Home > Uncategorized > Data without theory is always treacherous

Data without theory is always treacherous

from Lars Syll

gary smithData without theory can lead to bogus inferences …

Before being comforted or alarmed, consider whether it makes sense to extrapolate. Is there a persuasive reason why the future can be predicted simply by looking at the past? Or is that wishful thinking? Or nothing at all? …

Remember that even random flips can yield striking, even stunning, patterns that mean nothing at all …

A statistical comparison of two things is similarly unpersuasive unless there is a logical reason why they should be related … Ask yourself whether the people who did the study thought before calculating.

The central problem with the present ‘machine learning’ and ‘big data’ hype is that so many — falsely — think that they can get away with analysing real-world phenomena without any (commitment to) theory. But — data never speaks for itself. Without a prior statistical set-up, there actually are no data at all to process. And — using a machine learning algorithm will only produce what you are looking for.

Machine learning algorithms always express a view of what constitutes a pattern or regularity. They are never theory-neutral.

Clever data-mining tricks are not enough to answer important scientific questions. Theory matters.

  1. Helen Sakho
    May 23, 2019 at 12:23 am

    Theory without Practice is like Practice without Theory. Both are detrimental to authentic learning without each other; decontextualised. It is indeed “torturous” to see the same old arguments repeated over and over again, while new realities of abject poverty, destitution, corruption, war and conflict surrounds humanity everywhere.

    • Craig
      May 23, 2019 at 12:43 am

      Precisely. Instead of “the same old arguments repeated over and over again” why aren’t we talking about paradigm change, what a paradigm actually is (a single concept that defines and with philosophically aligned policies and regulations creates an entirely new pattern), debating what that particular concept might be and why? I don’t see that taking place here.

      Question. What does everyone here think the concept of a new monetary, financial and economic paradigm might be?

      • Helen Sakho
        May 23, 2019 at 1:09 am

        Perhaps we can ask dear Lars to explain it all, as this is his original post and he is a renowned Economist.

  2. John deChadenedes
    May 23, 2019 at 1:16 am

    What I think is missing, the big thing that is missing, is any theory about what the economy is actuallly for. Predicting (badly, in most cases) what it will do without reference to what it should be doing, is essentially worthless. I would like to engage others in a discussion or even a heated argument about what the economy is and what its main purposes are. While this blog is generally very interesting and valuable, I find it frustrating that it seldom leads to productive debate. My own view is that the economy is a system of institutions, traditions, relationships, knowledge, and tools through which people provide what we need and, where possible, what we also want. Again in my view, the main purpose of the economy is to ensure that every person has a sufficient share of everything she or he needs to enjoy a secure, healthy, and productive life. If you disagree, please argue! I would like to know what you think the economy is and what it’s for.

    • Craig
      May 23, 2019 at 4:30 am

      The purpose of production is consumption, the purpose of an ethical economy is relative freeing abundance for all and the purpose of economics is and/or should be as free flowing an economy as is possible within that ethic and within the planet’s capability to produce.

      • Robert Locke
        May 23, 2019 at 7:20 am

        What the economy is or is for, depends on time (specificity) and place (locality). And you find that out by looking at what people engaged in the economy are saying about their problems.

    • May 23, 2019 at 5:55 am

      Great topic for debate, what is economics? “My own view is that the economy is a system of institutions, traditions, relationships, knowledge, and tools through which people provide what we need and, where possible, what we also want.” Forgot about sex. I did not hear a more vulgar definition of economics. Thanks for the enlightenment.
      Economics is the science of profit. If someone still did not understand.
      The economy doesn’t care whether I am fed or hungry, I have a house or I live on the street. However, mathematics, physics, chemistry also do not care. 250 years of talking about the economy and not understand what it is – it is respectable fraud. Dear John deChadened probably came from a distant galaxy, where there are no wars, where good Santa Claus takes care of everyone and curses his “economy”.

    • May 23, 2019 at 8:50 pm

      John, I’m sorry Herbert was so dismissive of your “vulgar” (i.e. of the people, common sense) view of what the economy is. What is now called economics may be about making profits (I am not prepared to call not telling the truth “science”) but when Herbert tells us to “forget about sex”, perhaps he is being ironical. Economics was the name give to the business of “household management”, and as such is a direct descendent of “the birds and the bees”: of birds showing off in courtship and feeding the kids to perpetuate life of one’s own kind, or conversely, of ruthless survivors of a harem breeding slaves to bring food to a storehouse for the next generation of queens. It is surprising how much economic activity is about impressing the other sex: fancy cars, expensive jewelry, nice houses etc. The sick thing is when the courtiers are narcissicists or queens , so are never able to satisfy themselves.

  3. Helen Sakho
    May 23, 2019 at 1:55 am

    No argument whatsoever; you have hit the key points on the head! I only wish someone had a hammer as big as any craftsman or woman to hit the Economists so hard on their head as to wake them up from the coma that they seem to have been suffering from since the inception of this so called “science”.

    • May 23, 2019 at 5:57 am

      Can they run for forty years in the desert?

  4. Frank Salter
    May 23, 2019 at 6:19 am

    All this is true. Quantity calculus proves that there is no conventional analysis which is valid, Every equation used is effectively arbitrary. First principles analysis is necessary to provide valid theory. Until this is grasped and acted upon, there will be never be any development in economic analysis.

  5. May 23, 2019 at 7:57 am

    Calibration of an economic model is very similar to machine learning. It is a learning process of the model but is a typical case of data fitting without theory.

  6. Multicollinear
    May 23, 2019 at 3:53 pm

    Recovering former econometrician here with a few chestnuts:

    If you torture the numbers enough, they are bound to confess what you want to hear.

    That is like putting ten pounds of BS into a five pound bag.

    add your own, lighten the mood

    • Rob
      May 26, 2019 at 1:23 pm

      Man walking along a road in the countryside comes across a shepherd and a huge flock of sheep. Tells the shepherd, “I will bet you $100 against one of your sheep that I can tell you the exact number in this flock.” The shepherd thinks it over; it’s a big flock so he takes the bet. “973,” says the man. The shepherd is astonished, because that is exactly right. Says “OK, I’m a man of my word, take an animal.” Man picks one up and begins to walk away.

      “Wait,” cries the shepherd, “Let me have a chance to get even. Double or nothing that I can guess your exact occupation.” Man says sure. “You are an economist for a government think tank,” says the shepherd. “Amazing!” responds the man, “You are exactly right! But tell me, how did you deduce that?”

      “Well,” says the shepherd, “put down my dog and I will tell you.”

  7. Craig
    May 23, 2019 at 5:13 pm

    The question was actually “In your opinion what is the concept of the new monetary, financial and economic paradigm? Please, no squirreling off onto other topics.

  8. Ikonoclast
    May 24, 2019 at 12:20 am

    I am intrigued when original posters of excellent economic and philosophic standing (I place Lars Syll in this group) post and then don’t engage with comments afterwards. I am still puzzling as to what this might mean. There could be an understandable reluctance to engage with people who might turn out to be cranks. Some would no doubt consider me a crank from some of my posts. ;)

    The interesting thing about the unorthodox tent is that it has idiosyncratic cranks scattered throughout the seating. This phenomenon is intrinsic to dissent. In the orthodox tent by comparison, the cranks all align and eject all dissenters.

  9. Helen Sakho
    May 24, 2019 at 12:33 am

    It is indeed intriguing. Lars is probably too busy though; as for the “tent” just mentioned, please consider that his tent might lie somewhere in between. He might at some stage join us though, tent specificity allowing.

  10. Craig
    May 24, 2019 at 2:14 am

    In your opinion what is the concept of the new monetary, financial and economic paradigm?

    C’mon, take a shot at it. The worst thing you can be is wrong.

  11. Econoclast
    May 24, 2019 at 7:34 pm

    At the risk of being laughed off the blog, I offer the following definitely simplistic “definition” of what any economy should include. Please reply re what’s missing or flat-out wrong:

    What is an economy?
    At its essential core, stripped of ideology, an economy is a system, created or evolved by people to be run by people to serve people’s material needs. In this system resources derived from the solar/web of life systems are allocated to productive endeavors which create goods and services that subsequently are distributed throughout the cultural geography (tribe, region, nation, globe, whatever) that uses (consumes) them. These activities create value and waste (entropy). Accumulated value is invested and distributed to create individual and community wealth. Transactional and information transmission infrastructures (e.g., organizations, markets) are developed to facilitate the distribution. Finance and money (or some medium of exchange) are employed to facilitate the transactions as the economy becomes more complex. Some form of governance is required to make it all work. As the whole is dependent upon the solar and life relationships, it is subject to the first and second laws of thermodynamics (conservation of energy and entropy, respectively) At any time a specifiable technology set is essential. As the economy (and culture) develops, technology changes, and vice versa.
    The economy system and is governed by system rules, including stability, diversity, feedback and learning. All system components are connected by relationships. No one thing defines this or any other system. But if one characteristic is essential, it would be the quantum of relationships. None of this is static: the dynamics can only be understood by accounting for time and uncertainty.
    This simple essential economic system is made instantly complex by political considerations, the interactions among people as they act, individually and in groups, to meet their needs; the choices they make and how they make them. Social/political class analysis is required and a balance of power among classes, between public and private endeavors must be sought and maintained, as well as must a balance in shared output of the economy. Moral issues must be considered, issues that at the very least must be considered to achieve material security for all participants in the economy.
    When we understand the real world of material, culture, politics, ideology and institutions we build up from this simplistic model to greater complexity. For example, in 2016/17 our global reality is globalized predatory corporate financial capitalism. We have been and remain capitalist, whether we like it or not. But we no longer are driven by primitive accumulation, small community business, or manufacturing stages of capitalism, but globalized finance. No understanding, or proposed social change, can realistically be achieved without recognition of that reality.
    The overriding goal of political economy is to manage the human part of the biosphere. The economy is a human artifact, of the people, effectively designed by the people for the people. If the institutions and leaders aren’t up to the job of preserving their part of the biosphere and instead act to increase instability and inequality they must be replaced by the affected people.

    • Craig
      May 24, 2019 at 10:24 pm

      That’s a good exposition and perfectly reflects my post of 5/23 at 4:30 AM.

      Now considering that all heterodox economists agree that the scarcity of individual incomes and price and asset inflation are the currently the primary chronic systemic problems, that finance’s paradigm of Debt Only can only add an additional flow of costs to the system and new paradigms are always in conceptual opposition to the current paradigm….what might the new paradigm be?

  12. Rob
    May 25, 2019 at 2:57 am

    I am partial to Kate Raworth’s Doughnut Economics and her vision for the future of economics as a field of study.

    Gave her book to both my daughters. Time to kick mainstream economics out of the best and along with it the the the idea it is value-free science. It is anything but value-free.

    • Rob
      May 25, 2019 at 2:57 am

      Out of the nest …

      • Econoclast
        May 25, 2019 at 4:10 pm

        I’m partial to Raworth as well.

        Need to kick “mainstream economics” out of the best as well as the nest. But perhaps it will take an apocapitalypse for that to happen.

      • Rob
        May 25, 2019 at 9:53 pm

        I sure hope it doesn’t take an apocapitalypse, but I understand why one would think it might.

        Dark Ages are instructive, precisely because they are extreme examples of cultural collapse and thus more clear-cut and vivid than gradual decay. The purpose of this book is to help our culture avoid sliding into a dead end, by understanding how such a tragedy comes about, and thereby what can be done to ward it off and thus retain and further develop our living, functioning culture, which contains so much of value, so hard won by our forebears. We need this awareness because, as I plan to explain, we show signs of rushing headlong into a Dark Age. (Jane Jacobs, Dark Age Ahead, http://a.co/7LgFM6N)

      • Craig
        May 25, 2019 at 5:44 pm

        Not if we go directly to the individual and start a mass movement for the policy and structural changes that are needed instead of merely trying to convince the ego involved heads of academia.

      • Rob
        May 26, 2019 at 1:13 pm

        It sound so easy Craig, but it’s not. One hopeful sign though is there are some new leaders emerging in the US that are promising, such as AOC, Pete Pete Buttigieg, and others, etc. I hope that the slow death of American democracy can be reversed for my children’s and grandchildren’s sake, and frankly, for the world’s sake for Trump is a wicked demagogue and will lead the world into nothing but war.

      • John deChadenedes
        May 28, 2019 at 6:57 am

        OK, Craig, I’ll bite. I don’t mind being wrong if I can start an interesting argument. Talking about money (and by extension monetary and financial policy) the essential point is that money can only exist within a system of laws, rules, traditions, and institutions that regulates who can create money, what it can be used for, and how its ownership must be managed. In the beginning, only governments could create money and counterfeiting is still illegal. Yes, banks create money by issuing credit but this should obviously be more strictly limited and transparently regulated because it ultimately has the same effect as counterfeiting. To me it makes sense to consider all money as actually belonging to the government that issues it, with individual people and businesses permitted to use it for legitimate purposes and under appropriate conditions. I understand that one of the main drivers of monetary policy is to make sure profit-making can continue but i don’t necessarily accept all profit-making as legitimate. Most of the profits generated in the finance, real estate, and insurance sectors, to take the most obvious examples, are unearned and should either be prohibited or very steeply taxed to reduce the incentive for people to engage in such non-productive activities. This, in fact, should be the main goal of monetary, financial, and economic policy: to encourage people to engage in productive and meaningful work and to discourage actiivities that are essentially parasitic, where paper wealth is accumulated by people and institutions that produce nothing of real value.

      • Craig
        May 25, 2019 at 10:49 pm

        As Michael Hudson has shown in his recent book And Forgive Them Their Debts the failure to address the de-stabilizing nature of the money system has repeatedly been the operant factor in civilizational collapse. Furthermore, the way of re-setting the economy was always a debt jubilee. The problem was that only palliated the paradigm of Debt Only. We need to be smarter and deeper in our analysis of how to do that by awakening to the new paradigm of Direct and Reciprocal Monetary Gifting and its policies.

  13. Ken Zimmerman
    June 3, 2019 at 1:01 pm

    Yes, theory matters. The question is which theory? Any science in its goals, structure, and functions must reflect the subject of its study. Economics, no matter how much it may deny it, is a social science. The subject of its study is Sapiens, in all its forms and iterations. Unlike the subject of the physical sciences, Sapiens not only creates its culture (physical and psychic) but also explains its creation. For social scientists the theories humans create to explain their creations must be top priority in terms of creating social scientific theories. Actor theories may be complex, multilayered, multidimensional, or simple and single dimensional. But no matter how they look, social scientists must follow these theories and the actions they explain. It is not the job of the social scientist to replace the actor’s theories with ones from social science. Rather, the social scientist’s role is to allow the actor to be heard, not hide actor’s actions and theories behind social scientific explanations and theories. This means observation and theory construction are part of the same process. The actors we study have already found the patterns that explain their actions. They use them everyday to explain and contextualize their actions. How about we just respect their work, write it up, so a wide audience can see and understand it as well?

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