Science before statistics — causal inference

10 Sep, 2021 at 12:20 | Posted in Statistics & Econometrics | Leave a comment

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September 11, 2001

9 Sep, 2021 at 15:28 | Posted in Politics & Society | Leave a comment

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Impotence must eventually bring about what good will ought to have done but did not do: that each state becomes so organized internally that it is not the head of state, whom war really costs nothing (since he wages it at another’s cost, namely that of the people), who has the decisive voice as to whether there is to be war or not, but instead the people, which pays for it.

Immanuel Kant

Kan Magdalena Andersson släppa den nyliberala modellen?

8 Sep, 2021 at 20:23 | Posted in Economics | Leave a comment

Trots att ingen längre säger sig vara nyliberal, så dominerar de neoklassiska ekonomiska modeller som nobelpristagaren Milton Friedman skapade nyliberalismen av, den verkställda ekonomiska politiken. Det vill säga att ”marknadens” kollektiva visdom är den bärande bjälken som politiken har att förhålla sig till. Inte ens Socialdemokraterna, med finansministern och den sannolika partiledaren Magdalena Andersson i spetsen, vill släppa den modellen …

Neoliberalism: Political Success, Economic Failure - The American ProspectJag vill hävda att detta fullskaleexperiment med nyliberala idéer inte har varit rakt igenom lyckosamma utan har skapat det mesta av de sociala och ekonomiska spänningar som vi idag har att brottas med, i form av växande ojämlikhet och socialt utanförskap …

Problemen med dessa nyliberala reformer är att de har skapats för att vara så ”irreversibla” som möjligt. Där äganderätten och näringsfriheten är de heliga principer som har stadfästs så djupt som det någonsin går. Eller snarare definitionen av dessa rättigheter, som inte bygger på några ekonomiska naturlagar utan de är till sin natur politiska och handlar om vem som får privilegiet att definiera dem …

Vill man komma åt det sjuka systemet med vinstmaximerande skolor, så kan man börja med att reformera systemet för den så kallade skolpengen, som i dag är ger stora arbitragevinster till friskolorna.  Med sjunkande marginaler i friskolorna blir de också allt mindre intressanta som investeringsobjekt. Detta kommer i sin tur att bana väg för andra riktiga reformer.

Per Lindvall

Kant’s transcendental green spectacles

8 Sep, 2021 at 17:49 | Posted in Theory of Science & Methodology | 2 Comments

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T’as vu

8 Sep, 2021 at 14:06 | Posted in Varia | Leave a comment

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Was Marx right after all?

6 Sep, 2021 at 18:33 | Posted in Economics | 3 Comments

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Analytical bias

5 Sep, 2021 at 16:41 | Posted in Economics | 2 Comments

Expectation vs reality concept business analysis Vector ImageThe world is made up of systems.  Our body is a system, or in fact a system of systems.  What we call “society” is another system of systems, as is the natural environment …

But these systems are very complex, difficult to explain or predict.  One successful strategy, which has had a revolutionary impact on how we live, is analysis …

By biting off chewable portions of a much larger world, science makes it possible to achieve progress in our understanding of how things work …

But this approach, for all its benefits, fails to capture most of the interactive effects that make a system a system.  It leads us to overstate the separateness of the things we study and observe and to understate their connectedness.  This is not an argument against thinking analytically, but for not being surprised by what this thinking fails to see so we can at least somewhat compensate for its shortcomings.

Peter Dorman

Using the ‘analytical’ method — “biting off chewable portions of a much larger world” — may indeed sound as a convincing and good scientific approach. But — as Dorman  notices — there is a snag!

The procedure only really works when you have a machine-like whole/system/economy where the parts appear in more or less fixed and stable configurations. And if there is anything we know about reality, it is that it is not a machine! The world we live in is not a ‘closed’ system. On the contrary. It is an essentially ‘open’ system. Things are uncertain, relational, interdependent, complex, and ever-changing.

Without assuming that the underlying structure of the economy that you try to analyze remains stable/invariant/constant, there is no chance the equations of the model remain constant. That’s the very rationale why economists use (often only implicitly) the assumption of ceteris paribus. But — nota bene — this can only be a hypothesis. You have to argue the case. If you cannot supply any sustainable justifications or warrants for the adequacy of making that assumption, then the whole analytical economic project becomes pointless non-informative nonsense. Not only have we to assume that we can shield off variables from each other analytically (external closure). We also have to assume that each and every variable themselves are amenable to be understood as stable and regularity producing machines (internal closure). Which, of course, we know is as a rule not possible. Some things, relations, and structures are not analytically graspable. Trying to analyse parenthood, marriage, employment, etc, piece by piece doesn’t make sense. To be a chieftain, a capital-owner, or a slave is not an individual property of an individual. It can come about only when individuals are integral parts of certain social structures and positions. Social relations and contexts cannot be reduced to individual phenomena. A cheque presupposes a banking system and being a tribe-member presupposes a tribe.  Not taking account of this in the ‘analytical’ approach, economic ‘analysis’ becomes rather uninformative nonsense.

Modern macro — ‘genuine plurality’ vs. ‘axiomatic variation’

5 Sep, 2021 at 13:13 | Posted in Economics | Leave a comment

out-of-the-fryingThe DSGE mainstream — which is made up of new classical macroeconomics and neo-Keynesianism — is unanimously based on the core assumptions that characterize the paradigm of social exchange theory. These are rationality, ergodicity and substitutionality, the exclusive acceptance of a formal mathematical-deductive, positivist reductionism. After the ‘empirical turn’ of the last two or three decades, these have been combined with sophisticated micro- and macroeconometrics, or with experimental arrangements, such as are familiar from the leading natural sciences (physics and chemistry). The postulate of stability and optimality (Walras’s law), which is implemented a priori in the core assumptions, serves as a ‘model solution,’ and thus functions as a marker of a negative heuristic. The apparently very different model prognoses of new classical macroeconomics (hyper-balanced and hyper-stable) on the one hand, and of standard and neo-Keynesianism (unbalanced, open to intervention) on the other hand are based on changes to assumptions in the ‘protective belt’ (e.g. about the speed of adjustment, the rigidity of prices and quantities, the formation of expectations etc.), but do not actually point to a different paradigmatic origin of the two schools of theory.

Arne Heise & Sebastian Thieme

Maintaining that economics is a science in the ‘true knowledge’ business, yours truly remains a skeptic of the pretences and aspirations of New Classical and ‘New Keynesian’ macroeconomics. So far, I cannot really see that they have yielded very much in terms of realistic and relevant economic knowledge.

The marginal return on its ever higher technical sophistication in no way makes up for the lack of serious underlabouring of the deeper philosophical and methodological foundations of mainstream economics. The rather one-sided emphasis of usefulness and its concomitant instrumentalist justification cannot hide it cannot give supportive evidence for considering it fruitful to analyze macroeconomic structures and events as the aggregated result of optimizing representative actors. After having analyzed some of its ontological and epistemological foundations, I cannot but conclude that ‘modern’ macroeconomics on the whole has not delivered anything else than “as if” unreal and irrelevant models.

Science should help us penetrate to “the true process of causation lying behind current events” and disclose “the causal forces behind the apparent facts” [Keynes 1971-89 vol XVII:427]. We should look out for causal relations. But models can never be more than a starting point in that endeavour. There is always the possibility that there are other variables — of vital importance and although perhaps unobservable and non-additive not necessarily epistemologically inaccessible –- that were not considered for the model.

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-existant. Unfortunately that also makes most of the achievements of macroeconomics — as most of contemporary endeavours of economic theoretical modeling — rather useless.

Most mainstream economists seem to have no problem with the lack of fundamental diversity — not just path-dependent elaborations of the mainstream canon — and vanishingly little real-world relevance that characterize modern mainstream macroeconomics. They usually stick to the view that there is nothing basically wrong with ‘standard theory.’ As long as policymakers​ and economists stick to ‘standard economic analysis’ everything is just fine. Economics is just a common language and method that makes us think straight,  reach correct answers, and produce ‘knowledge.’

Although some mainstream economists try hard to give a picture of modern macroeconomics as a pluralist enterprise, the change and diversity that gets their approval only takes place within the analytic-formalistic modeling strategy that makes up the core of mainstream economics. You’re free to take your analytical formalist models and apply it to whatever you want — as long as you do it with a modeling methodology that is acceptable to the mainstream. If you do not follow this particular mathematical-deductive analytical formalism you’re not even considered doing economics. If you haven’t modeled your thoughts, you’re not in the economics business. But this isn’t pluralism. It’s a methodological reductionist straightjacket.

No matter how precise and rigorous the analysis is, and no matter how hard one tries to cast the argument in modern ‘the model is the message’ form, mainstream economics do not push economic science forwards one millimetre​ since it simply do not stand the acid test of relevance to the target. No matter how clear, precise, rigorous or certain the inferences delivered inside the models are, that is no guarantee whatsoever they have anything interesting or relevant to say about real-world economies.

Understanding intersectionality and identity politics

5 Sep, 2021 at 11:35 | Posted in Politics & Society | Leave a comment

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When I speak of 'negative dialectics' not the least important reason for  doing so is my

Berlin: Die Sinfonie der Großstadt

4 Sep, 2021 at 18:52 | Posted in Varia | Leave a comment

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Spectacular!

Sixty years later, yours truly at Café Einstein, Berlin. Photo by Bengt Nilsson.

jag på einstein-berlin1988

On sophistry and illusion

4 Sep, 2021 at 10:37 | Posted in Theory of Science & Methodology | Leave a comment

David Hume quote: If we take in our hand any volume; of divinity...

Noam Chomsky on language and knowledge

4 Sep, 2021 at 08:54 | Posted in Theory of Science & Methodology | Leave a comment

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Dialectic of Enlightenment

2 Sep, 2021 at 15:20 | Posted in Politics & Society | Leave a comment

Dialectic of Enlightenment: 15 (Verso Classics): Amazon.co.uk: Adorno,  Theodor W., Horkheimer, Max: 9781859841549: BooksEnlightenment, understood in the widest sense as the advance of thought, has always aimed at liberating human beings from fear and installing them as masters. Yet the wholly enlightened earth is radiant with triumphant calamity.

Whereas the unconscious colossus of real existence, subjectless capitalism, inflicts its destruction blindly, the deludedly rebellious subject is willing to see that destruction as its fulfillment, and, together with the biting cold it emits toward human beings misused as things, it also radiates the perverted love which, in the world of things, takes the place of love in its immediacy.

What we had set out to do was nothing less than to explain why humanity, instead of entering a truly human state, is sinking into a new kind of barbarism.

On logic and science

31 Aug, 2021 at 15:42 | Posted in Theory of Science & Methodology | 10 Comments

That logic should have been thus successful is an advantage which it owes entirely to its limitations, whereby it is justified in abstracting — indeed, it is under obligation to do so — from all objects of knowledge and their differences, leaving the understanding nothing to deal with save itself and its form. But for reason to enter on the sure path of science is, of course, much more difficult, since it has to deal not with itself alone but also with objects. Logic, therefore, as a propaedeutic, forms, as it were, only the vestibule of the sciences; and when we are concerned with specific modes of knowledge, while logic is indeed presupposed in any critical estimate of them, yet for the actual acquiring of them we have to look to the sciences properly so called, that is, to the objective sciences. 

In mainstream economics, both logic and mathematics are used extensively. And most mainstream economists sure look upon themselves as “twice blessed.”

Is there any scientific ground for that blessedness? None whatsoever!

If scientific progress in economics lies in our ability to tell ‘better and better stories’ one would, of course, expect economics journals being filled with articles supporting the stories with empirical evidence confirming the predictions. However, the journals still show a striking and embarrassing paucity of empirical studies that (try to) substantiate these predictive claims. Equally amazing is how little one has to say about the relationship between the model and real-world target systems. It is as though explicit discussion, argumentation and justification on the subject aren’t considered to be required.

In mathematics, the deductive-axiomatic method has worked just fine. But science is not mathematics. Conflating those two domains of knowledge has been one of the most fundamental mistakes made in modern economics. Applying it to real-world open systems immediately proves it to be excessively narrow and hopelessly irrelevant. Both the confirmatory and explanatory ilk of hypothetico-deductive reasoning fails since there is no way you can relevantly analyse confirmation or explanation as a purely logical relation between hypothesis and evidence or between law-like rules and explananda. In science, we argue and try to substantiate our beliefs and hypotheses with reliable evidence. Propositional and predicate deductive logic, on the other hand, is not about reliability, but the validity of the conclusions given that the premises are true.

Levels of aspiration among economists

31 Aug, 2021 at 10:10 | Posted in Economics | Leave a comment

225px-allais_pn_maurice-24x30-2001bSubmission to observed or experimental data is the golden rule which dominates any scientific discipline. Any theory whatever, if it is not verified by empirical evidence, has no scientific value and should be rejected.

Maurice Allais

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 models and lose sight of reality.

Mainstream economics has since long more or less given up on the real world and contents itself with proving things about thought up worlds. Empirical evidence — still — only plays a minor role in economic theory, where models largely function as a substitute for empirical evidence. Hopefully humbled by the ever growing manifest failure of its theoretical pretences, the one-sided, almost religious, insistence on axiomatic-deductivist modeling as the only scientific activity worthy of pursuing in economics will give way to methodological pluralism based on ontological considerations rather than formalistic tractability.

To have valid evidence is not enough. What economics needs is sound evidence. Why? Simply because the premises of a valid argument do not have to be true, but a sound argument, on the other hand, is not only valid, but builds on premises that are true. Aiming only for validity, without soundness, is setting the economics aspiration level too low for developing a realist and relevant science.

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