Home > Uncategorized > No reality, please. We’re economists!

No reality, please. We’re economists!

from Lars Syll

Mathematics, especially through the work of David Hilbert, became increasingly viewed as a discipline properly concerned with providing a pool of frameworks for possible realities. No longer was mathematics seen as the language of (non-social) nature, abstracted from the study of the latter. Rather, it was conceived as a practice concerned with formulating systems comprising sets of axioms and their deductive consequences, with these systems in effect taking on a life of their own. The task of finding applications was henceforth regarded as being of secondary importance at best, and not of immediate concern.

ffullbrookThis emergence of the axiomatic method removed at a stroke various hitherto insurmountable constraints facing those who would mathematise the discipline of economics. Researchers involved with mathematical projects in economics could, for the time being at least, postpone the day of interpreting their preferred axioms and assumptions. There was no longer any need to seek the blessing of mathematicians and physicists or of other economists who might insist that the relevance of metaphors and analogies be established at the outset. In particular it was no longer regarded as necessary, or even relevant, to economic model construction to consider the nature of social reality, at least for the time being …

The result was that in due course deductivism in economics, through morphing into mathematical deductivism on the back of developments within the discipline of mathematics, came to acquire a new lease of life, with practitioners (once more) potentially oblivious to any inconsistency between the ontological presuppositions of adopting a mathematical modelling emphasis and the nature of social reality. The consequent rise of mathematical deductivism has culminated in the situation we find today.

Tony Lawson

I think the ‘confidence’ mainstream economists have in their own theories and models, basically is a question of methodology. When applying deductivist thinking to economics, economists usually set up “as if” models based on a set of tight axiomatic assumptions from which consistent and precise inferences are made. The snag is that if the models are to be relevant, we also have to argue that their precision and rigour still holds when they are applied to real-world situations. They often don’t. When addressing real economies, the idealizations necessary for the deductivist machinery to work, simply don’t hold.

keynes-right-and-wrong

The world as we know it​ has limited scope for certainty and perfect knowledge. Its intrinsic and almost unlimited complexity and the interrelatedness of its organic parts prevent the possibility of treating it as constituted by ‘atoms’ with discretely distinct and stable causal relations. Our knowledge accordingly has to be of a rather fallible kind.

To search for precision and rigour in such a world is self-defeating, at least if precision and rigour are supposed to assure external validity. The only way to defend such an endeavour is to take a blind eye to ontology and restrict oneself to prove things in closed model-worlds. Why we should care about these and not ask questions of relevance is hard to see. We have to at least justify our disregard for the gap between the nature of the real world and our theories and models of it.

Deductivist closed-system theories, as all the varieties of the Walrasian general equilibrium kind, could perhaps adequately represent an economy showing closed-system characteristics. But since the economy clearly has more in common with an open-system ontology we ought to look out for other theories — theories who are rigorous and precise in the meaning that they can be deployed for enabling us to detect important causal mechanisms, capacities and tendencies pertaining to deep layers of the real world.

Rigour, coherence and consistency have to be defined relative to the entities for which they are supposed to apply. Too often they have been restricted to questions internal to the theory or model. But clearly,​ the nodal point has to concern external questions, such as how our theories and models relate to real-world structures and relations. Applicability rather than internal validity ought to be the arbiter of taste.

  1. JnKg
    August 14, 2019 at 9:54 pm

    Ernesto Sábato – Hombres y Engranajes

    Frente a la infinita riqueza del mundo material, los fundadores de la ciencia positiva seleccionaron los atributos cuantificables: la masa, el peso, la forma geométrica, la posición, la velocidad. Y llegaron al convencimiento de que “la naturaleza está escrita en caracteres matemáticos”, cuando lo que estaba escrito en caracteres matemáticos no era la naturaleza sino… la estructura matemática de la naturaleza. Perogrullada tan ingeniosa como la de afirmar que el esqueleto de los animales tiene siempre caracteres esqueléticos.

    • Rob
      August 14, 2019 at 10:22 pm

      Ernesto Sábato – Men and Gears
      .
      Faced with the infinite richness of the material world, the founders of positive science selected the quantifiable attributes: mass, weight, geometric shape, position, speed. And they came to the conviction that “nature is written in mathematical characters”, when what was written in mathematical characters was not nature but … the mathematical structure of nature. Perogrullada [truism?] as ingenious as to say that the skeleton of animals always has skeletal characters.

      Via Google Translate. What a beautiful quote.

      • Dave Raithel
        August 15, 2019 at 4:02 am

        And if the good things in life are incommensurable, then what have you?

      • Rob
        August 15, 2019 at 5:38 am

        Whatever do you mean?

  2. August 15, 2019 at 9:25 pm

    Many economists have had some odd ideas about mathematics, which has led to some absurd notions, with serious real-world impact. Could we throw out these odd ideas without throwing out mathematics all together?

    • Rob
      August 15, 2019 at 10:22 pm

      Yes, please, lets not throw the baby out with the bath water!

    • Yoshinori Shiozawa
      August 20, 2019 at 4:31 am

      In support of Dave Marsay, let me repeat my reply to Lars Syll’s post “Economics — an axiomatically based science doomed to fail” on July 27, 2019.
      https://rwer.wordpress.com/2019/07/27/economics-an-axiomatically-based-science-doomed-to-fail/

      Yoshinori Shiozawa July 28, 2019 at 3:55 am Reply
      “A modern economy is a very complicated system.” (Solow in Syll’s citation)

      To understand this complex system, it needs to develop appropriate tools. Some of them may take the form of mathematics. Don’t throw the baby out with the bathwater.

      Those who want to understand this complex system should not spare themselves efforts to obtain the necessary capability. Don’t make all aspirants idle economists.

  3. Helen Sakho
    August 16, 2019 at 1:24 am

    Unfortunately both the baby and the bath water have been thrown away! Please just look at the number of needy, poor children and the lack of basic human needs such as clean water, basic medicines, all over the globe.

    And here too (no disrespect to anyone) we hardly discuss trade wars, lack of collapse of basic structures for democratic progress, abject poverty and so on.

    Issues confronting the real world (global warming, war and conflict and the abandonment of democracy itself) did not happen overnight. If capitalism had a purpose to destruct and rebuild itself, it no loner needs to. It is now controlled by a handful of narcissists who enjoy having a game poker online. It is a win-win formula for them, as always.

    The only way forward is to start addressing some of these issues in a focused and contextualised manner.

    • James Beckman
      August 16, 2019 at 3:45 pm

      Helen, your words remind me of others, “through the eyes of a child”, my axiom for the day. That is, to use our senses to examine what is really happening around us. Among other phenomena we see Trump allowing massive abuse of families at his Mexican borders, a Brexit comedy which makes part of the British political establishment eligible for free passage around the world in a sailboat, and yet people in Hong Kong expressing their views in a very democratic manner.
      Personally, I have found nothing wrong with globalization that governments with appropriate actions couldn’t ameliorate–but little has been done. It has been the suffering masses which have to flee global warming and war, even as many in the benefiting nations have had little government support in the adjustment.to employment with new work skills & job locations. And then there are the social issues touching on equal respect for virtually all social groups. excluding pedophiles, murderers, drug sellers, etc.
      I hope economists will play a role in these many opportunities for analysis/action.

    • Rob
      August 17, 2019 at 3:15 am

      The only way forward is to start addressing some of these issues in a focused and contextualised manner. ~ Helen Sako

      .

      I hope economists will play a role in these many opportunities for analysis/action. ~ James Beckman

      .
      Why should the public trust economists to solve these very real-world problems facing our children and grandchildren when they bear to a significant degree responsibility for helping to create them and continue to elevate the “scientism” embodied in the dream of a theory of A Universal Science of Man over the pressing needs of humanity? Should we be not be hyper-critical of what “role” they assume they should play? I see little reason to place such hope in economists. They act more like sectarian religions of authority in perpetual conflict over flights of intellectual fantasy, conflating metaphors for concrete reality, while dismissing as not “scientific” the very reality-centered human intuitions grounded in the facts, meanings, and values illuminated by less dogmatic sciences , more balanced and meaningful philosophy, and true religion grounded in love, service, and living the Golden Rule.
      .

      The deliberate creation of boundaries between natural and religious or political knowledge, the conceptualization of science as a sharply edged and value-neutral domain of knowledge, the subordination of the biological and social to the physical science, the harnessing of a rhetoric of science, technology, and progress—these were some of the ways in which an ideology of science was constructed. (Alexander and Numbers 2010, 4, Biology and Ideology from Descartes to Dawkins)

      .
      The quote above applies to economics just as much as it applies to nineteenth century Newtonian physics and evolutionary theory modeled thereafter along with economics.
      .
      Economists, like all scientists, religionists, philosophers, politicians are standing before the judgment bar of pressing human needs. How they acquit themselves is yet to be seen. Will they insist that theory comes first, rendering themselves ensconced in ivory towers incapable of offering real-world solutions; wrapping themselves in pseudo-science and claims to being “scientific” while conflating one level of reality for another, confusing the mechanism of physics with the interpersonal value-relationships of the social, or reifying biological metaphors at the expense of embodied personal experiential reality–offering empty theory while the earth burns and humanity descends into conflict and war?
      .

      The purpose of studying economics is not to acquire a set of ready-made answers to economic questions, but to learn how to avoid being deceived by economists. ~ Joan Robinson, Quoted in John K. Galbraith’s 1973 book, Economics and the Public Purpose.

      .
      I am making sure my children know what Joan Robinson knew so well.

  4. Robert Locke
    August 17, 2019 at 9:20 am

    Rob, when I got involved in studying German Arbeitswissenschaftliche Lehre – a direct translation would be “a labor-science discipline,” implying that work and the work process could be treated as a science, I discovered that Americans thought that work process could be analyzed scientifically in a technical sense, and the ones who did it were middle managers and management professor in engineering and business schools. The workers, including their trade unions were left out of the process. That is what we are doing on this blog, letting the experts do it as the qualified scientists.

    German trade unions and the members of the employee elected works councils (in the German system of firm governance) do not think that the science these experts create can look after employee interests, since the scienctists themselves are interested parties.

    The issue goes to the heart of the social science problem. If employees (or employers) thought that the social sciences were (are) sufficiently robust to solve work-related problems in a discipline-determined objective way, they might accept scientific conclusions. But the social sciences have inspired distrust if not outright contempt towards their conclusions. Rather than eliminate the whole social science enterprise, the German experience suggests that vested interests be incorporated into the science. When this happens the science becomes useful as an instrument for enlightening the self-interest of people.

    This incorporation does not mean calling more up experts, as is done on this blog, but in including a variety of vested interests as participants on the development of the discipline.

    • Meta Capitalism
      August 17, 2019 at 10:15 am

      Robert I completely agree.
      .
      The real issues will not be solved by any theory, but in recognizing the needs of various needs of stakeholders / vested interests working together for mutually beneficial outcomes. Cooperative new business models have proven they work and better serve individuals and society.
      .
      There are good models already in Germany and the Nordic countries that the US should learn from. Whether they will is yet to be seen. .
      Soderbaun’s book is pointing the right way I think, and like Marques addresses real structures and actors in society that are the real causal agents influencing outcomes (i.e., politics, lobbyists, power relations, etc).
      .
      Lars has done a service by shining a bright light on the Naked Emperor’s pseudo-scientific metaphors pawning themselves off as scientific fact.
      .

      Mirowski writes:

      The neoclassicals opted to become scientific by ignoring what the physicists and they philosophers of science preached and to cut the Gordian knot by directly copying what the physicists did…. Nevertheless, imitation bears its own ironies and discomforts… First, there are those imperious role models, the physicists, who have a most disconcerting habit of spurning the social scientists most in awe of their exalted persons. Time and again in the twentieth century, prominent physicists have chastised their economist colleagues in no uncertain terms:

      The success of mathematical physics led the social scientist to be jealous of its power without quite understanding the intellectual attitudes that had contributed to the power. The use of mathematical formulae had accompanied the development of the natural sciences and become the mode of the social sciences… The mathematics that the social scientists employ and the mathematical physics that they use as their model are the mathematics and mathematical physics of 1850… Their quantitative theories are treated with the unquestioning respect with which the physicists of a less sophisticated age treated the concepts of Newtonian physics. Very few econometricians are aware that if they are to imitate the procedure of modern physics and not its mere appearances, a mathematical economics must begin with a critical account of these quantitative notions and the means adopted for collecting and measuring them [Wiener 1964, pp. 89-90]

      Then there are disturbing and insistent questions about the nature of the success of neoclassical economic theory. Why should scientific success in one sphere of inquiry carry over into another sphere? Is mimesis an irredeemably cynical ploy, or is there some sense in which it can serve as a gyroscope for a floundering research program? Once instituted, is imitation a persistently pragmatic operation? In other words, once they have begun, should economists continue to emulate and simulate physics as physics itself evolves? How can this mimesis be effective if many of the individual neoclassical economists are personally unaware of it? And — isn’t there a danger that the imitation might breed contempt as well as respect? Could the physics metaphor generate more heat than light? (Mirowski 1989, 357-358)

      .

      .
      The imitation game continues just as surely today by replacing physics metaphors with pan-selectionist and ultra-Darwinian metaphors while remaining stunning ignorant of the very science of theoretical biology in all its messy yet ongoing theoretical transformations as evo-devo (epigenetics and developmental biology) causes a re-synthesis of the very foundations of theoretical biology and evolutionary theory. The Central Dogma died a long time ago, yet some deaf, dumb, and blind economists seek to impose a new Central Dogma every bit as erroneous as the econo-physicists of old so eloquently exposed by Mirkoski.

      the efforts of so-called “evolutionary economics,” an ahistorical autistic attempt to base economics upon a form of ultra-Darwinism that excludes modern scientific empirical evidence to the contrary, that natural selection as it turns out, is not the all-powerful creative force pan-selectionism claims it is.

      • Yoshinori Shiozawa
        August 17, 2019 at 11:24 am

        >> the efforts of so-called “evolutionary economics,” an ahistorical autistic attempt to base economics upon a form of ultra-Darwinism that excludes modern scientific empirical evidence to the contrary, that natural selection as it turns out, is not the all-powerful creative force pan-selectionism claims it is.

        Is this a correct citation from Mirowski? Or a paragraph by Meta Capitalism him/herself? If it is Mirowski’s, this only suggests that Mirowski does not know what evolutionary economists are doing. But I can hardly believe it.

      • Yoshinori Shiozawa
        August 18, 2019 at 3:18 am

        Most probably the citation that I have copied above is Meta Capitalsm’s opinion on the evolutionary economics. I have tried to find where the citation appears in Mirowski’s book by Amazon, but I could not find no relevant part.

        At any rate, evolutionary economics (at least in its contemporary development) has nothing to do with ” ultra-Darwinism” and “pan-selectionism” as long as these terms are understood in standard meanings. In opposition to Meta Capitalism’s contention, evolutionary economics is historical and open-to-empirical-research discipline. Its theoretical structure is more open to historical change at least than the mainstream neoclassical economics.

        I wonder why this kind of apparent errors occur. My impression/conclusion is that Meta Capitalism is playing a word association game and has no interest on what is actually happening in the economics (mainstream or heterodox). This disdain of economics in general (including mainstream, heterodox, and new economics that may come in the future) is a very dangerous symptom of this open forum, i.e. RWER Blog.

      • Rob
        August 20, 2019 at 4:15 am

        Yohinori is a master of playing word association game[s], aka engaging in semantic negligence and tripping over his own tongue (揚げ足, あげあし).

      • Meta Capitalism
        August 22, 2019 at 6:10 am

        The password is: semanticnegligence

      • Yoshinori Shiozawa
        August 20, 2019 at 4:40 am

        Why don’t you sign Meta Capitalism, if this is Rob’s handle name?

        I am only talking about Meta Capitalism’s post on August 17, 2019 at 10:15 am. If you made a mistake, the first thing you should do is to correct it.

    • Rob
      August 17, 2019 at 11:17 pm

      [W]hen I got involved in studying German Arbeitswissenschaftliche Lehre – a direct translation would be “a labor-science discipline,” implying that work and the work process could be treated as a science, I discovered that Americans thought that work process could be analyzed scientifically in a technical sense, and the ones who did it were middle managers and management professor in engineering and business schools. The workers, including their trade unions were left out of the process. That is what we are doing on this blog, letting the experts do it as the qualified scientists. ~ Robert Locke, emphasis added.

      .
      One of the reasons that Continental Drift received are more general positive reception among European earth scientists was due the different in philosophical outlook; Americans dogmatically held to Uniformitarianism opposed to Catastrophism which was clearly visible to their European and South African counterparts who stood before the Alps and Great Rift Valley and saw its consequences with their own eyes. The other was their view of how science is done and what made good science. Wegener and other European scientists were less inclined to view science only through the lens of geophysics and open to other lines of evidence coming from diverse fields of study. In other words, they were Narrative Pluralists (see Fullbrook 2016, Narrative Fixation in Economics) vs. American scientists in general having fixated on a single narrative that imposed blinders on all other lines of evidence coming from fields that were not “hard science” (i.e., physics based) but rather based upon field observations and such.
      .
      Thomas C. Leonard (2016) in Iliberal Reformers: Race, Eugenics & American Economics in the Progressive Era describes Taylorism:
      .

      The bible of the 1910s gospel of efficiency was Frederick Winslow Taylor’s (1856–1915) international bestseller, The Principles of Scientific Management (1911)….
      .
      Taylor claimed that his system came first, but he was not eliminating authority. He was merely relocating it. Taylor did indeed reduce the power of shop floor bosses, but he did so by giving it to himself and the other efficiency gurus. (Leonard 2016, 60-62)

      .
      An army of technocrats who disregarded the views, insights, and needs of the stakeholders– like the real workers. This is what modern mainstream economics has essentially done as well.
      .
      Robert’s insight that we don’t need more arm chair “experts,” but pragmatic inclusion of “a variety of vested interests as participants on the development of the discipline” reminds me of Ken Zimmerman’s call to actually observe what real-world business men and women, in context (which would include lobbyists, politicians, workers, etc.) are doing to creatively create the real economy which technocrats and intellectuals then study to build their–frequently it turns out–house of theoretical cards.
      .
      In other words, let’s not let the tail wag the dog given we are as a community of humans living on this planet facing an existential crisis that needs solving now, not latter when some dreamed of “theory” is found that discloses so-called “deep structures” (are they not starring us in the face, such as when Moscow Mitch colludes with Russian lobbyists and oligarchs to undermine US democracy for predatory profits!).
      .

      [This] issue goes to the heart of the social science problem. If employees (or employers) thought that the social sciences were (are) sufficiently robust to solve work-related problems in a discipline-determined objective way, they might accept scientific conclusions. But the social sciences have inspired distrust if not outright contempt towards their conclusions. Rather than eliminate the whole social science enterprise, the German experience suggests that vested interests be incorporated into the science. When this happens the science becomes useful as an instrument for enlightening the self-interest of people. This incorporation does not mean calling more up experts, as is done on this blog, but in including a variety of vested interests as participants on the development of the discipline. ~ Robert Locke, emphasis added.

      .
      In other words, we can look to the pragmatic proven practices of those have democratized the labor-management-capital issue and adopted a form of democratic socialism in the work-place that takes everyone’s real human needs into consideration by bringing them together and listening to each other.
      .

      Going beyond bookish orientation in economics
      .
      Theoretical models built within the bookish orientation offer arbitrary and imaginary models designed to solve theoretical problems posed by antecedent models. One of the main assumptions of this book is that a correct characterization of the main traits of the subject under examination has preeminence over the set of strategies designed to understand it. If theoretical practice in economics is going to have authentic epistemic relevance, it is necessary to shift the attention from standard models developed within the current bookish tradition to the solution of those concrete problems which result from open ended, intervenible and conflictive economic processes, dominated by radical uncertainty…. (Marqués 2016, 3)
      .
      A processes oriented economics would have to provide a different kind of theoretical practice adequate for examining sequences of feasible economic events (i.e., the main developments that those processes could plausibly adopt). This kind of practice offers points of intervention to those skills, qualifications, common sense and political abilities that are needed to manage these processes. The accomplishment of one of the several plausible sequences will be the product of a combination of all these practical capabilities that belong to what may be called “management and lobbyist practice”. The subjects of this practice are both the action of the state (which wrongly has been traditionally identified as the only interventionist actor) and the lobby of the many diverse groups able to influence the economy. Their joint actions determine the state of the economic phenomena at each stage of the process. (Marqués 2016, 3)
      .
      (….) What I maintain, rather, is that theoretical practice in economics can be something different from the strategy that places theoretical models at the center of the scene. In this sense, this book contains a call for reorienting economic theory which is consistent with a pluralistic view: it states that there is another object – the concrete economic processes- that demands attention. The emergence of a Non-bookish Economics is possible and desirable, one which could perfectly coexist with imaginary model-building practice and that focuses on how real markets work. (Marqués 2016, 3-4, A philosophical framework for rethinking theoretical economics and philosophy of economics, WEA Press.)

      .
      Along with Soderbaum (2016) and others there is a common theme running throughout the “experts” on this blog, and it points towards shifting the focus away from dogmatic theory first sing narrative fixation and towards a more open approach that focuses on “concrete economic processes” as they are really embodied and created by actual actors (politicians, lobbyists, workers, managers, owners, etc.).

  5. Yoshinori Shiozawa
    August 17, 2019 at 10:18 am

    Lars Syll >> The world as we know it has limited scope for certainty and perfect knowledge. Its intrinsic and almost unlimited complexity and the interrelatedness of its organic parts prevent the possibility of treating it as constituted by ‘atoms’ with discretely distinct and stable causal relations.

    This is just the problem that is attacked by complexity science. See my fourth comment at August 8, 2019 at 5:29 am on Lars Syll’s blog article Non-normal normality for RWER:
    https://rwer.wordpress.com/2019/08/01/non-normal-normality/

    Economic situations are ubiquitously intractable, whereas human capability is limited in three aspects: (1) limited scope or sight, (2) bounded rationality and (3) limited range of actions. This is the very reason why economics by optimization (neoclassical economics) is completely wrong and the reason why we should formulate human (intentional) behavior as a series of CD-transformations.

    To know the ubiquity of intractable problems requires higher mathematics called computing complexity. Although it is not yet sufficiently developed to be used widely, it gives us hints in formulating human economic behaviors. When we investigate how such a behavior can be effective in a complex system to a certain degree, we are naturally led to a coevolution view between individual behaviors and whole process, or to a notion of micro-macro loop. This proves inadequacy of both methodological individualism (or atomism) and methodological holism. Theory of computing complexity is built by consistent and precise inferences but can contribute to understand ambiguous and often contradictory human behaviors.

    For the details, see Chapter 1 (with the same title as the book) of our book Microfoundations of Evolutionary Economics (2019) or the draft paper of the chapter (2016):
    https://www.researchgate.net/publication/334508762_Microfoundations_of_Evolutionary_Economics
    https://www.researchgate.net/publication/301766363_Microfoundations_of_Evolutionary_Economics

    Lars Syll >> We have to at least justify our disregard for the gap between the nature of the real world and our theories and models of it.

    There is a gap between the nature of the real world and our capability of describing and understanding it. This is important point of complexity argument for thinking possibilities of theories of complex system, but we should also look at the difficulty of problem and our capability as an animal. Indeed, this is the CD-gap that Heiner (1983) pointed as a source of predictable behavior.

    Heiner, Ronald A., “The Origin of Predictable Behavior,” American Economic Review, September 1983, 73, 560-95. See also Chapter 1 of our book above mentioned.

    Lars Syll >> But since the economy clearly has more in common with an open-system ontology we ought to look out for other theories — theories who are rigorous and precise in the meaning that they can be deployed for enabling us to detect important causal mechanisms, capacities and tendencies pertaining to deep layers of the real world.

    • Yoshinori Shiozawa
      August 18, 2019 at 9:18 am

      I have forgotten to copy and paste the last part of my above post:

      One of such theory that can show us a hint for a new framework other than equilibrium is dissipative structure. See my old paper:
      Economy as a dissipative structure, May 1996.
      https://www.researchgate.net/publication/236149834_Economy_as_a_Dissipative_Structure

      The founder of this concept, Ilya Prigogine, characterized it as stable structure which can only exist far from equilibrium.

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