Additivity — a dangerous assumption

22 Jul, 2019 at 12:30 | Posted in Economics | Leave a comment

2014+22keynes%20illo2The unpopularity of the principle of organic unities shows very clearly how great is the danger of the assumption of unproved additive formulas. The fallacy, of which ignorance of organic unity is a particular instance, may perhaps be mathematically represented thus: suppose f(x) is the goodness of x and f(y) is the goodness of y. It is then assumed that the goodness of x and y together is f(x) + f(y) when it is clearly f(x + y) and only in special cases will it be true that f(x + y) = f(x) + f(y). It is plain that it is never legitimate to assume this property in the case of any given function without proof.

J. M. Keynes “Ethics in Relation to Conduct” (1903)

Since econometrics doesn’t content itself with only making optimal predictions, but also aspires to explain things in terms of causes and effects, econometricians need loads of assumptions — most important of these are additivity and linearity. Important, simply because if they are not true, your model is invalid and descriptively incorrect. It’s like calling your house a bicycle. No matter how you try, it won’t move you an inch. When the model is wrong — well, then it’s wrong.

Boris Johnson — the habitual liar

22 Jul, 2019 at 09:57 | Posted in Politics & Society | 2 Comments

liEs war eine theatralische Szene, wie Boris Johnson sie liebt. Er trat in Ostlondon auf, zum letzten Mal bevor die Tory-Mitglieder am Montag über ihren künftigen Parteichef und damit auch über den nächsten Premierminister abstimmen. Dabei wedelte der Kandidat mit einem in Plastikfolie eingeschweißten Hering. Der käme von einem Fischräucherer auf der Isle of Man.

“Nach Jahrzehnten, in denen diese Heringe einfach per Post verschickt wurden, werden ihre Kosten jetzt durch Brüsseler Bürokraten massiv hochgetrieben”, behauptete Johnson. “Denn die bestehen darauf, dass jeder Fisch von einem Eiskissen aus Plastik begleitet werden muss.” Das sei sinnlos, teuer und umweltfeindlich. Nach dem Brexit könne Großbritannien sich von solchen Regeln befreien.

Leider ist die Geschichte rundum falsch. Zum einen gehört die zwischen Irland und Großbritannien gelegene Isle of Man nicht zur EU und folgt deren Regulierungen – wenn überhaupt – nur freiwillig. Zum anderen ist die EU für Hygiene- und Sicherheitsvorschriften beim nationalen Transport von Lebensmitteln nicht zuständig, sie sorgt nur für länderübergreifende Regeln …

Wegen dieses und anderer Vorfälle nennt Martin Wolf, Chefkommentator der “Financial Times”, Boris Johnson auch einen “seriellen Fantasten”, der untauglich für das höchste Staatsamt sei …

Bei der jüngsten Lokalwahl im Mai twitterte Johnson, er habe bereits die konservative Partei gewählt und seine Landsleute sollten doch seinem Vorbild folgen. Dumm nur, dass an seinem Wohnort London überhaupt keine lokalen Wahlen stattfanden. Der Tweet verschwand dann ziemlich schnell aus dem Netz …

“Ich war Boris Johnsons Boss – er ist völlig untauglich als Premierminister”, schreibt sein früherer Chef bei der Zeitung “Daily Telegraph”, Max Hastings. Er holte vor wenigen Wochen zum Rundumschlag gegen seinen Ex-Kollegen aus: “Er würde die Wahrheit nicht erkennen, wenn man sie ihm bei einer Gegenüberstellung vorführen würde.”

Barbara Wesel / Deutsche Welle

Avec le temps

21 Jul, 2019 at 22:08 | Posted in Varia | Leave a comment

 

C’est extra

21 Jul, 2019 at 21:38 | Posted in Varia | Leave a comment

 

Pour que tu m’aimes encore

21 Jul, 2019 at 21:25 | Posted in Varia | Leave a comment

 

DSGE models — worse than useless

21 Jul, 2019 at 14:35 | Posted in Economics | 1 Comment

impIf you want absolute truth then you must look to pure mathematics or religion, but certainly not to science … Science is all about possibilities. We propose theories, conjectures, hypotheses and explanations. We collect evidence and data, and we test the theories against this new evidence … It’s the very essence of science that its conclusions can change, that is, that its truths are not absolute. The intrinsic good sense of this is contained within the remark reportedly made by the eminent economist John Maynard Keynes, responding to the criticism that he had changed his position on monetary policy during the 1930s Depression: “When the facts change, I change my mind. What do you do, sir?”

DSGE models are worse than useless — and still, mainstream economists seem to be überimpressed by the ‘rigour’ brought to macroeconomics by New-Classical-New-Keynesian DSGE models and its rational expectations and microfoundations!

It is difficult to see why.

‘Rigorous’ and ‘precise’ DSGE models cannot be considered anything else than unsubstantiated conjectures as long as they aren’t supported by evidence from outside the theory or model. To my knowledge, no decisive empirical evidence has been presented.

keynes-right-and-wrong

Proving things ‘rigorously’ in DSGE models is at most a starting-point for doing an interesting and relevant economic analysis. Forgetting to supply export warrants to the real world makes the analysis an empty exercise in formalism without real scientific value.

Mainstream economists think there is a gain from the DSGE style of modelling in its capacity to offer the one and only structure around which to organise discussions. To me, that sounds more like a religious theoretical-methodological dogma, where one paradigm rules in divine hegemony. That’s not progress. That’s the death of economics as a science.

As David Hand tells us — building models based on questionable ontological or epistemological assumptions may be fine in mathematics and religion, but it certainly is not science.

Ágnes Heller (1929–2019)

21 Jul, 2019 at 14:05 | Posted in Politics & Society | 1 Comment

Ágnes Heller ist tot. Die ungarische Philosophin und Soziologin starb im Alter von 90 Jahren im Badeort Balatonalmádi am Plattensee …

Agnes-HellerHeller war eine Schülerin des ungarischen marxistischen Philosophen Georg Lukács. Nach dem ungarischen Volksaufstand von 1956 stellte sie das sozialistische Herrschaftssystem ihrer Heimat Ungarn infrage und wurde zur Dissidentin. 1989 kehrte sie nach Ungarn zurück und wurde zu einer wichtigen und streitbaren Stimme eines modernen Liberalismus. Dies brachte sie in entschiedene Gegnerschaft zur Regierung des seit 2010 amtierenden rechtsnationalen Ministerpräsidenten Viktor Orbáns, den sie als “rechtsorientierten, nationalistischen Demagogen” bezeichnete.

Die Zeit

Improbability and the law of truly large numbers

21 Jul, 2019 at 12:30 | Posted in Statistics & Econometrics | Leave a comment

 

Werk ohne Autor

21 Jul, 2019 at 11:31 | Posted in Varia | Leave a comment

 

Est-il possible de concilier liberté individuelle et justice sociale?

20 Jul, 2019 at 17:12 | Posted in Politics & Society | Leave a comment

abolir-le-hasard-9782711621606_0Le capitalisme contemporain est aujourd’hui sous le feu de la critique, comme facteur d’accroissement des inégalités et de destruction des « biens communs ». Comme au début du XIXe siècle, la question de la « justice sociale » est au cœur des débats. Jean-Fabien Spitz, professeur émérite de philosophie politique à l’université Paris-I, auteur d’Abolir le hasard? Responsabilité individuelle et justice sociale (Vrin, 2008), analyse l’apparente contradiction entre l’exigence de liberté individuelle et l’aspiration à l’égalité qui traverse les sociétés occidentales …

Antoine Reverchon: Comment la théorie économique, en particulier avec l’économiste autrichien Friedrich Hayek (1899-1992), a-t-elle, en soulignant la contradiction entre justices distributive et commutative, ouvert la voie aux réformes néolibérales de dérégulation?

Jean-Fabien Spitz: La pensée de Friedrich Hayek, heureusement, n’est pas la totalité de la théorie économique, mais le défi qu’il a lancé à la possibilité même de la justice distributive doit être pris avec le plus grand sérieux, contrairement à l’attitude trop répandue dans l’antilibéralisme contemporain. L’« idée-force » de Friedrich Hayek est qu’il est impossible de construire une structure sociale distributive – égalitaire ou non – sans une interférence constante dans les plans et les actions des individus, et qu’un tel projet les transforme inévitablement en agents d’une organisation dont ils ne partagent pas nécessairement les buts. La conséquence est que, pour lui, les valeurs bilatérales de la justice commutative sont les seules dont nous puissions admettre la validité. Mais Hayek commet ici une erreur logique évidente. Lorsqu’il affirme qu’interférer dans les plans et les actions des individus contredit leur liberté, ce n’est vrai que si ces plans et ces actions se déploient dans un contexte distributivement juste. Mais ce n’est pas le cas s’ils se déploient dans un contexte injuste qui leur permet de porter atteinte au droit égal des tiers de développer leurs propres plans et leurs propres actions dans des conditions conformes au principe de l’égalité de valeur de l’ensemble des individus. Dans un contexte injuste, une telle interférence – par exemple, le salaire minimum ou le droit du travail – accroît au contraire la liberté de ceux qu’elle met à l’abri de contraintes excessives sans détruire aucune liberté douée de valeur puisque, précisément, le fait d’exercer des contraintes excessives sur autrui n’a pas cette qualité.

Le Monde

A$AP Rocky and The Rule of Law

20 Jul, 2019 at 09:55 | Posted in Politics & Society | 5 Comments

Donald Trump has said he is working to free the American rapper A$AP Rocky, who has been held in police custody in Sweden for weeks.

LAW“I will be calling the very talented Prime Minister of Sweden to see what we can do about helping A$AP Rocky,” Trump tweeted from aboard Air Force One on Friday …

Rocky … has been in police custody since early July as Swedish police investigate his alleged involvement in a fight in Stockholm that occurred before his appearance at a music festival. Videos published on social media appear to show a person being violently thrown onto the ground by Rocky. A defense lawyer has said he acted in self-defense.

The Guardian

Sweden is not a Banana Republic. In Sweden everyone — regardless of whether you are rich and famous or just an ordinary citizen — has to follow the rule of law. How hard can it be to understand and accept that?

Today’s court ruling will not lay this infamy to rest

19 Jul, 2019 at 20:11 | Posted in Politics & Society | Leave a comment

 

The validity of statistical induction

18 Jul, 2019 at 22:59 | Posted in Statistics & Econometrics | 8 Comments

treatprob-2In my judgment, the practical usefulness of those modes of inference, here termed Universal and Statistical Induction, on the validity of which the boasted knowledge of modern science depends, can only exist—and I do not now pause to inquire again whether such an argument must be circular—if the universe of phenomena does in fact present those peculiar characteristics of atomism and limited variety which appear more and more clearly as the ultimate result to which material science is tending …

The physicists of the nineteenth century have reduced matter to the collisions and arrangements of particles, between which the ultimate qualitative differences are very few …

The validity of some current modes of inference may depend on the assumption that it is to material of this kind that we are applying them … Professors of probability have been often and justly derided for arguing as if nature were an urn containing black and white balls in fixed proportions. Quetelet once declared in so many words—“l’urne que nous interrogeons, c’est la nature.” But again in the history of science the methods of astrology may prove useful to the astronomer; and it may turn out to be true—reversing Quetelet’s expression—that “La nature que nous interrogeons, c’est une urne”.

Professors of probability and statistics, yes. And more or less every mainstream economist!

L’été indien

18 Jul, 2019 at 22:53 | Posted in Varia | Leave a comment

 

Two must-read statistics books

17 Jul, 2019 at 16:36 | Posted in Statistics & Econometrics | 4 Comments

freedmanMathematical statistician David Freedman‘s Statistical Models and Causal Inference (Cambridge University Press, 2010)  and Statistical Models: Theory and Practice (Cambridge University Press, 2009) are marvellous books. They ought to be mandatory reading for every serious social scientist — including economists and econometricians — who doesn’t want to succumb to ad hoc assumptions and unsupported statistical conclusions!

freedHow do we calibrate the uncertainty introduced by data collection? Nowadays, this question has become quite salient, and it is routinely answered using wellknown methods of statistical inference, with standard errors, t -tests, and P-values … These conventional answers, however, turn out to depend critically on certain rather restrictive assumptions, for instance, random sampling …

Thus, investigators who use conventional statistical technique turn out to be making, explicitly or implicitly, quite restrictive behavioral assumptions about their data collection process … More typically, perhaps, the data in hand are simply the data most readily available …

The moment that conventional statistical inferences are made from convenience samples, substantive assumptions are made about how the social world operates … When applied to convenience samples, the random sampling assumption is not a mere technicality or a minor revision on the periphery; the assumption becomes an integral part of the theory …

In particular, regression and its elaborations … are now standard tools of the trade. Although rarely discussed, statistical assumptions have major impacts on analytic results obtained by such methods.

Consider the usual textbook exposition of least squares regression. We have n observational units, indexed by i = 1, . . . , n. There is a response variable yi , conceptualized as μi + i , where μi is the theoretical mean of yi while the disturbances or errors i represent the impact of random variation (sometimes of omitted variables). The errors are assumed to be drawn independently from a common (gaussian) distribution with mean 0 and finite variance. Generally, the error distribution is not empirically identifiable outside the model; so it cannot be studied directly—even in principle—without the model. The error distribution is an imaginary population and the errors i are treated as if they were a random sample from this imaginary population—a research strategy whose frailty was discussed earlier.

Usually, explanatory variables are introduced and μi is hypothesized to be a linear combination of such variables. The assumptions about the μi and i are seldom justified or even made explicit—although minor correlations in the i can create major bias in estimated standard errors for coefficients …

Why do μi and i behave as assumed? To answer this question, investigators would have to consider, much more closely than is commonly done, the connection between social processes and statistical assumptions …

We have tried to demonstrate that statistical inference with convenience samples is a risky business. While there are better and worse ways to proceed with the data at hand, real progress depends on deeper understanding of the data-generation mechanism. In practice, statistical issues and substantive issues overlap. No amount of statistical maneuvering will get very far without some understanding of how the data were produced.

More generally, we are highly suspicious of efforts to develop empirical generalizations from any single dataset. Rather than ask what would happen in principle if the study were repeated, it makes sense to actually repeat the study. Indeed, it is probably impossible to predict the changes attendant on replication without doing replications. Similarly, it may be impossible to predict changes resulting from interventions without actually intervening.

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