The Beltrami identity (student stuff)

23 May, 2020 at 15:20 | Posted in Economics | Comments Off on The Beltrami identity (student stuff)


Economic models and reality

22 May, 2020 at 09:27 | Posted in Economics | 2 Comments

assumptionsThe abandonment of efforts to match real structures has led to disaster, as models of economic theory have grown progressively distant from reality. Attempts to fix the problem have failed to address the cause. Economists look at bad models, and say we should replace these by better models. But the process by which models are evaluated, the underlying methodology, is not examined. The real problem lies much deeper than bad models and ludicrous assumptions. Bad assumptions would quickly be replaced by better ones if the methodology insisted on correction of models to match reality. The real problem is the lack of a progressive methodology. When our mental models are attempts to approximate reality, then, when they fail, we try to improve the match to reality. Our models become better as approximations to the hidden structures of reality. However, when we abandon efforts to match reality, our mental models can become progressively worse as approximations to reality while becoming better at providing a match to observations …

The problem can be fixed only if we adopt a realist philosophy of science. Critical realism offers an extremely useful alternative to current economic and econometric methodology. A realist philosophy has the possibility of learning from experience. Even if we start with ridiculous assumptions, we will modify them in face of empirical evidence to the contrary. In complete contrast, economists stubbornly stick to assumptions known to be false because the standard methodology says that false assumptions are not a problem for models. There is no hope for progress in economics until we abandon Friedman’s methodological prescriptions according to which the more ludicrous our assumptions, the better our model.

Asad Zaman

Yes indeed, critical realism offers a useful alternative to current economic methodology. In a time when scientific relativism is still on the march, it is important to keep up the critical realist claim for not reducing science to a pure discursive level.

Science is made possible by the fact that there exists a reality beyond our theories and concepts of it. It is this reality that our theories in some way deal with. Contrary to positivism, yours truly cannot see that the main task of science is to detect event-regularities between observed facts. Rather, the task must be conceived as identifying the underlying structure and forces that produce the observed events.

The problem with positivist social science is not that it gives the wrong answers, but rather that in a strict sense it does not give answers at all. Its explanatory models presuppose that the social reality is ‘closed,’ and since social reality is fundamentally ‘open,’ models of that kind cannot explain anything about​ what happens in such a universe. Positivist social science has to postulate closed conditions to make its models operational and then – totally unrealistically – impute these closed conditions to society’s real structure.

What makes knowledge in social sciences possible is the fact that society consists of social structures and positions that influence the individuals of society, partly through their being the necessary prerequisite for the actions of individuals but also because they dispose individuals to act (within a given structure) in a certain way. These structures constitute the ‘deep structure’ of society.

Our observations and theories are concept-dependent without therefore necessarily being concept-determined. There is a reality existing independently of our knowledge and theories of it. Although we cannot apprehend it without using our concepts and theories, these are not the same as reality itself. Reality and our concepts of it are not identical. Social science is made possible by existing structures and relations in society that are continually reproduced and transformed by different actors.

Explanations and predictions of social phenomena require theory constructions. Just looking for correlations between events is not enough. One has to get under the surface and see the deeper underlying structures and mechanisms that essentially constitute the social system.

The basic question one has to pose when studying social relations and events are​ what are the fundamental relations without which they would cease to exist. The answer will point to causal mechanisms and tendencies that act in the concrete contexts we study. Whether these mechanisms are activated and what effects they will have in that case it is not possible to predict, since these depend on accidental and variable relations. Every social phenomenon is determined by a host of both necessary and contingent relations, and it is impossible in practice to have complete knowledge of these constantly changing relations. That is also why we can never confidently predict them. What we can do, through learning about the mechanisms of the structures of society, is to identify the driving forces behind them, thereby making it possible to indicate the direction in which things tend to develop.

The world itself should never be conflated with the knowledge we have of it. Science can only produce meaningful, relevant and realist knowledge if it acknowledges its dependence of the​ world out there. Ultimately that also means that the critique Asad Zaman and yours truly wage against mainstream economics is that it doesn’t take that ontological requirement seriously.

Euler-Lagrange (student stuff)

21 May, 2020 at 09:59 | Posted in Economics | 3 Comments


Pandemic depression antidote (XIV)

20 May, 2020 at 22:44 | Posted in Varia | Comments Off on Pandemic depression antidote (XIV)



Adam Smith and the other side of the invisible hand

19 May, 2020 at 20:47 | Posted in Economics | 1 Comment

thmorsentHow selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortune of others, and render their happiness necessary to him, though he derives nothing from it except the pleasure of seeing it. Of this kind is pity or compassion, the emotion which we feel for the misery of others, when we either see it, or are made to conceive it in a very lively manner. That we often derive sorrow from the sorrow of others, is a matter of fact too obvious to require any instances to prove it; for this sentiment, like all the other original passions of human nature, is by no means confined to the virtuous and humane, though they perhaps may feel it with the most exquisite sensibility. The greatest ruffian, the most hardened violator of the laws of society, is not altogether without it.

Det svenska kränkthetspladdret

19 May, 2020 at 18:46 | Posted in Politics & Society | 1 Comment

Vågade någon tala om för dig att du gjort ett dåligt arbete eller inte ansträngt dig nog? Fick du för dåliga betyg? Höll inte uppsatsen måttet? Det gör inget! För nu för tiden kan alla slö, slappa, lata och likgiltiga komma undan det egna ansvaret med tidens egen deus ex machina — de är kränkta. Simsalabim och problemet är inte längre deras utan den som hade fräckheten att våga påtala bristerna och undermåligheten.

För mig är detta en källa till ständig irritation. Varför? Jo — främst — därför att dagens imbecilla tyckmyckentrutade kränkthetspladder är en skymf mot alla de som verkligen blir kränkta i vårt samhälle. Genom att urvattna begreppet ‘kränkthet’ till en totalt intetsägande psykologiserande fras med betydelse ‘jag tycker detta är jobbigt och gillar det inte’ förlorar det den kraft och betydelse det en gång med rätta haft.

Rational choice theory — an abysmal failure

18 May, 2020 at 11:55 | Posted in Economics | 1 Comment

bunbgeThough an enthusiast of reason, I believe that rational choice theory has failed abysmally, and it saddens me that this failure has brought discredit upon the very enterprise of serious theorizing in the field of social study …

Rational choice theory is far too ambitious. In fact, it claims to explain everything social in terms of just three assumptions that would hold for all individuals in all social groups and in every historical period. But a Theory of Everything does not explain anything in particular … And being unable to account for differences among individuals and for the variety of social interactions, systems, processes, and institutions, the theory is bound to be unrealistic, i. e., false …

The reader may feel that my criticism is excessive: that I am throwing the baby out along with the bath water. My reaction is that there is no baby … It died long ago from mathematical anemia, from deficiency in the enzymes required to digest the simplest social facts, and from lack of exposure to the sound and light and fury of the social weather.

Most mainstream economists want to explain social phenomena, structures and patterns, based on the assumption that the agents are acting in an optimizing — rational — way to satisfy given, stable and well-defined goals.

The procedure is analytical. The whole is broken down into its constituent parts so as to be able to explain (reduce) the aggregate (macro) as the result of the interaction of its parts (micro). Building their economic models, modern mainstream economists ground their models on a set of core assumptions describing the agents as ‘rational’ actors and a set of auxiliary assumptions. Together these assumptions make up the base model of all mainstream economic models. Based on these two sets of assumptions, they try to explain and predict both individual and social phenomena.

The core assumptions typically consist of completeness, transitivity, non-satiation, expected utility maximization, and consistent efficiency equilibria.

When describing the actors as rational in these models, the concept of rationality used is instrumental rationality – choosing consistently the preferred alternative, which is judged to have the best consequences for the actor given his in the model exogenously given interests and goals. How these preferences, interests, and goals are formed is not considered to be within the realm of rationality, and a fortiori not constituting part of economics proper.

The picture given by this set of core assumptions – ‘rational choice’ – is a rational agent with strong cognitive capacity that knows what alternatives she is facing, evaluates them carefully, calculates the consequences and chooses the one – given her preferences – that she believes has the best consequences according to her. Weighing the different alternatives against each other, the actor makes a consistent optimizing choice and acts accordingly.

Besides the core assumptions the model also typically has a set of auxiliary assumptions that spatio-temporally specify the kind of social interaction between ‘rational’ actors that take place in the model. These assumptions can be seen as giving answers to questions such as: who are the actors and where and when do they act; which specific goals do they have; what are their interests; what kind of expectations do they have; what are their feasible actions; what kind of agreements (contracts) can they enter into; how much and what kind of information do they possess; and how do the actions of the different individuals interact with each other.

So, the base model basically consists of a general specification of what (axiomatically) constitutes optimizing rational agents and a more specific description of the kind of situations in which these rational actors act (making the auxiliary assumptions serve as a kind of restriction of the intended domain of application for the core assumptions and the deductively derived theorems). The list of assumptions can never be complete since there will always be unspecified background assumptions and some (often) silent omissions (usually based on some negligibility and applicability considerations). The hope, however, is that the ‘thin’ list of assumptions shall be sufficient to explain and predict ‘thick’ phenomena in the real, complex, world.

These models are not primarily constructed for being able to analyze individuals and their aspirations, motivations, interests, etc., but typically for analyzing social phenomena as a kind of equilibrium that emerges through the interaction between individuals.

Now, of course, no one takes the base model (and the models that build on it) as a good (or, even less, true) representation of reality (which would demand a high degree of appropriate conformity with the essential characteristics of the real phenomena, that, even when weighing in pragmatic aspects such as ‘purpose’ and ‘adequacy,’ it is hard to see that this ‘thin’ model could deliver). The model is typically seen as a kind of thought experimental ‘as if’ bench-mark device for enabling a rigorous mathematically tractable illustration of social interaction in an ideal-type model world, and to be able to compare that ‘ideal’ with reality. The ‘interpreted’ model is supposed to supply analytical and explanatory power, enabling us to detect and understand mechanisms and tendencies in what happens around us in real economies.

Based on the model – and on interpreting it as something more than a deductive-axiomatic system – predictions and explanations can be made and confronted with empirical data and what we think we know. The base model and its more or less tightly knit axiomatic core assumptions are used to set up further ‘as if’ models from which consistent and precise inferences are made. If the axiomatic premises are true, the conclusions necessarily follow. But if the models are to be relevant, we also have to argue that their precision and rigour still holds when they are applied to real-world situations. They often do not. When addressing real economies, the idealizations and abstractions necessary for the deductivist machinery to work simply do not hold.

If the real world is fuzzy, vague and indeterminate, then why should our models build upon a desire to describe it as precise and predictable? The logic of idealization, that permeates the base model, is a marvellous tool in mathematics and axiomatic-deductivist systems, but a poor guide for action in real-world systems, where concepts and entities are without clear boundaries and continually interact and overlap.

Being told that the model is rigorous and amenable to ‘successive approximations’ to reality is of little avail, especially when the law-like (nomological) core assumptions are highly questionable and extremely difficult to test. Being able to construct ‘thought-experiments’ depicting logical possibilities does not take us very far. An obvious problem with the mainstream base model is that it is formulated in such a way that it realiter is extremely difficult to empirically test and decisively ‘corroborate’ or ‘falsify.’

e201ada1b6To achieve explanatory success, a theory should, minimally, satisfy two criteria: it should have determinate implications for behavior, and the implied behavior should be what we actually observe. These are necessary conditions, not sufficient ones. Rational-choice theory often fails on both counts. The theory may be indeterminate, and people may be irrational …

I believe that much work in economics and political science that is inspired by rational-choice theory is devoid of any explanatory, aesthetic or mathematical interest, which means that it has no value at all. I cannot make a quantitative assessment of the proportion of work in leading journals that fall in this category, but I am confident that it represents waste on a staggering scale.

Jon Elster

Such models have — from an explanatory point of view — indeed no value at all. The ‘thinness’ is bought at too high a price unless you decide to leave the intended area of application unspecified or immunize your model by interpreting it as nothing more than two sets of assumptions making up a content-less theoretical system with no connection whatsoever to reality.

Republicans need to get their sh*t together

18 May, 2020 at 08:26 | Posted in Politics & Society | 1 Comment

That’s the right spirit!

Sacrificing realism at the altar of mathematical purity

18 May, 2020 at 08:16 | Posted in Economics | 1 Comment

e0f5b445c333de539ad33c6a63606b56Economists are too detached from the real world and have failed to learn from the financial crisis, insisting on using mathematical models which do not reflect reality, according to the Bank of England’s chief economist Andy Haldane.

The public has lost faith in economists since the credit crunch, he said, but the profession has failed to thoroughly re-examine its failings to come up with a new model of operating.

“The various reports into the economic costs of the UK leaving the EU most likely fell at the same hurdle. They are written, in the main, by the elite for the elite,” said Mr Haldane, writing the foreword to a new book, called ‘The Econocracy: the perils of leaving economics to the experts’ …

The chief economist said that the Great Depression of the 1930s resulted in a major overhaul of economic thinking, led by John Maynard Keynes, who emerged “as the most influential economist of the twentieth century”.

But the recent financial crisis and slow recovery has not yet prompted this great re-thinking …

For now, economists need to focus on reviewing their models, accepting a diversify of thought rather than one solid orthodoxy, and on communicating more clearly.

Economists should focus on other disciplines as well as maths, he said.

“Mainstream economic models have sacrificed too much realism at the altar of mathematical purity. Their various simplifying assumptions have served aesthetic rather than practical ends,” Mr Haldane wrote.

“As a profession, economics has become too much of a methodological monoculture. And that lack of intellectual diversity cost the profession dear when the single crop failed spectacularly during the crisis.”

Tim Wallace/The Telegraph

In the long run …

17 May, 2020 at 10:16 | Posted in Varia | 2 Comments

… not everything is dead. My Tell wristwatch from 1929 is still running perfectly.

Econometrics — a Keynesian perspective

17 May, 2020 at 08:55 | Posted in Economics | 3 Comments

istheseptuagintaIt will be remembered that the seventy translators of the Septuagint were shut up in seventy separate rooms with the Hebrew text and brought out with them, when they emerged, seventy identical translations. Would the same miracle be vouchsafed if seventy multiple correlators were shut up with the same statistical material? And anyhow, I suppose, if each had a different economist perched on his a priori, that would make a difference to the outcome.

J M Keynes

Mainstream economists today usually subscribe to the idea that although mathematical-statistical models are not ‘always the right guide for policy,’ they are still somehow necessary for making policy recommendations. The models are supposed to supply us with a necessary ‘discipline of thinking.’

This emphasis on the value of modelling should come as no surprise. Mainstreamers usually vehemently defend the formalization and mathematization that comes with the insistence of using a model-building strategy in economics.

But if these math-is-the-message-modellers aren’t able to show that the mechanisms or causes that they isolate and handle in their mathematical-statistically formalised models are stable in the sense that they do not change when we ‘export’ them to our ‘target systems,’ these models do only hold under ceteris paribus conditions and are consequently of limited value to our understandings, explanations or predictions of real economic systems. Building models only to show  ‘self-discipline’ is setting the aspiration level far too low.

According to Keynes, science should help us penetrate to ‘the true process of causation lying behind current events’ and disclose ‘the causal forces behind the apparent facts.’ We should look out for causal relations. But models — mathematical, econometric, or what have you — can never be more than a starting point in that endeavour. There is always the possibility that there are other (non-quantifiable) variables – of vital importance and although perhaps unobservable and non-additive not necessarily epistemologically inaccessible – that were not considered for the formalized mathematical model.

The kinds of laws and relations that ‘modern’ economics has established, are laws and relations about mathematically formalized entities in models that presuppose causal mechanisms being atomistic and additive. When causal mechanisms operate in real-world social target systems they only do it in ever-changing and unstable combinations where the whole is more than a mechanical sum of parts. If economic regularities obtain they do it (as a rule) only because we engineered them for that purpose. Outside man-made mathematical-statistical ‘nomological machines’ they are rare, or even non-existent. Whether econometric or not, that also, unfortunately, makes most of contemporary mainstream endeavours of economic modelling rather useless.

Econometric modelling should never be a substitute for thinking. From that perspective, it is really depressing to see how much of Keynes’ critique of the pioneering econometrics in the 1930s-1940s is still relevant today.

The general line you take is interesting and useful. It is, of course, not exactly comparable with mine. I was raising the logical difficulties. You say in effect that, if one was to take these seriously, one would give up the ghost in the first lap, but that the method, used judiciously as an aid to more theoretical enquiries and as a means of suggesting possibilities and probabilities rather than anything else, taken with enough grains of salt and applied with superlative common sense, won’t do much harm. I should quite agree with that. That is how the method ought to be used.

Keynes, letter to E.J. Broster, December 19, 1939


16 May, 2020 at 11:09 | Posted in Varia | Comments Off on Skärgård

Sven Barthel & Roland Svensson, “Skärgård” (Bonniers, 1952).

Friskolorna — socialdemokratins största svek någonsin

15 May, 2020 at 11:18 | Posted in Education & School | Comments Off on Friskolorna — socialdemokratins största svek någonsin

skolstartAtt vi har skolor som Vetenskapsskolan och att skolor som Thorén Innovation School kan fortsätta sin verksamhet trots massiv kritik från Skolinspektionen är inte att förundras över. Det är ett resultat av att det ses som en rättighet snarare än ett privilegium att driva skolor och att beröva någon en rättighet är ingen enkel juridisk process. Eftersom detta synsätt förefaller djupt förankrat så lär den politiska indignationen över olämpliga huvudmän fortsätta att tävla med den politiska oviljan att göra något åt problemet.

Jonas Vlachos

I Sverige år 2020 låter vi friskolekoncerner med undermålig verksamhet få plocka ut skyhöga vinster — vinster som den svenska staten gladeligen låter dessa koncerner ta av vår skattefinansierade skolpeng. Dessa smarta välfärdsplundrare har överlag en högre lönsamhet än näringslivet i sin helhet, men när man väl plundrat färdigt lämnar man över problemen och eleverna till den förkättrade offentliga sektorn.

Många är med rätta upprörda och de som är kritiska till privatisering av vård och skola har haft gyllene tillfällen att tydligt och klart tala om att man nu vill se till att undanröja möjligheterna för vinstdrivande bolag att verka inom vård, omsorg och skola.

Men så har inte skett.

Istället har det kommit en jämn ström av krav på ökad kontroll, tuffare granskning och inspektioner. När nu privatiseringsvåtdrömmen visar sig vara en mardröm så tror man att just det som man ville bli av med — regelverk och ‘byråkratisk’ tillsyn och kontroll — skulle vara lösningen.

skolpengEtt flertal undersökningar har på senare år  visat att det system vi har i Sverige med vinstdrivande skolor leder till att våra skolor blir allt mindre likvärdiga — och att detta i sin tur bidrar till allt sämre resultat. Ska vi råda bot på detta måste vi ha ett skolsystem som inte bygger på ett marknadsmässigt konkurrenstänk där skolor istället för att utbilda främst ägnar sig åt att ragga elever och skolpeng, utan drivs som icke-vinstdrivna verksamheter med kvalitet och ett klart och tydligt samhällsuppdrag och elevernas bästa för ögonen.

Vi vet idag att friskolor driver på olika former av etnisk och social segregation, påfallande ofta har låg lärartäthet och i grund och botten sviker resurssvaga elever. Att dessa verksamheter ska premieras med att få plocka ut vinster på våra skattepengar är djupt stötande.

I ett samhälle präglat av jämlikhet, solidaritet och demokrati borde det vara självklart att skattefinansierade skolor inte ska få drivas med vinst, segregation eller religiös indoktrinering som främsta affärsidé!

Många som är verksamma inom skolvärlden eller vårdsektorn har haft svårt att förstå socialdemokratins inställning till privatiseringar och vinstuttag i välfärdssektorn. Av någon outgrundlig anledning har ledande socialdemokrater under många år pläderat för att vinster ska vara tillåtna i skolor och vårdföretag. Ofta har argumentet varit att driftsformen inte har någon betydelse. Så är inte fallet. Driftsform och att tillåta vinst i välfärden har visst betydelse. Och den är negativ.

Historiens dom ska falla hård på ansvariga politiker — och inte minst på socialdemokratins Göran Persson, Kjell-Olof Feldt och alla andra som i deras fotspår glatt traskat patrull — som hänsynslöst och med berått mod låtit offra den en gång så stolta svenska traditionen av att försöka bygga en jämlik skola för alla!

Till skillnad från i alla andra länder i världen har den svenska socialdemokratins ledning gjort det möjligt för privata företag att göra vinst på offentligt finansierad undervisning. Och när borgerliga regeringar ytterligare stimulerat privatiseringsvågen har socialdemokraterna bara tigit och varit passiva. Och detta trots att det hela tiden funnits ett starkt folkligt motstånd  mot att släppa in vinstsyftande privata företag i välfärdssektorn.

Att socialdemokratin fortsätter bidra till skolans urholkning med sitt stöd för friskolor och deras vinstuttag är inte den enda anledningen till att partiet tappat en stor del av sitt tidigare väljarunderlag. Men säkert en av de viktigare. Ett tydligare självmål inom politiken är svårt att hitta. Att Löfvenregeringen lovat att man inte ska verka för vinstbegränsning inom skola och omvård fullbordar bara detta det största sveket någonsin mot de egna väljarna.

How the model became the message in economics

14 May, 2020 at 15:25 | Posted in Economics | Comments Off on How the model became the message in economics

In The World in the Model Mary Morgan gives a historical account of how the model became the message in economics. On the question of how the models provide a method of enquiry where they can function both as “objects to enquire into” and as “objects to enquire with”, Morgan argues that model reasoning involves a kind of experiment. She writes:

It may help to clarify my account of modelling as a double method of enquiry in economics if we compare it with two of the other reasoning styles … the method of mathematical postulation and proof and the method of laboratory experiment.

If we portray mathematical modelling as a version of the method of mathematical postulation and proof … models can indeed be truth-makers about that restricted and mathematical small world … But whether they can come to valid conclusions about the behaviour of their actual economic universe is a much more difficult problem …

If we make the alternative comparison with laboratory experiments … the important question of whether the results of the experiment on the model can be transferred to the world that the model represents can be considered an inference problem …

Of course, model experiments in economics are usually pen-and-paper, calculator, or computer, experiments on a model world or an analogical world … not laboratory experiments on the real world …

The experiments made on models are different from the experiments made in the laboratory … because model experiments are less powerful as an epistemic genre. It does make a difference to the power and scope of inference that the model experiment is carried out on a pen-and-paper represenation, that is on the world in the model, not on the world itself.

Now, I think it is but fair to say that field experiments, model experiments and laboratory experiments, are basically facing the same problems in terms of generalizability and external validity. They all have the same basic problem — they are built on rather artificial conditions and have difficulties with the trade-off between internal and external validity. The more artificial conditions, the more internal validity, but also less external validity. The more we rig experiments/field studies/models to avoid confounding, the less the conditions are reminiscent of the real target system.

The nodal issue is how economists using different isolation strategies in different ‘nomological machines’ attempt to learn about causal relationships. By contrast with Morgan, I would more explicitly and forcefully argue that the generalizability of all these research strategies — because the probability is high that causal mechanisms are different in different contexts and the lack of homogeneity/stability/invariance — doesn’t give us warranted export licenses to the real target system.

If we mainly conceive of laboratory experiments, field studies and model experiments as heuristic tools, the dividing line is difficult to perceive. But if we see them as activities that ultimately aspire to say something about the real target system, then the problem of external validity is central. Let me elaborate a little on this point:

Assume that you have examined how the performance of A is affected by B (treatment). How can we extrapolate/generalize to new samples outside the original population? How do we know that any replication attempt succeeds? How do we know when these replicated experimental results can be said to justify inferences made in samples from the original population? If, for example, P(A|B) is the conditional density function for the original sample, and we are interested in doing an extrapolative prediction of E [P*(A|B)], how can we know that the new sample’s density function is identical with the original? Unless we can give some really good argument for this being the case, inferences built on P(A|B) is not really saying anything on that of the target system’s P*(A|B).

As I see it is, this is the heart of the matter. External validity/extrapolation/generalization is founded on the assumption that we could make inferences based on P(A|B) that is exportable to other populations for which P*(A|B) applies. Sure, if one can convincingly show that P and P* are similar enough, the problems are perhaps surmountable. But arbitrarily just introducing functional specification restrictions of the type invariance/stability/homogeneity, is, at least for an epistemological realist far from satisfactory. And often it is – unfortunately – exactly this that I see when I take part in mainstream economists’ models/laboratory experiments/field studies.

By this, I do not mean to say that empirical methods per se are so problematic that they can never be used. On the contrary, I am basically — though not without reservations — in favour of the increased use of laboratory experiments and field studies within economics. Not least as an alternative to completely barren ‘bridge-less’ axiomatic-deductive theory models. My criticism is more about aspiration levels and what we believe that we can achieve with our mediational epistemological tools and methods in the social sciences.

Many laboratory experimentalists claim that it is easy to replicate experiments under different conditions and therefore a fortiori easy to test the robustness of experimental results. But is it really that easy? If in the example given above, we run a test and find that our predictions were not correct – what can we conclude? That B works in X but not in Y? That B worked in the field study conducted in year Z but not in year W? Population selection is almost never simple. Had the problem of external validity only been about inference from sample to population, this would be no critical problem. But the really interesting inferences are those we try to make from specific laboratory experiments/fields to specific real-world situations/structures that we are interested in understanding or (causally) to explain. And then the population problem is more difficult to tackle.

Nowadays many economists are in for randomized experiments. But just as most other methods used within neoclassical economics, randomization is basically a deductive method — or as Morgan calls it, “a deductive mode of manipulation”. Given the assumptions (such as manipulability, transitivity, separability, additivity, linearity etc) these methods deliver deductive inferences. The problem, of course, is that we will never completely know when the assumptions are right. Real target systems are seldom epistemically isomorphic to our axiomatic-deductive models/systems, and even if they were, we still have to argue for the external validity of the conclusions reached from within these epistemically convenient models/systems. Causal evidence generated by randomization procedures may be valid in laboratory models, but what we usually are interested in, is causal evidence in the real target system we happen to live in.

Ideally controlled laboratory experiments (still the benchmark even for natural and quasi-experiments) tell us with certainty what causes what effects — but only given the right ‘closures’. Making appropriate extrapolations from (ideal, accidental, natural or quasi) experiments to different settings, populations or target systems, is not easy. It works there is no evidence for it will work here. Causes deduced in a laboratory experiment still have to show that they come with an export-warrant to the target population/system. The causal background assumptions made have to be justified, and without licenses to export, the value of “rigorous” and “precise” methods is despairingly small.

Most mainstream economists want to have deductively automated answers to fundamental causal questions. But to apply ‘thin’ methods we have to have ‘thick’ background knowledge of what’s going on in the real world, and not in (ideally controlled randomized) laboratory experiments or ‘models experiment’. Conclusions can only be as certain as their premises – and that also goes for methods based on laboratory experiments.

Morgan’s book — and especially those carefully selected case studies presented — is an important contribution to the history of economics in general, and more specifically to our understanding of how mainstream economics has become a totally model-based discipline.

However, I haven’t read it without objections.

In her description of how economists have used — and are using — these ‘reasoning tools’ that we call models, Morgan puts too much emphasis ” at least for my taste –on modelling as an epistemic genre of “reasoning to gain knowledge about the economic world”. Even if epistemology is important and interesting in itself, it ought never to be anything but secondary in science, since the primary questions asked have to be ontological. First after having asked questions about ontology can we start thinking about what and how we can know anything about the world. If we do that, I think it is more or less necessary also to be more critical of the reasoning by  modelling that has come to be considered the only and right way to reason in mainstream economics for more than 50 years now.

In a way, it is rather symptomatic of the whole book that when Morgan gets into the all-important question of external validity in isolationist closed economic models, she most often halts at posing the question as “if those elements can be treated in isolation” and noting that this aspect of models is “much more difficult to characterize than the way economists use models to investigate their ideas and theories”. Absolutely! But this doesn’t make model reasonings as ‘objects to enquire’ into activities that from a scientific point of view are on a par with the much more important question if these models really have export-certificates or not. I think many readers of the book would have found it even more interesting to read if they would get more of argued and critical evaluations of the activities, and not just more or less analytical descriptions.

So, by all means, read Morgan’s book. It’s in many ways a superb book. As a detailed and well-informed case studies-based history it is definitely a proof of great scholarship. But to get more on the question if the economists’ models really give truthful and valid explanations on things happening in the real world, I would also recommend reading two other modern classics — Tony Lawson’s Economics and Reality (1997) and Nancy Cartwright’s Hunting Causes and Using Them  (2009).

Pandemic depression antidote (XIII)

13 May, 2020 at 19:09 | Posted in Varia | 1 Comment


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