Methodological arrogance
from Lars Syll
So what do I mean by methodological arrogance? I mean an attitude that invokes micro-foundations as a methodological principle — philosophical reductionism in Popper’s terminology — while dismissing non-microfounded macromodels as unscientific. To be sure, the progress of science may enable us to reformulate (and perhaps improve) explanations of certain higher-level phenomena by expressing those relationships in terms of lower-level concepts. That is what Popper calls scientific reduction. But scientific reduction is very different from rejecting, on methodological principle, any explanation not expressed in terms of more basic concepts.
And whenever macrotheory seems inconsistent with microtheory, the inconsistency poses a problem to be solved. Solving the problem will advance our understanding. But simply to reject the macrotheory on methodological principle without evidence that the microfounded theory gives a better explanation of the observed phenomena than the non-microfounded macrotheory … is arrogant. Microfoundations for macroeconomics should result from progress in economic theory, not from a dubious methodological precept.
For more on microfoundations and the dangers of methodological arrogance, read yours truly’s RWER-paper Micro versus Macro .
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Real-World Economics Review Blog 
Methodical arrogance extends to the entire political program of neoliberalism.
In the late 1990’s and early 2000s, I was an Australian Federal Government employee in a welfare department. I witnessed anti-welfare administrative policy implementations as a worker from the inside. Initially, I was so baffled by what was going on I had to do my own research into the neoliberal program and how it was affecting welfare. I researched and wrote a long paper, in my own time, purely for my own purposes, to properly order and formulate my thoughts. I addressed twelve basic theses in my paper. You will see the strong influence of writers like Michael Pusey and John Ralston Saul in some of these theses. I wrote this paper in 2000/2001 and below are its basic theses in abbreviated form.
1. Australia is now in the grip of a developing social policy and public administration disaster; a disaster of increasing inequality. A view derivative from Micheal Pusey and of course matters are now worse in 2019.
2. The root of this disaster lies in neoliberalism or economic fundamentalism and their prescription and program for a particular form of the state and economy. Current directions in Australian public administration cannot be interpreted without an understanding of the fundamental goals of neoliberalism.
3. In a democracy, the denial of a social and economic role for democratic government other than the minimal Laissez-faire role envisioned by neoliberalism is a denial of the validity of the democratic legitimation of government. It is a denial of the legitimacy of power coming from the people. (This view is derivative from the works of John Ralston Saul.)
4. Where democratic government is so minimized in the modern Western socio-economy, further power transfers to the elite or oligarchic owners and managers of the large corporations. This transfer of power is undemocratic. (J.R.S. again.)
5. As well as using the legal and economic tactics of deregulation, corporatization and privatization, the political tactics, as identified by Paul Pierson, are those of obfuscation, division (wedge politics) and selective compensation.
6. The emergence of managerialism, or generic managerialism as Brian Easton termed it, is not incidental to this picture. Generic managerialism is the neoliberal and neocorporatist management method par excellence. The obscurantist rhetoric of generic managerialism cloaks an intent to destroy public and democratic structures.
7. The curious alliance between “social capital” or “third way” advocates and neoliberalism, particularly among advocates in church and charity organizations could be a result of these advocates, despite their sincerity, lacking a full understanding of the methods and goals of neoliberalism.
8. A long term goal was to make government service delivery “contestable over time”. Historical note: This did occur with job search agencies but to date governments have found it too difficult (politically and technically) to privatize major welfare delivery (Pensions, Unemployment Benefits, Family Payments and War Veterans’ payments).
9.The interim goal of neoliberalism with relation to government welfare delivery is to completely outsource welfare delivery to a melange of private, enterprise, church and charitable bodies. The final goal is to cease completely the provision of welfare by the state. It is this final goal which is being obscured and denied by neoliberal rhetoric. (Note: The neoliberals have not to date been nearly as successful as they wished and the debacles in job search services and parts of the education system show what happens when they are successful.)
10. The rationale for outsourcing welfare delivery is given as the quest for efficiency and cost effectiveness in delivery by subjecting it to market competition. This economic “logic” is easily refuted by a simple consideration of the law of natural monopoly. Integrated national welfare delivery is like a natural monopoly (though a non-earning one) because of its requirement for a single, integrated and expensive-to-duplicate delivery infrastructure. The result of breaking up and outsourcing the provision of welfare delivery would be an increase in costs as the benefits of integration are lost. Savings could be achieved only if the intention and the eventuality was the substantial reduction or complete cessation of welfare provision and delivery.
11. The entrenched interests of the poor clients of the welfare state are seen by neoliberalism to be inimical to the efficient and proper functioning of the economy. (Remember, there are rich clients of the state too receiving huge contracts, subsidies and all sorts of corporate welfare and tax holidays.) Retrenching the welfare state for the poor is viewed as a return, as it were, to the unimpeded, correct and normal functioning of the free market economy. However, the processes of deregulation, corporatization and privatization have themselves served and enriched vested interests in the private enterprise sphere and seen the massive transfer of public wealth (long held in common and used for common benefit) to a relatively small number of individuals.
12. Most ominously, those resources which a government does not put into the welfare of its citizens (in the broadest sense of the term “welfare”) seem almost inevitably to be put into warfare against its own citizens or citizens of other nations. Rather than seeing any real shrinkage of the state under neoliberal practice, the resources which come out of health, education and welfare will go into the coercive apparatus, into expanding the courts, prisons and military. That which does not go into welfare will go into warfare.
My prediction of “that which does not go into welfare will go into warfare” seems to be holding up very well, given the history of the last 19 years.
To finidh with a little joke:
I once said to a colleague that I didn’t understand why poor farmers supported a political party with an agrarian socialist policy which gave by far the biggest subsidies to rich and corporate farmers. She replied; “Perhaps the poor farmers are dreaming of the day when they will be rich enough to get welfare.”
I do not disagree with the general position presented in Lars Syll’s paper “macro versus macro”. However I feel that there are two levels of discussion which are conflated, a meta-level and a concrete level. As I continue to point out, there are NO valid models or theories in the conventional canon. The quantity calculus precludes what is called theory from being anything more than curve fitting. However it is possible to demonstrate that analysis from first principles resolves the problems discussed.
For production theory the significant difference between micro and macro is that different forms of solving the differential equations exist. The algebraic formulations for firms produce world-line solutions which are on the hypersurface which the solution from calculus develops (Salter F M. Transient development, RWER-81, 2017. Figure 2 p.151). It is necessary to understand that there are different views of the same reality. We are only seeing different projections from higher dimensions.
I did just read through Lars’s original paper, and would repeat at the cost of preaching to the converted (I hope) that without realistic models that make proper interlinkages between the gruesome realities of todays economies almost everywhere in the West (unprecedented lack of accountability, the collapse of proper institutional recourse to justice, etc.) these models are pretty useless. And one cannot even bear to think of the poorer countries of the world that on a daily basis experience abject poverty, war and conflict, decease and destitution…Arrogance is not confined to mathematical formulae, or entrenched theoretical positions. It is indeed a mirror that echos the ego of the proponent. No disrespect to any colleague on this blog is intended, of course.
Which came first, the chicken or the egg? Sorry for the old joke, but it’s relevant. The answer: depends on the perspective. If what you see first is the egg, and from it emerges the chicken, then the egg is the “more basic concept.” In this discussion, the micro. If what you see first is the chicken, that produces the egg, then the chicken is the “more basic concept.” The macro. Nothing in the world of humans is ever free of perspective. What most historians call context. To identify the “more basic” you must first grasp the perspective. What’s the perspective here?
This reply is late I know. What comes first, in the chicken-egg analogy and in the micro-macro debate, is history as evolution and emergence. The perspective Ken Zimmerman is calling for is that of time and its process and productions. In each case, the chicken-egg paradox and the micro-macro paradox can only be resolved (if at all) by reference to the processes and productions of time; of evolution and emergence. Looking at economics sans time and sans history is precisely the mistake that standard micro-macro and (some) equilibrium models make. But even the most sophisticated DSGE models (to my admittedly limited knowledge) do not allow for evolution and emergence over time. Otherwise they would not and could not postulate a timeless or even a long run general equilibrium.
Thus, the essential ontological question is not about subject-object perspective or the “more basic concept” as cause versus effect. From both a material-dialectic and complex systems point of view, the question is about a spiraling cause and effect system generating (in continuous loops-feedbacks fashion) evolution and emergence.
Ikonoclast, interesting. Just one question. Where are the people in this “spiraling cause and effect system generating (in continuous loops-feedbacks fashion) evolution and emergence?” Almost seems the system has no relation to people. Does it operate without people? If that’s the case, then for people it does not exist. So, what’s the point?
Everything,no doubt is composed of quarks. But if you want to be a good cook, or a good biochemist you are not advised to start with quarks. The fact that progress in knowledge can be made considering entities at higher levels of aggregation is what makes other sciences than particle physics possible. The universe is full of emergent phenomena whereby complex, aggregate entities behave in comprehensible ways, which are not evidently implied by their ultimate composition. I know Roger Federer would beat me at tennis without benefit of quantum theory, relativity of chaos theory. The world evolves slowly enough for me to know that and for book-makers to make a living. It is perfectly possible for economic knowledge to grow through observation and testing of middle-brow theorising without all this methodological angst. The fact that a lot of economics is ideologically loaded, driven by fashion and full of persistent error is true. So criticise the practice. There are lots of very bad cooks around too. That’s not a reason for starving or eating only raw food.
Gerald, emergence, chaos, non-linearity, uncertainty, and complexity are a part of human existence, like it or not. Humans find these when they study the universe, big U, and when they study the universe, small U. This is not a surprise since people (including physicists, who often wall it off from their physics) see it every day in their own lives. You don’t know that Federer would beat you at tennis. But the odds are overwhelmingly in Federer’s favor. That’s why you’ll get 500-1 odds from the bookie. As to economics, it is ideologically loaded. Much more than the average in the social sciences. That makes it difficult for economists to admit any uncertainty, non-linearity, chaos, and complexity in the economies they supposedly study. Before one textbook is read, market created, or keystroke taken, economists are nearly 100% out of alignment with the daily lives of the humans who create and live within those economies.