Why every economics paper should come with a warning label

2 October, 2018 at 18:48 | Posted in Economics | 6 Comments

e8f9b7fec248157b1989085deaa05dde-d7bu3k6It should be part of the academic competences of trained economists to be able to be clear about what their models are for; what the models are about; what the models are capable of doing, and what not; how reliable the models are; what sorts of criticisms have been levelled against the models and how the criticisms have been responded; what alternative models there are; etc. The challenge is not easy, and it is clear that it has not been met with sufficient exuberance and success. The capacity of writing “warning labels” would be part of the needed professional competence. Such warning labels would alert the relevant audiences to the capabilities and limitations of the models …

Exceptional amongst the social sciences is the role of the economics discipline in contemporary society, the intellectual and political authority economics enjoys regardless of its failures. Above, I cited Colander’s confession, “we pretend we understand more than we do” and we could add that economists do so in order to – or with the consequence of – protecting and promoting their socially acknowledged authority. In the worst case, there is a nightmarish scenario on which the more economists are consulted for policy advice, the more they need to pretend to know, and so the higher the likelihood of policies going astray. Avoiding the nightmare would require some smart restructuring of the institutions of the economics discipline.

Uskali Mäki



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  1. Writing “warning labels” about models is not going endow any one — writer or reader — with either curiosity about how the actual institutional economy works or good judgment in assessing the practical implications of a logical argument.
    When economists are ready to discard a line of argument as disproven, logically or factually, get back to me. What is wrong in economics is that a culture has taken over that permits the use of a generally flawed model to answer what is claimed to be a particular and narrowly framed question. Critical attention to method and acknowledgement of the epistemic limits of analytic theory are regularly suspended by means of this excuse that the economist is only trying to answer this one question and this excuse fuels the professional routine of inventing and publishing novel and largely pointless models, while fundamental questions about the general framework are ignored lest the whole fraudulent enterprise collapse like a Ponzi scheme. What is needed is a professional routine of eliminating such models as untruthful, removing them methodically like noxious weeds from a carefully cultivated garden, followed by dismantling disproven frameworks.
    Perhaps we could give aspiring economists a licensing exam like we give automobile drivers. Give them an eye exam: if they can spot administered prices or involuntary unemployment at a distance of 20 paces, let them practice; if they are blind, assign them to count angels on a pin in a civic theology department — that should be harmless enough not to require a weasily warning label.

  2. How Economics Became a Cult -Steve Keen

  3. It is standard practice in every other field to discuss any assumptions made in the research and the broad applicability of the results. Economists used to do this, e.g. Kalecki’s 1945 brilliant ‘Full Employment by Stimulating Private Investment’ https://sci-hub.tw/10.2307/2663489in . Where he makes, and then relaxes, several assumptions while demonstrating that monetary policy will never generate full employment but as it attempts to it will require ever decreasing interest rates.

  4. I’m always late to the party.
    I hope this passage isn’t mean to show Mäki’s bona fides as a non-apologist for mainstream economics. Because the whole article is very weak tea indeed on that front, rarely actually confirming any of the criticisms of mainstream economics in Mäki’s own voice, but simply citing them to show that his “model of models” can “incorporate” them (and make them more rigorous, of course!).
    Note too how often he can’t help using the word “alleged”: “allegedly failed DSGE … models”; “alleged failures of economics vis-a-vis the financial crisis”; “the allegedly flawed contents of the models behind the 2008 crisis”….
    Look at how his model [ModRep] inserts his favourite go-to weasel word, “possible” and “possibility”, at various points: “a [scholar] uses [her model] … as a representative of actual or possible target R…”, “… at least potentially [!!] prompting genuine issues of relevant resemblance between [model] and [target in reality] to arise …”
    “The targets of models can be either actual or merely possible objects or systems…. [E]conomists often treat their models as representatives of some possible targets, using them as tools for how-possibly explanations”. If you think that Mäki is treating this behaviour as somehow illegitimate or problematic, you haven’t been reading Mäki’s other work.
    Then there are the various parts where he lets defenders of mainstream economics get the final word, as with Ben Bernanke, who claims critics miss the limited target of mainstream economic models, “arguing that they work fine under ordinary conditions… In other words, the 2008 crisis was not a feature of the proper targets of the then-dominant economic models. Thus the problem was not with those models but with the modelling practices that had failed to address targets with bubble-generating capacities.”
    Or John Cochrane’s “vigorous” defence against Krugman’s (rather soft) critique of over-reliance on mathematics: ““So it seems Cochrane admits that economic models have missed important features of real world targets and that part of the reason lies in mathematical descriptions of the models constraining the contents of those models. But he thinks the problem is not with mathematics per se but rather with the limitations of the sorts of mathematics now used: ‘The problem is that we do not have enough mathematics.’”
    Then there is the “out” for mainstream economics provided by the catch-all of modelling purposes: “It makes no sense to talk about successes or failures without specifying the relevant purposes. Success and failure are functions of purpose, among other things….” “Stiglitz and many others charged economics for predictive failure, but this is very ambiguous…. What is important is that many economists defended their models and modelling practices by arguing that prediction is not among their proper and reasonable goals after all.”
    Then back to the never-never-land of toy models: “It is important to see that there are two ways in which models may fail to relevantly resemble their targets. One kind of failure occurs when the relevant resemblance arises, but the attempt fails…. Another kind of failure occurs when there is no trying at all, unlike in the case of surrogate modelling. It is not a failed attempt but rather a failure to attempt [, … what I call substitute modelling].” Of course Mäki doesn’t actually criticise “substitute modelling” as illegitimate or pointless, because elsewhere he uses this as a cudgel against “misplaced” criticisms of the realism (oops, sorry, “realisticness”) of economic models. Is it a problem that most mainstream economists devote the vast majority of their efforts to “examining the properties of models” rather than investigating actual economies? Well, no — enter the magic of the broader research community and of the indefinite promissory note of the future:
    “One dimension is that of individual-community: the task of addressing the issue of resemblance is delegated to other researchers within the scientific community in line with some principle of division of scientific labour. Even if one modeller may appear to practise substitute modelling only, this is supplemented by others who turn the exercise into one of surrogate modelling. Another dimension is the historical one of now-later: there is an appropriate temporal order of research tasks, and the task of addressing issues of resemblance will be taken up and accomplished by some later (generations of) researchers. Both of these dimensions have been utilised by economists in defending their models.”
    More apologism: “Commentary [by modellers on their models] has the important task of accomplishing a functional decomposition among model components. Idealisations are not to be interpreted literally at face value, they typically need first to be translated into claims whose roles are well understood in the structure of the modelling process, so that they can be more directly assessed for how well they serve their proper functions. These latter claims may turn out to be true statements about things such as negligibility (of some falsehood for some purpose) or applicability (of the model to one rather than another domain), or they may become justified as serving a useful purpose as early steps in a sequence of models leading to ever better ones.”
    And mainstream economists aren’t really unaware of the limitations of their models — just guilty of excess hubris in front of the general public: “Given the reputation of arrogance and self-confidence enjoyed by the economics profession, it is remarkable that when addressing fellow economists, they exhibit relatively more modesty and humility when presenting their models and making claims about them. They pay more attention to the complexity of the issues, and are more explicit about the various provisos, background assumptions, and uncertainties that are involved.”
    “Models and modelling are powerful means of acquiring information about dynamically complex systems such as economies.” Sure. Pony up the proof.

    • I agree with much of what you write here, KM.
      As I wrote a couple of weeks ago, comparing Lawson’s and Mäki’s kinds of ‘realist’ critique of economics:

      “Lawson and Mäki are both highly influential contemporary students of economic methodology and philosophy. Yours truly has learned a lot from both of them. Although to a certain degree probably also a question of ‘temperament,’ I find Lawson’s ‘critical realist’ critique of mainstream economic theories and models deeper and more convincing than Mäki’s more ‘distanced’ and less critical approach. Mäki’s ‘detached’ style probably reflects the fact that he is a philosopher with an interest in economics, rather than an economist. Being an economist it is easier to see the relevance of Lawson’s ambitious and far-reaching critique of mainstream economics than it is to value Mäki’s often rather arduous application of the analytic-philosophical tool-kit, typically less ambitiously aiming for mostly conceptual and terminological ‘clarifications.’ “

      • Sorry, the “you” in my comment was a generic one, not you specifically, Lars, of course.
        Just have a bee in my bonnet about Mäki … as was obvious in the above….

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