the 15. century as from literature made in the 1990’ties. Max Weber had a (borrowed) disctinction btw. the general ways of the world and the ‘ideosyncratic’ ways of the world. Syll is clearly talking about the latter. Better not confuse the two. Children and other people need to know about the laws of the social universe – to understand the current events and what we cannot (completely;) ) foresee. Like this comment. – Btw. let me promote my fiat money page with a few quotes by the great sociologist – Pierre Bourdieu – who predicted how the neoliberal ideology might take control of the world – and how MMT is the only way to undermine it today. http://homosociologicus.com/neoliberalism-3

  4. Norman L. Roth
    March 3, 2018 at 11:00 pm

    First class stuff, Lars Syll

    Especially your references to the Keynes {and Frank Ramsay} developing a kind of mathematics of the formation of “subjective belief” in the face of ‘radical uncertainty’:. Not to mention the process of assigning “evidential weight” that goes on in our minds to actualize those ‘subjective beliefs’. In TELOS & TECHNOS, Page 178 of the 197 page edition, I cited Jochen Runde as a reference on Keynes;s and Frank Ramsay’s differing views on the subject. during the late 1920’s and early 1930’s.Although I can scarcely claim any depth of understanding in this sort of reasoning at the frontiers of Math, psychology & epistemology, they certainly cannot be dismissed with a wave of the hand by claiming “There is no such thing as ‘subjective belief’ as a strong influence on human action. I would add that Jochen Runde’s stuff is very demanding. I also agree with Frank Salter’s argument that there must be are at least some islands of ergodocity at the micro level that allow us to proceed with our human actions with some confidence . I must say that acquiring a knowledge of the philosophy of TIME had a decisive influence on TELOS & TECHNOS, with the relevant .savants listed in the bibliography. The philosophy of TIME has been the key to developing “the paradigm that dare NOT speak is name” . It was a hard slog. I might also add that the great Keynes’ genius was equally present in THE ECONOMIC CONSEQUENCES of the PEACE and A TREATISE on PROBABILITY as in The GENERAL THEORY.

    • Rob Reno
      March 4, 2018 at 8:10 pm

      In the organic complex of habits and thought which make up the substance of an individual’s conscious life, the economic interest does not lie isolated and distinct from all other interests. — Thorstein Veblen

      Economics is essentially a moral “science,” and not a natural science. That is to say, it employs introspection and judgments of value. — John Maynard Keynes, letter to Roy Harrod in 1938

      Consciousness cannot be computable. — Roger Penrose

      It is the “end” that lends “means” its importance, not vice versa… There cannot be any doubt that there is a causal relationship between the importance of the end, and that of the means. — Eugen Von Böhm-Bawerk

      (Roth 2008, Front Material)

      Economics is a social science. It is neither a branch of mathematics nor the study of nature. It is, instead, analysis of humans by humans…. Economics is difficult, because it does not study a demarcated sphere of behaviour. What we consider to be economic behaviour is but a part of the totality of human action. Psychologists, sociologists, anthropologists, geographers and historians also analyse the phenomena considered by economists. The assumption that it is possible to separate out economic behaviour and objectives from other forms of human behaviour and objectives is an heroic simplification and, like all such simplifications, it is fundamentally false. (Fischer et. al. 2018, xiii)

      Critical Realism accepts that we can never demonstrate that we have discovered the truth, even if we have (fallibilism), but does not reject the idea of there being an underlying objective reality. The description under critical realism is of an ordered hierarchy of sciences at the structural level. There is real (ontological) difference in the strata, so they are not regarded as just cognitively (epistemologically) convenient. The real distinctions between the strata and their irreducibility of one to another (contra reductionism) are used to explain differences between the various sciences and the reason for a plurality of sciences to exist. So, for example, because everything is governed by the laws of physics, all biological entities are physical but not vice versa. Therefore biological sciences are embedded within the physical and, likewise, the social within the biological, and the formal economy within the social. At the level of structural mechanisms there is a one-way hierarchy. This type of embeddedness is one of the key messages Ecological Economists have been at pains to communicate, and especially that the economy is embedded in the Natural environment and subject to the Laws of Thermodynamics. Yet, embeddedness should not be confused with reductionism. Biology cannot be understood from physics, nor a human from studying cells, nor the social from the economic (Spash, 2012, 2015). (Fischer et. al. 2018, 127)

      Social science, including economics, can be differentiated on a substantive basis from the natural sciences because it involves (contra Hume) an inseparability of facts and values. Understanding social phenomena (e.g., unemployment) requires addressing the real structural causes (e.g., financial institutions, government policy, world markets) and prevalent ideas. Those ideas appear as social attitudes and political behaviour. Thus, explanations arising from a social scientific study entail criticism of some ideas in society. Furthermore, there is often a functional relationship between organisations that cause false beliefs and beliefs about those organisations. False beliefs may be spread in order to preserve an organisation, its power and associated institutions. Thus, the rhetoric of the liberating character of ‘free-markets’ and benefits of material growth may be used by corporations and governments extracting resources, dislocating indigenous populations and creating environmental destruction. In such cases, to propound the truth is not just to criticise, but to undermine the institution. Explanations of social institutions are a precondition of criticising and changing them, and sometimes the critique will begin the work of their subversion. Open realisation and acceptance of this position makes Social Ecological Economics far more radical than orthodox economics, which pretends to give objective, value-free advice while actually supporting the existing institutional structures. (Fischer et. al. 2018, 127-128)

      Science and economics

      Let me advance a brief comment about the relation between science and economics. This book does not take an irrational or anti-scientific stance. On the contrary, in the domain of natural phenomena modern science has shown extraordinarily successful results. But the same cannot be said when social processes are at stake, and I have tried to offer some of the reasons (ultimately, ontological) for this failure. So, I do not share the idea of those authors who think that economics can be scientific (as much as natural sciences), and that such an economic theory, once found, would solve those economic problems that the best theoretical tradition assigned to economics a long time ago (growth, employment and development with fairness and equality).

      Particularly, I think that the dream of having a successful theory of expectation formation is largely a chimera, and indeed I dismiss the necessity of having such a theory. Neither governmental authorities nor any other economic actor may count on being able in a sure (scientific) way to intervene and make people entertain “correct” expectations. But as we try to show in this book economic actors (including the state) do not need a scientific theory able to guarantee their goals in order to intervene systematically upon the economy. Instead they can apply feasible sequences as well as direct (practical) knowledge and skills to cope with the situation and push the process in the desired direction. (Marqués 2016, 5)

      It is also important to examine the relation between science and economics from another perspective. Theoretical physics has been successfully applied to a wide range of circumstances of our world. This could be done thanks to the development of associated technologies (different kinds of engineering, founded on physical theory). Some may think that nowadays economics is at a pre-technological stage (like physics was sometime ago), and that what is needed is more time (and more knowledge, mainly mathematical knowledge) to develop a sort of economic engineering…. But I suspect that in reference to more traditional economic problems …, a similar expectation is unfounded and doomed to failure. As far as economic phenomena result from open ended processes … there is no possibility of shaping and controlling them by means of social engineering similar to what happens in the case of natural sciences. The social technologies [i.e., new mechanistic approach such as Bayesian, Designed mechanisms, Game Theory, etc.] … are limited to very specific domains where neither uncertainty nor conflicts between lobbyists that defend different and opposite interests exist. These technologies are not designed for “leading” in a scientific way the economic processes. And I suspect that it is not possible to hope that we may count on similar tools in the near future. (Marqués 2016, 6)

      Some, blind to their own unexamined philosophical assumptions (Rosenberg 2016, 1-3), dogmatically insist they can “separate out economic behaviour and objectives from other forms of human behaviour” and that economics, like physics once was, is merely in its “pre-technological” stage and will eventually become a natural science like physics:

      To argue the political remedy for what has happened is one thing. Ruccio is doing it beautifully. To analyze what is happening is another. This is a question of economics. (Yoshinori Shiozawa, 3/2/2018, RWER Blog)

      Those who claim that economics is not science are forgetting that the present state of natural science is the result of long historical development. In the time of Classic Greece, the physics was still in an embryonic stage…. It took more than 2000 years before the physics became a modern science. (Yoshinori Shiozawa, 3/2/2018, RWER Blog)

      It must be nice to be so naïve historically and utterly unaware of the philosophical implications of modern relativity and quantum physics ;-) For such mechanistic materialists, faith sustains their hope in the face of all evidence to the contrary that given enough time their dream of a social mathematics will someday be realized.

      There seems to be levels of ontic reality, each embedded within a lower but not reducible thereto, which means proper recognition of specific methodologies pertain to each level within the range of their respective domain, attesting to the reality that the whole is more than the sum of its parts.

      • Frank Salter
        March 6, 2018 at 8:00 am

        “the whole is more than the sum of its parts” — a sonorous phrase — but what does it actually mean?

        There is little reason to expect non-scientists fully to understand the nuanced nature of science. One fundamental error is for non-scientists to assert that science asserts truth — this is frequently attested in much of the discussion on these pages. Science only asserts validity, based on empirical evidence or the alternative, invalid or simply wrong! Even its “laws” are based on their not having been falsified.

        The use of mathematics per se is denigrated as if it has been proven wrong, rather than accept that most of the models (essentially only the author’s assumptions) are simply wrong. Then improper mathematical manipulations are allowed to stand rather than being declared wrong.

        Most of the mathematics in use in economics is linear. It is as if calculus had never been developed. Time is usually ignored except as a variable against which to plot some economic quantity. It is the inappropriate use of mathematics which is at fault in economic analysis, not mathematics itself.

        Now, back to the original quotation — from properly conducted mathematical analysis using calculus, the emergent properties will rarely be linear! Linear analysis sums its parts linearly. Valid analysis will be able to be be described as “more than the sum of its parts”.

        The conclusion must be that the majority of theoretical economic analysis is simply wrong. Economists need to apply the scientific method, not to discuss its meta-analysis.

  5. March 4, 2018 at 1:05 pm

    Plato’s interpretation of the philosophy of Heraclitus is the one heard quite often, “No man ever steps in the same river twice.” A more accurate version might be “Ever-newer waters flow on those who step into the same rivers.” The fundamental essence of the universe for Heraclitus is ever-present change, flows. Heraclitus also contended the world is made up of unities of opposites — stating that “the path up and down are one and the same.” All that exists per Heraclitus are pairs of contrary properties, whereby no entity may ever occupy a single state at a single time. If the Greek historian Herodotus is the father of history, then Heraclitus is its sage. Humans live through and by means of history, flows, says Heraclitus. Human life is movement, change. But it is movement in community, not as individuals. Heraclitus is the answer to your question, in my view. Movement – flow – is the root of both uncertainty and certainty. Uncertainty because we can never know how far or in which direction the flow will take us. Certainty because there is a preexisting flow that can be described and studied and quarried for understandings of human society and culture. A sort of relativistic certainty, if you please.

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