Home > Uncategorized > Statistics and econometrics are not very helpful for understanding economies

Statistics and econometrics are not very helpful for understanding economies

from Lars Syll

leamer1 zoomedA statistician may have done the programming, but when you press a button on a computer keyboard and ask the computer to find some good patterns, better get clear a sad fact: computers do not think. They do exactly what the programmer told them to do and nothing more. They look for the patterns that we tell them to look for, those and nothing more. When we turn to the computer for advice, we are only talking to ourselves …

Mathematical analysis works great to decide which horse wins, if we are completely confident which horses are in the race, but it breaks down when we are not sure. In experimental settings, the set of alternative models can often be well agreed on, but with nonexperimental economics data, the set of models is subject to enormous disagreements. You disagree with your model made yesterday, and I disagree with your model today. Mathematics does not help much resolve our internal intellectual disagreements.

Ed Leamer

Indeed. As social researchers, we should never equate science with mathematics and statistical calculation. All science entail human judgement, and using mathematical and statistical models don’t relieve us of that necessity. They are no substitutes for thinking and doing real science. Or as a great German philosopher once famously wrote: 

There is no royal road to science, and only those who do not dread the fatiguing climb of its steep paths have a chance of gaining its luminous summits.

  1. Prof Dr James Beckman, Germany
    June 23, 2018 at 12:52 pm

    Indeed, for those who have not done Karl Marx’ “fatiguing climb” the resort to mathematics as a “truth identifier” is one path to professional acceptance. But try to correlate such more or less exact relations–that is to reproduce alleged empirical findings–and one is mostly empy-handed, at least in my experience.

  2. Helge Nome
    June 23, 2018 at 3:32 pm

    “Science”, in the popular mind, is often times identified with “truth”. As is “mathematics”. Therefore, those that want to impose themselves on the rest of society as purveyors of truth hide behind these terms in order to give their theories and beliefs credibility.

    Remember the “good old days” (100 years ago) when arsenic and mercury vapours were used to ‘cure’ all kinds of diseases? At the time, those methods were claimed to be scientific by the mainstream establishment, not unlike “economics” as practiced today.

    • Prof Dr James Beckman, Germany
      June 24, 2018 at 9:01 am

      Hi, Helge, I take “truth” to be a philosophic/religious concept, while for me “prediction” is the scientific answer, whether it be about an eclipse of the sun or the next economic cycle. Adding to your examples is the cocaine used in the original CocaCola, developed appropriately by a pharmacist.

  3. Helen Sakho
    June 24, 2018 at 1:31 am

    Truth is the ONLY phenomenon that is both relative and absolute, to the best of my knowledge, at this very point in time.

    • Prof Dr James Beckman, Germany
      June 24, 2018 at 9:06 am

      Helen, that is very interesting if one speaks of the work of Einstein & Planck, each empirically valid within their often contradictory models.

  4. June 24, 2018 at 10:45 am

    See my lecture on “A Realist Approach to Econometrics” which explains why modern econometrics, based on a nominalist methodology, is a complete fraud. The lecture also explains how we can change the methodology to realist one, to get better results.
    https://weapedagogy.wordpress.com/2018/05/04/a-realist-approach-to-econometrics/

  5. Rhonda Kovac
    June 24, 2018 at 2:48 pm

    “In experimental settings, the set of alternative models can often be well agreed on, but with nonexperimental economics data, the set of models is subject to enormous disagreements.”

    Unfortunately, the falsity of statistical conclusions afflicts experimental as well as non-experimental economics. The “alternative models” aren’t really any more secure in the former as in the latter. Being “agreed upon” is different from being known. I concur with Asad Zaman that the problem runs much deeper, to the very nature of scientific methodology itself.

    • Prof Dr James Beckman, Germany
      June 24, 2018 at 3:34 pm

      Rhonda, I think the famous Einstein-Planck dichotomy on dual instantaneous events & the statisitical nature of life indicates this out in a well-funded & continuing effort in cosmology.

  6. Craig
    June 25, 2018 at 5:10 am

    What if there is a relevant and aligned natural philosophical concept around which one could understand, craft and pin point economic and monetary policy that not only resolved the paradox of thrift and the quantity theory of money, but even the fallacy of composition….because it is in fact the most basic, omnipresent and yet subtle reality upon which the woof and warp of the physical cosmos is composed.

    Economic and monetary alignment with the aspects of cosmic natural and temporal alignment itself…..would be a pretty deep “thing”. And that’s because Wisdom as a set encompasses science and even makes it good and innovative science.

  7. July 7, 2018 at 12:44 pm

    Movie makers seem to intuitively grasp that science is not about truth but judgements about what might and does work in different situations. Witness this exchange between Professor Barnhardt and Klaatu (the alien) in the original “The Day the Earth Stood Still” (1951),
    Barnhardt: Have you tested this theory?
    Klaatu: I find it works well enough to get me from one planet to another.
    Seems Robert Wise (Director), and writers Edmund H. North (screen play), Harry Bates (based on a story by) know more science than most every economist.

    Mathematics is an exact way (as exact is culturally constructed) to express inexact relationships. Thus, demanding humans “add the missing judgements” that make the relationship work or fail. All relationships are inexact.

  8. Calgacus
    July 8, 2018 at 10:48 am

    Of course science – which just means “knowledge” – is about truth. Earlier you have wrongly said that modern/ Western culture is peculiarly obsessed with truth. I would say that as much as I agree with much of what you say, appreciate the tendencies of thought, the social construction of knowledge jazz etc, the problem is that you basically exchange the common meanings of “truth” and “fact”. Interchange those two words and you usually make better sense. The correct, and I think commoner, observation, is that modern Western culture is singularly obsessed with “fact”. For every human culture always and everywhere is obsessed with “truth”.

    Saying that there is no such thing as truth, absolute truth (” ‘absolute’ truth? – as if there were any other kind!” (Hegel somwhere)) or that man cannot know the truth – well, as Hegel said in a place I do remember (Philosophy of Mind) – people who say such things cannot be understanding what they are saying. I repeat myself, but I think it is necessary, Hegel and many others felt this need to repeat when unintelligible odes to unintelligibility had not become as utterly de rigeur as today.

    • July 8, 2018 at 1:11 pm

      Calgacus, “The absurd is the essential concept and the first truth.” (Albert Camus) Is this truth, your truth, any one’s truth? Is it Camus’ truth, or is he just using it to rev up the in crowd? Truth is like everything else in the life of human culture. It’s made up by the humans involved. Made up for use. That’s the beginning and end of truth. As for Hegel, I tend not to pay much attention to old white guys delivering truth. And repeating nonsense doesn’t make the nonsense sensible. If you want to understand what people do and say, watch the people involved, not so called clever philosophers. As to what science is. It’s one form of knowledge. Not the only one. Perhaps not even the most useful one.

      • Craig
        July 8, 2018 at 5:45 pm

        There is particle of truth in everything. Differentiating, evaluating and integrating them all until one is fully conscious of them is the object and the point in economics and in Life.

      • Prof Dr James Beckman, Germany
        July 8, 2018 at 6:49 pm

        Hi, Craig, when we give a lecture in economics, engineering or any science, we are not a Albert Camus. We are normally using what passes for clearly defined variables & seek numeric ways of linking them. That is what we are paid to do as best I know.
        That said, of course Camus was a very senious & clever person, but doesn’t he normally still appear in lit or culture courses these days? Am I out of date?

      • July 9, 2018 at 4:49 am

        James, Camus was a person of many talents. Popular author, philosopher, journalist, playwright, one of the creators of absurdism, resistance fighter in WWII (as a pacifist), passionate footballer, Nobel prize winner in literature, forebear of existentialism, and open marriage advocate. Camus’ life and work can be valuable in living. But so definitely can be mathematics and “clearly defined variables.” So long as we don’t take either as the final arbiter of all that matters or a guide for life.

      • Prof Dr James Beckman, Germany
        July 9, 2018 at 7:04 am

        Certainly I agree with you, Ken. I work with Computer Science people, who often think that good statisitics (whether they realize it or not) + good code writing to capture the data is all one needs in science. I suggest to them that the system analyzed–autonomous vehicle versus human vehicle buyer, for example–indeed makes a difference. But they are believers in their young discipline, such as many traditional economists seem to be in theirs.

      • July 9, 2018 at 9:05 am

        James, nice point. And the center of it all is, in the words of William James, “the will to believe.” Not the key to eternal knowledge or universality, but the aspect that defines humans and human knowledge. We need to study it more.

      • July 9, 2018 at 4:44 am

        But which particles are truth, and which are not. And how do we figure that out? If everything is in some sense or part true, then why do we even need the notion of truth?

      • Craig
        July 8, 2018 at 10:11 pm

        James,

        Camus wrote aesthetically and effectively about the mind at the end of its orthodox scientific mindset tether and so was simply expressing the flip, absurd and yet still un-integrated side of that perspective. What is required is the complete integration of science and wisdom/self actualization which enables one to see both fragmented/scientific and the deeper, broader and more consciously complete truth….in its total perspective.

      • Prof Dr James Beckman, Germany
        July 9, 2018 at 6:40 am

        Craig, I have never been in a faculty which would integrate wisdom on an ongoing basis. Perhaps “Camus & Kant on Economics” as an elective from time-to-time. Can you tell the rest of us what economics departments would make such a course as requirement. —I have students who might be interested.

      • Craig
        July 8, 2018 at 10:23 pm

        And science should be applied (especially after looking where I correctly have observed that economists are NOT looking) and wisdom/natural philosophy/spirituality must needs be the guide for policies derived from that scientific examination…because the cosmos is a mostly unperceived integrative whole and the integration of philosophy/thought and policy/action makes for logic in the temporal universe.

      • July 9, 2018 at 5:14 am

        Craig, I agree, science should be applied. Otherwise it’s not science. The cosmos may be fused through some connections we don’t see, and perhaps will never see. We can work to see them, but we don’t control them. It thus escapes me how these “spiritual” universal connections can in any way guide us. Plus, the entire history of Sapiens is creating partitions or wrinkles we call culture. All incomplete and uncertain.

      • Craig
        July 9, 2018 at 7:16 pm

        Ken, “But which particles are truth, and which are not. And how do we figure that out? If everything is in some sense or part true, then why do we even need the notion of truth?”

        That’s for scientists to discover and define…along with the even more comprehensive and superior mental discipline of wisdom.

        James, “Can you tell the rest of us what economics departments would make such a course as requirement. —I have students who might be interested.”

        Sure, The Essence of World Wisdom Traditions and The Signatures of Paradigm Change 501

        Ken, “Craig, I agree, science should be applied. Otherwise it’s not science. The cosmos may be fused through some connections we don’t see, and perhaps will never see. We can work to see them, but we don’t control them. It thus escapes me how these “spiritual” universal connections can in any way guide us. Plus, the entire history of Sapiens is creating partitions or wrinkles we call culture. All incomplete and uncertain.”

        Grace, satori-kensho, atonement, samadhi are all the same experience and concept. And those/that concept is also the deepest, broadest, most universally applicable (because it is the most basic aspect of human life, i.e. consciousness itself) and you can’t divide consciousness up into parts, although there are differing levels of it.

        So just contemplate it in all of its aspects. By all means call it the scientific study of grace….but remember to make sure you focus on its experience not its abstract once or tenth removed significance.

        And so far as economics is concerned focus on its aspects of abundance, directness, reciprocality (back and forthness, interactivity, integrativeness, process)

      • July 10, 2018 at 10:49 am

        Craig, scientists of human communities only study what other humans have created. Whether that be families, politics, wars, or economics. These social scientists stop being scientists when they begin to substitute themselves in that work. When they chose how communities do economics, families, politics, wars, etc. Grace, atonement, etc. are part of the creative work of human communities. No more, no less. These may be loved, hated, ignored, or made the basis of a civilization. Every aspect of which social scientists have committed themselves to describing in as much detail as possible. This is the only duty of social scientists.

      • Craig
        July 10, 2018 at 6:08 pm

        I’ve never said anything but exactly that….and that they haven’t entirely cognited on and integrated the full understanding of the natural philosophical and personal concept of grace etc. …..yet.

      • July 11, 2018 at 6:14 am

        My apology, Craig. All these actions, beliefs, feelings are grounded in human culture. They are not ethereal. I believed that was your position. Sorry for my misunderstanding.

      • Craig
        July 11, 2018 at 7:36 am

        No problem. Actually all of those things are both ethereal and extremely deeply mentally rooted. It’s a supreme paradox that a human mind is both the easiest and the most difficult thing to change in the entire cosmos. And that’s another reason why studying the world’s wisdom traditions is important because they were the scientists of consciousness and how to best self actualize it before science became the dominant form of inquiry and “observation”. And very good scientists of consciousness and its various levels of awareness they were.

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