Does it — really — take a model to beat a model? No!

9 Feb, 2021 at 16:57 | Posted in Economics | 3 Comments

Many economists respond to criticism by saying that ‘all models are wrong’ … But the observation that ‘all models are wrong’ requires qualification by the second part of George Box’s famous aphorism — ‘but some are useful’ … The relevant  criticism of models in macroeconomics and finance is not that they are ‘wrong’ but that they have not proved useful in macroeconomics and have proved misleading in finance.

kaykingWhen we provide such a critique, we often hear another mantra to which many economists subscribe: ‘It takes a model to beat a model.’ On the contrary, we believe that it takes facts and observations to beat a model … If a model fails to answer the problem to which it is addressed, it should be put back in the toolbox … It is not necessary to have an alternative tool available to know that the plumber who arrives armed only with a screwdriver is not the tradesman we need.

A similar critique yours truly sometimes encounters is that as long as I cannot come up with some own alternative model to the failing mainstream models, I shouldn’t expect people to pay attention.

This is, however, not only wrong for the reasons given by Kay and King, but is also to utterly misunderstand the role of philosophy and methodology of economics!

Clearing obstacles to science by clarifying limits and consequences of choosing specific modelling strategies, assumptions, and ontologies — that’s what philosophy and methodology can contribute to economics.

unnameadIt takes a model to beat a model has to be one of the stupider things, in a pretty crowded field, to come out of economics … I don’t get it. If a model is demonstrably wrong, that should surely be sufficient for rejection. I’m thinking of bridge engineers: ‘look I know they keep falling down but I’m gonna keep building them like this until you come up with a better way, OK?’

Jo Michell

Commenting on my critique of mainstream economics some colleagues argue that if we are going be taken seriously we also need to come up with a new and better theory. This is what Joan Robinson has to say on the issue:

It is often said that one theory can be driven out only by another; the neoclassicals have a complete theory (though I maintain it is nothing but a circular argument) and we need a better theory to supplant them. I do not agree. I think any other ‘complete theory’ would be only another box of tricks. What we need is a different habit of mind — to eschew fudging, to respect facts and to admit ignorance of what we do not know.

Nudgelords

9 Feb, 2021 at 08:49 | Posted in Economics | Comments Off on Nudgelords

What’s my problem with the nudgelords? Aren’t they a force for good in the world?

Image result for nudge sunstein memeMy answer is that I’m not sure. The problem is that good advice is good, and bad advice is bad, but Sunstein and his friends doesn’t seem to distinguish between them. They seem to be spewing out research or claims about research or claims about behavior based on what they already want to believe, without regard to the quality of evidence. And they rarely seem to go back and assess what went wrong.

And, when people express skepticism about their claims, these critics are labeled as “Stasi.” I don’t trust someone who wants to get the government to nudge us, when he has a track record of (a) hyping shaky claims, and (b) ignoring, dismissing, or going on the attack against serious criticism. So I’m suspicious, despite that the Milton Friedman Distinguished Service Professor of Economics tells us, “This is wisdom that should be acted on.”

P.S. Bonus Sunstein quote:

“I have noted that when confident people are shown to be wrong, people tend to stop believing what they say.”

All right, then.

Andrew Gelman

Hans Albert turns 100

8 Feb, 2021 at 08:41 | Posted in Economics, Theory of Science & Methodology | 1 Comment

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Clearly, it is possible to interpret the ‘presuppositions’ of a theoretical system … not as hypotheses, but simply as limitations to the area of application of the system in question. Since a relationship to reality is usually ensured by the language used in economic statements, in this case the impression is generated that a content-laden statement about reality is being made, although the system is fully immunized and thus without content. In my view that is often a source of self-deception in pure economic thought …

200px-Hans_Albert_2005-2A further possibility for immunizing theories consists in simply leaving open the area of application of the constructed model so that it is impossible to refute it with counter examples. This of course is usually done without a complete knowledge of the fatal consequences of such methodological strategies for the usefulness of the theoretical conception in question, but with the view that this is a characteristic of especially highly developed economic procedures: the thinking in models, which, however, among those theoreticians who cultivate neoclassical thought, in essence amounts to a new form of Platonism.

Hans Albert

Seen from a deductive-nomological perspective, typical economic models (M) usually consist of a theory (T) — a set of more or less general (typically universal) law-like hypotheses (H) — and a set of (typically spatio-temporal) auxiliary assumptions (A). The auxiliary assumptions give ‘boundary’ descriptions such that it is possible to deduce logically (meeting the standard of validity) a conclusion (explanandum) from the premises T & A. Using this kind of model game theorists are (portrayed as) trying to explain (predict) facts by subsuming them under T, given A.

An obvious problem with the formal-logical requirements of what counts as H is the often severely restricted reach of the ‘law.’ In the worst case, it may not be applicable to any real, empirical, relevant, situation at all. And if A is not true, then M does not really explain (although it may predict) at all. Deductive arguments should be sound – valid and with true premises – so that we are assured of having true conclusions. Constructing game theoretical models assuming ‘common knowledge’ and ‘rational expectations,’ says nothing of situations where knowledge is ‘non-common’ and  expectations are ‘non-rational.’

Building theories and models that are ‘true’ in their own very limited ‘idealized’ domain is of limited value if we cannot supply bridges to the real world. ‘Laws’ that only apply in specific ‘idealized’ circumstances —  in ‘nomological machines’ — are not the stuff that real science is built of.

When confronted with the massive empirical refutations of almost all models they have set up, many game theorists react by saying that these refutations only hit A (the Lakatosian ‘protective belt’), and that by ‘successive approximations’ it is possible to make the models more readily testable and predictably accurate. Even if T & A1 do not have much of empirical content, if by successive approximation we reach, say, T & A25, we are to believe that we can finally reach robust and true predictions and explanations.

Hans Albert’s ‘Model Platonism’ critique shows that there is a strong tendency for modellers to use the method of successive approximations as a kind of ‘immunization,’ taking for granted that there can never be any faults with the theory. Explanatory and predictive failures hinge solely on the auxiliary assumptions. That the kind of theories and models used by game theorists should all be held non-defeasibly corroborated, seems, however — to say the least — rather unwarranted.

Retreating into looking upon models and theories as some kind of ‘conceptual exploration,’ and give up any hopes whatsoever of relating theories and models to the real world is pure defeatism. Instead of trying to bridge the gap between models and the world, they simply decide to look the other way.

To me, this kind of scientific defeatism is equivalent to surrendering our search for understanding and explaining the world we live in. It cannot be enough to prove or deduce things in a model world. If theories and models do not directly or indirectly tell us anything about the world we live in – then why should we waste any of our precious time on them?

Thinking about thinking

7 Feb, 2021 at 15:42 | Posted in Economics | 6 Comments

Unfortunately, the greater part of economic controversies arise from confronting dogmas. The style of argument is that of theology, not of science … In economics, new ideas are treated, in theological style, as heresies and as far as possible kept out of the schools by drilling students in the habit of repeating the old dogmas, so as to prevent established orthodoxy from being undermined …

Image result for joan robinson further contributionsOn the plane of academic theory, the importance of the Keynesian revolution was to show that all the familiar dogmas are set in a world without time and cannot survive the simple observation that decisions, in economic life, are necessarily taken in the light of uncertain expectations about their future consequences.

Orthodox theory reacted to this challenge, in true theological style, by inventing fanciful worlds in which the difference between the past and the future does not a rise and devising intricate mathematical theorems about how an economy would operate if everyone in it had correct foresight about how everybody else was going to behave.

Mainstream — ‘orthodox’ — economists extensively exploit ‘rational choice’ assumptions in their explanations. That is probably also the reason why the theory has not been able to accommodate well-known anomalies in its theoretical framework. That should hardly come as a surprise to anyone. Mainstream theory with its axiomatic view on individuals’ tastes, beliefs, and preferences, cannot accommodate very much of real-life behaviour. It is hard to find really compelling arguments in favour of us continuing down its barren paths since individuals obviously do not comply with, or are guided by, ‘orthodox’ theory.

Looking, e.g., at the special branch of mainstream theory called game theory, it is — apart from a few notable exceptions — difficult to find really successful applications of the theory. Why? To a large extent simply because the boundary conditions of game theoretical models are false and baseless from a real-world perspective. And, perhaps even more importantly, since they are not even close to being good approximations of real-life, game theory is lacking predictive power. This should come as no surprise. As long as mainstream economic theory sticks to its ‘rational choice’ foundations, there is not much to be hoped for.

Game theorists can, of course, marginally modify their tool-box and fiddle with the auxiliary assumptions to get whatever outcome they want. But as long as the ‘rational choice’ core assumptions are left intact, it seems a pointless effort of hampering with an already excessive deductive-axiomatic formalism. If you do believe in a real-world relevance of game theoretical ‘science fiction’ assumptions such as expected utility, ‘common knowledge,’ ‘backward induction,’ correct and consistent beliefs etc., etc., then adding things like ‘framing,’ ‘cognitive bias,’ and different kinds of heuristics, do not ‘solve’ any problem. If we want to construct a theory that can provide us with explanations of individual cognition, decisions, and social interaction, we have to look for something else than — as Robinson eloquently puts it — “invented fanciful worlds.”

Building theories and models on unjustified patently ridiculous assumptions we know people never conform to, does not deliver real science. Real and reasonable people have no reason to believe in ‘as-if’ models of ‘rational’ robot-imitations acting and deciding in a Walt Disney-world characterised by ‘common knowledge,’ ‘full information,’ ‘rational expectations,’ zero  transaction costs, given stochastic probability distributions, risk-reduced genuine uncertainty, and other laughable nonsense assumptions of the same ilk. Science fiction, with its “invented fanciful worlds,” is not science.

Much work done in mainstream theoretical economics is devoid of any explanatory interest. And not only that. Seen from a strictly scientific point of view, it has no value at all. It is a waste of time. And as so many have been experiencing in modern times of austerity policies and market fundamentalism — a very harmful waste of time.

The world’s worst writing

7 Feb, 2021 at 11:22 | Posted in Economics | 1 Comment
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Image result for scientific mumbo jumboEach year Philosophy and Literature, an academic journal, runs a bad-writing contest to celebrate “the most stylistically lamentable passages found in scholarly books and articles” … Here are the 1998 results. The journal found it hard to suppress its delight that “two of the most popular and influential literary scholars in the US are among those who wrote winning entries.”

“The move from a structuralist account in which capital is understood to structure social relations in relatively homologous ways to a view of hegemony in which power relations are subject to repetition, convergence, and rearticulation brought the question of temporality into the thinking of structure, and marked a shift from a form of Althusserian theory that takes structural totalities as theoretical objects to one in which the insights into the contingent possibility of structure inaugurate a renewed conception of hegemony as bound up with the contingent sites and strategies of the rearticulation of power.”

Judith Butler, professor at UC Berkeley

Interview with Tony Lawson

6 Feb, 2021 at 15:32 | Posted in Economics | 3 Comments

Jamie Morgan: Let’s return to your work on economics and place this in the context of how you came to work in the field. As suggested in the biographical introduction, you have been closely associated with the critique of the ‘formalisation’ of theory and the dominance of mathematical modelling, including the use of statistical techniques, not least econometrics. Were you always critical of these?

Image result for journal of critical realism Tony Lawson: I was. Or at least I was from the moment I moved across to economics. I first completed a degree in mathematics. Pure maths. I loved the subject. I was set to do a PhD in either Group Theory or Ring Theory at Queen Mary College in Cambridge. But I was aware I would be feeling more and more isolated if I took that road, with few people in the world to discuss my research with. Additionally, I was aware that I was fairly ignorant about how the social world, capitalism, money, etc., worked. Indeed, I knew almost nothing of economics, and yet I was getting quite heavily involved in student politics. So, I decided to go for a change. I took up an MSc in Economics at the LSE instead.

However, I was equally ignorant of the situation in academic economics. I had not the slightest notion that it would be all about mathematical modelling. So, in my very first lecture I asked the lecturer why he kept trying to express everything in terms of mathematical models, focussing only on comparing different ones. I was keen to learn about social reality, and the models seemed to me to be an obvious distraction. The question did not go down well. I felt in my gut that these methods were inappropriate, given the nature of social reality. However, I was not in a position to articulate that view very well. I needed to be able to express my intuitions in a manner that I could easily communicate to others. That is where my excursions into social ontology effectively started; and that is also when I started criticizing the emphasis on methods of mathematical modelling as tools for social analysis. There was never a moment that I thought that seeking mathematically to model human behaviour was, in most situations anyway, other than absurd.

But I was very naïve about the state of academic economics. I was always surprised that criticizing this modelling emphasis was received so badly. There was never much of a reasoned defence of it provided by anyone. Mostly the reaction has been annoyance. Of course, the very reason I was so readily accepted into economics was the same reason that a critique of modelling has had so little impact. Economists, in my experience, were and are in awe of mathematicians. In addition, they seem to think not only that economics must be a science, but that mathematics is essential to science, and ‘so’ they have to do it. It’s a form of methodological ideology, and it is very difficult to shift.

Journal of Critical Realism

To have ‘consistent’ models and ‘valid’ evidence is, as Lawson again and again has reminded us, not enough. Models may help us think through problems. But we should never forget that the formalism we use in our models is not self-evidently transportable to a largely unknown and uncertain reality. The tragedy with mainstream economic theory is that it thinks that the logic and mathematics used are sufficient for dealing with our real-world problems. They are not. Model deductions based on questionable assumptions can never be anything but exercises in hypothetical reasoning.

The world in which we live is inherently uncertain and quantifiable probabilities are the exception rather than the rule. To every statement about it is attached a ‘weight of argument’ that makes it impossible to reduce our beliefs and expectations to a one-dimensional stochastic probability distribution. If “God does not play dice” as Einstein maintained, I would add “nor do people.” The world as we know it has limited scope for certainty and perfect knowledge. Its intrinsic and almost unlimited complexity and the interrelatedness of its organic parts prevent the possibility of treating it as constituted by ‘legal atoms’ with discretely distinct, separable and stable causal relations. Our knowledge accordingly has to be of a rather fallible kind.

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? Even if there always has to be a trade-off between theory-internal validity and external validity, we have to ask ourselves if our models are relevant.

‘Human logic’ has to supplant the classical — formal — logic of deductivism if we want to have anything of interest to say of the real world we inhabit. Logic is a marvellous tool in mathematics and axiomatic-deductivist systems, but a poor guide for action in real-world systems, in which concepts and entities are without clear boundaries and continually interact and overlap. In this world, I would say we are better served with a methodology that takes into account that the more we know, the more we know we do not know.

Mathematics and logic cannot establish the truth value of facts. Never has. Never will.

[Added: For those who read Swedish, my article on Tony Lawson’s thoughts on economics and ontology published in Fronesis 54-55 may be of interest.]

La Sagrada Famiglia (personal)

4 Feb, 2021 at 18:45 | Posted in Economics | 2 Comments

Tora (27), Amanda (30), David (30), Sebastian (27), Linnea (21) and Hedda (6).

It was great to be able to have all our sons and daughters home over Christmas holidays in spite of the ongoing pandemic. To me that was the greatest pandemic depression antidote of all.

The future of macroeconomics

4 Feb, 2021 at 08:37 | Posted in Economics | 6 Comments

But why are DSGE models still in the mix at all, and in a key position? Given all the criticisms, what can such models tell us, even as a ‘first pass at important questions’? Multiple equilibria do allow for discussion of a wider range of scenarios, but any discussion of a particular scenario is still constrained by the requirements of general equilibrium theory. These requirements are at the root of the more fundamental critiques of DSGE. While Vines and Wills set out an impressive research agenda to flesh out this multiple-equilibrium approach, we need to reflect on the constraints imposed by general equilibrium theorising itself.

Image result for macroeconomics lars syllWe therefore need to revisit the fundamental problems with general equilibrium theory and the restrictions it imposes on what is admissible. Individual behaviour needs to be determinate such that indeterminacy can only enter due to an ad hoc restriction or else as a shock. Institutional structures need to be fixed, or else evolve in a deterministic way. Further, the very focus on equilibrium as an outcome of market forces severely constrains the subject matter. This is epitomised by the treatment of uncertainty as risk, or concealed risk. Without being able to absorb the significance of fundamental uncertainty for individual behaviour, for social structures and institutions, and for economics itself, the subject matter and the theoretical structures designed to capture it are inevitably constrained.

The force of these restrictions is embodied in the requirement for microfoundations, whereby all propositions need to be derivable from axioms with respect to individual behaviour. The issue of microfoundations (their role and content) lies at the heart, not only of critiques of general equilibrium theory but also of debate within mainstream macroeconomics itself.

Sheila Dow

Thanks to latter-day Lucasian new-classical-new-Keynesian-rational-expectations-representative-agents-microfoundations-economists, we are supposed not to – as our primitive ancestors – use that archaic term ‘macroeconomics’ anymore (with the possible exception of warning future economists not to give in to ‘discomfort.’)  Being intellectually heavily indebted to the man who invented macroeconomics – Keynes – yours truly firmly declines to concur.

Microfoundations – and a fortiori rational expectations and  representative agents – serve a particular theoretical purpose. And as the history of macroeconomics during the last thirty years has shown, this Lakatosian microfoundation programme for macroeconomics is only methodologically consistent within the framework of a (deterministic or stochastic) general equilibrium analysis. In no other context has it been possible to incorporate these kind of microfoundations, with its “forward-looking optimizing individuals,” into macroeconomic models.

This is of course not by accident. General equilibrium theory — built on heaps of known to be fictitious assumptions — is basically nothing else than an endeavour to consistently generalize the microeconomics of individuals and firms on to the macroeconomic level of aggregates.

But it obviously doesn’t work. The analogy between microeconomic behaviour and macroeconomic behaviour is misplaced. Empirically, science-theoretically and methodologically, mainstream microfoundations for macroeconomics are defective.  Tenable foundations for macroeconomics really have to be sought for elsewhere.

Defenders of microfoundations standardly say there is no alternativ. But of course there are alternative to mainstream general equilibrium microfoundations! Behavioural economics and Goldberg & Frydman’s “imperfect knowledge” economics being two noteworthy examples that easily come to mind.

And for those of us who have not forgotten the history of our discipline, and not bought the sweet-water nursery tale of Lucas et consortes that Keynes was not “serious thinking,” we can easily see that there exists a macroeconomic tradition inspired by Keynes (that has absolutely nothing to do with any “new synthesis” or “new-Keynesianism” to do).

Its ultimate building-block is the perception of genuine uncertainty and that people often “simply do not know.” Real actors can’t know everything and their acts and decisions are not simply possible to sum or aggregate without the economist risking to succumb to “the fallacy of composition”.

Instead of basing macroeconomics on ontological blindness and unreal and unwarranted generalizations of microeconomic behaviour and relations, it is far better to accept the ontological fact that the future to a large extent is uncertain, and rather conduct macroeconomics on this fact of reality.

The real macroeconomic challenge is to accept uncertainty and still try to explain why economic transactions take place – instead of simply conjuring the problem away by assuming uncertainty to be reducible to stochastic risk. That is scientific cheating. And it has been going on for too long now.

The Keynes-inspired building-blocks are there. But it is admittedly a long way to go before the whole construction is in place. But the sooner we get rid of the ontological blindness of mainstream macroeconomics and are intellectually honest and ready to admit that the microfoundationalist programme has come to way’s end – the sooner we can redirect are aspirations and knowledge in more fruitful endeavours. To accomplish this, the starting point needs to be — as Dow so eloquently puts it — “explicit statements about the nature of the real world.”

When should we trust science?

3 Feb, 2021 at 19:00 | Posted in Theory of Science & Methodology | 2 Comments

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Using formal mathematical modelling, mainstream economists sure can guarantee that the conclusions hold given the assumptions. However the validity we get in abstract model-worlds does not warrant transfer to real-world economies. Validity may be good, but it isn’t — as Nancy Cartwright so eloquently argues — enough. From a realist perspective, both relevance and soundness are sine qua non.

broken-linkIn their search for validity, rigour and precision, mainstream macro modellers of various ilks construct microfounded DSGE models that standardly assume rational expectations, Walrasian market clearing, unique equilibria, time invariance, linear separability and homogeneity of both inputs/outputs and technology, infinitely lived intertemporally optimizing representative household/ consumer/producer agents with homothetic and identical preferences, etc., etc. At the same time, the models standardly ignore complexity, diversity, uncertainty, coordination problems, non-market clearing prices, real aggregation problems, emergence, expectations formation, etc., etc.

The predominant strategy in mainstream macroeconomics today is to build ‘rigorous’ models and make things happen in these ‘analogue-economy models.’ But although macro-econometrics may have supplied economists with rigorous replicas of real economies, if the goal of theory is to be able to make accurate forecasts or explain what happens in real economies, this ability to — ad nauseam — construct toy models, does not give much leverage.

‘Rigorous’ and ‘precise’ New Classical models — and that goes for the ‘New Keynesian’ variety too — 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.

keynes-right-and-wrong

Mainstream economists are proud of having an ever-growing smorgasbord of models to cherry-pick from (as long as, of course, the models do not question the standard modelling strategy) when performing their analyses. The ‘rigorous’ and ‘precise’ deductions made in these closed models, however, are not in any way matched by a similar stringency or precision when it comes to what ought to be the most important stage of any research — making statements and explaining things in real economies. Although almost every mainstream economist holds the view that thought-experimental modelling has to be followed by confronting the models with reality — which is what they indirectly want to predict/explain/understand using their models — they all of a sudden become exceedingly vague and imprecise. It is as if all the intellectual force has been invested in the modelling stage and nothing is left for what really matters — what exactly do these models teach us about real economies.

No matter how precise and rigorous the analysis, and no matter how hard one tries to cast the argument in modern mathematical form, they do not push economic science forwards one single millimetre if they do not stand the acid test of relevance to the target. No matter how clear, precise, rigorous or certain the inferences delivered inside these models are, they do not per se say anything about real-world economies.

Proving things ‘rigorously’ in mathematical 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.

Teaching heterodox microeconomics

3 Feb, 2021 at 16:13 | Posted in Economics | 1 Comment

In memoriam: Frederic S. Lee (1949-2014), el adiós a un “economista  blasfemo”[*] | LumpenproletariatClearly, neoclassical economists believe that neoclassical microeconomic theory is theoretically coherent and provides the best explanation of economic activity; therefore there is no good reason to not teach it, if not exclusively. Many heterodox economists also broadly agree with this position, although not with all the particulars. However, sufficient evidence exists showing that as a whole neoclassical microeconomic theory is theoretically incoherent and without empirical support (see Lee and Keen, 2004; and Keen, 2001). Moreover, the methodological underpinning of neoclassical microeconomics is open to criticisms. The methodological approach of neoclassical economics is based on a pre-vision of supply and demand and/or a Walrasian general equilibrium all combined with scarcity and constrained maximization. Accepting this vision as a matter of faith, neoclassical economists construct axiomatic-based arguments via a deductivist methodology (with or without the use of mathematics) to articulate this pre-vision. There is no attempt to establish that the pre-vision has any connection to or is grounded in the actual capitalist economy it purports to explain. Hence the method of constructing theory is not tied to or informed by the real world, which means that the axioms qua assumptions used are not chosen because of their realism or some other way grounded in reality but solely because they contribute to articulating the pre-vision. Therefore with a methodology unconcerned with the real world, the theories derived therefrom​ are theoretically vacuous and hence not really explanations. They are in fact non-knowledge. Consequently,​ the methodology of neoclassical economics is not just wrong, it is also misleading in that it cannot inherently provide any understanding of how the real works or even predict outcomes in the real world.

Fred Lee

Fred was together with Nai Pew Ong, Bob Pollin and Axel Leijonhufvud one of those who made a visit to University of California such a great experience for a young economics scholarship holder back at​ the beginning of the 1980s. I especially remember our long and intense discussions on Sraffa and Neo-Ricardianism. It is now more than five years since Fred passed away. I truly miss this open-minded and good-hearted heterodox economist.

Der Himmel über Berlin

3 Feb, 2021 at 12:41 | Posted in Varia | 3 Comments

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Watching Peter Handke’s and Wim Wenders’ masterpiece — a movie that touches my heart more than any other — takes me back to the city I learned to love already back in the 1970’s.

Als das Kind Kind war,
ging es mit hängenden Armen,
wollte der Bach sei ein Fluß,
der Fluß sei ein Strom,
und diese Pfütze das Meer.
Als das Kind Kind war,
wußte es nicht, daß es Kind war,
alles war ihm beseelt,
und alle Seelen waren eins.
Als das Kind Kind war,
hatte es von nichts eine Meinung,
hatte keine Gewohnheit,
saß oft im Schneidersitz,
lief aus dem Stand,
hatte einen Wirbel im Haar
und machte kein Gesicht beim fotografieren.

What is wrong with modern economics?

2 Feb, 2021 at 18:01 | Posted in Economics | Comments Off on What is wrong with modern economics?

It is simply that modern economists persist in insisting that a set of tools be everywhere adopted that are mostly inadequate to social analysis, given the nature of social phenomena …

wrong toolTo put the matter bluntly (the pun may be useful), it is like attempting to cut the grass with a hammer or a piece of paper. The latter objects have their uses, but mowing the lawn is not one of them. Methods of applied mathematics of the sort economists wield have their uses, but illuminating social reality is not one of them, or at best, is so only in exceptional circumstances. I hope that it is clear that this explanation, whether correct or not, reflects a stance that is not anti-mathematics but anti a mismatch of tool and object — and so, given the circumstances, anti the abuse of mathematics …

There is a good deal wrong with modern economics. There is much to be done to remedy matters at all levels of analysis. But little can improve at any level until we discard the widely-worn methodological blinkers which encourage the view that mathematical modelling is everywhere automatically relevant, even essential, so that paying explicit attention to matters of ontology is unnecessary.

Tony Lawson

Modern economics has become increasingly irrelevant to the understanding of the real world. In his seminal book Economics and Reality (1997), Tony Lawson traced this irrelevance to the failure of economists to match their deductive-axiomatic methods with their subject

largepreview It is — sad to say — as relevant today as it was twenty five years ago.

It is still a fact that within mainstream economics internal validity is everything and external validity nothing. Why anyone should be interested in that kind of theories and models is beyond imagination. As long as mainstream economists do not come up with any export-licenses for their theories and models to the real world in which we live, they really should not be surprised if people say that this is not science, but autism!

Studying mathematics and logic is interesting and fun. It sharpens the mind. In pure mathematics and logic, we do not have to worry about external validity. But economics is not pure mathematics or logic. It’s about society. The real world.

Economics and Reality was a great inspiration to yours truly twenty five years ago. It still is.

A milestone in the history of human rights

2 Feb, 2021 at 17:06 | Posted in Politics & Society | Comments Off on A milestone in the history of human rights

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La Grande Bellezza

2 Feb, 2021 at 11:11 | Posted in Varia | Comments Off on La Grande Bellezza

Una farfalla che muore sbattendo le ali

1 Feb, 2021 at 18:43 | Posted in Varia | Comments Off on Una farfalla che muore sbattendo le ali
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