Scientific racism and the alt-right

24 april, 2018 kl. 13:14 | Publicerat i Politics & Society | Kommentarer inaktiverade för Scientific racism and the alt-right

Welche Rolle Gene beim IQ spielen, kann man untersuchen, indem man identische Zwillinge findet, die bei ihrer Geburt getrennt wurden und getrennt voneinander groß wurden. Es gibt nur wenige untersuchte Fälle, in denen Zwillinge in unterschiedlichen Familien aufgewachsen sind, die gleichzeitig zu verschiedenen sozialen Schichten mit abweichendem Bildungsniveau zählten. Untersuchungen zeigten hier deutliche Unterschiede in den IQ-Werten – in einem Fall lagen 20 IQ-Punkte zwischen den Zwillingen, in einem anderen sogar 29 …

PinocchioDie Erforschung von Adoptionen bestätigt diesen Eindruck. Wer statt einzelnen Personen ganze Populationen betrachtet, entdeckt ein ähnliches Muster.

Der bedeutendste IQ-Theoretiker der vergangenen 50 Jahre ist der Neuseeländer James Flynn. Er fand heraus, dass die IQ-Tests mit jeder Generation anspruchsvoller werden müssen, wenn ein Schnitt von 100 erhalten bleiben soll … Er stellte fest, dass die durchschnittlichen IQ-Werte im Jahr 1900, gemessen an den heutigen Standards, bei etwa 70 lägen.

Was sich geändert hat, hat nichts mit Genetik zu tun. Stattdessen sind Menschen heute häufiger mit abstrakter Logik konfrontiert, die in den IQ-Tests gemessen wird. Manche Bevölkerungsgruppen begegnen ihr häufiger als andere, was auch erklärt, warum ihre IQ-Werte sich voneinander unterscheiden. Flynn zeigte, dass sich die unterschiedlichen Durchschnittswerte von Populationen komplett durch äußere Einflüsse erklären lassen …

Trotz der überwältigenden Beweise gegen sie bleibt die Rassenlehre ein fester Bestandteil der Ansichten der US-amerikanischen Alt-Right, die sie als politischen Rammbock immer wieder für ihre Kleinstaaten-Agenda einsetzen. Wer glaubt, die Armen seien arm, weil sie dumm geboren worden seien, der braucht auch nicht viel Fantasie, um die These auf ganze Bevölkerungsgruppen zu erweitern, die von Armut betroffen sind.

Gavin Evans / Die Zeit

Finland ends basic income experiment

24 april, 2018 kl. 12:04 | Publicerat i Economics | Kommentarer inaktiverade för Finland ends basic income experiment

Europe’s first national government-backed experiment in giving citizens free cash will end next year after Finland decided not to extend its widely publicised basic income trial and to explore alternative welfare schemes instead.

universal_basic_incomeSince January 2017, a random sample of 2,000 unemployed people aged 25 to 58 have been paid a monthly €560 (£475), with no requirement to seek or accept employment …

The scheme – aimed primarily at seeing whether a guaranteed income might incentivise people to take up paid work by smoothing out gaps in the welfare system – is strictly speaking not a universal basic income (UBI) trial, because the payments are made to a restricted group and are not enough to live on.

But it was hoped it would shed light on policy issues such as whether an unconditional payment might reduce anxiety among recipients and allow the government to simplify a complex social security system that is struggling to cope with a fast-moving and insecure labour market …

The idea of UBI – appealing both to the left, which hopes it can cut poverty and inequality, and to the right, which sees it as a possible route to a leaner, less bureaucratic welfare system – has gained traction recently amid predictions that automation could threaten up to a third of current jobs.

Jon Henley/The Guardian

Tractability hoax redux​

23 april, 2018 kl. 18:32 | Publicerat i Economics | 2 kommentarer

A ‘tractable’ model is one that you can solve, which means there are several types of tractability:​ analytical tractability (finding a solution to a theoretical model), empirical tractability (being able to estimate/calibrate your model) and computational tractability (finding numerical solutions). It is sometimes hard to discriminate between theoretical and empirical, or empirical and computational tractability …

canopenrWhat I’d like to capture is the effect of those choices economists make “for convenience,” to be able to reach solutions, to simplify, to ease their work, in short, to make a model tractable. While those assumptions are conventional and meant to be lifted as mathematical, theoretical and empirical skills and technology (hardware and software) ‘progress,’ their underlying rationale is often lost as they are taken up by other researchers, spread, and become standard (implicit in the last sentence is the idea that what a tractable model is evolves as new techniques and technologies are brought in) …

The tractability lens also helps me make sense of what is happening in economics now, and what might come next.  Right now, clusters of macroeconomists are each working on relaxing one or two tractability assumptions: research agendas span heterogeneity, non-rational expectations, financial markets, non-linearities, fat-tailed distributions, etc. But if you put all these adds-on together (assuming you can design a consistent model, and that adds-on are the way forward, which many critics challenge), you’re back to non-tractable. So what is the priority? How do macroeconomists rank these model improvements? And can the profession afford​ waiting 30 more years, 3 more financial crises and two trade wars before it can finally say it has a model rich enough to anticipate crises?

Beatrice Cherrier

Important questions that serious economists ought to ask themselves. Using ‘simplifying’ tractability assumptions — rational expectations, common knowledge, representative agents, linearity, additivity, ergodicity, etc — because otherwise they cannot ‘manipulate’ their models or come up with ‘rigorous ‘ and ‘precise’ predictions and explanations, does not exempt economists from having to justify their modelling choices. Being able to ‘manipulate’ things in models cannot per se be enough to warrant a methodological choice. If economists — as Cherrier conjectures — do not think their tractability assumptions make for good and realist models, it is certainly a just question to ask for clarification of the ultimate goal of the whole modelling endeavour.

Take for example the ongoing discussion on rational expectations as a modelling assumption. Those who want to build macroeconomics on microfoundations usually maintain that the only robust policies are those based on rational expectations and representative actors models. As yours truly has tried to show in On the use and misuse of theories and models in mainstream economics there is really no support for this conviction at all. If microfounded macroeconomics has nothing to say about the real world and the economic problems out there, why should we care about it? The final court of appeal for macroeconomic models is not if we — once we have made our tractability assumptions — can ‘manipulate’ them, but the real world. And as long as no convincing justification is put forward for how the inferential bridging de facto is made, macroeconomic modelbuilding is little more than hand-waving that give us rather a little warrant for making inductive inferences from models to real-world target systems. If substantive questions about the real world are being posed, it is the formalistic-mathematical representations utilized to analyze them that have to match reality, not the other way around.

Browning et al. (1999, p. 545) recognize in regard to DSGEs that “the microeconomic evidence is often incompatible with the macroeconomic model being calibrated.” These authors highlight three main criticalities feeding the micro–macro gap and that DSGEs largely neglect for reasons of computational tractability: heterogeneity, which empirical evidence widely documents, in preferences, constraints, and skills; uncertainty, for it is fundamental to distinguish between micro and macro uncertainty, and to deduce it from measurement error and model misspecification; and the synthesis of the micro evidence, since a plethora of micro studies often implies very different assumptions that prevent the (estimated) parameters from fitting any kind of context.

Finally, worth recalling is the problem of the intertemporal inconsistency of the rational expectations hypothesis with unanticipated structural breaks. The empirical importance of this point is very evident on considering the effects of the latest financial and economic crisis.

Roberto Marchionatti & Lisa Sella

Manifeste contre le nouvel antisémitisme

22 april, 2018 kl. 12:42 | Publicerat i Politics & Society | 1 kommentar

Le-Nouvel-Antisémitisme-en-France-L’antisémitisme n’est pas l’affaire des Juifs, c’est l’affaire de tous. Les Français, dont on a mesuré la maturité démocratique après chaque attentat islamiste, vivent un paradoxe tragique. Leur pays est devenu le théâtre d’un antisémitisme meurtrier. Cette terreur se répand, provoquant à la fois la condamnation populaire et un silence médiatique que la récente marche blanche a contribué à rompre …

La dénonciation de l’islamophobie – qui n’est pas le racisme anti-Arabe à combattre – dissimule les chiffres du ministère de l’Intérieur : les Français juifs ont 25 fois plus de risques d’être agressés que leurs concitoyens musulmans. 10 % des citoyens juifs d’Ile-de-France – c’est-à-dire environ 50 000 personnes – ont récemment été contraints de déménager parce qu’ils n’étaient plus en sécurité dans certaines cités et parce que leurs enfants ne pouvaient plus fréquenter l’école de la République …

Pourquoi ce silence ? Parce que la radicalisation islamiste – et l’antisémitisme qu’il véhicule – est considérée exclusivement par une partie des élites françaises comme l’expression d’une révolte sociale, alors que le même phénomène s’observe dans des sociétés aussi différentes que le Danemark, l’Afghanistan, le Mali ou l’Allemagne… Parce qu’au vieil antisémitisme de l’extrême droite, s’ajoute l’antisémitisme d’une partie de la gauche radicale qui a trouvé dans l’antisionisme l’alibi pour transformer les bourreaux des Juifs en victimes de la société. Parce que la bassesse électorale calcule que le vote musulman est dix fois supérieur au vote juif …

Nous attendons de l’islam de France qu’il ouvre la voie. Nous demandons que la lutte contre cette faillite démocratique qu’est l’antisémitisme devienne cause nationale avant qu’il ne soit trop tard. Avant que la France ne soit plus la France.

La liste des signataires:
Charles Aznavour … Elisabeth de Fontenay … Nicolas Sarkozy … Pascal Bruckner … Gérard Depardieu … Carla Bruni … Bernard-Henri Lévy … Julia Kristeva … Luc Ferry … Alain Finkielkraut … Danielle Cohen-Levinas …

Le Parisien

A new paradigm for teaching economics

22 april, 2018 kl. 12:08 | Publicerat i Economics | 1 kommentar

CORE-Team_pb_Proof.inddDon’t let the students know! What we teach them in our intro classes bears little resemblance to how we do economics ourselves …

The new paradigm not only provides a more convincing story about how an economy might reach a competitive equilibrium, it also fundamentally alters the nature of that outcome. When lenders and borrowers, and employers and employees, are modelled as principals and agents with asymmetric information, who interact under an incomplete contract, credit and labour markets do not clear in competitive equilibrium …

The gap between concerns about major economic problems that bring students to our classrooms, and the topics we teach, is a second motivation for the CORE Project. During the past four years we have asked, in classrooms around the world: “what is the most pressing problem that economists should address?” The word cloud below shows what students at the Humboldt University in Berlin told us:


Word clouds from students in Sydney, London and Bogota are barely distinguishable from Berlin … Even more remarkable, in 2016 we asked the same question to new recruits – mostly economics graduates – at the Bank of England, and professional economists and other staff at the New Zealand Treasury and Reserve Bank. Both responded with a similar concern about inequality. Word clouds from France gave greater prominence to unemployment. All of them highlight climate change and environmental problems, automation, and financial instability.

Samuel Bowles & Wendy Carlin

La Chine — un défi adressé aux théories économiques

22 april, 2018 kl. 10:28 | Publicerat i Economics | Kommentarer inaktiverade för La Chine — un défi adressé aux théories économiques

Avec l’effondrement de l’Union Soviétique, nombre d’intellectuels avaient anticipé une fin de l’histoire : marché et démocratie allaient remplacer le Gosplan et la domination du Parti Communiste. Depuis 1989, les régimes démocratiques se sont diffusés sur la plupart des continents et la logique du marché semble dominer les choix politiques que, dans le passé, mettaient en œuvre les gouvernements. Les années 2010 marquent cependant un infléchissement car se multiplient les régimes autoritaires qui n’ont plus que de lointaines similitudes avec l’idéal de la démocratie. Simultanément, dans l’ordre économique, un nombre croissant de gouvernements revendiquent une reprise de contrôle du processus d’internationalisation.

chineLa trajectoire russe témoigne de l’échec du processus de démocratisation comme préliminaire à la modernisation économique et la trajectoire chinoise invalide le pronostic qui ferait de la démocratie le régime politique nécessaire à la performance économique. On trouve, même en Chine, une justification d’un pouvoir centralisé : les défis seraient si nombreux et l’urgence telle que les délibérations propres à la démocratie ne permettraient pas d’y répondre. La multiplicité des investissements chinois à l’étranger actualise la possibilité d’une alternative au Consensus de Washington. Il est donc devenu essentiel de cerner les ressorts mais aussi les faiblesses qui sous- tendent le dynamisme de la Chine …

Les Etats-Unis ne sont plus la référence incontestée dans l’organisation des sociétés contemporaines. Après l’effondrement de l’Union Soviétique, vint le temps du Japon et aujourd’hui la Chine est perçue comme représentant une alternative, au point de susciter l’idée d’un consensus de Pékin. Développement accéléré et succès économique, doutes sur les vertus de la démocratie, montée en régime d’une puissance scientifique sont autant d’atouts aux yeux de divers gouvernements tentés par la verticalité du pouvoir politique. En fait, ce « modèle » repose sur la puissance d’une économie continentale, le rôle d’un parti-Etat et l’inscription dans une longue tradition d’exercice du pouvoir, autant de caractéristiques qui hypothèquent sa diffusion. La faiblesse des autres nations nourrit son expansion internationale mais aussi les sources de dépendance, peu favorable au développement. Enfin nombre de tensions et déséquilibres traversent la société chinoise au point de susciter la recherche d’un autre régime socio-économique. Dès lors la leçon chinoise est sans doute que chaque société doit inscrire sa stratégie dans l’histoire longue et que tout modèle finit par rencontrer ses limites.

Robert Boyer/Le Monde

L’antisémitisme en France

22 april, 2018 kl. 09:49 | Publicerat i Politics & Society | Kommentarer inaktiverade för L’antisémitisme en France

FIGAROVOX. – Un an après le meurtre de Sarah Halimi, nous apprenons la mort de Mireille Knoll dans des circonstances similaires. Que cela nous dit-il de la situation de l’antisémitisme en France?


Alexis LACROIX. – Que la cote d’alerte est atteinte. Et que le déni vertueux a assez duré. Déni vertueux, oui, car, sous prétexte de ne stigmatiser personne, nous avons collectivement ajourné le moment de nommer l’ennemi. Et l’ennemi, c’est, comme l’a dit le président de la République lors de son hommage à Arnaud Beltrame, l’islamisme – un islamisme pas forcément «souterrain», mais en effet toujours «insidieux», qui mine des arpents entiers de notre République et y contrebat l’État de droit.

Les Frères musulmans, qui ne représentent aucunement les musulmans de France, excellent dans la pratique de l’infiltration idéologique. S’ils ne prêchent pas toujours ouvertement l’antisémitisme, leur militance est le terreau sur lequel celui-ci s’est développé, suivant la logique patiente, et comme machiavélienne, d’un travail de sape.

Les médias ont été plutôt discrets au moment de l’affaire Halimi. Pensez-vous qu’au lendemain des attentats de Trèbes, le meurtre de Mireille Knoll va susciter une indignation de masse?

La République a, trop longtemps, trop reculé. Il fallait réagir avec la gravité et la hauteur requises. La marche blanche du 28 mars, malgré les incidents qui l’ont émaillée, va dans le bon sens. Elle montre que, partout, en France, s’amorce une esquisse de prise de conscience. Des quatre coins du pays, au sein de milieux sociologiquement, politiquement, religieusement très divers, ces crimes sont – enfin! – tenus pour inacceptables.

Le Figaro

1968 — Die ganze Welt in Aufruhr

21 april, 2018 kl. 10:11 | Publicerat i Politics & Society | Kommentarer inaktiverade för 1968 — Die ganze Welt in Aufruhr

Nicht nur ideenpolitisch war Amerika der große Speicher, aus dem sich die Gesellschaftskritik fast überall im Westen bediente. Auch hinsichtlich der Formen und Techniken des Protests wuchs dem »Land der unbegrenzten Möglichkeiten«, von dem man damals noch ohne viel Sarkasmus sprach, eine Vorreiterrolle zu. Die Sit-ins im Süden der USA, mit denen sich seit 1960 eine junge Generation von Schwarzen (ihrerseits unter Berufung auf den gewaltlosen Widerstand eines Mahatma Gandhi) gegen die nicht enden wollenden Apartheidstrukturen wehrte, prägten vier Jahre später auch in Berkeley das Bild: als an der kalifornischen Eliteuniversität das Free Speech Movement entstand – die, wie man zu Recht gesagt hat, »Mutter aller Studentenrevolten«.


Seit den Tagen und Nächten auf dem Campus von Berkeley entfaltete sich das Repertoire der Protestformen. Go-ins und Teach-ins gingen als Begriff und Praxis um den Globus, ebenso wie die bereits unter den Free-Speech-Aktivisten herangereifte Gewissheit, dass niemandem über dreißig zu trauen sei. Und spätestens seit dem Summer of Love in San Francisco (1967) gesellten sich zu den politischen auch die psychedelischen Happenings: die Be-ins, Love-ins und dergleichen mehr.

Diese Vermischung von Popkultur und Politik, die Entgrenzung des Politischen – im Deutschen unter der Parole »Alles ist politisch« –, gehörte zu den weltumspannenden Charakteristika der »unruhigen Jahre«. Sie war sowohl ein Produkt jener Mentalität der Nachkriegsjahrzehnte, von der in der Zeitgeschichtsschreibung inzwischen unter dem Stichwort Cold War Culture die Rede ist, als auch eine Antwort darauf.

Norbert Frei/Dei Zeit

The case for a new economics

20 april, 2018 kl. 19:04 | Publicerat i Economics | Kommentarer inaktiverade för The case for a new economics

When the great crash hit a decade ago, the public realised that the economics profession was clueless …

After 10 years in the shadow of the crisis, the profession’s more open minds have recognised there is serious re-thinking to be done …

But the truth is that most of the “reforms” have been about adding modules to the basic template, leaving the core of the old discipline essentially intact. My view is that this is insufficient, and treats the symptoms rather than the underlying malaise …

RE-LogoIf we accept that we need fundamental reform, what should the new economics—“de-conomics” as I’m calling it—look like?

First, we need to accept that there is no such thing as “value-free” analysis of the economy. As I’ve explained, neoclassical economics pretends to be ethically neutral while smuggling in an individualistic, anti-social ethos …

Second, the analysis needs to be based around how human beings actually operate—rather than how neoclassicism asserts that “rational economic person (or firm)” should operate …

Third, we need to put the good life centre stage, rather than prioritising the areas that are most amenable to analysis via late-19th century linear mathematics. Technological progress and power relationships between firms, workers and governments need to be at the heart of economic discourse and research …

Finally, economics needs to be pluralistic. For the last half-century neoclassical economics has been gradually colonising other social science disciplines such as sociology and political science. It is high time this process reversed itself so that there was two-way traffic and a mutually beneficial learning exchange between disciplines. It is possible—and probably desirable—that the “deconomics” of the future looks more like psychology, sociology or anthropology than it does today’s arid economics …

The change I am seeking is no more fundamental than the transition from classical to neoclassical economics, and that was accomplished without the discipline imploding. And this time around we’ve got then-unimaginable data and other resources. So there can be no excuse for delay. Let economists free themselves of a misleading map, and then—with clear eyes—look at the world anew.

Howard Reed/Prospect Magazine

Mainstream economists are of course not überjoyed when confronted with this kind of critique. Diane Coyle’s reply to Reed in Prospect Magazine is typical.

Those of us in the economics community who are impolite enough to dare question the​ preferred methods and models applied in mainstream economics are as a rule met with disapproval. But although people seem to get very agitated and upset by the critique — just read the commentaries on this blog if you don’t believe me — defenders of ”received theory” always say that the critique is ”nothing new”, that they have always been ”well aware” of the problems, and so on, and so on.

So, for the benefit of Diane Coyle and all other mindless practitioners of mainstream economic modeling who don’t want to be disturbed in their doings, David Freedman has put together a very practical list of vacuous responses to criticism that can be freely used to save their peace of mind:

We know all that. Nothing is perfect … The assumptions are reasonable. The assumptions don’t matter. The assumptions​ are conservative. You can’t prove the assumptions are wrong. The biases will cancel. We can model the biases. We’re only doing what everybody​ else does. Now we use more sophisticated techniques. If we don’t do it, someone else will. What would you do? The decision-maker has to be better off with us than without us … The models aren’t totally useless. You have to do the best you can with the data. You have to make assumptions in order to make progress. You have to give the models the benefit of the doubt. Where’s the harm?

The tractability hoax in modern economics

20 april, 2018 kl. 11:16 | Publicerat i Economics | Kommentarer inaktiverade för The tractability hoax in modern economics

While the paternity of the theoretical apparatus underlying the new neoclassical synthesis in macro is contested, there is wide agreement that the methodological framework was largely architected by Robert Lucas … Bringing a representative agent meant foregoing the possibility to tackle inequality, redistribution and justice concerns. Was it deliberate? How much does this choice owe to tractability? What macroeconomists were chasing, in these years, was a renewed explanation of the business cycle. They were trying to write microfounded and dynamic models …

tractable-2Rational expectations imposed cross-equation restrictions, yet estimating these new models substantially raised the computing burden. Assuming a representative agent mitigated computational demands, and allowed macroeconomists to get away with general equilibrium aggregate issues: it made new-classical models analytically and computationally tractable …

Was tractability the main reason why Lucas embraced the representative agent (and market clearing)? Or could he have improved tractability through alternative hypotheses, leading to opposed policy conclusions? … Some macroeconomists may have endorsed the new class of Lucas-critique-proof models because they liked its policy conclusions. Other may have retained some hypotheses, then some simplifications, “because it makes the model tractable.” And while the limits of simplifying assumptions are often emphasized by those who propose them, as they spread, caveats are forgotten. Tractability restricts the range of accepted models and prevent economists from discussing some social issues, and with time, from even “seeing” them. Tractability ‘filters’ economists’ reality … The aggregate effect of “looking for tractable models” is unknown, and yet it is crucial to understand the current state of economics.

Beatrice Cherrier

Cherrier’s highly readable article underlines​ that the essence of mainstream​ (neoclassical) economic theory is its almost exclusive use of a deductivist methodology. A methodology that is more or less used without a smack of argument to justify its relevance.

The theories and models that mainstream economists construct describe imaginary worlds using a combination of formal sign systems such as mathematics and ordinary language. The descriptions made are extremely thin and to a large degree disconnected to the specific contexts of the targeted system than one (usually) wants to (partially) represent. This is not by chance. These closed formalistic-mathematical theories and models are constructed for the purpose of being able to deliver purportedly rigorous deductions that may somehow by be exportable to the target system. By analyzing a few causal factors in their ”laboratories” they hope they can perform ”thought experiments” and observe how these factors operate on their own and without impediments or confounders.

Unfortunately, this is not so. The reason for this is that economic causes never act in a socio-economic vacuum. Causes have to be set in a contextual structure to be able to operate. This structure has to take some form or other, but instead of incorporating structures that are true to the target system, the settings made in economic models are rather based on formalistic mathematical tractability. In the models they appear as unrealistic assumptions, usually playing a decisive role in getting the deductive machinery deliver ”precise” and ”rigorous” results. This, of course, makes exporting to real world target systems problematic, since these models – as part of a deductivist covering-law tradition in economics – are thought to deliver general and far-reaching conclusions that are externally valid. But how can we be sure the lessons learned in these theories and models have external validity​ when based on highly specific unrealistic assumptions? As a rule, the more specific and concrete the structures, the less generalizable the results. Admitting that we in principle can move from (partial) falsehoods in theories and models to truth in real​-world target systems do​ not take us very far​ unless a thorough explication of the relation between theory, model and the real world target system is made. If models assume 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 conclusions or hypothesis of causally relevant mechanisms or regularities can be bridged, are obviously non-justifiable. To have a deductive warrant for things happening in a closed model is no guarantee for them being preserved when applied to an open real-world target system.

Henry Louis Mencken once wrote that ”there is always an easy solution to every human problem – neat, plausible and wrong.” And mainstream economics has indeed been wrong. Very wrong. Its main result, so far, has been to demonstrate the futility of trying to build a satisfactory bridge between formalistic-axiomatic deductivist models and real-world​d target systems. Assuming, for example, perfect knowledge, instant market clearing and approximating aggregate behaviour with unrealistically heroic assumptions of representative actors, just will not do. The assumptions made, surreptitiously eliminate the very phenomena we want to study: uncertainty, disequilibrium, structural instability and problems of aggregation and coordination between different individuals and groups.

The punch line is that most of the problems that mainstream economics is wrestling with, issues from its attempts at formalistic modelling per se of social phenomena. Reducing microeconomics to refinements of hyper-rational Bayesian deductivist models is not a viable way forward. It will only sentence to irrelevance the most interesting real-world​ economic problems. And as someone has so wisely remarked, murder is — unfortunately — the only way to reduce biology to chemistry – reducing macroeconomics to Walrasian general equilibrium microeconomics basically means committing the same crime.

If scientific progress in economics – as Robert Lucas and other latter days mainstream economists seem to think – lies in our ability to tell ”better and better stories” without considering the realm of imagination and ideas a retreat from real-world target systems reality, one would, of course, think our economics journal being filled with articles supporting the stories with empirical evidence. However, I would argue that the journals still show a striking and embarrassing paucity of empirical studies that (try to) substantiate these theoretical claims. Equally amazing is how little one has to say about the relationship between the model and real-world target systems. It is as though thinking explicit discussion, argumentation and justification on the subject not required. Mainstream economic theory is obviously navigating in dire straits.

If the ultimate criteria for success of a deductivist system is to what extent it predicts and cohere with (parts of) reality, modern mainstream economics seems to be a hopeless misallocation of scientific resources. To focus scientific endeavours on proving things in models is a gross misapprehension of what an economic theory ought to be about. Deductivist models and methods disconnected from reality are not relevant to predict, explain or understand real-world economic target systems. These systems do not conform to the restricted closed-system structure the mainstream modelling strategy presupposes.

Mainstream economic theory still today consists mainly in investigating economic models. It has since long given up on the real world and contents itself with proving things about thought up worlds. Empirical evidence still only plays a minor role in mainstream economic theory, where models largely function as substitutes for empirical evidence.

What is wrong with mainstream economics is not that it employs models per se, but that it employs poor models. They are poor because they do not bridge to the real world target system in which we live. Hopefully humbled by the manifest failure of its theoretical pretences, the one-sided, almost religious, insistence on mathematical deductivist modelling as the only scientific activity worthy of pursuing in economics will give way to methodological pluralism based on ontological considerations rather than formalistic tractability.​​

Marx predicted the present crisis — and points the way out

20 april, 2018 kl. 08:14 | Publicerat i Economics | Kommentarer inaktiverade för Marx predicted the present crisis — and points the way out

Marx and Engels based their manifesto on a touchingly simple answer: authentic human happiness and the genuine freedom that must accompany it. For them, these are the only things that truly matter. Their manifesto does not rely on strict Germanic invocations of duty, or appeals to historic responsibilities to inspire us to act. It does not moralise, or point its finger. Marx and Engels attempted to overcome the fixations of German moral philosophy and capitalist profit motives, with a rational, yet rousing appeal to the very basics of our shared human nature.

yanisKey to their analysis is the ever-expanding chasm between those who produce and those who own the instruments of production. The problematic nexus of capital and waged labour stops us from enjoying our work and our artefacts, and turns employers and workers, rich and poor, into mindless, quivering pawns who are being quick-marched towards a pointless existence by forces beyond our control.

But why do we need politics to deal with this? Isn’t politics stultifying, especially socialist politics, which Oscar Wilde once claimed “takes up too many evenings”? Marx and Engels’ answer is: because we cannot end this idiocy individually; because no market can ever emerge that will produce an antidote to this stupidity. Collective, democratic political action is our only chance for freedom and enjoyment. And for this, the long nights seem a small price to pay.

Humanity may succeed in securing social arrangements that allow for “the free development of each” as the “condition for the free development of all”. But, then again, we may end up in the “common ruin” of nuclear war, environmental disaster or agonising discontent. In our present moment, there are no guarantees. We can turn to the manifesto for inspiration, wisdom and energy but, in the end, what prevails is up to us.

Yanis Varoufakis/The Guardian

Sometimes we do not know because we cannot know

18 april, 2018 kl. 17:11 | Publicerat i Economics, Statistics & Econometrics | 8 kommentarer

Some time ago, Bank of England’s Andrew G Haldane and Benjamin Nelson presented a paper with the title Tails of the unexpected. The main message of the paper was that we should not let us be fooled by randomness:

The normal distribution provides a beguilingly simple description of the world. Outcomes lie symmetrically around the mean, with a probability that steadily decays. It is well-known that repeated games of chance deliver random outcomes in line with this distribution: tosses of a fair coin, sampling of coloured balls from a jam-jar, bets on a lottery number, games of paper/scissors/stone. Or have you been fooled by randomness?

blNormality has been an accepted wisdom in economics and finance for a century or more. Yet in real-world systems, nothing could be less normal than normality. Tails should not be unexpected, for they are the rule. As the world becomes increasingly integrated – financially, economically, socially – interactions among the moving parts may make for potentially fatter tails. Catastrophe risk may be on the rise.

If public policy treats economic and financial systems as though they behave like a lottery – random, normal – then public policy risks itself becoming a lottery. Preventing public policy catastrophe requires that we better understand and plot the contours of systemic risk, fat tails and all. It also means putting in place robust fail-safes to stop chaos emerging, the sand pile collapsing, the forest fire spreading. Until then, normal service is unlikely to resume.

Since I think this is a great paper, it merits a couple of comments s.

To understand real world ”non-routine” decisions and unforeseeable changes in behaviour, ergodic probability distributions are of no avail. In a world full of genuine uncertainty – where real historical time rules the roost – the probabilities that ruled the past are not those that will rule the future.

Time is what prevents everything from happening at once. To simply assume that economic processes are ergodic and concentrate on ensemble averages – and a fortiori in any relevant sense timeless – is not a sensible way for dealing with the kind of genuine uncertainty that permeates open systems such as economies.

When you assume the economic processes to be ergodic, ensemble and time averages are identical. Let me give an example: Assume we have a market with an asset priced at 100 €. Then imagine the price first goes up by 50% and then later falls by 50%. The ensemble average for this asset would be 100 €- because we here envision two parallel universes (markets) where the asset-price falls in one universe (market) with 50% to 50 €, and in another universe (market) it goes up with 50% to 150 €, giving an average of 100 € ((150+50)/2). The time average for this asset would be 75 € – because we here envision one universe (market) where the asset-price first rises by 50% to 150 €, and then falls by 50% to 75 € (0.5*150).

From the ensemble perspective nothing really, on average, happens. From the time perspective lots of things really, on average, happen.

Assuming ergodicity there would have been no difference at all. What is important with the fact that real social and economic processes are nonergodic is the fact that uncertainty – not risk – rules the roost. That was something both Keynes and Knight basically said in their 1921 books. Thinking about uncertainty in terms of “rational expectations” and “ensemble averages” has had seriously bad repercussions on the financial system.

Knight’s uncertainty concept has an epistemological founding and Keynes’ definitely an ontological founding. Of course, this also has repercussions on the issue of ergodicity in a strict methodological and mathematical-statistical sense. I think Keynes’ view is the most warranted of the two.

The most interesting and far-reaching difference between the epistemological and the ontological view is that if one subscribes to the former, Knightian view – as Taleb, Haldane & Nelson and “black swan” theorists basically do – you open up for the mistaken belief that with better information and greater computer-power we somehow should always be able to calculate probabilities and describe the world as an ergodic universe. As Keynes convincingly argued, that is ontologically just not possible.

If probability distributions do not exist for certain phenomena, those distributions are not only not knowable, but the whole question regarding whether they can or cannot be known is beside the point. Keynes essentially says this when he asserts that sometimes they are simply unknowable.

John Davis

To Keynes, the source of uncertainty was in the nature of the real — nonergodic — world. It had to do, not only — or primarily — with the epistemological fact of us not knowing the things that today are unknown, but rather with the much deeper and far-reaching ontological fact that there often is no firm basis on which we can form quantifiable probabilities and expectations at all.

Sometimes we do not know because we cannot know.

Es reicht. Es reicht. Es reicht.

18 april, 2018 kl. 14:00 | Publicerat i Politics & Society | Kommentarer inaktiverade för Es reicht. Es reicht. Es reicht.


Seit Jahren nun wird über den Antisemitismus in Deutschland als eine nicht hinzunehmende Zersetzung unseres Werte- und Gesellschaftsverständnisses gesprochen. Es gibt Sonntagsreden, Ermahnungen, und nun gibt es auch einen Antisemitismusbeauftragten, der zumindest symbolisch dieser Welle von Hass und Gewalt entgegentreten soll.

Es ist naiv und schlicht zu glauben, dass das etwas verändert. Wenig ändern werden auch die rührenden Projekte in Schulen mit vielen arabischen und muslimischen Kindern und Jugendlichen, solange in den Familien, in den Moscheeverbänden, in den subkulturellen Peers der Antisemitismus keine Ausnahme, sondern die Regel ist. Die schockierenden Aufnahmen eines Handyvideos, aufgenommen im weitgehend gentrifizierten Prenzlauer Berg in Berlin, dort, wo die gehobene Mittelschicht längst den Ton angibt, verdeutlicht, dass Deutschland dabei ist, den Kampf gegen den Antisemitismus zu verlieren.

Die Welt

Pretentious​? Moi?

17 april, 2018 kl. 22:31 | Publicerat i Varia | Kommentarer inaktiverade för Pretentious​? Moi?

ranelidBjörn Ranelid anser inte att Svenska Akademien är att betrakta som en intellektuell elit, utan beskriver samlingen av ledamöter som ”ett B- eller C-lag”.

För att institutionen ska kunna överleva så måste det rensas upp och vädras ut på allvar.

Om du själv skulle få frågan att sitta i akademien?

– Svaret är absolut nej, jag är alldeles för känd. För mycket känd, berömd och älskad.


DSGE models — overconfident macroeconomic story-telling

16 april, 2018 kl. 16:41 | Publicerat i Economics | 2 kommentarer

A recent paper by Christiano, Eichenbaum and Trabandt (C.E.T.) on Dynamic Stochastic General Equilibrium Models (DSGEs) has generated quite a reaction in the blogosphere …

The-DSGE-Model-Quarrel-Again-e1512989462377Bradford Delong points out that new Keynesian models were constructed to show that old Keynesian and old Monetarist policy conclusions were relatively robust, and not blown out of the water by rational expectations … The DSGE framework was then constructed so that new Keynesians could talk to RBCites. None of this has, so far, materially advanced the project of understanding the macroeconomic policy-relevant emergent properties of really existing industrial and post-industrial economies …

Lars Syll thinks that ‘rigorous’ and ‘precise’ DSGE models cannot be considered anything other than unsubstantiated conjectures as long as they aren’t supported by evidence from outside the theory or model, and no decisive empirical evidence has been presented. Advocates of DSGE modelling want to have deductively automated answers to fundamental causal questions. But to apply ‘thin’ methods we have to have ‘thick’ background knowledge of what’s going on in the real world, and not in idealised models. Conclusions can only be as certain as their premises. The modelling convention used when constructing DSGE models makes it impossible to fully incorporate things that we know are of paramount importance for understanding modern economies. Given all these fundamental problems for the use of these models and their underlying methodology, it is beyond understanding how the DSGE approach has come to be the standard approach in ‘modern’ macroeconomics. DSGE models are based on assumptions profoundly at odds with what we know about real-world economies. That also makes them little more than overconfident story-telling devoid of real scientific value …

Brian Romanchuk at Bond Economics thinks that the recent attempt at a defence by C.E.T. was such a spectacular intellectual failure that it is not worth taking seriously … One could easily raise doubts about other methodologies, but the paper by C.E.T. went completely off the rails by arguing that no other economic modelling methodology even exists.

Silvia Merler/Bruegel

Kommenterar kring vårbudgeten

16 april, 2018 kl. 14:55 | Publicerat i Economics | 3 kommentarer

Efter att ha följt nationalekonomiprofessorn John Hasslers analys av vårbudgeten på SvT Forum tidigare idag, slog det mig att jag nog hört det här förut …

Shortcomings of regression analysis

16 april, 2018 kl. 08:45 | Publicerat i Statistics & Econometrics | Kommentarer inaktiverade för Shortcomings of regression analysis

Distinguished social psychologist Richard E. Nisbett has a somewhat atypical aversion to multiple regression analysis. In his Intelligence and How to Get It (Norton 2011) he writes:

iqResearchers often determine the individual’s contemporary IQ or IQ earlier in life, socioeconomic status of the family of origin, living circumstances when the individual was a child, number of siblings, whether the family had a library card, educational attainment of the individual, and other variables, and put all of them into a multiple-regression equation predicting adult socioeconomic status or income or social pathology or whatever. Researchers then report the magnitude of the contribution of each of the variables in the regression equation, net of all the others (that is, holding constant all the others). It always turns out that IQ, net of all the other variables, is important to outcomes. But … the independent variables pose a tangle of causality – with some causing others in goodness-knows-what ways and some being caused by unknown variables that have not even been measured. Higher socioeconomic status of parents is related to educational attainment of the child, but higher-socioeconomic-status parents have higher IQs, and this affects both the genes that the child has and the emphasis that the parents are likely to place on education and the quality of the parenting with respect to encouragement of intellectual skills and so on. So statements such as “IQ accounts for X percent of the variation in occupational attainment” are built on the shakiest of statistical foundations. What nature hath joined together, multiple regressions cannot put asunder.

Now, I think that what Nisbett says is right as far as it goes, although it would certainly have strengthened Nisbett’s argumentation if he had elaborated more on the methodological question around causality, or at least had given some mathematical-statistical-econometric references. Unfortunately, his alternative approach is not more convincing than regression analysis. As so many other contemporary social scientists today, Nisbett seems to think that randomization may solve the empirical problem. By randomizing we are getting different “populations” that are homogeneous in regards to all variables except the one we think is a genuine cause. In this way, we are supposed to be able to not have to actually know what all these other factors are.

If you succeed in performing an ideal randomization with different treatment groups and control groups that is attainable. But it presupposes that you really have been able to establish — and not just assume — that the probability of all other causes but the putative have the same probability distribution in the treatment and control groups, and that the probability of assignment to treatment or control groups is independent of all other possible causal variables.

Unfortunately, real experiments and real randomizations seldom or never achieve this. So, yes, we may do without knowing all causes, but it takes ideal experiments and ideal randomizations to do that, not real ones.

As I have argued — e. g. here — that means that in practice we do have to have sufficient background knowledge to deduce causal knowledge. Without old knowledge, we can’t get new knowledge — and, no causes in, no causes out.

On the issue of the shortcomings of multiple regression analysis, no one sums it up better than eminent mathematical statistician David Freedman:

If the assumptions of a model are not derived from theory, and if predictions are not tested against reality, then deductions from the model must be quite shaky. However, without the model, the data cannot be used to answer the research question …

statIn my view, regression models are not a particularly good way of doing empirical work in the social sciences today, because the technique depends on knowledge that we do not have. Investigators who use the technique are not paying adequate attention to the connection – if any – between the models and the phenomena they are studying. Their conclusions may be valid for the computer code they have created, but the claims are hard to transfer from that microcosm to the larger world …

Regression models often seem to be used to compensate for problems in measurement, data collection, and study design. By the time the models are deployed, the scientific position is nearly hopeless. Reliance on models in such cases is Panglossian …

Given the limits to present knowledge, I doubt that models can be rescued by technical fixes. Arguments about the theoretical merit of regression or the asymptotic behavior of specification tests for picking one version of a model over another seem like the arguments about how to build desalination plants with cold fusion and the energy source. The concept may be admirable, the technical details may be fascinating, but thirsty people should look elsewhere …

Causal inference from observational data presents may difficulties, especially when underlying mechanisms are poorly understood. There is a natural desire to substitute intellectual capital for labor, and an equally natural preference for system and rigor over methods that seem more haphazard. These are possible explanations for the current popularity of statistical models.

Indeed, far-reaching claims have been made for the superiority of a quantitative template that depends on modeling — by those who manage to ignore the far-reaching assumptions behind the models. However, the assumptions often turn out to be unsupported by the data. If so, the rigor of advanced quantitative methods is a matter of appearance rather than substance.

MMT for Dummiez

14 april, 2018 kl. 16:12 | Publicerat i Economics | 1 kommentar


Modeling economic risk

14 april, 2018 kl. 16:04 | Publicerat i Economics | Kommentarer inaktiverade för Modeling economic risk

sav2 Model builders face a constant temptation to make things more complicated than necessary because this makes them appear more capable than they really are.

Remember that a model is not the truth.

It is a lie to help you get your point across.

And in the case of modeling economic risk, your model is a lie about others, who are probably lying themselves.

And what’s worse than a simple lie?

A complicated lie.

Advertising Space

14 april, 2018 kl. 15:47 | Publicerat i Varia | Kommentarer inaktiverade för Advertising Space


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