Home > Uncategorized > Wren-Lewis trying to cope with ideology

Wren-Lewis trying to cope with ideology

from Lars Syll

Simon Wren-Lewis has also commented on the study by Mohsen Javdani and Ha-Joon Chang — on economics and ideology — that I wrote about earlier today. Says Wren-Lewis:

scI also, from my own experience, want to suggest that in their formal discourse (seminars, refereeing etc) academic economists normally pretend that this ideological bias does not exist. I cannot recall anyone in any seminar saying something like ‘you only assume that because of your ideology/politics’. This has one huge advantage. It means that academic analysis is judged (on the surface at least) on its merits, and not on the basis of the ideology of those involved.

The danger of doing the opposite should be obvious. Your view on the theoretical and empirical validity of an academic paper or study may become dependent on the ideology or politics of the author or the political implications of the results rather than its scientific merits. Having said that, there are many people who argue that economics is just a form of politics and economists should stop pretending otherwise. I disagree. Economics can only be called a science because it embraces the scientific method. The moment evidence is routinely ignored by academics because it does not help some political project economics stops being the science it undoubtedly is.

Quite frankly I have to admit to being at a loss here. Of course, you never hear anyone at our seminars telling the lecturer that the assumptions on which his models are built are only made for ideological reasons. But that does not necessarily mean — wether on the surface or not — that “academic analysis is judged on its merits”. What it means is that we have a catechism that no one dares to question. And that catechism has become hegemonic for particular reasons, one of which may very well be of an ideological nature. When the neoclassical theory was developed in the late 19th century one of the reasons was that some economists — e.g. Böhm-Bawerk –thought that the Ricardian (labour value) tradition had become too radical and could be used as a dangerous weapon in the class struggle. Marginalism was explicitly seen as a way to counter that.

Wren-Lewis seems to think that ‘the facts are bound to win in the end.’

It is difficult to see why.

Take the rational expectations assumption. Rational expectations in the mainstream economists’ world imply that relevant distributions have to be time-independent. This amounts to assuming that an economy is like a closed system with known stochastic probability distributions for all different events. In reality, it is straining one’s beliefs to try to represent economies as outcomes of stochastic processes. An existing economy is a single realization tout court, and hardly conceivable as one realization out of an ensemble of economy-worlds since an economy can hardly be conceived as being completely replicated over time. It is — to say the least — very difficult to see any similarity between these modelling assumptions and the expectations of real persons. In the world of the rational expectations hypothesis, we are never disappointed in any other way than as when we lose at the roulette wheels. But real life is not an urn or a roulette wheel. And that’s also the reason why allowing for cases where agents make ‘predictable errors’ in DSGE models doesn’t take us any closer to a relevant and realist depiction of actual economic decisions and behaviours.

‘Rigorous’ and ‘precise’ DSGE models cannot be considered anything else than unsubstantiated conjectures as long as they aren’t supported by evidence from outside the theory or model. To my knowledge no in any way decisive empirical evidence has been presented.

So, given this lack of empirical evidence, why do mainstream economists still stick to using this kind of theories and models building on blatantly ridiculous assumptions? Well, one reason, I would argue, is of an ideological nature. Those models and the assumptions they build on standardly have a neoliberal or market-friendly bias. I guess that is also one of the — ideological — reasons those models and theories are so dear to many Chicago economists and ‘New Keynesian’ macroeconomists …

  1. Frank Salter
    August 22, 2019 at 2:00 pm

    I think Wren-Lewis is correct right up to the point where he proves he has no understanding of the scientific method. His idea of science appears to be that he recognises the words without understanding that economists do NOT practise real science any way at all. Then he is only left preaching ideology.

  2. Econoclast
    August 22, 2019 at 2:31 pm

    A long time ago (I think it was an appendix in his classic An American Dilemma, 1944), Nobel-winning (1974) economist Gunnar Myrdal advised of the importance of revealing your assumptions and biases at the beginning of your presentation.

  3. John deChadenedes
    August 23, 2019 at 12:30 am

    It was my observation – a disturbing one, I can tell you – when I first encountered conventional economics in graduate school, that all of the fundamental assumptions of classical economics are actually false. They are not usually made explicit, of course, but once you work out what they are, in every case the appropriate response was “No, the world doesn’t really work that way. People don’t think that way. Why are you ignoring fundamental human rights?” And so on. I was appalled. In my view, we need an entirely new way of thinking about the economy and about economics. The first and most fundamental assumptions of this new approach would be (1) that every person is born with an equal and inalienable right to a life-sustaining share of everything necessary for a secure and healthy existence and (2) that there is enough to go around. The second, of course, would be an operating assumption only until we could demonstrate that it is true, which it is.

    • Rob
      August 23, 2019 at 12:44 am

      John deChadenedes, well said.

  4. Ken Zimmerman
    August 24, 2019 at 3:17 pm

    In my view, as I’ve noted, the job of the scientist is to follow the actor. For physical scientists, the actors are stars, planets, flora, fauna, earthquakes, volcanoes, pollution, energy, etc. For social scientists, the actors are humans and the cultures and societies they create.

    This task is difficult for both physical and social scientists due to each being human. What I posted at another part of this blog helps explain this. “According to neo-classical and today neo-liberal economists the “rational economic person” decides what to do by weighing up marginal costs and marginal benefits, for example by comparing the price of an ice cream cone with its utility. For economists, the economy is made up of cool-headed people who do all these calculations perfectly every time. Even if that were possible, which all the research in biology, psychology, and neuroscience says it is not, how does that cool-headed person distinguish a cost from a benefit? That involves creating “seams” in the flow of consciousness. This part is benefit, while this part is cost. It also involves some form of judgment about where to draw these seams. That’s developed from experiences. But since humans’ experiences are not identical, the edges of seams will be different from person to person. In the community of humans that problem is dealt with through accounts and feedback on these accounts. And, just like building a railroad is placing sets of rails and ties after one another till you’ve gone from “micro” to “macro,” so accounts and feedback work the same from pairs of humans to multiples of corporations, communities, and nations. Also, just like railroads, the accounts and feedback require constant upkeep and revisions, from just a bit to entire reworks. All of this is verified by thousands of studies in all the social sciences and history. Now comes economics to reject all of this. And reject it with virtually no empirical study.”

    Scientists do their work, following the actor in just this way. This, of course means ideologies are inherent in science, as in everyday life. Favored ways of observing, organizing research, interpreting results, research tools, etc. are part of the work of every scientist. As noted, in everyday community life of humans these problems of ideology are dealt with through accounts and feedback on these accounts. The process in science is much the same, although more formal, and more intense and probing. For example, anthropologist Sharon Traweek is well known for her interrogations of the ideology of representations in the social studies of science. This goes on throughout all sciences. Scientists interrogate one another on the judgments they make, the seams they create, the terminology they deploy to describe, in the social studies of science, science and the work of scientists. This is not a magic bullet to clear ideology out of science. There is no such magic bullet. Ideology cannot be removed from science because humans cannot be removed from science. Science is a culture, however, that emphasizes and expects scientists to interrogate one another to improve the work of all scientists by forcing scientists to answer tough and probing questions.

    • August 28, 2019 at 11:00 am

      Ken, “what you posted at another part of this blog” is well said. Not having got involved with the difference between a map (which needs updating) and a model, when you start likening the economy to a railway you are actually modelling it.

      One can see what is involved in running a railway by constructing a toy railway with several lines feeding (as you suggest) different human purposes, and seeing how decisions are made to switch traffic from one line to another. Where the capitalists have gone wrong (I will not dignify them with the name of economists) is that they have economised on their toy train set, leaving out everything significant by reducing it to a single circuit serving only one purpose: accumulating money.

      • Ken Zimmerman
        August 28, 2019 at 11:54 am

        Yes, a railroad can be used as a model for economic life. A vastly simplified model, but still useful in some limited ways in showing how humans construct and maintain economic objects and ways of life. But a toy railway is like a non-toy railway just as a toy jet aircraft is like the full size one that carries passengers, etc. But still potentially useful for planning. But in these days of electronic simulation, an electronic simulation would be more useful. Sticking to the analogy, capitalists have “screwed up” the railroads and the rest of the economy by allowing capitalism to function unrestrained. By being immature with no self-control. Capitalism has tendencies for wealth and income concentration and for large private firms to grab and assert political power over all activities, economic and otherwise. Capitalism has survived because others have put in place laws and restrains (e.g., high taxes on firms and the rich) to ensure these tendencies don’t get out of hand as they did in 19th century America, 1929, 2007, etc. Considering capitalism’s suicidal tendencies, it should have died in America before the beginning of the 20th century. Now, capitalism has reached excesses never before seen in the US. Either it will be constrained, once again, or as FDR warned there will be revolution. And not a pretty revolution. Now we wait.

  5. EDWARD K ROSS
    August 24, 2019 at 11:44 pm

    In reply to Lars Syll whom I respect, however as a non academic I seriously question
    “As economics can only be called a science because it embraces the scientific method”.
    In replying to the above line I acknowledge that it may not represent what the writer intended.

    My reason for replying is that although I am not an academic, from my practical experience in the real world and the resulting logic. I THINK that ideally it would be great if economics used the scientific method in all its deliberations. To me from observation it appears to me that a great deal of the economic conversations, particularly those that support mainstream neoliberal ideology, Apply a post modernist attitude that allows them to ignore anything that that questions their ideological beliefs and aims. Therefor in my view economics cannot be a true science, until they openly embrace a scientific method that deals with all the facts and not just those that suit their intentions.

    I have made this reply because I think until economists wake up to this fact they are not likely to gain credibility in the real world. Ted

  6. EDWARD K ROSS
    August 26, 2019 at 10:38 pm

    Here I note at the time of my post I was not aware of Ha-Joon Chang’s excellent honest post of August 19 Economics and Ideology.

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