Courage that will live on forever

22 February, 2018 at 18:02 | Posted in Politics & Society | Leave a comment


Seventy-five years ago, on February 22, 1943, Hans and Sophie Scholl — members of the resistance group ‘Die Weisse Rose’ — were killed by the Nazis.

Courage is not anything very common, and the value we put on it is a witness to its rarity.

Courage is a capability to confront fear, as when in front of the powerful and mighty, not to step back, but stand up for one’s rights not to be humiliated or abused in any ways by the rich and powerful.

Courage is to do the right thing in spite of danger and fear. To keep on even if opportunities to turn back are given. Like in the great stories. The ones where people have lots of chances of turning back — but don’t.

Dignity, a better life, or justice and rule of law, are things worth fighting for. Not to step back, in spite of confronting the mighty and powerful, creates courageous acts that stay in our memories and means something – as when Hans and Sophie Scholl decided to fight the Nazi atrocities. May their beautiful souls live on forever.


Economics — a science with wacky views of human behaviour​

21 February, 2018 at 17:08 | Posted in Economics | 2 Comments

There is something about the way economists construct their models nowadays that obviously doesn’t sit right.

The one-sided, almost religious, insistence on axiomatic-deductivist modelling as the only scientific activity worthy of pursuing in economics still has not given way to methodological pluralism based on ontological considerations (rather than formalistic tractability). In their search for model-based rigour and certainty, ‘modern’ economics has turned out to be a totally hopeless project in terms of real-world relevance.

grumpy-economics-catIf macroeconomic models — no matter of what ilk — build on microfoundational assumptions of representative actors, rational expectations, market clearing and equilibrium, and we know that real people and markets cannot be expected to obey these assumptions, the warrants for supposing that model-based conclusions or hypotheses of causally relevant mechanisms or regularities can be bridged to real-world target systems, are obviously non-justifiable. Incompatibility between actual behaviour and the behaviour in macroeconomic models building on representative actors and rational expectations microfoundations shows the futility of trying to represent real-world target systems with models flagrantly at odds with reality. As Robert Gordon once had it:

Rigor competes with relevance in macroeconomic and monetary theory, and in some lines of development macro and monetary theorists, like many of their colleagues in micro theory, seem to consider relevance to be more or less irrelevant.

Science and the quest for truth

20 February, 2018 at 19:01 | Posted in Economics | 4 Comments

28mptoothfairy_jpg_1771152eIn my view, scientific theories are not to be considered ‘true’ or ‘false.’ In constructing such a theory, we are not trying to get at the truth, or even to approximate to it: rather, we are trying to organize our thoughts and observations in a useful manner.

Robert Aumann


What a handy view of science.

How reassuring for all of you who have always thought that believing in the tooth fairy make you understand what happens to kids’ teeth. Now a ‘Nobel prize’ winning economist tells you that if there are such things as tooth fairies or not doesn’t really matter. Scientific theories are not about what is true or false, but whether ‘they enable us to organize and understand our observations’ …

Mirabile dictu!

What Aumann and other defenders of scientific storytelling ‘forgets’ is that potential explanatory power achieved in thought experimental models is not enough for attaining real explanations. Model explanations are at best conjectures, and whether they do or do not explain things in the real world is something we have to test. To just believe that you understand or explain things better with thought experiments is not enough. Without a warranted export certificate to the real world, model explanations are pretty worthless. Proving things in models is not enough. Truth is an important concept in real science.

Marx and Keynes on the contradictions of capitalism

19 February, 2018 at 14:56 | Posted in Economics | 6 Comments

elsterEach capitalist, Marx noted, has an ambiguous relation to the workers. On the one hand, she wants the workers she employs to have low wages, since that makes for high profits. On the other hand, she wants all other workers to have high wages, since that makes for high demand for her products. Although it is possible for any one capitalist to have both desires satisfied, it is logically impossible for this to be the case for all capitalists simultaneously. This is a ‘contradiction of capitalism’ that Keynes spelled out as follows. In a situation of falling profit, each capitalist responds by laying off workers, thus saving on the wage bill. Yet since the demand of workers directly or indirectly is what sustains the firm, the effect of all capitalists’ simultaneously laying off workers will be a further reduction in profit, causing more lay-offs or bankruptcies.

Flight From The City

19 February, 2018 at 13:55 | Posted in Varia | Leave a comment


Jóhann Jóhannsson (1969 – 2018)  R.I.P.

The future — something we know very little about

18 February, 2018 at 19:54 | Posted in Economics | 1 Comment

All these pretty, polite techniques, made for a well-panelled Board Room and a nicely regulated market, are liable to collapse. At all times the vague panic fears and equally vague and unreasoned hopes are not really lulled, and lie but a little way below the surface.

check-your-assumptionsPerhaps the reader feels that this general, philosophical disquisition on the behavior of mankind is somewhat remote from the economic theory under discussion. But I think not. Tho this is how we behave in the marketplace, the theory we devise in the study of how we behave in the market place should not itself submit to market-place idols. I accuse the classical economic theory of being itself one of these pretty, polite techniques which tries to deal with the present by abstracting from the fact that we know very little about the future.

I dare say that a classical economist would readily admit this. But, even so, I think he has overlooked the precise nature of the difference which his abstraction makes between theory and practice, and the character of the fallacies into which he is likely to be led.

John Maynard Keynes

Poland’s Law and Justice — now and then

18 February, 2018 at 15:59 | Posted in Politics & Society | 2 Comments

A new law passed by Poland’s ruling Law and Justice Party and signed by President Andrzej Duda on Feb. 6, means that you may end up in prison for three years if you “publicly and against the facts attribute to the Polish nation or the Polish state responsibility or co-responsibility for Nazi crimes committed by the German Third Reich.”

JedwabneThe Polish Parliament ordered a new investigation into the Jedwabne atrocity in July 2000 … Over the course of two years, investigators from the Polish Institute of National Remembrance (IPN) interviewed some 111 witnesses … On July 9, 2002, IPN released the final findings of its two-year-long investigation. In a carefully worded summary IPN stated its principal conclusions as follows:

The perpetrators of the crime sensu stricto were Polish inhabitants of Jedwabne and its environs; responsibility for the crime sensu largo could be ascribed to the Germans. IPN found that Poles played a “decisive role” in the massacre, but the massacre was “inspired by the Germans”. The massacre was carried out in full view of the Germans, who were armed and had control of the town, and the Germans refused to intervene and halt the killings. IPN wrote: “The presence of German military policemen…..and other uniformed Germans…..was tantamount to consent to, and tolerance of, the crime.”


China concerts

16 February, 2018 at 22:02 | Posted in Varia | Leave a comment


The Bayesian folly

16 February, 2018 at 18:18 | Posted in Economics | 1 Comment

Assume you’re a Bayesian turkey and hold a nonzero probability belief in the hypothesis H that “people are nice vegetarians that do not eat turkeys and that every day I see the sun rise confirms my belief.” For every day you survive, you update your belief according to Bayes’ Rule

P(H|e) = [P(e|H)P(H)]/P(e),

where evidence e stands for “not being eaten” and P(e|H) = 1. Given that there do exist other hypotheses than H, P(e) is less than 1 and so P(H|e) is greater than P(H). Every day you survive increases your probability belief that you will not be eaten. This is totally rational according to the Bayesian definition of rationality. Unfortunately — as Bertrand Russell famously noticed — for every day that goes by, the traditional Christmas dinner also gets closer and closer …

Neoclassical economics nowadays usually assumes that agents that have to make choices under conditions of uncertainty behave according to Bayesian rules — that is, they maximize expected utility with respect to some subjective probability measure that is continually updated according to Bayes theorem. If not, they are supposed to be irrational.

bayes_dog_tshirtBayesianism reduces questions of rationality to questions of internal consistency (coherence) of beliefs, but — even granted this questionable reductionism — do rational agents really have to be Bayesian? As I have been arguing repeatedly over the years, there is no strong warrant for believing so.

The nodal point here is — of course — that although Bayes’ Rule is mathematically unquestionable, that doesn’t qualify it as indisputably applicable to scientific questions. As one of my favourite statistics bloggers —  Andrew Gelman — puts it:

The fundamental objections to Bayesian methods are twofold: on one hand, Bayesian methods are presented as an automatic inference engine, and this raises suspicion in anyone with applied experience, who realizes that different methods work well in different settings … Bayesians promote the idea that a multiplicity of parameters can be handled via hierarchical, typically exchangeable, models, but it seems implausible that this could really work automatically. In contrast, much of the work in modern non-Bayesian statistics is focused on developing methods that give reasonable answers using minimal assumptions.

The second objection to Bayes comes from the opposite direction and addresses the subjective strand of Bayesian inference: the idea that prior and posterior distributions represent subjective states of knowledge. Here the concern from outsiders is, first, that as scientists we should be concerned with objective knowledge rather than subjective belief, and second, that it’s not clear how to assess subjective knowledge in any case.

bayesfunBeyond these objections is a general impression of the shoddiness of some Bayesian analyses, combined with a feeling that Bayesian methods are being oversold as an all-purpose statistical solution to genuinely hard problems. Compared to classical inference, which focuses on how to extract the information available in data, Bayesian methods seem to quickly move to elaborate computation. It does not seem like a good thing for a generation of statistics to be ignorant of experimental design and analysis of variance, instead of becoming experts on the convergence of the Gibbs sampler. In the short term this represents a dead end, and in the long term it represents a withdrawal of statisticians from the deeper questions of inference and an invitation for econometricians, computer scientists, and others to move in and fill in the gap …

Bayesian inference is a coherent mathematical theory but I don’t trust it in scientific applications. Subjective prior distributions don’t transfer well from person to person, and there’s no good objective principle for choosing a noninformative prior (even if that concept were mathematically defined, which it’s not). Where do prior distributions come from, anyway? I don’t trust them and I see no reason to recommend that other people do, just so that I can have the warm feeling of philosophical coherence …

As Brad Efron wrote in 1986, Bayesian theory requires a great deal of thought about the given situation to apply sensibly, and recommending that scientists use Bayes’ theorem is like giving the neighborhood kids the key to your F-16 …

Economics education — teaching cohorts after cohorts of students useless theories

15 February, 2018 at 20:17 | Posted in Economics | 4 Comments

Nowadays there is almost no place whatsoever in economics education for courses in the history of economic thought and economic methodology.

This is deeply worrying.

A science that doesn’t self-reflect and asks important methodological and science-theoretical questions about the own activity, is a science in dire straits.

How did we end up in this sad state?

Philip Mirowski gives the following answer:

phil After a brief flirtation in the 1960s and 1970s, the grandees of the economics profession took it upon themselves to express openly their disdain and revulsion for the types of self-reflection practiced by ‘methodologists’ and historians of economics, and to go out of their way to prevent those so inclined from occupying any tenured foothold in reputable economics departments. It was perhaps no coincidence that history and philosophy were the areas where one found the greatest concentrations of skeptics concerning the shape and substance of the post-war American economic orthodoxy. High-ranking economics journals, such as the American Economic Review, the Quarterly Journal of Economics and the Journal of Political Economy, declared that they would cease publication of any articles whatsoever in the area, after a prior history of acceptance.

Once this policy was put in place, and then algorithmic journal rankings were used to deny hiring and promotion at the commanding heights of economics to those with methodological leanings. Consequently, the grey-beards summarily expelled both philosophy and history from the graduate economics curriculum; and then, they chased it out of the undergraduate curriculum as well. This latter exile was the bitterest, if only because many undergraduates often want to ask why the profession believes what it does, and hear others debate the answers, since their own allegiances are still in the process of being formed. The rationale tendered to repress this demand was that the students needed still more mathematics preparation, more statistics and more tutelage in ‘theory’, which meant in practice a boot camp regimen consisting of endless working of problem sets, problem sets and more problem sets, until the poor tyros were so dizzy they did not have the spunk left to interrogate the masses of journal articles they had struggled to absorb.

Methodology is about how we do economics, how we evaluate theories, models and arguments. To know and think about methodology is important for every economist. Without methodological awareness it’s really impossible to understand what you are doing and why you’re doing it. Dismissing methodology is dismissing a necessary and vital part of science.

Already back in 1991, a commission chaired by Anne Krueger and including people like Kenneth Arrow, Edward Leamer, and Joseph Stiglitz, reported from own experience “that it is an underemphasis on the ‘linkages’ between tools, both theory and econometrics, and ‘real world problems’ that is the weakness of graduate education in economics,” and that both students and faculty sensed “the absence of facts, institutional information, data, real-world issues, applications, and policy problems.” And in conclusion, they wrote that “graduate programs may be turning out a generation with too many idiot savants skilled in technique but innocent of real economic issues.”

Not much is different today. Economics — and economics education — is still in dire need of a remake.

Twenty-five years ago, Phil Mirowski was invited to give a speech on themes from his book More Heat than Light at my economics department in Lund, Sweden. All the mainstream neoclassical professors were there. Their theories were totally mangled and no one — absolutely no one — had anything to say even remotely reminiscent of a defence. Being at a nonplus, one of them, in total desperation, finally asked: “But what shall we do then?”

rethinkYes indeed — what shall they do when their emperor has turned out to be naked?

More and more young economics students want to see a real change in economics and the way it’s taught. They want something other than the same old mainstream neoclassical catechism. They don’t want to be force-fed with useless mainstream neoclassical theories and models.

Next Page »

Blog at
Entries and comments feeds.