Home > Uncategorized > Maurice Allais on empirics and theory

Maurice Allais on empirics and theory

from Lars Syll

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Submission to observed or experimental data is the golden rule which dominates any scientific discipline. Any theory whatever, if it is not verified by empirical evidence, has no scientific value and should be rejected.

 

Maurice Allais

Formalistic deductive “Glasperlenspiel” can be very impressive and seductive. But in the realm of science, it ought to be considered of little or no value to simply make claims about the model and lose sight of reality.

Mainstream — neoclassical — economics has since long given up on the real world and contents itself with proving things about thought up worlds. Empirical evidence only plays a minor role in economic theory, where models largely function as a substitute for empirical evidence. Hopefully humbled by the manifest failure of its theoretical pretences, the one-sided, almost religious, insistence on axiomatic-deductivist modelling as the only scientific activity worthy of pursuing in economics will give way to methodological pluralism based on ontological considerations rather than formalistic tractability.

To have valid evidence is not enough. What economics needs is sound evidence. Why? Simply because the premises of a valid argument do not have to be true, but a sound argument, on the other hand, is not only valid but builds on premises that are true. Aiming only for validity, without soundness, is setting the economics aspirations level too low for developing a realist and relevant science.

  1. Gerald Holtham
    December 4, 2019 at 6:16 pm

    Can’t disagree with that. Allais’ own “paradox” was an early dent in the axioms underlying rational choice theory. Since then we have the rise of behaviourism in economics, especially financial economics, though it is at a primitive stage.

    • Herbert
      December 5, 2019 at 7:01 pm

      Rational choice does not exist. Emotions are always decisive not only in the choice of acquisition, but also in behavior as a whole. Emotion is the result of biochemical processes in the body. Therefore, economics is a subsection of biology.

      • December 6, 2019 at 12:24 am

        That is not true. otherwise E=MC2 would just be a theory and unprovable, because Einstein chose it. Rational choice is not a choice it is a fact not subject to emotional decision making. Probably current Economics is never a rational choice however as it is fact deficient.

  2. Ikonoclast
    December 4, 2019 at 7:43 pm

    There is an old recipe for jugged hare. It starts, “First catch your hare.”

    An objective economics is just as elusive. Before catching your hare, your ontology must be accurate; true to objective reality. You have to know what a hare looks like and how to catch it. So long as the ontology of economics is about measuring objects and processes in dollars, rather than in SI (scientific units) for things amenable to measurement in SI units, and via moral philosophy (ethics) for things and processes not amenable to measurement in SI units, then economics will remain mired in prescriptions which ignore real world and human outcomes.

    This is the issue is at the heart(lessness) of economics. If decisions are made on the criteria of how many dollars can be created and allocated to entities via profits rather than on how much CO2 and micro-plastics are going into the environment (and how to lower those quantities) then mainstream neoclassical economics will continue to destroy the biosphere as a viable habitat for humans and much the rest of the web of life.

    • December 9, 2019 at 5:06 pm

      I agree with the spirit of the discussion here, but would replace the word “dollars” with “real (inflation-adjusted) output” or GDP to more accurately describe neoclassical economics. Actually, dollars and other units of currency seem rather amenable to objective measurement to me, but they are in fact not favored by the mainstream. Of course, your main point is to critique units that supposedly measure the desired performance of the economy, and that in fact leave out anything that matters. That point still applies once it is understood that the use of “real” measures does not get us any closer to the desired measure, which would include, say, human health.

  3. Robert Locke
    December 5, 2019 at 12:42 pm

    “Reform of finance education in US business schools:
    An historian’s view} *58, 2011.
    Robert R. Locke [University of Hawaii, USA]
    Copyright: Robert R. Locke, 2011

    I discuss comparatively, Maurice Allais’ school of French ingenieur economists and U.S. financial business school education with respect to different foundations of knowledge, especially mathematics, and ethics, mainly the difference between people trained in engineering and money.

  4. December 5, 2019 at 2:21 pm

    The snags with Allais’s argument is that relevant empirical evidence may be rejected and fraudulent empirical evidence accepted. I can cite modern scientist’s dismissal of the Gospel narrative unseen, on the grounds that (in the modern style of writing history) it is unhistorical and in any case unrepeatable; and Burt’s doctoring of the evidence to support his views on intelligence testing (a fact only discovered after his death, by when his views were already embodied in practice).

    In real science there is also a ‘chicken and egg’ situation: which came first, the theory or the observations? How can you know if something is circuital if one doesn’t know what a circuit is? The early electrical theorists didn’t: they had to work it out from what they were observing.

  5. December 5, 2019 at 8:12 pm

    Mr Allais firat above comment should be common understanding. My position is that we eliminate all the guff surrounding Economics and just work with facts, starting with the laws, the Constitution. Currency is a creature of the law, not some esoteric human attribute that informs mainstream economics. And yes be vigilant against falsehoods. Dave, the theory cannot come first, although in the Mainstream it does. That is its downfall.

    • December 7, 2019 at 8:27 am

      John, in my example, the epistemological ‘applied’ theory did not come first, the language did, which draws the attention of an observer to the ontological question and answer of ‘fundamental theory’.

      In my example, is there or is there not such a thing as a circuit to be observed? That there is was only realised by electricity theorists about 1800, although it was proposed by Harvey c.1620 in the different context of our blood by looking, not just at some not very obvious facts, but at the relationships between them. My fundamental economic theory concerns the circulation of ‘money’: not between obvious institutions like banks, businesses and markets but between growing up people with different responsibilities performing different functions. What is it doing? And what does it look like in ‘macro and ‘micro’ perspectives?

      I am very sympathetic with your position about looking at the facts rather than what other people say about them, but the facts include language and our need to understand it. So look at how language works? I got my vocabulary from Algol68 and Shannon’s Mathematical Theory of Communication, and spent twenty years experimenting with how they ‘applied’.

      • John Doyle
        December 9, 2019 at 1:40 pm

        Re electricity., Morris Copeland suggested in 1952 that electricity is like money. You have to turn a switch to get any current to materialise. Money is energy as well. I found this analogy very interesting. This is where language comes into play, but It’s still a complication that we might be better without.

      • December 9, 2019 at 10:17 pm

        If you examine the matter more closely, you find money is neither energy nor power, but it is ENERGISING if we interpret it as if it were. Most people do, and that’s not the power it has but (in the familar phrase) the power it has over us: the mis-interpretation which is enslaving us. I tried to direct attention away from that to power as a carrier of information, where the switching makes the difference that makes a difference. At the first level think cable telegraphy with a separate cable per message; at the second level think radio telegraphy with many broadcast programs or broadband cable signals at different carrier frequencies; at the third level think digitised messages, chopped up, packaged, labelled and sent in same time (as against frequency) slot: sharing the same carrier signal but
        delivered only to those addressed. Most of what goes on the economic system is not power directing information but information directing our own (or some computer’s) power, and systematically synchronising it with other people or computers doing (in the most general sense) the same thing. Moving on to the flow of money from the quantity of it is a real advance, but the theory of the control of motion and change has moved on to the internet since then.

        The internet may be complicated but the theory of it doesn’t have to be. Like its navigational and linguistic paradigms it is merely 4-phase complex. A digitally multiplexed signal looks like noise but isn’t: it is an encrypted signal. Likewise when empiricists look at the signals emitted by the economy. One needs to know the encryption system and its key word – that being, I am arguing, PID ‘information’ rather than ‘power’.

      • John Doyle
        December 10, 2019 at 2:18 am

        Information as energy?Rather than electricity,Yes. Power is perhaps a fraught word subject to misinterpretation, it is used every day in one way or another in Economics.The context makes it clear, as with sand and snow. Analogies can make understanding clearer, but if not well thought through are likely to not work. Electricity is one of those. I keep Practising on Quora ways to render meaning to economics to avoid confusion. It’s not easy. How do you get someone to understand that Federal Taxes cannot, when they are in sovereign governments. be revenue?

    • December 7, 2019 at 9:10 am

      From Asad’s “Foundations of Probability 4”:

      “The Arabs have many words for sand, and the Eskimos have many words for snow. According to the Sapir-Whorf hypothesis, lack of vocabulary can prevent us from seeing the differences in sand and snow which can be seen by those who have the words to express the difference.”

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