Postmodernist flips

30 Sep, 2021 at 11:23 | Posted in Theory of Science & Methodology | 1 Comment

The Annual Equality Lecture with Professor Andrew Sayer - Social Science  blogI have argued against the postmodern tendency to flip from naive objectivism to relativism and idealism, from totalities to fragments, and from ethnocentrisms to new forms of self-contradictory cultural relativism. A realist approach shows us that we can escape from these alternatives. The Modernist project — and more specifically, critical social science — don’t need foundationalism or notions of absolute truth. They can be not only better understood but furthered through a critical realist interpretation. The new kinds of idealism and relativism that have infected postmodernist thought offer no support to critical social science, to anti-racism and feminism.

Let us update Hume’s taunts against idealism: we will see how idealists — all those who bracket out reality, who imagine that knowledge is purely a matter of rhetoric and power, those who want to throw out reference and representation along with any concept of truth — fare when the meeting is ended. Truth being apparently purely a matter of convention or power and purely internal to theory and nothing to do with representation of some external ‘reality’, it will of course be easy for the anti-realists to change the conventions and leave through (the so-called) solid walls rather than through the doors of realist orthodoxy. And to add a dash of Bachelard, we shall see the difference between the nocturnal philosophies of the idealists and their diurnal realism, when at the end of the meeting, they sheepishly leave by the door.

Andrew Sayer

Postmodern undecidability

29 Sep, 2021 at 13:26 | Posted in Theory of Science & Methodology | 1 Comment

Realism and Social Science: Amazon.co.uk: Sayer, Andrew: 9780761961246:  BooksFor the idealist, the fact that the Inuit have many words for snow while the bush people of the Kalahari desert have none is merely a function of their different languages and has nothing to do with any extra-discursive reality … However, those who claim that reality is a discursive construct don’t believe what they say, for their practice — for example avoiding extra-discursive dangers, such as oncoming cars — shows that they cannot make the world a slave to their discourses …

Part of the function of communicative action and associated material acts is to indicate which of those many possible meanings apply in a given situation. When we read a final demand for payment of our electricity bill and the accompanying threat of disconnection, we could play endless parlour games running through diverse constructions of what this text says, showing off our ability to construe it in imaginative ways. Never-theless, which of the many possible meanings is supposed to apply, is usually pretty clear; if it isn’t, it might register when the lights go out.

Statistics and econometrics — science building on fantasy worlds

28 Sep, 2021 at 11:04 | Posted in Statistics & Econometrics | 2 Comments

In econometrics one often gets the feeling that many of its practitioners think of it as a kind of automatic inferential machine: input data and out comes casual knowledge. This is like pulling a rabbit from a hat. Great — but first you have to put the rabbit in the hat. And this is where assumptions come into the picture.

The assumption of imaginary ‘super populations’ is one of the many dubious assumptions used in modern econometrics.

Creepy Condescending Wonka Meme - ImgflipAs social scientists — and economists — we have to confront the all-important question of how to handle uncertainty and randomness. Should we define randomness with probability? If we do, we have to accept that to speak of randomness we also have to presuppose the existence of nomological probability machines, since probabilities cannot be spoken of – and actually, to be strict, do not at all exist – without specifying such system-contexts. Accepting a domain of probability theory and sample space of infinite populations also implies that judgments are made on the basis of observations that are actually never made!

Infinitely repeated trials or samplings never take place in the real world. So that cannot be a sound inductive basis for a science with aspirations of explaining real-world socio-economic processes, structures or events. It’s not tenable.

And as if this wasn’t enough, one could — as we’ve seen — also seriously wonder what kind of ‘populations’ these statistical and econometric models ultimately are based on. Why should we as social scientists — and not as pure mathematicians working with formal-axiomatic systems without the urge to confront our models with real target systems — unquestioningly accept models based on concepts like the ‘infinite super populations’ used in e.g. the ‘potential outcome’ framework that has become so popular lately in social sciences?

The theory requires that the data be embedded in a stochastic framework, complete with random variables, probability distributions, and unknown parameters. However, the data often arrive without benefit of randomness. In such cases, the investigators may still wish to separate effects of “the causes they wish to study or are trying to detect” from “accidental occurrences due to the many other circumstances which they cannot control.” What can they do? Usually, they follow Fisher (1922) into a fantasy world “by constructing a hypothetical infinite population, of which the actual data are regarded as constituting a random sample.” Unfortunately, this fantasy world is often harder to understand than the original problem which lead to its invocation.

David Freedman & David Lane

Of course one could treat observational or experimental data as random samples from real populations. I have no problem with that (although it has to be noted that most ‘natural experiments’ are not based on random sampling from some underlying population — which, of course, means that the effect-estimators, strictly seen, only are unbiased for the specific groups studied). But probabilistic econometrics does not content itself with that kind of populations. Instead, it creates imaginary populations of ‘parallel universes’ and assume that our data are random samples from that kind of  ‘infinite super populations.’

But this is actually nothing else but hand-waving! And it is inadequate for real science. As David Freedman writes:

These are convenient fictions … Nevertheless, reliance on imaginary populations is widespread. Indeed regression models are commonly used to analyze convenience samples … The rhetoric of imaginary populations is seductive because it seems to free the investigator from the necessity of understanding how data were generated.

Modelling assumptions made in statistics and econometrics are more often than not made for mathematical tractability reasons, rather than verisimilitude. That is unfortunately also a reason why the methodological ‘rigour’ encountered when taking part of statistical and econometric research to a large degree is nothing but deceptive appearance. The models constructed may seem technically advanced and very ‘sophisticated,’ but that’s usually only because the problems here discussed have been swept under the carpet. Assuming that our data are generated by ‘coin flips’ in an imaginary ‘superpopulation’ only means that we get answers to questions that we are not asking. The inferences made based on imaginary ‘superpopulations,’ well, they too are nothing but imaginary. We should not — as already Aristotle noted — expect more rigour and precision than the object examined allows. And in social sciences — including economics and econometrics — it’s always wise to ponder C. S. Peirce’s remark that universes are not as common as peanuts …

Why technical fixes will not rescue econometrics

27 Sep, 2021 at 21:35 | Posted in Statistics & Econometrics | 1 Comment

On the issue of the various shortcomings of regression analysis and econometrics, no one sums it up better than David Freedman in his Statistical Models and Causal Inference:

David A. Freedman - WikipediaIn my view, regression models are not a particularly good way of doing empirical work in the social sciences today, because the technique depends on knowledge that we do not have. Investigators who use the technique are not paying adequate attention to the connection — if any — between the models and the phenomena they are studying. Their conclusions may be valid for the computer code they have created, but the claims are hard to transfer from that microcosm to the larger world …

Regression models often seem to be used to compensate for problems in measurement, data collection, and study design. By the time the models are deployed, the scientific position is nearly hopeless. Reliance on models in such cases is Panglossian …

Given the limits to present knowledge, I doubt that models can be rescued by technical fixes. Arguments about the theoretical merit of regression or the asymptotic behavior of specification tests for picking one version of a model over another seem like the arguments about how to build desalination plants with cold fusion and the energy source. The concept may be admirable, the technical details may be fascinating, but thirsty people should look elsewhere …

Causal inference from observational data presents may difficulties, especially when underlying mechanisms are poorly understood. There is a natural desire to substitute intellectual capital for labor, and an equally natural preference for system and rigor over methods that seem more haphazard. These are possible explanations for the current popularity of statistical models.

Indeed, far-reaching claims have been made for the superiority of a quantitative template that depends on modeling — by those who manage to ignore the far-reaching assumptions behind the models. However, the assumptions often turn out to be unsupported by the data. If so, the rigor of advanced quantitative methods is a matter of appearance rather than substance.

Mainstream economics — replete with arrant nonsense

27 Sep, 2021 at 15:13 | Posted in Economics | 2 Comments

Chair of the Federal Reserve - WikipediaMainstream economics is replete with ideas that “everyone knows” to be true, but that are actually arrant nonsense. For example, “everyone knows” that:

• Aggregate production functions (and aggregate measures of the capital stock) provide a good way to characterize the economy’s supply side;

• Over a sufficiently long span—specifically, one that allows necessary price adjustments to be made—the economy will return to a state of full market clearing; and,

• The theory of household choice provides a solid justification for downward-sloping market demand curves.

None of these propositions has any sort of empirical foundation; moreover, each one turns out to be seriously deficient on theoretical grounds. Nevertheless, economists continue to rely on these and similar ideas to organize their thinking about real-world economic phenomena. No doubt, one reason why this situation arises is because the economy is a complicated system that is inherently difficult to understand, so propositions like these—even though wrong—are all that saves us from intellectual nihilism …

Is this state of affairs ever harmful or dangerous? One natural source of concern is if dubious but widely held ideas serve as the basis for consequential policy decisions. In this note, I examine one such idea, namely, that expected inflation is a key determinant of actual inflation.

Jeremy Rudd, Board of Governors of the FRS

Reinstating the gold standard

27 Sep, 2021 at 08:11 | Posted in Economics | 3 Comments

Ninety years ago Keynes could congratulate Great Britain on finally having got rid of the biggest ”barbarous relic” of his time — the gold standard. He lamented that

advocates of the ancient standard do not observe how remote it now is from the spirit and the requirement of the age … [T]he long age of Commodity Money has at last passed away before the age of Representative Money. Gold has ceased to be a coin, a hoard, a tangible claim to wealth … It has become a much more abstract thing – just a standard of value; and it only keeps this nominal status by being handed round from time to time in quite small quantities amongst a group of Central Banks.

goldEnding the use of fiat money guaranteed by promises for currencies once more backed by gold is not the way out of the present economic crisis. Far from being the sole prophylactic against the alleged problems of fiat money, as the ‘gold bugs’ maintain, a return to gold would only make things far worse. So yours truly — just as Keynes did — most certainly rejects any proposals for restoring the gold standard.

The ‘gold bugs’ seem to forget that we actually have tried the gold standard before – in the era more or less between 1870 and 1930 – and with disastrous results!


Implementing a new gold standard today would only lead to a generally falling price level. Sounds great? If you think so, read what Keynes wrote already ninety years ago in Essays in Persuasion:

Of course, a fall in prices, which is the the same thing as a rise in the value of claims on money, means that real wealth is transferred from the debtor in favour of the creditor, so that a larger proportion of the real assets is represented by the claims of the depositor, and a smaller proportion belongs to the nominal owner of the asset who has borrowed in order to buy.

Allowing this debt deflation process — the analysis of which was later developed by Irving Fisher and Hyman Minsky — would land us in a situation where output and wages would fall and unemployment and the real burden of debt would increase. The only winners would probably be banks and financial institutes.

So why would anyone want to reinstate a gold standard? The best surmise is probably that it’s a question of ideology and politics. Libertarians and market fundamentalists that advocate a return to gold, want to restrict the possibilities of governments to intervene in the economy and — even harder than with ‘independent’ central banks — force countries to pursue restrictive economic policies that at all costs keep inflation down.

Still not convinced of why a return to gold is a bad idea? Then, at least, remember what Keynes wrote in The Economic Consequences of Mr Churchill (1925):

We stand midway between two theories of economic society. The one theory maintains that wages should be fixed by reference to what is ’fair’ and ’reasonable’ as between classes. The other theory–the theory of the economic juggernaut–is that wages should be settled by economic pressure, otherwise called ’hard facts’, and that our vast machine should crash along, with regard only to its equilibrium as a whole, and without attention to the chance consequences of the journey to individual groups. The gold standard, with its dependence on pure chance, its faith in the ’automatic adjustments’, and its general regardlessness of social detail, is an essential emblem and idol of those who sit in the top tier of the machine. I think that they are immensely rash… in their comfortable belief that nothing really serious ever happens. Nine times out of ten, nothing really does happen–merely a little distress to individuals or to groups. But we run a risk of the tenth time (and stupid into the bargain), if we continue to apply the principles of an economics, which was worked out on the hypothesis of laissez-faire and free competition, to a society which is rapidly abandoning these hypotheses.

gold_bugSo, next time you want to come up with some new idea on how to solve our economic problems with a magic gold bullet, remember new economic thinking starts with reading old books! Why not start with the best there are — those written by John Maynard Keynes.

Facts and values — a critical realist perspective

25 Sep, 2021 at 15:58 | Posted in Theory of Science & Methodology | Comments Off on Facts and values — a critical realist perspective

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Judith Butler — a severe case of postmodern mumbo jumbo

25 Sep, 2021 at 11:24 | Posted in Politics & Society | 3 Comments

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61YybQj5SvLThe 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

Prayer

24 Sep, 2021 at 22:16 | Posted in Varia | Comments Off on Prayer

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The great debt debate — Thomas Piketty and Michael Hudson

24 Sep, 2021 at 17:14 | Posted in Economics | 2 Comments

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‘New Keynesian’ macroeconomics — worse than useless

24 Sep, 2021 at 11:00 | Posted in Economics | 1 Comment

Macroeconomic models may be an informative tool for research. But if practitioners of ‘New Keynesian’ macroeconomics do not investigate and make an effort of providing a justification for the credibility of the assumptions on which they erect their building, it will not fulfill its tasks. There is a gap between its aspirations and its accomplishments, and without more supportive evidence to substantiate its claims, critics will continue to consider its ultimate argument as a mixture of rather unhelpful metaphors and metaphysics. Maintaining that economics is a science in the ‘true knowledge’ business, yours truly remains a skeptic of the pretenses and aspirations of ‘New Keynesian’ macroeconomics. So far, I cannot really see that it has yielded very much in terms of realistic and relevant economic knowledge.

kKeynes basically argued that it was inadmissible to project history on the future. Consequently an economic policy cannot presuppose that what has worked before, will continue to do so in the future. That macroeconomic models could get hold of correlations between different ‘variables’ was not enough. If they could not get at the causal structure that generated the data, they were not really ‘identified.’ Dynamic stochastic general euilibrium (DSGE) macroeconomists — including ‘New Keynesians’ — has drawn the conclusion that the problem with unstable relations is to construct models with clear microfoundations where forward-looking optimizing individuals and robust, deep, behavioural parameters are seen to be stable even to changes in economic policies. As yours truly has argued in a couple of post (e. g. here and here), this, however, is a dead end.

Here we are getting close to the heart of darkness in ‘New Keynesian’ macroeconomics. Where ‘New Keynesian’ 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 characterize 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 analyzed also on their own terms. And although one may easily agree with e.g. Paul Krugman’s emphasis on simple models, the simplifications used may have to be simplifications adequate for macroeconomics and not those adequate for microeconomics.

In microeconomics we know that aggregation really presupposes homothetic an identical preferences, something that almost never exist in real economies. The results given by these assumptions are therefore not robust and do not capture the underlying mechanisms at work in any real economy. And models that are critically based on particular and odd assumptions – and are neither robust nor congruent to real world economies – are of questionable value.

Even if economies naturally presuppose individuals, it does not follow that we can infer or explain macroeconomic phenomena solely from knowledge of these individuals. Macroeconomics is to a large extent emergent and cannot be reduced to a simple summation of micro-phenomena. Moreover, even these microfoundations aren’t immutable. The ‘deep parameters’ of ‘New Keynesian’ DSGE models — ‘tastes’ and ‘technology’ — are not really the bedrock of constancy that they believe (pretend) them to be.

So I cannot concur with Paul Krugman, Mike Woodford, Greg Mankiw and other sorta-kinda ‘New Keynesians’ when they more or less try to reduce Keynesian economics to “intertemporal maximization modified with sticky prices and a few other deviations.”

If there is one thing that distinguished Keynes’ economic analysis from that of his predecessors, it was his rejection of the idea of a unique full employment equilibrium to which a market economy will automatically return when it experiences a shock. Keynes argued that an economy could shift from a full-employment equilibrium to a persistent slump as the result of the interaction between objective macroeconomic variables and the subjective ‘animal spirits’ of investors and other decision-makers. It is this perspective that has been lost in the absorption of New Keynesian macro into the DSGE framework.

John Quiggin

Revisiting Myrdal’s ‘solution’ to the problem of value-bias

24 Sep, 2021 at 10:22 | Posted in Theory of Science & Methodology | Comments Off on Revisiting Myrdal’s ‘solution’ to the problem of value-bias

Buy The Possibility of Naturalism: A philosophical critique of the  contemporary human sciences (Classical Texts in Critical Realism) Book  Online at Low Prices in India | The Possibility of Naturalism: A  philosophicalRecognition of the phenomena of rationalization and mystification as the effects of unconscious interference enables us to pinpoint the error in an influential ‘solution’ to the problem of ‘value-bias’, authorized inter alia by Myrdal. On this solution, recognizing that value-neutrality is impossible, all the social scientist needs to do is state his or her own value assumptions fully and explicitly at the beginning of some piece of work so as to put the reader (and possibly also the writer) on their guard. It is not difficult to see that this solution begs the question. For it presupposes that X knows what his or her values are; that is, it presupposes that s/he has the kind of knowledge about him- or herself that ex hypothesi, in virtue of unconscious interference, s/he cannot have about society. Now for X to have such knowledge about him- or herself, s/he would have had to become fully conscious of the formerly unconscious mode of interference, in which case a statement of value assumptions is unnecessary, because objectivity is now possible. Conversely, if X is not conscious of the (unconscious) mode of interference, then any statement of his or her (professed) value assumptions will be worthless. Moreover, one cannot say in general whether any such statement will be more or less misleading. (Thus consider, for instance, what often follows professions of the kind ‘I’m not prejudiced about . . .’ or ‘I’m a tolerant sort of person/true liberal/good democrat . . .’) Mutatis mutandis, similar considerations apply in the case of conscious and semi-conscious modes of interference: avowals are either unnecessary or potentially misleading.

Hume’s Fork

23 Sep, 2021 at 16:59 | Posted in Theory of Science & Methodology | 1 Comment

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Top 100 Economics Blogs

22 Sep, 2021 at 16:59 | Posted in Economics | 3 Comments

10. Naked Capitalism

46. Stumbling and Mumbling

63. Lars P Syll | Non-ergodic, realist and relevant economics

66. Real-World Economics Review Blog

74. Greg Mankiw’s Blog

Mainstream economics has sadly made economics increasingly irrelevant to the understanding of the real world. Trying to contribute in making economics a more realist and relevant science, yours truly launched this blog in March 2011.

Now, ten years later and with millions of page views on it, yours truly’s blog is ranked on Top 100 Economics Blogs.

I am — of course — truly awed, honoured and delighted.

How is a philosophy of science possible?

22 Sep, 2021 at 11:00 | Posted in Theory of Science & Methodology | 1 Comment

Amazon.in: Buy Possibility of Naturalism: v. 1: Philosophical Critique of  the Contemporary Human Sciences Book Online at Low Prices in India |  Possibility of Naturalism: v. 1: Philosophical Critique of the ContemporaryWhat is the relation between science and philosophy? Do they compete with one another or speak of different worlds? Neither position is acceptable …

Philosophy is distinguished by the kinds of considerations and arguments it employs. It does not consider a world apart from that of the various sciences. Rather it considers just that world, but from the standpoint of what can be established about it by a priori argument …

Philosophy, like science, produces knowledge. But it is knowledge of the necessary conditions for the production of knowledge — second-order knowledge, if you like. If philosophy is, as I believe it can be, a conceptual science, then like any science it ought to be able to tell us something we did not already know: it ought to be able to surprise us. For, as Marx astutely observed, ‘all science would be superfluous if the outward appearances and essences of things directly coincided.’

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