Wren-Lewis trying to cope with ideology

18 Aug, 2019 at 20:07 | Posted in Economics | 6 Comments

Simon Wren-Lewis has also commented on the study by Mohsen Javdani and Ha-Joon Chang — on economics and ideology — that I wrote about earlier today. Says Wren-Lewis:

scI also, from my own experience, want to suggest that in their formal discourse (seminars, refereeing etc) academic economists normally pretend that this ideological bias does not exist. I cannot recall anyone in any seminar saying something like ‘you only assume that because of your ideology/politics’. This has one huge advantage. It means that academic analysis is judged (on the surface at least) on its merits, and not on the basis of the ideology of those involved.

The danger of doing the opposite should be obvious. Your view on the theoretical and empirical validity of an academic paper or study may become dependent on the ideology or politics of the author or the political implications of the results rather than its scientific merits. Having said that, there are many people who argue that economics is just a form of politics and economists should stop pretending otherwise. I disagree. Economics can only be called a science because it embraces the scientific method. The moment evidence is routinely ignored by academics because it does not help some political project economics stops being the science it undoubtedly is.

Quite frankly I have to admit to being at a loss here. Of course, you never hear anyone at our seminars telling the lecturer that the assumptions on which his models are built are only made for ideological reasons. But that does not necessarily mean — wether on the surface or not — that “academic analysis is judged on its merits”. What it means is that we have a catechism that no one dares to question. And that catechism has become hegemonic for particular reasons, one of which may very well be of an ideological nature. When the neoclassical theory was developed in the late 19th century one of the reasons was that some economists — e.g. Böhm-Bawerk –thought that the Ricardian (labour value) tradition had become too radical and could be used as a dangerous weapon in the class struggle. Marginalism was explicitly seen as a way to counter that.

Wren-Lewis seems to think that ‘the facts are bound to win in the end.’

It is difficult to see why.

Take the rational expectations assumption. Rational expectations in the mainstream economists’ world imply that relevant distributions have to be time-independent. This amounts to assuming that an economy is like a closed system with known stochastic probability distributions for all different events. In reality, it is straining one’s beliefs to try to represent economies as outcomes of stochastic processes. An existing economy is a single realization tout court, and hardly conceivable as one realization out of an ensemble of economy-worlds since an economy can hardly be conceived as being completely replicated over time. It is — to say the least — very difficult to see any similarity between these modelling assumptions and the expectations of real persons. In the world of the rational expectations hypothesis, we are never disappointed in any other way than as when we lose at the roulette wheels. But real life is not an urn or a roulette wheel. And that’s also the reason why allowing for cases where agents make ‘predictable errors’ in DSGE models doesn’t take us any closer to a relevant and realist depiction of actual economic decisions and behaviours.

‘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 in any way decisive empirical evidence has been presented.

So, given this lack of empirical evidence, why do mainstream economists still stick to using this kind of theories and models building on blatantly ridiculous assumptions? Well, one reason, I would argue, is of an ideological nature. Those models and the assumptions they build on standardly have a neoliberal or market-friendly bias. I guess that is also one of the — ideological — reasons those models and theories are so dear to many Chicago economists and ‘New Keynesian’ macroeconomists …

6 Comments

  1. He is a writer and a good storyteller, Simon Wren Lewis. You have to give him that, he is a good “storyteller” every time. You can watch him, repetitive and predetermined, in lengthy thoughts and and in career … Well done Simon .Long may you run. Labour ?Skipped that?

  2. Economics isn’t a science and to pretend that is, is to remove all possibility of it ever becoming a credible discipline.

  3. There is a tension between the (semi-)formal discourse of the seminar or working paper and the informal discourse of the cafeteria or hallway. The slippery slope between them is composed of a lot of “of course, we all know that!” as sometimes very closely reasoned argument in formal published papers is argued “among friends” in a looser way in seminar and very loosely indeed in the cafeteria or over cheese and sherry after the talk. Processes of semantic generalization take over and essential distinctions erased, even as economists assure their colleagues that all their opinions are rigorously tested somewhere else.
    .
    It all blends together in the unquestioned hand-waving of the classroom, not to mention the op-ed page’s sloganeering.
    .
    Such common expressions as “market economy” have no referents. With reasoning divorced so completely from reality, there can only be ideology. Empiricism can gain no toe-hold where basic facts of how our financial and bureaucratic economy works are routinely denied or ignored in fundamental doctrine.

  4. Payson (2017) has an interesting vignette about story telling in economics.

  5. “The moment evidence is routinely ignored by academics because it does not help some political project economics stops being the science it undoubtedly is.”

    The problem is here. The problem is that many people actually doubt that it is a science. Including scientists. Even more seriously, scientists and philosophers whose specialisation is the methodology of science.

    You ultimately trying to answer how to satisfy unlimited wants with limited resources. Have you found the answer? But more important than that, is that the right question?

    How is it that this became the question?

    We can go further into specifics, as Lars does. Are sticky price rational expectations optimisation models scientific? How did a rational expectations model become a, if not the, foundational methodology of macroeconomic analysis?

    I think Wren Lewis and the profession at large needs to tell us what science is, and how economics has “undoubtedly” fulfilled accepted standards across disciplines about what scientific methodology is.

  6. Simon Lewis is probably one of the most reliable squatters, in the economics profession, Krugman perhaps even better,one the more reliable of the more skilled in in there the subject – says much without weight, and benefit.Very much thin air in their speaches!


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