Reasoning in economics

9 Apr, 2021 at 10:22 | Posted in Economics | 3 Comments

Reasoning: Scriven, Michael: 9780070558823: BooksReasoning is the process whereby we get from old truths to new truths, from the known to the unknown, from the accepted to the debatable … If the reasoning starts on firm ground, and if it is itself sound, then it will lead to a conclusion which we must accept, though previously, perhaps, we had not thought we should. And those are the conditions that a good argument must meet; true premises and a good inference. If either of those conditions is not met, you can’t say whether you’ve got a true conclusion or not.

Mainstream economic theory today is in the story-telling business whereby economic theorists create make-believe analogue models of the target system – usually conceived as the real economic system. This modeling activity is considered useful and essential. Since fully-fledged experiments on a societal scale as a rule are prohibitively expensive, ethically indefensible or unmanageable, economic theorists have to substitute experimenting with something else. To understand and explain relations between different entities in the real economy the predominant strategy is to build models and make things happen in these ‘analogue-economy models’ rather than engineering things happening in real economies.

Mainstream economics has since long given up on the real world and contents itself with proving things about thought up worlds. Empirical evidence only plays a minor role in economic theory, where models largely function as a substitute for empirical evidence. The one-sided, almost religious, insistence on axiomatic-deductivist modeling as the only scientific activity worthy of pursuing in economics, is a scientific cul-de-sac. To have valid evidence is not enough. What economics needs is sound evidence — evidence based on arguments that are valid in form and with premises that are true.

Avoiding logical inconsistencies is crucial in all science. But it is not enough. Just as important is avoiding factual inconsistencies. And without showing — or at least presented with a warranted argument — that the assumptions and premises of their models are in fact true, mainstream economists aren’t really reasoning, but only playing games. Formalistic deductive ‘Glasperlenspiel’ can be very impressive and seductive. But in the realm of science it ought to be considered of little or no value to simply make claims about the model and lose sight of reality.


  1. “Avoiding logical inconsistencies is crucial in all science.”
    Why? The law of non-contradiction is itself an assumption, subject to the Problem of Infinite Regress. In the real world we deal with contradictions all the time. It rains while the sun is shining; databases inevitably contain inconsistent facts. The world doesn’t end because rain falls while it’s sunny enough to get a sunburn, and software has to be written to accommodate inconsistent propositions.
    In physics, there is a long-standing contradiction between quantum laws and general relativity. The very small is inconsistent with the very large.
    Why fetishize consistency? If science really wants to model nature, inconsistency will be accommodated …

  2. And those are the conditions that a good argument must meet; true premises and a good inference.
    what is described above is proving a theorem — not reasoning, per se, but rather the form of logic, which reasoning may borrow and employ as a tool, but which is NOT itself the stuff of reasoned argument.
    Since fully-fledged experiments on a societal scale as a rule are prohibitively expensive, ethically indefensible or unmanageable, economic theorists have to substitute experimenting with something else.
    the romance of experiment – accompanied by the vulgar forms of post hoc, propter hoc — is a poor substitute for observation, measurement and disciplined interpretation
    i feel like interpretation of disciplined observation gets short shrift by economists: go, look, measure, see.
    what we want is the best explanation and the way interpretative methods test an explanation is to trial extensions. if “a” explains x, but if “a” is the case, then r will also have happened — did it? If the explanation for why the grass is wet is that it rained last night, and it actually rained, then the street will also be wet — is the street wet? If not, a better explanation for why the grass is wet is needed.
    interpretation in the light shone by logically consistent models have their application in reasoned argument — this is reasoning. because interpretation proceeds by extension, the best, most celebrated explanations unite many seemingly disparate observations. sometimes, the great explanation can be summarized by a model, but it was never the model making the explanation great — it is always reason weaving together disparate observation.
    Newton’s gravity, Darwin’s evolution by natural selection, Smith’s division of labor.
    i do not discount at all the insight provided by a model as a spark that lights the bonfire of productive interpretative explanation. Euclidean geometry allows us to survey and map the earth — over and over, the sound logic of the theorem finds application in measuring the dimensions of the world. I cannot look at Euclid’s axioms and seriously argue their “truth” — the truth of a line with length but no width? it feels ridiculous. nor do i see any sense in which the concepts of classroom geometry form an analogue with objects in the real world — i do not look for equilateral triangles growing in my garden. in practice, in engineering, land survey, geodesy, analogue models are built as a kind of bridge, but that is an activity distinct from the practice of theory and ought to be separately acknowledged by students of the meta theory of science.
    the fault in economics is that economists betray no interest in the processes and engineered institutions of the actual economy. go, look, measure, interpret and test by extension

    • It might seem a stretch, but I would like to draw attention to this article on the epidemiology of COVID. It illustrates the key part of reasoning by extension in the interpretation of observation.
      It also illustrates the role of teh stupid — a lot of people supposedly doing the business of science in the role of experts are just in the way.

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