Why ontology?

29 Nov, 2020 at 15:52 | Posted in Economics | 2 Comments

With any phenomenon of interest, understanding its nature or essential properties allows us to relate to, or interact with, it in more knowledgeable and competent ways than would otherwise be the case …

The Nature of Social Reality: Issues in Social Ontology (Economics as Social  Theory): Amazon.co.uk: Lawson, Tony: 9780367188931: Books A surprising number of social theorists, when embarking on substantive analyses, pay almost no attention at all to insights bearing on the nature of these (or any other) factors. Instead, the preferred option is to select the types of methods, procedures or tools to be employed before, and quite independently of, knowing the task to be undertaken, the nature of the phenomena involved, the context or any other specifics of the situation …

This is the case of modern academic economics. Economists do indeed widely suppose, prior to undertaking any analysis that there is one specific way of proceeding that is appropriate for all occasions … This is to employ methods of mathematical modelling …

The discipline has failed to provide significant insight for the last 60 years or  more … This persistent failure is indeed to a very large extent the result of sustained ontological neglect.

The kinds of laws and relations that economics has established, are laws and relations about entities in models that presuppose causal mechanisms being atomistic and additive. When causal mechanisms operate in the real world 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 “nomological machines” they are rare, or even non-existent. Unfortunately that also makes most of the achievements of contemporary economic theoretical modelling — rather useless.

When mainstream economists think that they can rigorously deduce the aggregate effects of (representative) actors with their reductionist microfoundational methodology, they have to put a blind eye on the emergent properties that characterise all open social systems – including the economic system. The interaction between animal spirits, trust, confidence, institutions etc., cannot be deduced or reduced to a question answerable on the individual level. Macroeconomic structures and phenomena have to be analysed also on their own terms.

Mainstream macromodels describe imaginary worlds using a combination of formal sign systems such as mathematics and ordinary language. The descriptions made are extremely thin and to a large degree disconnected to the specific contexts of the targeted system than one (usually) wants to (partially) represent. This is not by chance. These closed formalistic-mathematical theories and models are constructed for the purpose of being able to deliver purportedly rigorous deductions that may somehow by be exportable to the target system. By analysing a few causal factors in their “macroeconomic laboratories” they hope they can perform “thought experiments” and observe how these factors operate on their own and without impediments or confounders.

Unfortunately, this is not so. The reason for this is — as underlined by Lawson — that economic causes never act in a socio-economic vacuum. Causes have to be set in a contextual structure to be able to operate. This structure has to take some form or other, but instead of incorporating structures that are true to the target system, the settings made in these macroeconomic models are rather based on formalistic mathematical tractability. In the models they appear as unrealistic assumptions, usually playing a decisive role in getting the deductive machinery deliver “precise” and “rigorous” results. This, of course, makes exporting to real-world target systems problematic, since these models — as part of a deductivist covering-law tradition in economics — are thought to deliver general and far-reaching conclusions that are externally valid. But how can we be sure the lessons learned in these theories and models have external validity, when based on highly specific unrealistic assumptions? As a rule, the more specific and concrete the structures, the less generalisable the results. Admitting that we in principle can move from (partial) falsehoods in theories and models to truth in real world target systems does not take us very far, unless a thorough explication of the relation between theory, model and the real world target system is made. If models assume representative actors, rational expectations, market clearing and equilibrium, and we know that real people and markets cannot be expected to obey these assumptions, the warrants for supposing that conclusions or hypothesis of causally relevant mechanisms or regularities can be bridged, are obviously non-justifiable. To have a deductive warrant for things happening in a closed model is no guarantee for them being preserved when applied to the real world.

2 Comments

  1. “If economic regularities obtain they do it (as a rule) only because we engineered them for that purpose.”
    .
    Stocks always go up because the Fed intervenes to stop panics. Big financial firms have constructed “man-made nomological machines” that include the Fed as a backstop.
    .
    “Unfortunately that also makes most of the achievements of contemporary economic theoretical modelling — rather useless.”
    .
    Look rather to the modeling done by Goldman Sachs, J P Morgan, Citigroup, etc. which assume the Fed put in their predictions. Usefulness is measured by profit, and GS has a long track record of profit in recessions …
    .
    Black swans occur, but the Fed reacts quickly to provide insurance against them.
    .
    “Causes have to be set in a contextual structure to be able to operate.”
    .
    Operating financial firms contextualize their models with unlimited liquidity provisioning from the Fed.
    .
    “If models assume representative actors, rational expectations, market clearing and equilibrium,”
    .
    Big firms can model the largest agents as rational. The Fed guarantees markets will clear. Equilibrium does not seem necessary in the private research models I’ve seen.

  2. Is it possible for someone who has never done any serious work in any field of applied economics to usefully criticise economics?

    It seems that Tony Lawson has never published anything which resembles applied economics. I am unable to find any published book or article written by him which deals with any real world economic problem, statistics or quantitative relationship.
    .
    Wikipedia misleadingly describes some of his early work as “substantive analyses of the labour process and the industrial decline of the United Kingdom”, but this is highly misleading. All of his published work seems to be concerned with methodology, philosophy. gender and such matters.
    ———-
    “One mustn’t criticize other people on grounds where he can’t stand perpendicular himself”
    – Mark Twain
    .
    “Children need models rather than critics.”
    – Joseph Joubert
    .
    “Don’t criticize what you don’t understand, son. You never walked in that man’s shoes.”
    – Elvis Presley
    .
    “Criticism is easy; achievement is difficult”
    – Winston Churchill
    .
    “I criticize by creation, not by finding fault”
    – Marcus Tullius Cicero
    .
    “Criticism is something we can avoid easily by saying nothing, doing nothing, and being nothing.”
    – Aristotle
    .
    “Any fool can criticize, condemn and complain and most fools do.”
    – Benjamin Franklin

    “He has a right to criticize, who has a heart to help.”
    – Abraham Lincoln
    .
    “It is not the critic who counts; not the man who points out how the strong man stumbles, or where the doer of deeds could have done them better.
    The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood, who strives valiantly; who errs and comes short again and again; because there is not effort without error and shortcomings; but who does actually strive to do the deed; who knows the great enthusiasm, the great devotion, who spends himself in a worthy cause, who at the best knows in the end the triumph of high achievement and who at the worst, if he fails, at least he fails while daring greatly.
    So that his place shall never be with those cold and timid souls who know neither victory nor defeat.”
    – Theodore Roosevelt
    .
    “A man interrupted one of the Buddha’s lectures with a flood of abuse.
    Buddha waited until he had finished and then asked him:
    If a man offered a gift to another but the gift was declined, to whom would the gift belong?
    To the one who offered it, said the man.
    Then, said the Buddha, I decline to accept your abuse and request you to keep it for yourself.”


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