Krugman vs. Galbraith on math and models

21 August, 2013 at 18:06 | Posted in Economics, Theory of Science & Methodology | 10 Comments

James K. Galbraith

Krugman’s main point is that he represents the “nerds” of economics, whereas I and the distinguished writer Robert Kuttner are “literati,” who would like the profession to be less mathematical than it is. Leaving Kuttner to speak for himself, this view also totally misrepresents not only my position but also Paul Krugman’s own professional one.

This may come as a surprise to outsiders, but Krugman is not a mathematical theorist (and I have heard him admit this, to a knowing audience). Krugman’s mathematics are not deep, and he has no interest in complicated manipulations of data. He owes his fame, instead, to an exceptional grace and lucidity of formal presentation. With these gifts, Paul has expanded the range of neoclassical economics in several notable directions, especially international trade theory. Krugman’s professional work is mathematically literate, of course. The point is that it is also literate, and, for many economists, that is its appeal.

My own work is mathematical when it needs to be …

So if the issues between Krugman and myself are neither hermeneutic nor mathematic, what are they? The actual issues are philosophical and theoretical.

Paul’s worldview rests on the belief that useful implications for important questions of public policy can be derived, essentially from first principles, with the help of a well-structured logic. Well-structured deduction from metaphysical first principles is the Krugman forte.

cartoon
I don’t accept that much of use can be learned about policy in this way. When the world deviates from the principles, as it usually does, the simple lessons go astray. This is not a complaint against math. It is a complaint against indiscriminate application of the deductive method, sometimes called the Ricardian vice, to problems of human action. Mine is an old gripe against much of what professional economists do; not against science but against scientism, against the pretense of science. To combat it, I spend my research time wrestling with real-world data, and I spend much of my writing time warring against the policy ideas of aggressive, ahistorical deductivists …

In the final analysis, Krugman’s argument is that there is a simple distinction between the “serious” economists–who agree with him–and the “critics,” who are, by definition, not serious. It is true, of course, that economic-policy discussions are magnets for cranks. But from this it does not follow, and is not in fact true, that all “serious” economists hold to some single position. It is even more absurd to suppose that one gains access to this wisdom by passing an exam in algebra. In this respect, Krugman’s argument is so shallow, so actually illogical (a fallacy of induction, in this case), that it is evidently aimed at rubes. I hope not many will be taken in.

Paul Krugman


images-14Economics is at least partly about quantities and their relationships; so you can’t make sense of it unless you are willing to do some arithmetic and even some algebra to make sure that the stories you tell hang together–and that they are consistent with the evidence. This doesn’t sound like much, but experience shows that there are many influential intellectuals who are prepared to make sweeping pronouncements on economics without doing the arithmetic …

Galbraith, like many critics of economics, seems to believe in the following syllogism:

1) Economists disagree about some important issues, and some economists with impeccable credentials say silly things.

2) Therefore, there is no need for a smart individual to brush up on economics–say by reading an undergraduate textbook–before making pronouncements on the subject.

Although Galbraith systematically exaggerates and misrepresents the actual disagreements, 1) is obviously true about economics–and about medicine, and physics, and law, and any other discipline you choose to name. Did you know that astronomers cannot agree on the age of the universe, and that the current best estimates suggest that the oldest stars are older than the universe in which they shine? So maybe Copernicus was wrong!

The point is that in each of these disciplines, we all understand that while there are major disagreements about some questions, there is also a large area on which the experts do agree, and in which their expertise is real …

Because of this attitude, most of the criticism economists face is not over issues where there is legitimate disagreement. Instead, the heavy majority of the challenges are simply wrong on the arithmetic. That is, the doctrines asserted either do not add up, can be shown to be flatly untrue using readily available data, or can be shown by simple calculations to involve effects much too small to bear the weight being placed on them …

Now we all make mistakes. But the peculiar thing here is that in each of these cases, the proponents imagine themselves to have achieved a higher level of understanding, to have transcended the narrowness of conventional economics. Somebody needs to point out to them and to their audiences that, on the contrary, they are simply misunderstanding basic arithmetic.

Post Keynesian Archive

(h/t Jan Milch)

Added (GMT 20:20): And, coincidentally, Krugman has a post on – yes, math – on his blog today, now — 17 years later — writing:

What is true is that all too many economists have lost sight of this purpose; they treat their models as The Truth, and/or judge each others’ work by how hard the math is. It sounds as if Smith was taught macro by people like that. And there are a lot of people in macro, some of them fairly prominent, who are what my old teacher Rudi Dornbusch used to call “fearful plumbers” — people who can push equations around, but have no sense of what they mean, and as a result say quite remarkably stupid things when confronted with real-world economic issues.

With age comes humility and wisdom …

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10 Comments

  1. See Noah’s lament on math and Krugman’s reflections

  2. The wheels of discourse turn round and round while we stay stay stationary. It is interesting that Kalecki is back in fashion since he was ‘rediscovered’ by Krugman recently on the web’s most influential blog; it should go without saying that he is wrong on point (2) above. And elsewhere, while Galbraith rightly criticizes scientism, which has pervaded discourse amongst academics, Steve Pinker urges the humanities to embrace it: “Scientism, in this good sense, is not the belief that members of the occupational guild called “science” are particularly wise or noble. On the contrary, the defining practices of science, including open debate, peer review, and double-blind methods, are explicitly designed to circumvent the errors and sins to which scientists, being human, are vulnerable. Scientism does not mean that all current scientific hypotheses are true; most new ones are not, since the cycle of conjecture and refutation is the lifeblood of science. It is not an imperialistic drive to occupy the humanities; the promise of science is to enrich and diversify the intellectual tools of humanistic scholarship, not to obliterate them.” (Source: http://www.newrepublic.com/article/114127/science-not-enemy-humanities ) On the question of imperialism, I think sociologists and others could argue with Pinker’s view.

  3. Reminds me of another debate that kicked off a few days back…

    http://fixingtheeconomists.wordpress.com/2013/08/21/naked-and-free-economics-without-models-a-response-to-grasselli/

    *Whistles*…

    • Interesting debate. Some people in science often argue like: it’s nothing wrong with mathematics/axiomatics/deductivism, it’s just that people are using the wrong kind of m/a/d, and that we really need more of m/a/d. Doing some ontological reflection on the way the world works I would say that it’s — especially when we’re talking about socio-economic subsystems of the world — far from self-evident that m/a/d is appropriate (and to me that’s what people like Keynes and Bhaskar have convincingly shown to be the case).

      • Indeed. In the back of my mind always is the specter of the mathesis universalis. That’s what these folks are aiming at. And it’s a ghost.

        http://en.wikipedia.org/wiki/Mathesis_universalis

        Actually the mathesis universalis is, as Foucault once argued, really a centerpiece in the Enlightenment project. Of course, you’ll probably disagree with me on that, Lars. 😉

  4. Philip Pilkington recently made a good point to the effect that neoclassical economics has a strong teleological bent. There’s an idea that “markets” naturally want to end up at a blessed destination Omega, and would do, if only the durn gummint would git outta the durn way and let ’em. Marxism has a different teleology, some sort of idea of a propertylessness Utopia of equality and abundance emerging in a period of end-state grace, after interim periods of capitalist exertion and overextension followed by a dictatorship of “the proletariat”. Both teleologies are rubbish.

    I have no problem with the idea that various schools in economics have different ideas of what an econo-utopia might look like. What I do have a problem with is when those schools pretend that their preferred vision of the future is some kind of inevitability, or the ‘natural state’ the world is tending toward, if only some straw-man enemy class or institution (the bourgoisie, or the gummint, or whatever) could be defeated or got out of the way.

    In fact, I think economists should spend a lot more time pointing out that if we really want to, and are willing to design institutions and price incentives accordingly, we could build almost any kind of socioeconomic reality we can imagine. So let’s be open and explicit about that, and imagine different possible futures, not as end-stations, but perhaps as way-stations. Then different schools of economics can drop the teleology and instead propose normative scenarios, i.e. set about trying to (a) describe and propose a desirable future economy in its key features, and (b) design a benign pathway for getting there, complete with appropriate regulatory policies and financial incentive structures to motivate collective behaviours in the desired direction. And then political movements can endorse one or the other vision.

    There isn’t much that’s inevitable in economics. Human beings are capable of organising an astonishing variety of socioeconomies, and making them work.

    • “In fact, I think economists should spend a lot more time pointing out that if we really want to, and are willing to design institutions and price incentives accordingly, we could build almost any kind of socioeconomic reality we can imagine. So let’s be open and explicit about that, and imagine different possible futures, not as end-stations, but perhaps as way-stations. Then different schools of economics can drop the teleology and instead propose normative scenarios, i.e. set about trying to (a) describe and propose a desirable future economy in its key features, and (b) design a benign pathway for getting there, complete with appropriate regulatory policies and financial incentive structures to motivate collective behaviours in the desired direction. And then political movements can endorse one or the other vision.”

      Exactly. See Mathew Forstater, “Toward a New Instrumental Macroeconomics: Abba Lerner and Adolph Lowe on Economic Method, Theory, History and Policy
      http://cas.umkc.edu/econ/economics/faculty/Forstater/papers/Levy/wp254.pdf

      “Lowe’s investigations of the technological and structural features of contemporary capitalism from the 1920s to the 1950s led him to the position that modern industrial systems exhibit inherent macroeconomic instability, necessitating an abandonment of the traditional deductive method and its replacement with an alternative instrumental method for economic theory and public policy. Rather than taking only the initial conditions as given, and employing deductive analysis to predict and explain, Lowe proposed also taking as given a vision of desired macro-outcomes. These macro-goals would not be determined by economic analysis, but rather would be independently determined by democratic political process. Analysis would then “work backwards” from the macro-goals to the economic means for their attainment (Lowe, 1965; Forstater, 1997).

      Such a conceptualization of the means-ends relation is also found in Lerner’s functional finance. Functional finance was first put forward by Lerner in his article, “Functional Finance and the Federal Debt” (1943) and inhis Economics of Control (1944).2″

  5. I do the Maths for large companies, and there are no ‘professional economists’ in sight as my competition for the mere multi-£million/£billion roles
    (i.e. my Excel addin EspressoRec : http://www.Espressorec.co.uk
    as used in M&S plc and being trialled in PWC) – because ‘professional
    economists’ don’t know basic bookkeeping ! But when it comes to the
    multi-£Trillion National roles they have a monopoly ! …and they still don’t know
    basic bookkeeping !
    This is basic ‘basic Bookkeeping’ maths applied to the National Accounts :

  6. […] Lars Syll has brought my attention to a very interesting exchange between Jamie Galbraith and Paul Krugman from 1996 that is archived on the latter’s website (or a website created for him, I cannot tell). Much of the discussion is on long dead arguments from the 1990s that now look as antiquated as early episodes of Friends. But there are two things that are interesting about the debate. […]

  7. I wonder if some of the previous commenters read these two sentences in Prof. Galbraith’s quote:

    “This is not a complaint against math. It is a complaint against indiscriminate application of the deductive method, sometimes called the Ricardian vice, to problems of human action.”

    While — in my reading — Galbraith is warning against an over-reliance on deductive/mathematical logic, I think the risk among previous commenters is exactly the opposite: to take his warning as an exhortation, a license, if you will, to the practice of illogical thought.

    Just sayin’.


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