Thomas Sargent’s weird methodology

14 August, 2012 at 13:24 | Posted in Economics, Theory of Science & Methodology | 2 Comments

In Arjo Klamer’s The New Classical Macroeconomics (1984, p 79) Nobel laureate Thomas Sargent answers a couple of Klamer’s questions in a rather surprising way:

People say that many of your assumptions are unrealistic.

It is true that these assumptions are unrealistic.

Do you feel comfortable with them?

Yes, about certain matters. I’m aware of all the problems with them. There are philosophical contradictions about using this methodoology. Deep down I don’t believe in them, but I don’t have a better method of understanding what’s going on out there.

But if the best is not good enough? Wittgenstein’s dictum in Tractatus Logico-Philosophicus comes to mind:

Wovon man nicht sprechen kann, darüber muss man schweigen.

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  1. I have to do a limerick on Sargent soon. For now, here is one on an instrumental variable debate.

    Thou Shalt Not Question Swiss Cheese

    Acemoglu, Simon, and Robinson have to adjudicate the settler case once more,
    They say with a sigh, this getting to be a bore,
    We showed the truth with our robust mean,
    Who cares about the fact that the mean hides more variance than what is seen,
    Phewy to Alhouy for poking holes into our statistical cheese,
    Show some respect before geniuses, please!
    With this reply we have most emphatically shown why we are the best,
    Now it is time to give the dead White settlers their well earned institutional rest,
    Henceforth we will have no more to say on this score!

  2. Sargent knows well the ergodicity drill
    Mapping the stochastic logic of rational expectations brings a thrill
    It is easier to make an efficient market case
    When the actor is perfectly informed at the base
    However, the Lucas critique makes aggregate policy stability hard
    Since the rational actor anticipates any changes from the start
    Solid econometric models nevertheless give us a peek
    Into the inter-temporality of the rational actor that we seek
    It does not matter that such an actor is not real
    He comes pre-determined in the theoretical spiel
    The task of a drill sergeant is to make reality conform
    He keeps at it until he gets his preferred statistical norm
    While the Sissyphus effort might seem outsized
    The clever ones know at the end of futility lies a Nobel Prize.
    Yet, despite the inspiration of Jill, Jack was still too damn myopic to get up the hill.

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