Home > Uncategorized > Chicago economics — the triumph of empty formalism

Chicago economics — the triumph of empty formalism

from Lars Syll

Is macroeconomics for real? | LARS P. SYLLVielleicht ist diese Grundperspektive der radikalen Trennung von Form und Gehalt hilfreich, einige zunächst überaus paradoxe Äußerungen von Lucas etwas zu erhellen. Erinnert man sich der Forderungen von Lucas, die Makroökonomik zwingend auf Basis der klassischen Postulate, die Lucas und Sargent (1978) als (a) „Markträumung“ und (b) „Eigennutz“ umrissen hatten, zu errichten, so erstaunt man doch angesichts Passagen wie der folgenden:

“In recent years, the meaning of the term “equilibrium” has undergone such dramatic development that a theorist of the 1930s would not recognize it. It is now routine to describe an economy following a multivariate stochastic process as being “in equilibrium,” by which is meant nothing more than that at each point in time, postulates (a) and (b) above are satisfied. This development, which stemmed mainly from work by K. J. Arrow […] and G. Debreu […], implies that simply to look at any economic time series and conclude that it is a “disequilibrium phenomenon” is a meaningless observation. Indeed, a more likely conjecture […] is that the general hypothesis that a collection of time series describes an economy in competitive equilibrium is without con tent.” (Lucas und Sargent 1978: 58-9)”

Zunächst ist man erstaunt, weil die Argumentation nicht nur kontraintuitiv, sondern geradezu widersinnig erscheint: Wie passt das zusammen, dass Lucas und Sargent einerseits einfordern, jegliche Makrotheorie habe von den Prinzipien „Markträumung bzw. Gleichgewicht“ und „Eigennutz bzw. Optimierung“ auszugehen, wenn sie direkt anschließend konstatieren, dass solche Aussagen inhaltsleer und ohne Bedeutung sind? Die hier gelieferte Verteidigung der Gleichgewichtsannahme „geräumter Märkte“ hat demnach für Lucas gar nichts mit jener alltäglichen Bedeutung zu tun, wonach der Markt für Äpfel geräumt ist, wenn wie beobachten können, dass alle angebotenen Äpfel auch gekauft werden. Markträumung als Konzept ist somit kein Ereignis, dass mit der Realität korrespondiert, sondern ein Modellbaukonzept, mit dem Modellstrukturen erzeugt werden kön nen, die Zeitreihen nachbilden können. Die Begriffe „Markträumung“ und „Eigennutz“ haben eben in diesem Sinne keine empirische, oder reale Bedeutung, wie Lucas und Sargent klar herausstellen, sie dienen nur zur Erzeugung der formalen Struktur des Modells, sie sind jedoch losgelöst von ihrer (anschaulichen) Bedeutung oder Interpretation.

Roberto Cruccolini

In case your German isn’t to rusty, Cruccolini’s dissertation on the development of modern macroeconomics is highly recommended reading.

Some of us have for years been urging economists to pay attention to the ontological foundations of their assumptions and models. Sad to say, economists have not hearkened the appeal — and so modern economics has become increasingly irrelevant to the understanding of the real world.

Within mainstream economics internal validity is still everything and external validity nothing. Why anyone should be interested in that kind of theories and models is beyond imagination. As long as mainstream economists do not come up with any export-licenses for their theories and models to the real world in which we live, they really should not be surprised if people say that this is not science.

Studying mathematics and logics is interesting and fun. It sharpens the mind. In pure mathematics and logics we do not have to worry about external validity. But — economics is not pure mathematics or logics. It’s about society. The real world. Forgetting that, economics is in dire straits.

hqdefaultThe scientific method arose as a rejection of the axiomatic method used by the Greeks for scientific methodology. It was this rejection of axiomatics and logical certainty in favour of empirical and observational approach which led to dramatic progress in science. However, this did involve giving up the certainties of mathematical argumentation and learning to live with the uncertainties of induction. Economists need to do the same — abandon current methodology borrowed from science and develop a new methodology suited for the study of human beings and societies.

Asad Zaman

  1. March 1, 2021 at 12:48 pm

    I’ve googled Roberto Cruccolini and it seems that he has left academia. Unfortunately, that appears to be a regular for economists dealing with ontological questions.

  2. March 1, 2021 at 12:57 pm

    That’s a sad, but so true, reflection. I think most of us non-mainstream economists have had to fight hard against the far from pluralist or open-minded orthodoxy for resources and employment. You have to be really tough to survive in a hostile environment!

  3. March 1, 2021 at 1:44 pm

    Is it good to think it is the problem of surviving and fighting back? I have posed a doubt on the productivity of Lawson’s style critical realism. See here and comments after it, including the one by Dave Marsay. Please point us one or two seminal papers, excepting criticism, that prove the productivity or fecundity of critical realism à la Lawson and Syll.

    • March 3, 2021 at 3:51 pm

      The reality Yoshinori likes to hide behind is illustrated by the UK’s .gov scheme allowing individuals to comment on government policies. There have to be more than 10,000 signatures before the issue has a chance of being raised in parliament. One won’t find seminal (original) policy papers arising from critical realist philosophy partly because economists don’t understand philosophising and partly because most people won’t waste their time writing for those incapable of grasping their arguments. The problem is humorously discussed in E T Bell’s study of Boole (inventor of Boolean algebra) in “Men of Mathematics”, but I experienced it in the contrast between the mathematician’s language Algol and the accountant’s language COBOL, it being found necessary in the latter to spell out mathematical operations in words. Poor Tony Lawson suffers similar misunderstanding. It is not that he is wrong but that his style of writing is that of a philosopher or a lawyer rather than a mathematician. I agree with his “positioning” theory of money in Fullbrook and Morgan’s “MMT and its Critics”, but his long paper – written, I presume, for non-mathematicians – taught me no more than I Iearned from a few lines of my Algol68 User Guide. “What type of object is it, which remains constant but can refer to one value at one time and another at another? The answer is a working space in the store. … In high level languages, working spaces are given identifiers and are described as variables”. To use Yoshinori’s posh word ‘fecundity’, the practical value of that lies not in a particular working space being a variable, but in a variable piggy-backing on a non-variable, like TV programmes piggy-back on carrier signals. Boole discovered invariance. Henri Poincare discovered the automorphic Fourier variables which information scientists take for granted.

      I was glad to see Yoshinori following up Dave M’s comment to discover “science is “an ongoing process in which scientists improve the concepts they use to understand the mechanisms that they study.” That’s where I am at myself. Having recognised the fixed mechanism guiding economic flows in ways which create differentials, I have seen how the concept of a potential dividers forms a balance of forces in a Wheatstone’s Bridge but balances information in a PID control system: a monetarised version of this being applicable both to decentralised and centralised banking systems. Money is credit in the former, but debt (ceding control of the money supply to the bankers) in the latter, complete control in which controls not the economy but chrematism (i.e. money making).

  4. Laurent Leduc
    March 1, 2021 at 11:40 pm

    What about a “stable disequilibrium”? E.g., Earth’s atmosphere is a stable disequilibrium while Mars has a stable equilibrium.

  5. Craig
    March 2, 2021 at 5:17 am

    Here’s an analytic that the 50% discount/rebate policy at retail sale refutes:

    More money always results in inflation.

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