Does truth matter in economics?

12 May, 2017 at 13:47 | Posted in Economics | 10 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’!

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 ought to be as important a concept in economics as it is in real science.



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  1. Spot on Lars, No sadly the most in economy as well as in most social sciences, i read ,belong in “Storytelling” buisness, i fear!!!

  2. A sympathetic reading of Aumann is that construction comes before test, and theories are constructed, based on the material at hand, to be ‘logical’ and ‘useful’, with ‘usefulness’ implying testable. The truthfulness (or otherwise) is then addressed through testing.

    Of course, we only test in conditions that we think are relevant, so any ‘warrant’ is conditional on our test actually having been adequate. The difficulty with much economics (as against science) is that it includes various assumptions that it can’t or won’t test. That is, the problem is in the warrant, not the theory construction.

  3. “Economist don’t rock the boat until the boat rocks them”, I always say. If the economy is doing well, as in the 1920’s, who bothered to question its fundamentals? and if some did (like the Austrian school), who listened?. It is after a disaster happens that people turn to economists for answers and if they don’t have them they better find them or loose their reputation, even if it means throwing out the window some established beliefs. In science it is different; these people fall into 3 categories. A) Those who seek the truth B) those who use the truth and C) those in the middle of these 2 extremes. All but C are very useful for knowledge and prosperity and C is still good but inferior to A and B. But Economists have a completely different objective, which is to make tons of money either in investment banks or consultants.

    Nothing wrong with that, except when it becomes dishonest, as it is now. The standard defence for economists is that they dont have a laboratory where they can control experiments, as scientists do, and that now with globalization where what happens in India may affect a business in California is all the more harder. True enough, but there is something that economists should be doing that most have not and would help them allot to get better, and that is to become more knowledgeable of energy science.

    For reasons too long to explain here, when scribbling the factors of production that make any economy grow, they only write 2 of them, capital and labor, and completely omit energy simply because they don’t understand its properties, its behaviour and/or its decisive impact on economic growth and creation of money. As I have proven in my books* abundant and cheap energy is the lien of money and the guarantor of present and future prosperity. This is curious because Adam Smith in 1776, although he never used the word energy (coined in modern use by Thomas Young in 1805) Smith and the classical economists like Ricardo always gave Land a front row seat in production factors. But since understanding how energy works involves science, economists who chose their profession for the money in it, simply ignore it or are too lazy or arrogant to learn it. I also call this the Truman Trap, after President Harry Truman who famously said: “An expert is a fellow who never wants to learn anything new, because if he ever had to, he would not be an expert any more”…..

    When the information is there and economists simply ignore it, this is just fraud. How do economists hide this fraud? by mathematizing everything into irrelevant unsustainable equations that only they “understand” and convince their clients that they are so smart….This is the definition of Charlatans. I conclude this with a quote from Paul Romer, now chief economists of the World Bank:
    “Assume A, Assume B, blah, blah, blah, blah, we have proven that P is true”

    *look at for the title of my books and company

  4. Make econ true
    Comment on Lars Syll on ‘Does truth matter in economics?’
    Scientific truth is well-defined since 2000+ years: “Research is in fact a continuous discussion of the consistency of theories: formal consistency insofar as the discussion relates to the logical cohesion of what is asserted in joint theories; material consistency insofar as the agreement of observations with theories is concerned.” (Klant)
    Not all economists got the message. Robert Aumann, for instance, maintains: “In 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.” (See intro)
    Robert Aumann is in NO position to redefine science. Either his contributions are materially and formally consistent or he is OUT of science.
    Aumann, though, is not an isolated case. The four main approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, and materially/formally inconsistent. Therefore, both Orthodoxy and Heterodoxy, are OUT of science.
    The general public thinks that economics is a science because each year a prize is awarded that bears the title: “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel”.
    Of course, the Bank of Sweden is in NO position to redefine science. Economics is materially/formally inconsistent from Adam Smith to Robert Aumann an because of this the economics Nobel is a mystification of the general public.
    It is of utmost importance that the term ‘Economic Sciences’ is deleted from the Prize’s title as fast as possible because there is NO such thing. Economics is since 200+ years OUT of science.
    Egmont Kakarot-Handtke

  5. Seems to me that the problem is that theories are too often easily reified.

  6. These two identities should be derived:
    1. Economics ≡ Social Scientific Fiction
    2. Robert Aumann ≡ Fictionist

  7. Lars,
    I think you have taken Aumann’s comment out of context. He goes on to say:
    “Similarly, scientific theories must be judged by how well they enable us
    to organize and understand our observations; by how well they ‘‘work.’’”
    This is essentially saying what you are saying.
    However, you go on to say:
    “Truth ought to be as important a concept in economics as it is in real science.”
    You quest for truth is somewhat misguided as all science/economics can do is formulate theories which are supported by the latest set of observations and data. This is what Aumann is arguing (and of course, so are you) and for me it makes sense.
    When has the “truth” ever been discovered by science? It seems to me science is satisfied with the process of discovery as described both you and Aumann. Science does not appear to be immediately interested in discovering “truth”, that is deep understanding of natural phenomena (gravity, time, space, matter, energy etc.). It’s ultimate goal may be such, but it’s accession to the “truth” is a distant dream.
    Science can only be satisfied with not falsifying the latest and current theory. Perhaps economics should proceed similarly, except that for economics, the task is inordinately more difficult.

  8. Excellent comment by Henry above. Let me add a few ad hominem points.

    Prof.Syll argues that: “Without a warranted export certificate to the real world, model explanations are pretty worthless.”
    Thus, as in many previous posts, Prof.Syll bases his argument on his own purported knowledge of the “real world”. But he never explains the source of his information.
    From where does he derive his wisdom?
    (a) From analysis of empirical data? No way!
    Prof. Syll never refers empirical data to support his views. He insists that empirical economics is doomed to failure because social and economic relationships are unstable.
    (b) From divine revelation? Conceivably!
    There are stylistic similarities with Old Testament prophets Moses, Isaiah etc.
    Exodus 20: “Thou shalt not make thee any economic model without ontology, epistemology, reality and fundamental uncertainty. Thou shalt not do econometrics/ ISLM/ DSGE/ mathematics/ neoliberalism.”
    Isaiah 1 – 5: “Ah, sinful profession, laden with iniquity, descendants of evildoers: they have forsaken Lord Keynes and turned their backs on him… Woe unto those who follow the strong drink of neoclassical synthesis … the nation goes into captivity for lack of knowledge, academics are famished, and students are parched with thirst.”
    (c) From philosophical delusions and devotion to the scriptures of Roy Bhaskar? This is reportedly the case.
    According to Wikipedia, Prof Syll is a proselytizer of an abstruse postmodern philosophy called “transcendental critical realism”. He is trying to provide mysterious explanations for economic theories in terms of “hidden generative structures”. The real world is “the intransitive domain of knowledge”.
    Sadly, all the gallons of ink which have been expended on transcendental philosophy have provided zero scientific knowledge or understanding of the real world in which we live.
    (d) From his supernatural abilities? This is what Prof. Syll claims!
    He claims that he has the supernatural gift of being able to discover the hidden underlying substance and causes of economic phenomena without using empirical data!
    Several centuries ago empiricist philosopher John Locke commented: “spirits of a higher rank than those immersed in flesh, may have clear ideas of the radical constitution of substances … but the manner how they come by that knowledge exceeds our conceptions.”
    John Locke – An Essay concerning Human Understanding [1689] Book III, chapter XI, §23
    It is incumbent upon Prof. Syll to produce evidence for his purported knowledge of “reality”. Otherwise his claims must be disregarded as self-delusion.
    Neither Prof. Syll nor anyone else has ever produced any clear information regarding transcendental “deep reality”. So there is no reason to believe that there is any such deus ex machina which could illuminate economics.

    • Kingsley,

      I have no idea what is meant by “transcendental critical realism” etc.. However, and of course Lars can defend himself himself, I don’t think he is arguing that the “truth” can be discerned without reference to empirical data. I also think he should be careful how he uses the word “truth”. I may misconstrue what he argues for, but it seems to me mostly what he is arguing for is that models, to be really useful, should be based on assumptions that reflect the real world, an argument which to my mind is fairly made. I would not go as far as he seems to go and argue that neoclassical models are useless per se because they embody abstractions. The abstractions may render them useless as representations as models of the real world but they may be useful as a means to dealing with subtle theoretical matters. My main criticism of neoclassical models qua macroeconomic models is that neoclassical models do not deal directly with the generation of the level of output and employment, they deal with a given level of output and the deployment of a given set of resources to the production of that given level of output. This means they can only be ineffective as a way of describing macroeconomic behaviour.

  9. There is no absolute truth in this subject, but one can refine the theory so as to approach closer to it and that is the nature of scientific investigations.

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