Donald & Boris

26 Jun, 2019 at 19:12 | Posted in Politics & Society | Leave a comment

DUMBC’est le rêve des auteurs de politique-fiction. Qui, ailleurs que dans leurs fantasmes les plus fous, aurait imaginé qu’un jour les Etats-Unis et le Royaume-Uni, deux pays qui, séparément ou ensemble, ont dominé le monde, seraient dirigés par des hommes aussi disruptifs que Donald Trump et Boris Johnson ?

La réalité, pourtant, est en passe de dépasser la fiction. Si tout se passe comme prévu, si, fin juillet, les militants du Parti conservateur britannique choisissent l’ancien maire de Londres comme chef, deux tignasses blondes se distingueront sur la carte postale du prochain sommet du G7, le mois suivant, à Biarritz (Pyrénées-Atlantiques). Et ce G7, qui s’annonce déjà compliqué pour son hôte, Emmanuel Macron, pourrait bien tourner au cauchemar …

Il y a, bien sûr, un certain nombre de traits communs aux deux hommes, en dehors de leur chevelure et du fait qu’ils soient tous les deux natifs de New York, il y a soixante-treize ans pour l’un, cinquante-cinq ans pour l’autre. Un narcissisme sans limites, une savante utilisation des médias, le goût du risque et de l’improvisation, un recours totalement désinhibé au mensonge, une propension à mobiliser les émotions plutôt que les faits, la facilité avec laquelle ils peuvent changer d’avis. Une vie privée agitée aussi : tous deux ont quitté leur deuxième femme pour une compagne vingt-quatre ans plus jeune qu’eux.

Sylvie Kauffman / Le Monde

The weird absence of money and finance in economic theory

26 Jun, 2019 at 14:45 | Posted in Economics | 5 Comments

Consider the problem of money. Money is of central importance to any modern capitalist market economy. Yet it is mainly sociologists, philosophers and dissenters that have maintained an interest in what money “is” with a view to continued critique and development … One might think this is because economics has already provided an agreed clear concept of money. But this is not the case. Contemporary economics defines money in terms of function (unit of account, store of value, medium of exchange), but puts aside both the actual history of money (after an origin story) and the conceptual problem of money, both of which likely affect the functionality of money in the broader sense of its role and consequence in real systems …

barterWhat appears weird to those outside of the mainstream is that in economic theory in general money is typically absent. It is usually assumed that in a properly functioning market system prices express the value of output such that all prices effectively become representative of ratios between goods and services (and inputs), and this ultimately means a market system operates as though it were barter. Money simply becomes the convenient symbol (in its medium of exchange guise) that expresses these ratios. As such, it has no independent significance, and one ought to look through money to the operation of “real” economic factors, and can in effect ignore money as a contributory, contextualising or significant component in a system …

The role of money in real systems has generally been peripheralised because of an arbitrary limitation created by the assumption that money is separate from and then circumspectly significant to “real” factors. This statement may seem odd to a non-economist, since we live in a world where monetary policy is high profile, and a great deal of attention is paid to central bank policy (inflation targeting for price stability), and to the existence and activity of banks.

Jamie Morgan / RWER

Yes indeed — money doesn’t matter in mainstream macroeconomic models. That’s true. According to the ‘classical dichotomy,’ real variables — output and employment — are independent of monetary variables, and so enables mainstream economics to depict the economy as basically a barter system.

But in the real world in which we happen to live, money certainly does matter. Money is not neutral and money matters in both the short run and the long run:

The theory which I desiderate would deal … with an economy in which money plays a part of its own and affects motives and decisions, and is, in short, one of the operative factors in the situation, so that the course of events cannot be predicted in either the long period or in the short, without a knowledge of the behaviour of money between the first state and the last. And it is this which we ought to mean when we speak of a monetary economy.

J. M. Keynes A monetary theory of production (1933)

What is also ‘forgotten’ in mainstream economic theory, is the insight that finance — in all its different shapes — has its own dimension, and if taken seriously, its effect on an analysis must modify the whole theoretical system and not just be added as an unsystematic appendage. Finance is fundamental to our understanding of modern economies​ and acting like the baker’s apprentice who, having forgotten to add yeast to the dough, throws it into the oven afterwards, simply isn’t enough.

All real economic activities nowadays depend on a functioning financial machinery. But institutional arrangements, states of confidence, fundamental uncertainties, asymmetric expectations, the banking system, financial intermediation, loan granting processes, default risks, liquidity constraints, aggregate debt, cash flow fluctuations, etc., etc. — things that play decisive roles in channelling money/savings/credit — are more or less left in the dark in modern mainstream formalizations.

Adorno und die Ursachen von Rechtsradikalismus

26 Jun, 2019 at 09:00 | Posted in Politics & Society | 1 Comment

 

[h/t Anders Ramsay]

Chicago economics — a pseudo-scientific zombie

25 Jun, 2019 at 19:17 | Posted in Economics | 6 Comments

A couple of years ago, in a lecture on the US recession, Robert Lucas gave an outline of what the New Classical school of macroeconomics today thinks on the latest downturns in the US economy and its future prospects.

lucasLucas starts by showing that real US GDP has grown at an average yearly rate of 3 per cent since 1870, with one big dip during the Depression of the 1930s and a big – but smaller – dip in the recent recession.

After stating his view that the US recession that started in 2008 was basically caused by a run for liquidity, Lucas then goes on to discuss the prospect of recovery from where the US economy is today, maintaining that past experience would suggest an “automatic” recovery, if the free market system is left to repair itself to equilibrium unimpeded by social welfare activities of the government.

As could be expected there is no room for any Keynesian type considerations on eventual shortages of aggregate demand discouraging the recovery of the economy. No, as usual in the new classical macroeconomic school’s explanations and prescriptions, the blame game points to the government and its lack of supply side policies.

Lucas is convinced that what might arrest the recovery are higher taxes on the rich, greater government involvement in the medical sector and tougher regulations of the financial sector. But — if left to run its course unimpeded by European type welfare state activities — the free market will fix it all.

In a rather cavalier manner — without a hint of argument or presentation of empirical facts — Lucas dismisses even the possibility of a shortfall of demand. For someone who already 30 years ago proclaimed Keynesianism dead — “people don’t take Keynesian theorizing seriously anymore; the audience starts to whisper and giggle to one another” — this is of course only what could be expected. Demand considerations are simply ruled out on whimsical theoretical-ideological grounds, much like we have seen other neo-liberal economists do over and over again in their attempts to explain away the fact that the latest economic crises shows how the markets have failed to deliver. If there is a problem with the economy, the true cause has to be government.

Chicago economics is a dangerous pseudo-scientific zombie ideology that ultimately relies on the poor having to pay for the mistakes of the rich. Trying to explain business cycles in terms of rational expectations has failed blatantly. Maybe it would be asking too much of freshwater economists like Lucas to concede that, but it’s still a fact that ought to be embarrassing.

shackleIf at some time my skeleton should come to be used by a teacher of osteology to illustrate his lectures, will his students seek to infer my capacities for thinking, feeling, and deciding from a study of my bones? If they do, and any report of their proceedings should reach the Elysian Fields, I shall be much distressed, for they will be using a model which entirely ignores the greater number of relevant variables, and all of the important ones. Yet this is what ‘rational expectations’ does to economics.

G. L. S. Shackle

Boris Johnson — la promesse d’une calamité pour le Royaume-Uni

25 Jun, 2019 at 13:09 | Posted in Politics & Society | 1 Comment

«Quelle révélation pourrait encore faire dérailler sa marche vers Downing Street, alors qu’il s’est maintes fois rendu coupable de mensonge, de tricherie, de déloyauté, de paresse, d’indiscrétion, d’incompétence, de mépris cynique pour les autres, sans jamais en subir les conséquences ? », se demandait la journaliste Sonia Purnell, une ancienne subordonnée de Boris Johnson pendant ses années de journaliste au Telegraph …

donald-trump«Il peut passer de la bonhomie à la fureur noire en quelques secondes, pour peu que l’on remette en cause le sentiment que tout lui est dû ou que l’on blesse son amour-propre», a ajouté Sonia Purnell dans le Times au lendemain de la rixe.

Si Boris Johnson n’était qu’un personnage de roman, il pourrait personnifier la quintessence d’une certaine catégorie d’Anglais : bien né et sûr de son fait, dilettante jusqu’au cynisme, spirituel jusqu’à la clownerie. Son assurance n’a d’égale que sa capacité à gaffer et à se ridiculiser. D’où les consignes de ses communicants : éviter au maximum les débats et les interviews en direct. « Fini de rire, Boris », semble être la consigne.

Le Monde

Bitte besteuert uns stärker!

25 Jun, 2019 at 12:41 | Posted in Politics & Society | 2 Comments

georgeIn einem offenen Brief haben sich mehrere reiche US-Unternehmer für die Einführung einer Vermögensteuer ausgesprochen. Zu den Initiatoren gehören etwa der Milliardär George Soros, Facebook-Mitbegründer Chris Hughes sowie Disney-Erben und die Besitzer der Hotelkette Hyatt. Sie rufen die Präsidentschaftsbewerber für die Wahl 2020 auf, eine gemäßigte Vermögensteuer zu unterstützen. “Amerika steht in der moralischen, ethischen und ökonomischen Verantwortung, unseren Wohlstand stärker zu besteuern”, heißt es in dem Brief, der auf der Plattform Medium veröffentlicht wurde.

Demnach kann eine Vermögensteuer dabei helfen, den Klimawandel anzugehen, die Wirtschaft zu stärken und Chancengleichheit zu schaffen. Umfragen zeigten, dass eine Mehrheit eine moderate Vermögensteuer für die reichsten Amerikaner unterstütze, schreiben die Autoren. Mehrere der demokratischen Präsidentschaftsbewerber haben sich bereits für eine Vermögensteuer ausgesprochen.

Die Unterzeichnerinnen und Unterzeichner verweisen unter anderem auf den Großinvestor Warren Buffet, der nach eigenen Angaben niedriger besteuert wird als seine Sekretärin. Sie signalisieren Unterstützung für die Vorstöße zu den Vermögensteuerplänen einiger demokratischer Präsidentschaftsbewerber – darunter die Senatorin Elizabeth Warren und Beto O’Rourke. Sie mahnen aber auch einen überparteilichen Konsens an.

Die Zeit

What is wrong with modern economics?

25 Jun, 2019 at 10:28 | Posted in Economics | 1 Comment

It is simply that modern economists persist in insisting that a set of tools be everywhere adopted that are mostly inadequate to social analysis, given the nature of social phenomena …

wrong toolTo put the matter bluntly (the pun may be useful), it is like attempting to cut the grass with a hammer or a piece of paper. The latter objects have their uses, but mowing the lawn is not one of them. Methods of applied mathematics of the sort economists wield have their uses, but illuminating social reality is not one of them, or at best, is so only in exceptional circumstances. I hope that it is clear that this explanation, whether correct or not, reflects a stance that is not anti-mathematics but anti a mismatch of tool and object — and so, given the circumstances, anti the abuse of mathematics …

There is a good deal wrong with modern economics. There is much to be done to remedy matters at all levels of analysis. But little can improve at any level until we discard the widely-worn methodological blinkers which encourage the view that mathematical modelling is everywhere automatically relevant, even essential, so that paying explicit attention to matters of ontology is unnecessary.

Tony Lawson

Modern economics has become increasingly irrelevant to the understanding of the real world. In his seminal book Economics and Reality (1997), Tony Lawson traced this irrelevance to the failure of economists to match their deductive-axiomatic methods with their subject

largepreview It is — sad to say — as relevant today as it was twenty years ago.

It is still a fact that within mainstream economics internal validity is everything and external validity nothing. Why anyone should be interested in that kind of theories and models is beyond imagination. As long as mainstream economists do not come up with any export-licenses for their theories and models to the real world in which we live, they really should not be surprised if people say that this is not science, but autism!

Studying mathematics and logic is interesting and fun. It sharpens the mind. In pure mathematics and logic, we do not have to worry about external validity. But economics is not pure mathematics or logic. It’s about society. The real world.

Economics and Reality was a great inspiration to yours truly twenty years ago. It still is.

The difference between statistical and causal assumptions

24 Jun, 2019 at 19:57 | Posted in Statistics & Econometrics | Leave a comment

Causality and CorrelationThere are three fundamental differences between statistical and causal assumptions. First, statistical assumptions, even untested, are testable in principle, given sufficiently large sample and sufficiently fine measurements. Causal assumptions, in contrast, cannot be verified even in principle, unless one resorts to experimental control. This difference is especially accentuated in Bayesian analysis. Though the priors that Bayesians commonly assign to statistical parameters are untested quantities, the sensitivity to these priors tends to diminish with increasing sample size. In contrast, sensitivity to priors of causal parameters … remains non-zero regardless of (nonexperimental) sample size.

Second, statistical assumptions can be expressed in the familiar language of probability calculus, and thus assume an aura of scholarship and scientific re- spectability. Causal assumptions, as we have seen before, are deprived of that honor, and thus become immediate suspect of informal, anecdotal or metaphysical thinking. Again, this difference becomes illuminated among Bayesians, who are accustomed to accepting untested, judgmental assumptions, and should therefore invite causal assumptions with open arms—they don’t. A Bayesian is prepared to accept an expert’s judgment, however esoteric and untestable, so long as the judgment is wrapped in the safety blanket of a probability expression. Bayesians turn extremely suspicious when that same judgment is cast in plain English, as in “mud does not cause rain” …

The third resistance to causal (vis-a-vis statistical) assumptions stems from their intimidating clarity. Assumptions about abstract properties of density functions or about conditional independencies among variables are, cognitively speaking, rather opaque, hence they tend to be forgiven, rather than debated. In contrast, assumptions about how variables cause one another are shockingly transparent, and tend therefore to invite counter-arguments and counter-hypotheses.

Judea Pearl

Pearl’s seminal contributions to this research field is well-known and indisputable. But on the ‘taming’ and ‘resolve’ of the issues, yurs truly however has to admit that (under the influence of especially David Freedman and Nancy Cartwright) I still have some doubts on the reach, especially in terms of realism and relevance, of his ‘do-calculus solutions’ for social sciences in general and economics in specific (see here, here, here and here). The distinction between the causal — ‘interventionist’ — E[Y|do(X)] and the more traditional statistical — ‘conditional expectationist’ — E[Y|X] is crucial, but Pearl and his associates, although they have fully explained why the first is so important, have to convince us that it (in a relevant way) can be exported from ‘engineer’ contexts where it arguably easily and universally apply, to socio-economic contexts where ‘manipulativity’ and ‘modularity’ are not perhaps so universally at hand.

President Trump talking bollocks

24 Jun, 2019 at 18:26 | Posted in Politics & Society | 12 Comments

buff President Trump believes we live in a zero-sum world in which one country’s gain is another’s loss. This is evident in his reaction to Mario Draghi’s comment this week that additional monetary stimulus will be needed if euro zone inflation doesn’t rise. Trump tweeted:

“Mario Draghi just announced more stimulus could come, which immediately dropped the Euro against the Dollar, making it unfairly easier for them to compete against the USA. They have been getting away with this for years, along with China and others.”

Adding that this is “very unfair to the United States!”

This, of course, is bollocks. The US would actually gain from monetary stimulus to the extent that it strengthens the euro zone economy, thus allowing US firms to sell more to it: exports are more sensitive to demand than they are to exchange rates. What’s more, insofar as expectations of low interest rates cause investors to reach for yield and buy shares they are likely to also buy some US equities thereby giving Americans the benefits of a positive wealth effect and lower cost of capital. Sure enough, the S&P did indeed rise after Draghi’s speech. Trump tweeted that the index hit an all-time high this week, but failed to connect this fact and Draghi’s words.

Yes, Draghi deserves criticism. But it is for not responding soon enough to the weak economy and low inflation rather than for belatedly talking of doing so.

This is not the only example of Trump’s zero-sum “thinking”. He also recently tweeted that:

“The United States has been losing, for many years, 600 to 800 Billion Dollars a year on Trade. With China we lose 500 Billion Dollars.”

You don’t need me to tell you that this is also bollocks. It is like me complaining that I lose money by my trading with Lidl. I don’t, of course. I merely exchange goods for money – which is exactly what US citizens with China are doing. Free exchange benefits both buyer and seller. It’s positive sum. In believing otherwise, Trump is expressing the pre-Smithian mercantilist idea, that wealth consists in piling up money by running a trade surplus, rather than in the expansion of consumption opportunities and increased productivity that comes from trade.

Chris Dillow / Stumbling & Mumbling

Confirms — again — what we already knew: Trump is a reckless, untruthful, outrageous, incompetent and undignified buffoon!

Why statistics does not give us causality

24 Jun, 2019 at 12:28 | Posted in Statistics & Econometrics | 4 Comments

If contributions made by statisticians to the understanding of causation are to be taken over with advantage in any specific field of inquiry, then what is crucial is that the right relationship should exist between statistical and subject-matter concerns …

introduction-to-statistical-inferenceWhere the ultimate aim of research is not prediction per se but rather causal explanation, an idea of causation that is expressed in terms of predictive power — as, for example, ‘Granger’ causation — is likely to be found wanting. Causal explanations cannot be arrived at through statistical methodology alone: a subject-matter input is also required in the form of background knowledge and, crucially, theory …

Likewise, the idea of causation as consequential manipulation is apt to research that can be undertaken primarily through experimental methods and, especially to ‘practical science’ where the central concern is indeed with ‘the consequences of performing particular acts’. The development of this idea in the context of medical and agricultural research is as understandable as the development of that of causation as robust dependence within applied econometrics. However, the extension of the manipulative approach into sociology would not appear promising, other than in rather special circumstances … The more fundamental difficulty is that, under the — highly anthropocentric — principle of ‘no causation without manipulation’, the recognition that can be given to the action of individuals as having causal force is in fact peculiarly limited.

John H. Goldthorpe

Causality in social sciences — and economics — can never solely be a question of statistical inference. Causality entails more than predictability, and to really in depth explain social phenomena require theory. Analysis of variation — the foundation of all econometrics — can never in itself reveal how these variations are brought about. First, when we are able to tie actions, processes or structures to the statistical relations detected, can we say that we are getting at relevant explanations of causation.

5cd674ec7348d0620e102a79a71f0063Most facts have many different, possible, alternative explanations, but we want to find the best of all contrastive (since all real explanation takes place relative to a set of alternatives) explanations. So which is the best explanation? Many scientists, influenced by statistical reasoning, think that the likeliest explanation is the best explanation. But the likelihood of x is not in itself a strong argument for thinking it explains y. I would rather argue that what makes one explanation better than another are things like aiming for and finding powerful, deep, causal, features and mechanisms that we have warranted and justified reasons to believe in. Statistical — especially the variety based on a Bayesian epistemology — reasoning generally has no room for these kinds of explanatory considerations. The only thing that matters is the probabilistic relation between evidence and hypothesis. That is also one of the main reasons I find abduction — inference to the best explanation — a better description and account of what constitute actual scientific reasoning and inferences.

For more on these issues — see the chapter “Capturing causality in economics and the limits of statistical inference” in my On the use and misuse of theories and models in economics.

In the social sciences … regression is used to discover relationships or to disentangle cause and effect. However, investigators have only vague ideas as to the relevant variables and their causal order; functional forms are chosen on the basis of convenience or familiarity; serious problems of measurement are often encountered.

Regression may offer useful ways of summarizing the data and making predictions. Investigators may be able to use summaries and predictions to draw substantive conclusions. However, I see no cases in which regression equations, let alone the more complex methods, have succeeded as engines for discovering causal relationships.

David Freedman

Some statisticians and data scientists think that algorithmic formalisms somehow give them access to causality. That is, however, simply not true. Assuming ‘convenient’ things like faithfulness or stability is not to give proofs. It’s to assume what has to be proven. Deductive-axiomatic methods used in statistics do no produce evidence for causal inferences. The real causality we are searching for is the one existing in the real world around us. If there is no warranted connection between axiomatically derived theorems and the real-world, well, then we haven’t really obtained the causation we are looking for.

Hicks on probability calculus

20 Jun, 2019 at 23:05 | Posted in Economics | 20 Comments

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 necessarily those that will rule the future.

Wickham, Mark, active 1984-2000; Sir John Hicks (1904-1989)When we cannot accept that the observations, along the time-series available to us, are independent … we have, in strict logic, no more than one observation, all of the separate items having to be taken together. For the analysis of that the probability calculus is useless; it does not apply … I am bold enough to conclude, from these considerations that the usefulness of ‘statistical’ or ‘stochastic’ methods in economics is a good deal less than is now conventionally supposed … We should always ask ourselves, before we apply them, whether they are appropriate to the problem in hand. Very often they are not … The probability calculus is no excuse for forgetfulness.

John Hicks 

Standing up against fascists and neo-nazis

19 Jun, 2019 at 13:56 | Posted in Politics & Society | 9 Comments

tess

A couple of years ago, neo-nazis and fascists were out marching on Swedish streets.

Tess Asplund courageously showed us all how to confront that kind of people.

Could Italy save the euro?

19 Jun, 2019 at 09:03 | Posted in Economics | 3 Comments

In a recent interview … Silvio Berlusconi mooted the introduction of a parallel domestic currency, the so-called mini-bills of Treasury (“mini-BOTs” for short), which would in theory allow Italy to exit austerity without exiting the eurozone. Italy’s Five Star/Lega coalition government has also embraced the idea. The ECB and the European Commission, predictably, oppose the mini-BOT’s introduction, seeing it as an existential threat to the single currency and a means of avoiding the fiscal rules established at its creation …

minibotDetermining what constitutes legal tender for the settlement of tax liabilities opens up considerably more fiscal policy space for a national government. Hence the appeal to Rome, as their proposed mini-BOT would give Italy’s government more policy options to generate an economic expansion commensurate with higher incomes and more job growth …

The mini-BOT remains highly controversial, both politically and legally. In terms of the latter, many, such as Lorenzo Codogno, a former chief economist at the Italian Treasury, claim that the introduction of a parallel domestic currency would contravene the terms of the European Monetary Union treaty … The real concern is political, a view typified by Riccardo Puglisi, an economist at the University of Pavia. Puglisi sees the mini-BOT not as a complement to the euro, but rather as “a way to facilitate the exit of Italy from the eurozone” …

The “phony war” will end soon. The parallel currency at least offers a fresh approach to reverse Italy’s relative economic decline. However, the European Commission’s reluctance to tolerate any degree of experimentation, its politically tone-deaf browbeating of the Italian government to fall into line with prevailing economic orthodoxy actually feeds the anti-establishment and anti-euro forces now politically ascendant in Italy.

Marshall Auerback

The monetary union has not been able to show any noteworthy productivity jumps since it was launched twenty years ago. The economic problems have been growing and at times almost led to national catastrophes. The EMU is not an optimal currency union, and as history has told us, countries like Germany, Greece, and Italy do not fall into step when marching.

Although data indicate that there may be some weak evidence of convergence in long-term interest rates in the Eurozone, there seems to be very little evidence of convergence when it comes to macroeconomic outcomes such as growth, employment, inflation, or public debt. The magic silver-bullet that would solve all problems, simply has not materialized.

The problems with the euro should not come as a surprise. If a country gives up its own currency, it does not only give up the possibility of having its own over monetary policy. Membership in the European monetary union means less accommodation and flexibility when it comes to country-specific asymmetric shocks, and fewer possibilities for freely using financial policies to guarantee low unemployment and high welfare levels.

The unfolding of the repeated economic crises in euro land has shown beyond any doubts that the euro is not only an economic project but just as much a political one. What the neoliberal revolution during the 1980s and 1990s didn’t manage to accomplish, the euro shall now force on us.

But do the peoples of Europe really want to deprive themselves of economic autonomy, enforce lower wages and slash social welfare at the slightest sign of economic distress? Are increasing income inequality and a federal überstate really the stuff that our dreams are made of? The euro has taken away the possibility for national governments to manage their economies in a meaningful way — and in Italy the people have had to pay the true costs of its concomitant misguided austerity policies.

The euro model is and has always been footed on an economic model that increases inequality and is to the disadvantage of the working classes. Austerity measures are repeatedly imposed and threaten not only our economies but also democracy itself.

How much whipping can economy and democracy take? How many have to be hurt and ruined before we end the euro madness? Instead of just go on mending the project it would be better to just admit that we have reached way’s end and that it is time to take another road. A road forward. A road without the euro.

Why attractive people you date tend​ to be jerks

19 Jun, 2019 at 00:12 | Posted in Statistics & Econometrics | 1 Comment

The Book of Why_coverHave you ever noticed that, among the people you date, the attractive ones tend to be jerks? Instead of constructing elaborate psychosocial theories, consider a simpler explanation. Your choice of people to date depends on two factors, attractiveness and personality. You’ll take a chance on dating a mean attractive person or a nice unattractive person, and certainly a nice attractive person, but not a mean unattractive person … This creates a spurious negative correlation between attractiveness and personality. The sad truth is that unattractive people are just as mean as attractive people — but you’ll never realize it, because you’ll never date somebody who is both mean and unattractive.

My philosophy of economics

18 Jun, 2019 at 13:45 | Posted in Economics, Theory of Science & Methodology | 4 Comments

A critique yours truly sometimes encounters is that as long as I cannot come up with some own alternative to the failing mainstream theory, I shouldn’t expect people to pay attention.

This is, however, to totally and utterly misunderstand the role of philosophy and methodology of economics!

As John Locke wrote in An Essay Concerning Human Understanding:

19557-004-21162361The Commonwealth of Learning is not at this time without Master-Builders, whose mighty Designs, in advancing the Sciences, will leave lasting Monuments to the Admiration of Posterity; But every one​e must not hope to be a Boyle, or a Sydenham; and in an Age that produces such Masters, as the Great-Huygenius, and the incomparable Mr. Newton, with some other of that Strain; ’tis Ambition enough to be employed as an Under-Labourer in clearing Ground a little, and removing some of the Rubbish, that lies in the way to Knowledge.

That’s what philosophy and methodology can contribute to economics — clearing obstacles to science by clarifying limits and consequences of choosing specific modelling strategies, assumptions, and ontologies.

respectEvery now and then I also get some upset comments from people wondering why I’m not always ‘respectful’ of people like Eugene Fama, Robert Lucas, Greg Mankiw, Paul Krugman, Simon Wren-Lewis, and others of the same ilk.

But sometimes it might actually, from a Lockean perspective, be quite appropriate to be disrespectful.

New Classical and ‘New Keynesian’ macroeconomics is rubbish that ‘lies in the way to Knowledge.’

And when New Classical and ‘New Keynesian’ economists resurrect fallacious ideas and theories that were proven wrong already in the 1930s, then I think a less respectful and more colourful language is called for.

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