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Technobabble economics

from Lars Syll


Deductivist modelling​ endeavours and an overly simplistic use of statistical and econometric tools are sure signs of the explanatory hubris that still haunts mainstream economics.

In an interview Robert Lucas says

the evidence on postwar recessions … overwhelmingly supports the dominant importance of real shocks.

So, according to Lucas, changes in tastes and technologies should be able to explain the main fluctuations in e.g. the unemployment that we have seen during the last six or seven decades. But really — not even a Nobel laureate could in his wildest imagination come up with any warranted and justified explanation solely based on changes in tastes and technologies.

The Chicago übereconomist is simply wrong. But how do we protect ourselves from this kind of scientific nonsense? In The Scientific Illusion in Empirical Macroeconomics Larry Summers has a suggestion well worth considering — not the least since it makes it easier to understand how mainstream economics actively contribute to causing economic crises rather than to solve them: 

technoA great deal of the theoretical macroeconomics done by those professing to strive for rigor and generality, neither starts from empirical observation nor concludes with empirically verifiable prediction …

The typical approach is to write down a set of assumptions that seem in some sense reasonable, but are not subject to empirical test … and then derive their implications and report them as a conclusion …

What then do these exercises teach us about the world? … If empirical testing is ruled out, and persuasion is not attempted, in the end I am not sure these theoretical exercises teach us anything at all about the world we live in …

Serious economists who respond to questions about how today’s policies will affect tomorrow’s economy by taking refuge in technobabble about how the question is meaningless in a dynamic games context abdicate the field to those who are less timid. No small part of our current economic difficulties can be traced to ignorant zealots who gained influence by providing answers to questions that others labeled as meaningless or difficult. Sound theory based on evidence is surely our best protection against such quackery.


  1. Helen Sakho
    August 27, 2018 at 1:42 am

    In case any confusions arise here dear colleagues, the sand referred to above is the sand of the Desert Storm, as far as I can tell.

  2. lobdillj
    August 27, 2018 at 12:16 pm

    Summers seems to have used this information for his own personal benefit as he guided Clinton in deregulating privatization of the economies of the post-Soviet states, and in the deregulation of the U.S financial system, including the repeal of the Glass-Steagall Act. His political mentor is Robert Rubin. These “economists” knowingly set the stage for the rape of the 99.9% in 2008 IMHO.

    • charlie
      August 29, 2018 at 10:00 pm

      thank you for your observations lobdillj? Summers has been a quack expert consistently over the last 30 years why would this isolated passage be worth noticing?

  3. August 31, 2018 at 1:31 pm

    “Sound theory based on evidence is surely our best protection against such quackery.”

    I agree. But this is no easy task. Otherwise all those, like many economists would not take shortcuts that skip this process. The shortcuts are easy compared to actual observations, development of facts, and creating stories (theories) that explain the observations. Everything about this process is difficult, uncertain, and inexact. First, every human’s life is based on observations (interactions) with humans and nonhumans. Deciding what is observed is tough. Humans compare observations to make this decision. For example, in a room I observe what appear to be human faces. Are these humans or only pictures, or mannequins, or statutes, or a mix of these? By changing positions or observing with tools like microscopes we compare observations to answer the question. Once we have a grasp of what is observed, we write a story that puts our observations in some sensible order based on what we’ve decided our observations show. Then we make more observations and attempt to compare these with our story. This is a long and frustrating process. As humbling as it is informative. All humans do it, but scientists do it almost continuously, making multiple and complex comparisons, building detailed stories which the scientists never cease questioning. Not an attractive life style in the view of many.

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