Chicago style response to critique

29 Jun, 2019 at 18:44 | Posted in Economics | 5 Comments

 

In a post up here earlier this week yours truly questioned the scientific value of Chicago economics. I took as an example the SMD theorem, that has unequivocally showed that there does not exist any condition by which assumptions on individuals would guarantee neither stability nor uniqueness of a general equilibrium solution — and that it, therefore, is intellectually dishonest to just go on pretending that it is still acceptable to model real-world economies building on the assumption that an entire economy can be modelled as a representative actor and that this is a valid procedure.

And as usual, when those Chicago economists respond to the critique, they
immediately want to divert the attention into focusing on mathematical technicalities.

As if that was the problem! It is not.

The basic problem is that Chicago style models crucially build on unrealistic assumptions known to be false. And since genuine explanations require truth, those models capture nothing of significance and so end up being explanatorily totally irrelevant since they fundamentally misrepresent acting causal factors known to be relevant — they simply lack the necessary representational relationship with the real world.

But reacting the way they do those Chicago economists, should come as no surprise to us since this is the typical Chicago procedure when facing critique. How should one react? Robert Solow knows:

Suppose someone sits down where you are sitting right now and announces to me that he is Napoleon Bonaparte. The last thing I want to do with him is to get involved in a technical discussion of cavalry tactics at the battle of Austerlitz. If I do that, I’m getting tacitly drawn into the game that he is Napoleon. Now, Bob Lucas and Tom Sargent like nothing better than to get drawn into technical discussions, because then you have tacitly gone along with their fundamental assumptions; your attention is attracted away from the basic weakness of the whole story. Since I find that fundamental framework ludicrous, I respond by treating it as ludicrous – that is, by laughing at it – so as not to fall into the trap of taking it seriously and passing on to matters of technique.

Robert Solow