Hip Orthodoxy

by Henry on May 30, 2007

Chris Hayes’ article on heterodox economics has gotten a lot of attention; for my money, the two best takes on it are Ezra Klein’s and Matt Yglesias’s. As Matt says:

What heterodox economists are really challenging isn’t neoclassical economics but the political behavior of neoclassical economists. The recent Alan Blinder fracas is a case in point. He didn’t call any of the standard neoliberal case for free trade into question, and, indeed, didn’t argue against free trade at all. He just said something that he thought would be helpful in spurring the creation of the sort of social democratic society with an open market that he favors, while many economists saw his statements as giving aide and comfort to people who have a political agenda (blocking new trade agreements) that they don’t like.

There seem to me to be two different fights going on here, which often get confused (and are systematically confused together by some of the post-autistic economics crew). One is whether economists’ reliance on the rational actor model, assumptions of self-interest, supply and demand and so on is intellectually good or bad). The second is whether ‘mainstream’ economics is necessarily right wing. (or, a little less polemically, whether it confines ‘legitimate’ debate to a political spectrum ranging from moderate Democrats to extreme Republicans). All too often, these get jumbled together into the implicit or explicit claim that economists’ reliance on the rational actor model means that they come up with results that are necessarily right wing. This is wrong. There’s lots of very interesting work out there, including some that is self-avowedly Marxist (the ‘no bullshit’ variety of Marxism that Harry Brighouse and I have both been influenced by), which relies extensively on economistic arguments about self-interested rational utility maximizing actors, and is no less left wing for it.

This is on my mind at the moment not only because of Chris’s piece, but because I’m in the middle of reading Tom Slee’s “No-One Makes You Shop at Walmart,” (Powells, Amazon) which so far is an utterly wonderful book that uses simple arguments from game theory to make the case for lefty politics and collective action. The book is so great not because of any profound and original insights, (most of the arguments in it have been made in greater detail elsewhere), but because it sets its claims out carefully in straightforward, clear and readable prose that ought to be accessible to any reasonably intelligent person. It’s a kind of counter-economics 101, showing how the neat lessons that undergraduate courses draw about market efficiency break down when actors’ choices are interdependent (see further Alex Tabarrok, who deserves kudos for alerting readers including meself to the virtues of a book that he vigorously disagrees with). I don’t know of anyone who has done anything like this anywhere near as well as Slee has, and he deserves to sell lots and lots of copies (if I was teaching a relevant undergraduate course, I’d assign it; I’m buying a copy for my younger sister who is a social sciences undergrad at the moment the better that she can confound her teachers). Anyway, the point is that Slee (although he is not himself a professional economist) is orthodox – the sources that he draws upon are all more or less within the mainstream of game theory. However, he’s able to deploy that orthodoxy to rather unconventional political ends.

Which brings us back to Matt’s original point. I’d certainly like to see more heterodoxy of the kind that Chris talks about in the economics profession, for the sake of intellectual diversity. Mark Thoma has some good things to say about this at TPMCafe. Chris retells the utterly scandalous story of what happened at Notre Dame’s economics department, which speaks to something that is intellectually unhealthy in the profession as a whole (more on this in the next couple of days when I finish my review of Scott Page’s book on the benefits of diversity). Equally unhealthy is the lack of interest among economists in engaging with economic sociologists (this isn’t true in the economics blogosphere, but economist-bloggers are outliers in their profession). But this doesn’t explain the political puzzle that Matt and Ezra implicitly point to. If economic theory (and game theory is established at the heart of the orthodoxy) potentially gives succour to a wide variety of ideologies and points of view, why is it that economists who step beyond a certain policy consensus are perceived as breaking the club rules? A lot of it is surely because most economists probably do broadly subscribe to the idea that free trade is good, and don’t want to give ammunition to Lou Dobbs and co. Some of it, however, smacks to me a little of the condescension of any priesthood trying to keep up a unified front against the unhallowed masses – a belief that the multitudes can’t handle the notion that these debates are complex, and that any admission of same is liable to undermine the prestige and authority of the profession.

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{ 85 comments }

1

Donald A. Coffin 05.30.07 at 7:55 pm

Tyler Cowen at Marginal Revolution posts this link (http://www.amazon.com/gp/cdp/member-reviews/A2U0XHQB7MMH0E/002-1827497-3917607; scroll down, at least to the second review) to Herb Gintis’s review of a collection of essays on heterodox economics. Gintis is, as many readers of Crooked Timer will know, hardly a staunch advocate of neoclassical economics. He is, in my opinion, quite correct about the problems with most of what passes for heterodox economics today.

2

notsneaky 05.30.07 at 8:24 pm

Wow, the Henry Gintis review is the best thing I’ve read on this topic amidst all the recent hoopla. Thanks donald.

3

notsneaky 05.30.07 at 8:24 pm

and of course Hnery too

4

notsneaky 05.30.07 at 8:31 pm

arghhghg

5

derek 05.30.07 at 8:35 pm

Economics is the political behaviour of economists. Bring back the phrase “political economy”, I say.

6

Henry 05.30.07 at 8:46 pm

The Gintis review is really on target. I somehow was on the initial mailing list for the Post Autistic Economics Review when it first got started, and was a little amazed at how bad most of it was – the odd good piece in there, but an awful lot of self-indulgence and not very much that seemed at all _useful._ I do think that there are some very interesting heterodox economists out there, many of them outside economics departments as Nathan Newman observes. But the organized wing of the movement strikes me as just not very intellectually convincing (and like Gintis, I’m happy to be convinced about the failings of the neo-classical model etc; it’s just that I think that economic sociologists are already doing a very good job of talking about said failings, and doing what the PAE crowd haven’t really done, which is to come up with fruitful new research agendas.

7

Seth Finkelstein 05.30.07 at 9:06 pm

Regarding: “why is it that economists who step beyond a certain policy consensus are perceived as breaking the club rules?”

Umm, because that’s where the money is?

There’s no need to create a “priesthood” argument, which verges on the unfalsifiable. In fact, standard neo-classic economics of rational actor maximizing self-interest works very well (no smiley, I’m quite serious).

8

ejh 05.30.07 at 9:23 pm

the sources that he draws upon are all more or less within the mainstream of game theory

The apparent fact that orthodoxy involves applying the rules of game theory makes one wish to bash one’s head against a wall for a prolonged period. If only in theory.

9

sdh 05.30.07 at 9:30 pm

Post-autistic economics ignores the innovative work of Ernst Fehr, Abijit Banerjee and Esther Duflo, Colin Camerer, Samuel Bowles, George Loewenstein, Daniel Kahneman, Benoit Mandelbrot, Edward Glaeser, David Laibson, Matthew Rabin, Bruno Frey, Elinor Ostrom, Armin Falk, Simon Gaechter, Jean Tirole, Aldo Rustichini, and many others. It ignores neuroeconomics, econophysics, and the notion of the economy as a complex system, with its stress on agent-based modeling. These researchers transform analytical economics to meet the empirical challenges posed by new data. Unlike leaders of the post-autistic school, they do not urge a retreat to philosophy or some some defunct 20th century doctrine.

On target? As someone unfamiliar with the state of economics today, Gintis’s review reads like a farcical piece dreamed up by post-modern satirist. What next? Econorobotics or Pre-Dementia Economics?

10

bob 05.30.07 at 9:53 pm

I somehow was on the initial mailing list for the Post Autistic Economics Review when it first got started, and was a little amazed at how bad most of it was – the odd good piece in there, but an awful lot of self-indulgence and not very much that seemed at all useful.

please, don’t let John Emerson read this. He’ll be crushed :)

11

notsneaky 05.30.07 at 10:09 pm

I think a good bit of why “mainstream economists” don’t pay much attention to heterodox view is simply that the signal extraction problem is so severe. The signal to noise ratio ain’t that high. There’s good heterodox folks who have important things to say but the group, being heterodox, also tends to attract a lot of cranks, folks with axes to grind, bruised egos and just plain ideologous who have no clue as to what they’re talking about. In those circumstances it just becomes really costly for your average mainstream economist to weigh through all that to in order to seperate the wheat from the shaff. So most stick to what they know works decently well.

This is also part of the reason why I’m so harsh on Keen all the time. I really resent the time I wasted reading that book. There’s nothing more annoying and frustrating then spending a lot of time to work your way through what looks like a legit mathematical argument only to realize after some time that it’s all nonsense, either out of incompetence or just plain lyin’.

Re: 9

I’m waiting…ready to pounce.

radek

12

dsquared 05.30.07 at 10:14 pm

The Gintis review badly misses the whole Post-Keynesian school (he even claims that Keynes came and went and had nothing major to contribute to the neoclassical debate, which is IMO a pretty fucking stupid thing to say, even by accident). Barkley Rosser makes this comment on Tyler’s post; the real sin of neoclassical economics (and the reason why counter-reformationists like Gintis really aren’t going far enough) is that there actually was a major theoretical revolution in economics (by Keynes) based on profound theoretical insights and inconsistent with the prevailing classical model, and the actually existing economics profession killed it stone dead (then tried to pretend it hadn’t with “New Keynesianism” etc).

13

SamChevre 05.30.07 at 10:14 pm

why is it that economists who step beyond a certain policy consensus are perceived as breaking the club rules?

Part of the reason is that many social sciences (not just economics) seem to have a norm of “Don’t make, in public, arguments that will be misused to justify really bad policies.” That applies to most research on biological differences between the races; to a good bit of research on male-female differences; and so forth. (I can’t imagine any academic publishing a popular article on “hereditary criminality” and remaining well-regarded, for example.)

14

dsquared 05.30.07 at 10:15 pm

Part of the reason is that many social sciences (not just economics) seem to have a norm of “Don’t make, in public, arguments that will be misused to justify really bad policies.”

this is broadly right, but economics doesn’t – the k% monetary policy rule was a really bad policy, for example …

15

Colin Danby 05.30.07 at 10:20 pm

Beyond a certain point of discussion there’s the problem that “orthodoxy” is hard to pin down and that “heterodoxy” as its opposite is also a floating signifier, but even looser because it contains so many things. Is Akerlof heterodox? And what’s at stake in the answer?

Herb Gintis understands the theory well enough to spot bad arguments, and, yes, the effort by some PAE folks to seize the ground of “realism” is at best question-begging and at worst cheap rhetoric. But I would be much more careful than Donald (#1) in seeing the book he criticizes as all contemporary heterodoxy rolled into a neat little ball, nor would I sneer about “what passes for” without doing a little more reading. And Gintis (I was a grad student at UMass Amherst while he was staking out this position) has a particular take on how economic theory ought to work which rules a lot of heterodoxy out from the start.

One of the better results of the PAE moment, though, was that it got people talking who normally wouldn’t. There’s more interaction today among Austrian, Post Keynesian, Feminist, Marxian, Institutionalist, and Evolutionary economists. Feminist economics has become a particularly interesting space in which no one school is hegemonic.

The other useful thing is slowly getting past bitching about “the failings of the neo-classical model.” Not only is there no one such model, but neoclassical econ, however defined, is really good for thinking about certain questions, as I think most of us heterodox types will agree. Whether it is complete and adequate is another matter, but I’m happy to have neoclassicals, including neo-neo-classicals like the always-interesting Herb G, do what they do and, hopefully, join a larger conversation.

16

Tracy W 05.30.07 at 10:24 pm

After Davis’s talk I went upstairs to catch a talk from a friend of mine, a bright young mainstream economist named Jesse Shapiro. The room was far easier to find and significantly more populated. Shapiro’s co-author was presenting an experiment they’d just done to investigate how people evaluated the trade-offs between getting a certain amount of money immediately and waiting a short time (a week) for more money. In attempting to understand the different preferences, they used a model of agents with two distinct selves: a long-run self and short-run self, and posited that those with more developed “long-run selves” were the ones who’d wait the week for the extra money.

Okay, I’m puzzled. This article is written in 2007, presumably the conference attended is in the last couple of years. From the writing, perhaps even in January 2007.

And he’s talking about a model I learnt about in an honours Microeconomics class back in 1999?

17

will u. 05.30.07 at 10:29 pm

Oh gosh, memories of futile hours spent in high school trying to read about the capital reswitching controversy, the difference between American and Cambridge Post Keynesians, etc. for my senior project on Keynes are flooding back. I would like to revisit economics, but it looks like I’m taking the long route through doctoral study in statistical physics..

18

notsneaky 05.30.07 at 10:30 pm

He misses PK because he’s writing a book review of a book of PAE folks, presumably not PKs.

19

H. E. Baber 05.30.07 at 10:33 pm

Now I understand the difference between philosophers and (orthodox) economists: we both operate a priori but THEY think they can get practical, empirical results out of it.

20

dsquared 05.30.07 at 10:41 pm

He misses PK because he’s writing a book review of a book of PAE folks, presumably not PKs.

then why does he specifically take time out to claim that “Marxism, Keynesianism, Institutionalism, Syndicalism, Austrian economics, and the like developed strongly for a while and then foundered”? I mean, it’s not even true about Institutionalism or Austrianism, but it’s ludicrously not true of Keynesianism.

21

notsneaky 05.30.07 at 10:52 pm

Institutionalism or Austrianism as orthodoxy definetly foundered.
To be honest I don’t know which Keynesianism he is referring to. I’m guessing IS/LM as orthdoxy. Which also foundered.
Then there’s the phrase “developed strongly”. I know that this ain’t my area but I don’t think that many new, novel and interesting results have been produced by (Old) Institutionalists or Austrians in the past 40 years. It’s just repeating old themes.
Same may be true about PKs too though. After showing in the 1950’s that one can construct counterexamples to many neoclassical claims they … did what exactly? It’s not a rhetorical question, I’m certainly curious how PKism of today differs from PKism of say 1972. Are there PKian models of price discrimination? Of technological innovation? Of markets with assymetric information? From what I understand more recently there’s been actual empirical work done which looks for Wicksell effects in real world data. That’s definetly welcome and perhaps the PKs will rise and rule once again.

22

Alex 05.30.07 at 11:08 pm

Feminist economics has become a particularly interesting space in which no one school is hegemonic.

You are feeling sleepy…very sleepy…you can hardly keep your eyes open..

23

Colin Danby 05.30.07 at 11:42 pm

“Notsneaky,” Peter Boettke’s blog is nice place to get a sense of current Austrian discussions; he also edited the Elgar Companion To Austrian Economics. There’s a companion Elgar volume for PK edited by John King, and check out this one edited by Randall Wray and Mat Forstater. The Routledge “Economics as Social Theory” series is worth a look. You want journals?

Take a nap, Alex.

24

anon 05.30.07 at 11:51 pm

Tracy W, multiple selves theories were already over two decades old when you learned them – Nobel Prize winner Thomas Schelling began working on them in the 1970s. But there is still plenty of active experimental work going on over how people actually behave when their multiple selves conflict.

25

John Emerson 05.31.07 at 12:42 am

I’m not going to start in again, but economists really should be more attentive to the way their profession is perceived. And they really shouldn’t say that it’s a misperception, simply because leading researchers and various dissidents deviate from the orthodoxy. I think that most non-economists, based on their experience and observation of economics in undergraduate education, political administration, and the political dialogue, rightly come to the conclusion that the political opinions of actual flesh-and-blood economists ranges from neoliberal to hardcore Pinochet right wing, with the center of gravity in the area represented by the less-crazy, more libertarian conservative Republicans.

If it is true, as people tell me, that the best work of the sharpest people is not represented in undergrad education or in the generalist press, that’s a serious problem and a black spot on the profession as a whole.

If it’s also true, and I think that it is, that the typical econ grad student in the most successful departments finds himself being pushed politically to the right, that’s another black spot.

There are plenty of straws in the wind making it seem that the economics cartel is enforcing orthodoxy. I keep being told that this is my error, but I really doubt that it is.

26

John Emerson 05.31.07 at 12:46 am

“Don’t make, in public, arguments that will be misused to justify really bad policies.”

Pinochet? Sachs in Russia?

27

John Emerson 05.31.07 at 12:58 am

I was never convinced that the defeat of the institutionalists and the political economists by the neoclassicists was anything more than a coup. The neoclassicists said “let’s talk about this and not that” and gained control, and people who talked about “that” gradually disappeared. I think that if economics hadn’t narrowed so much the world would be a better place now.

I’m really as tired of you guys as you are of me, though. You are free to go on believing that your profession is perfectly fine and has only the normal problems, and that its right-wing reputation is false and would be no big deal anyway because economics is science, not politics, and that the post-autistic people are stupid, and that the heterodox economists are interesting but not really very good economists, and that no orthodoxy is imposed on grad students who want to enter the profession, and that undergrad econ ed is not rightwing indoctrination.

And I’ll try to shut up now, so you can meditate joyfully on science without someone stinking up the place.

28

notsneaky 05.31.07 at 1:15 am

Colin, thanks for the links.

John, maybe this time around to economize on the bandwith we’ll just refer each other to previous threads and comments.
See Th3, Comment 112.

29

Paul 05.31.07 at 1:49 am

“The apparent fact that orthodoxy involves applying the rules of game theory [in No-One Makes You Shop at Walmart] makes one wish to bash one’s head against a wall for a prolonged period. If only in theory.”

The idea of collective action problems really strikes you as that abstract and unhelpful ehj?

As the Gintis review suggests, a lot of people seem to have a sophisticated and well-developed critique of a straw man dressed up as game theory.

30

dsquared 05.31.07 at 1:51 am

Institutionalism or Austrianism as orthodoxy definetly foundered

but this is a sociological statement about economists, not a scientific one about economics.

It’s not a rhetorical question, I’m certainly curious how PKism of today differs from PKism of say 1972

Stock flow consistent models, circulationism (plus a blind alley down into endogenous money), a number of other extensions of the basic Keynes-Keynesian model into open economies with developed financial markets. And that’s without getting into Sraffaism.

31

G. Chalton 05.31.07 at 1:52 am

The only thing I learned following this discussion is that the term heterodox, by itself tells you almost nothing about an economist and her work. I think some of these guys are right to feel excluded from the cool kid table. Others, seem like they are on the margins for good reason.

32

dsquared 05.31.07 at 1:53 am

The idea of collective action problems really strikes you as that abstract and unhelpful ehj?

There’s nothing wrong with collective action problems, but the specific way in which they’re modelled in a lot of game theory is one which nobody who understands the subject is really happy with.

33

dsquared 05.31.07 at 2:00 am

Seriously though, as Robert Vienneau notes Greg Mankiw is happy to say in public that “The neoclassical theory of distribution teaches us that a person’s earnings depend on his or her productivity”, and nobody seems really particularly eager to correct him. If Greg Mankiw isn’t thoroughly and reprehensibly confused about what neoclassical economics says about earnings, then there is a serious problem here with neoclassical economics. If Greg Mankiw is confused about what neoclassical economics really says about earnings, then at the very least it’s hard to argue that the strawman was entirely constructed by the heterodox crowd.

I mean seriously. The marginal productivity theory of distribution was definitively one of the casualties of the CCC. It’s gone, stick a fork in it, it’s done. If there isn’t a very serious problem with neoclassical economics as a social phenomenon in American universities, why is Greg Mankiw (who is pretty much the paradigm example of a neoclassical economist) saying something that’s both theoretically based on a logical inconsistency and empirically falsified? I really don’t think that the marginal productivity theory can be defended as a “first approximation” to anything, and even if it can, that ought to be admitted.

34

Shane Taylor 05.31.07 at 2:04 am

dsquared wrote:

> plus a blind alley down into endogenous money

Do you consider all endogenous theories of money to be a blind alley? Doug Henwood gave a capsule summary of several views in Wall Street, some of which appeared as such, but not all.

35

dsquared 05.31.07 at 2:14 am

There is probably a lot of sense to the general concept of endogenous money, but the amount of hot air expended over the subject in the PK community was, in my opinion, wildly disproportionate and wasted a lot of energy.

36

notsneaky 05.31.07 at 2:26 am

Also as an aside, since this discussion is raging everywhere, I really think the various schools of Keynesians just need to go ahead and adopt colors as identifying monikers. And flags. I suggest an orange field with the black Keynesian cross for the Samuelson/Solow ones, a red one with the yellow wage-profit frontier for the Cambridge ones and a nice shade of blue with, I don’t know, a golden impulse response function for the New Keynesians. That way you could just say “the Red Keynesians did this”, “the Orange Keynesians got published here” and “the Blue Keynesians believe that this”.

Otherwise it’s hard to figure out which one of these someone’s talking about. In addition to the ambiguity in Gintis above, you have Thomas Palley over at TPM Cafe saying:
The last time a paper on macroeconomics with a Keynesian structure was published in the American Economic Review was in the early 1980s.

which could maybe true if it applied to the Red Keynesians, is definetly, most definetly false if you’re talking about and is 90% false for the orange Keynesians (maybe by the early 00’s).

37

notsneaky 05.31.07 at 2:34 am

but the specific way

And what way is that? Again, I’m not being snarky, just asking.

38

MQ 05.31.07 at 2:49 am

Anybody want to expand on the critique of Steve Keen in comment #11? In particular, does anyone have a link to the Quiggin review of his book, which I have been unable to find on the web without paying $$$?

39

Henry 05.31.07 at 3:03 am

on the game theory front – the Slee book mostly takes very basic concepts which it explains – best replies, equilibrium etc – and pushes them as far as they can go. One bit however that Slee does get wrong is that he identifies collective action problems more or less exclusively with prisoner’s dilemmas. I suspect he’s getting this from Russell Hardin’s _Collective Action_ – as Michael Taylor points out in his reply to Hardin somewhere in _Anarchy and Cooperation_ lots of collective action problems are much better thought of as assurance games and so on. But this isn’t a teched up book.

40

notsneaky 05.31.07 at 3:17 am

The marginal productivity theory of distribution was definitively one of the casualties of the CCC

If you take marginal productivity theory of distribution to be some of the crazy things that John Bates Clark said then yes. Or in other words factor stocks determine factor prices but these determine factor stocks so you get circularity. But given a stock of a factor if there’s a rise in “productivity” of that factor, usually the return to that factor stock will rise. Not always but usually.

I think the talk of “approximation” comes from here (I might be confusing my threads/blogs):
http://eaepe.org/eaepe.php?q=node/view/233

7th and 8th paragraphs up from references:
The first one consists of computing the probability that reswitching actually happens on the basis of the Monte Carlo method The result was that the likelihood is rather small but positive.

the wage-profit rates curve (w-r curve) are estimated for real economies (Ochoa 1989; Da Silva 1991; Han and Schefold 2006). Ochoa and Da Silva calculated the w-r curves respectively for the US and Brazil, obtaining a surprisingly quasi-linear relation. (D’Ippolito 1989). (Footnote: The quasi-linear relation is surprising because the mathematical form of the profit-wage relation is a polynomial of very high degree (the degree depending on the number of industries of the input-output tables considered), which in principle should show a rather irregular shape.) This could suggest that, in practice, reswitching does not occur because straight lines cannot intercept more than once

Han and Schefold overcome this objection [to Ochoa and De Silva] by estimating the w-r envelopes for 32 input-output tables for nine OECD countries for 1979-1986. Reswitching appeared in one case, and in 3.65% of tested cases there was a “perverse” substitution of labour, i.e. capital-labour substitution that contradicts the neoclassical parable.

3.65% of cases. Let’s just call that 4% of the cases.

Economists, particularly neoclassical economists get accused of making crazy assumptions that contradict common sense all the time. But is the proposition that factor payments are related to productivity (properly defined – independent of K for example) that crazy? And hey, factor income shares have stayed really constant for really long time (now we’re seeing a blip).

41

terence 05.31.07 at 4:28 am

I’d agree with John Emmerson that part of the problem with neo-classical economics (or, part of the problem with people’s perception of neo-classical economics) is that the sophistication that may exist in journals appears to be long lost by the time it makes it to public policy debates.

Notsneaky,

I like the idea; I’m not so sure about your fashion sense though.

42

Barkley Rosser 05.31.07 at 4:29 am

I think we are observing an unprecedented blogosphere phenomenon. This whole debate has gone bananas. The real signal of this is this enormous and lengthy discussion of Herb Gintis’s book review that was originally linked over on Marginal Revolution, with scads of comments here.

How many comments are there on it over there? Well, I just added the first one, noting all this hullabaloo here and on some other blogs as well. Totally weird and unprecedented.

BTW, I see the Post Keynesians of the 1940s, such as Nicholas Kaldor and Richard Goodwin, as having laid the foundations for later nonlinear complex macroeconomic fluctuations theory, which I have long argued should be done in modern Post Keynesian economics. Some agree with me, some do not.

43

terence 05.31.07 at 4:30 am

But is the proposition that factor payments are related to productivity (properly defined – independent of K for example) that crazy?

Related sure, but how strongly given that labour markets operate in far from perfect competition?

44

notsneaky 05.31.07 at 4:45 am

terence1 – that’s sort of the point

terence 2 – i don’t think the problem here is imperfect competition. Even with that they’re gonna move together. It’s the whole Wicksell effects thing.

45

Paul 05.31.07 at 4:48 am

“There’s nothing wrong with collective action problems, but the specific way in which they’re modelled in a lot of game theory is one which nobody who understands the subject is really happy with.”

I’m aware of JQ’s version of this critique Daniel, and it’s not a sufficiently fundamental objection to the whole idea of modelling strategic interaction to justify an attack of the vapours any time anyone mentions “game theory”, which is basically what we got at #8 above.

46

ejh 05.31.07 at 7:01 am

“The apparent fact that orthodoxy involves applying the rules of game theory [in No-One Makes You Shop at Walmart] makes one wish to bash one’s head against a wall for a prolonged period. If only in theory.”

The idea of collective action problems really strikes you as that abstract and unhelpful ehj (sic)?

Not sure what the bit in square brackets is doing in the quote: I was (fairly clearly) referring to what “orthodoxy” is apparently considered to be, not to the content of any given book.

And yes, I do find it unhelpful that in a field which is supposed to understand actual real-life human problems and interactions, we can define “orthodoxy” as something that entails accepting something which is not only removed from real-life experience, but whose application to that real-life experience is more than a little tendentious. It’s not that it’s useless: the question is, what is it doing at the centre of events? There’s something more than a little theological going on here.

47

dsquared 05.31.07 at 7:05 am

The failure of the marginal productivity theory of distribution isn’t dependent on reswitchings. Also:

But is the proposition that factor payments are related to productivity (properly defined – independent of K for example) that crazy?

Not crazy, just unsupported by evidence.

And hey, factor income shares have stayed really constant for really long time (now we’re seeing a blip).

Well this is surely ambiguous evidence at best; one could equally well argue that there isn’t “enough” volatility in factor shares for them to have been driven by productivity, given what we know about technological change.

48

Paul 05.31.07 at 8:21 am

ejh (sorry about the inversion earlier),

Check the quote to which you were responding again:

The “he” in “the sources that he draws upon” is Tom Slee, the author of the book on which you apparently don’t want to comment. If you dislike game theory’s place in orthodox methodology it’s relevant to point out that the specific example you’re complaining about is pretty innocuous, more or less regardless of the nature of your critique.

And as for the nature of your critique, it appears to be a mix of “real life is more complicated than your models” and “I don’t mind a bit of it, but there should be less”. Neither would appear to apply to a simple collective action problem model, and nor would either objection seem to justify anything other than case-by-case assessment of the technique’s application.

There’s a lively literature on the whole “removed from real life experience” point, and it’s not the knock-down argument many people seem to imagine when they first make it.

49

ejh 05.31.07 at 8:30 am

I did check the quote and you may wish to do the same. Although the passage on which I commented was a comment on Slee’s book, the descriptions which I questioned were not Slee’s: they were Henry’s, though it does not follow that Henry was using them as a mark of approval. Or indeed disapproval – he was saying that “this is the orthodoxy”, which fact I lamented. Slee don’t come into it.

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Paul 05.31.07 at 8:41 am

Ejh, you respond to the statement “Slee used orthodox techniques like game theory” with “I wish game theory wasn’t an orthodox technique”. It follows that you are objecting to people using game theory. People like Slee, who was right there, in the sentence you were responding to. So you seem to be arguing that you’ve got nothing against Slee (who uses game theory), you just object to people using game theory, like Slee. Which is a little odd.

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ejh 05.31.07 at 8:51 am

It follows that you are objecting to people using game theory

No it doesn’t.

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engels 05.31.07 at 9:00 am

no bullshit’variety of Marxism … which relies extensively on economistic arguments about self-interested rational utility maximizing actors, and is no less left wing for it

Somewhat OT but is this meant to imply that eg. David Elster’s version of Marx is “no less leftwing” as a result of his economistic approach? I very much doubt that is true.

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Stuart 05.31.07 at 10:23 am

It follows that you are objecting to people using game theory

No it doesn’t.

Maybe you should work on communicating your ideas more clearly, because thats exactly the impression I got of your statement as well. Rereading it several times I still can’t find a way to interpret your statement that does not amount to the same conclusion.

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engels 05.31.07 at 10:53 am

I do find it unhelpful that in a field which is supposed to understand actual real-life human problems and interactions, we can define “orthodoxy” as something that entails accepting something which is not only removed from real-life experience, but whose application to that real-life experience is more than a little tendentious

Apart from the word “human”, all this would apply to geometry, say, and many other scientific fields. It’s really in the nature of theoretical abstraction. So I have to agree with others who point out this doesn’t seem to be very powerful criticism of economics.

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Z 05.31.07 at 11:55 am

There’s a lively literature on the whole “removed from real life experience” point, and it’s not the knock-down argument many people seem to imagine when they first make it.

There is also a large literature in epistemology and sociology on the standard of evidence admissible in different science, and economics does come out as singularly uninterested in high standards of correlation with actual experimental results. For experts, this quote is very pertinent in my opinion:

Third, the production of theories in which social units appear comparable (Meyer 1994; Strang and Meyer 1994), or of organizational designs and policies that hold “universal” validity, has a neutralizing effect that helps rationalize a post-hoc consensus among economists and makes it appear as the outcome of the cumulative progress of science—hence legitimating isomorphic diffusion as a positive, rather than normative phenomenon and concealing its hegemonic origins (Bourdieu and Wacquant 1998).

Frédéric Lebaron and Marion Fourcade-Gourinchas are interesting reads on the subject. And this is how I try to usurp Kieran’s indentity.

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tom s. 05.31.07 at 12:00 pm

52 – I think you mean Jon Elster, not David.

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ejh 05.31.07 at 12:04 pm

Rereading it several times I still can’t find a way to interpret your statement that does not amount to the same conclusion.

Can I recommend that you try “appreciating the difference between employing a technique and elevating it to the benchmark of orthodoxy”?

Apart from the word “human”, all this would apply to geometry, say, and many other scientific fields.

Mmmm, but the word “human” is of a certain central importance here, is it not? And economics isn’t really on the same level of theoretical abstraction as geometry, is it? Perhaps it may aspire to be – and perhaps that may be part of the problem.

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josh bivens 05.31.07 at 2:19 pm

maybe it’s too early and i need more coffee, but, i can’t find the gintis review people are referring to on the amazon page – which book is it?

thanks

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Henry 05.31.07 at 3:20 pm

It would appear that the review has been taken down.

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G. Chalton 05.31.07 at 4:48 pm

Why would it have been taken down? Did Gintis do it himself or some other party?

Anyway the entire review or at least a good part of it was posted in one of the threads in the tpmcage.com forum on the current debate.

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josh bivens 05.31.07 at 6:09 pm

that’s disappointing.

and weird.

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tom bach 05.31.07 at 6:11 pm

paste the url listed above in google and click on cache, if you really want the Gintis review.

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notsneaky 05.31.07 at 7:24 pm

The failure of the marginal productivity theory of distribution isn’t dependent on reswitchings.

Nope. But it’s a part of it. And note the above quote refers to “perverse labour substitution” – not just reswitching.

Not crazy, just unsupported by evidence.

Ok, like? Over the long term wages track productivity (or did until early 00’s), real rates of return are constant and factor shares are constant. The Kaldor facts. That looks like Solow, even if the world really isn’t Solow.

Well this is surely ambiguous evidence at best; one could equally well argue that there isn’t “enough” volatility in factor shares for them to have been driven by productivity, given what we know about technological change.

Over the short run, sure. But we’re talking about long run trends.

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G. Chalton 05.31.07 at 8:25 pm

The review can now be linked to from Max’s site, where the Prof. himself has graced the comments section.

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Miracle Max 05.31.07 at 8:33 pm

The Gintis review is here.

It was seized upon by Tyler Cowen and a few lesser mortals but it is really less than on-point. The post-autistics, God love ’em, are but one of multiple currents of heterodoxy. Danby’s link to journals points to many others.

One thing worth noting: some heterodox scholars don’t own up to being heterodox, hence discount the issue, since they are trying to gain acceptance to the club. They don’t want to single themselves out as different, and especially not as any sort of political opponent to the profession. One can hardly blame them, but it can confuse the issue by downplaying the extent and quality of dissent. Gintis (and Tyler Cowen, for that matter) are good examples.

Perhaps Franz Fanon could have explained this better.

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Mathew Forstater 05.31.07 at 11:26 pm

interesting discussion – i would recommend MAKING SENSE OF A CHANGING ECONOMY by Edward Nell (Routledge, 1996), (originally titled ECONOMICS AT THE PRINCETON CLUB, by the way) – a very funny overview of what’s at stake in the heterodox-neoclassical ‘debate’.

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seth edenbaum 06.01.07 at 12:30 am

I’ll just link again to this

Since so many homes were destroyed, the natural inclination is to build safer or perhaps impregnable structures. But that is the wrong response. No one should or will rebuild or insure expensive homes on vulnerable ground, such as the devastated Ninth Ward. And it is impossible to make homes perfectly safe against every conceivable act of nature.
Instead, the city should help create cheap housing by reducing legal restrictions on building quality, building safety, and required insurance. This means the Ninth Ward need not remain empty. Once the current ruined structures are razed, governmental authorities should make it possible for entrepreneurs to put up less-expensive buildings. Many of these will be serviceable, but not all will be pretty. We could call them structures with expected lives of less than 50 years. Or we could call them shacks.
…To be sure, the shantytowns could bring socioeconomic costs. Yet crime, lack of safety, and racial tension were all features of New Orleans ex ante. The city has long thrived as more dangerous than average, more multicultural than average, and more precarious than average for the United States. And people who decide the cheap housing isn’t safe enough will be free to look elsewhere—or remain in Utah with their insurance checks.
Shantytowns might well be more creative than a dead city core. Some of the best Brazilian music came from the favelas of Salvador and Rio. The slums of Kingston, Jamaica, bred reggae. New Orleans experienced its greatest cultural blossoming in the early 20th century, when it was full of shanties. Low rents make it possible to live on a shoestring, while the population density blends cultural influences. Cheap real estate could make the city a desirable place for struggling artists to live. The cultural heyday of New Orleans lies in the past. Katrina rebuilding gives the city a chance to become an innovator once again.

And I’ll add something I didn’t at E.Klein’s post. And this is that throughout recorded history the life of the mind was seen to be in conflict with the search for gelt, perhaps a necessary productive conflict but a conflict nonetheless. The pathetic stupidy of Cowen and others like him is to in an act of will, twist a realist understanding of human behavior into a utopian one. It’s not only that his recipe for a new New Orleans shows a ridiculously simplistic understanding of human behavior, it’s that even assuming otherwise, the cruelty his program requires is elided (if that’s even the word) with happy talk. Tyler Cowen’s is truly Autistic Economics

This of course goes back to this recent discussion of “reason” and society.

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engels 06.01.07 at 10:06 am

Ejh – Like many of the people who attack economics here on CT you seem to brush up against some potentially interesting lines of criticism while failing to develop any of these into a serious argument. You say economics rests on assumptions which are remote from “real life experience” and that the application of its results to real life experience is not straightforward. That is true of many if not all mathematical sciences. You seem to want to claim that this is a particular problem for economics on account of its being a human science but you make no attempt to develop this idea. I don’t think your commments provide any coherent argument against economics as they stand.

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dsquared 06.01.07 at 10:17 am

Over the long term wages track productivity (or did until early 00’s), real rates of return are constant and factor shares are constant

but “real rates of return are constant” is close to a tautology here; rates of return on what?!??!

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Cian 06.01.07 at 1:24 pm

Engels:
If economics has removed human nature from the models, then it can scarcely have any relevance to human beings, can it? Though there is a precedent – behaviourism in psychology, which was a roaring success.

Though actually economics likes to pretend that it is studying human nature, which is why the misuse of models built upon inaccurate assumptions about human nature are particularly problematic.

Notsneaky: read Wittgenstein’s philosophical investigations for a discussion of language vs maths. Most of the points you have made here on this subject have been dealt with (to death quite frankly) in other human sciences.

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seth edenbaum 06.01.07 at 2:07 pm

Darryl Pinkney in this weeks NYRB:
“Art is what black people had instead of freedom, Ellison once said”

If I don’t trust Panglossian logic, I don’t trust Malthusian logic either. And what am I to say of those who sell the later as the former? As with Franco Moretti, who would also like to think that his asocial analysis of social activity has some sort of “universal” value, as if his own writings were not themselves “social activity” and therefore bounded by contemporary forms of language. This is where the modernist dream of the irrelevance of history ends up: John Holbo writing about Zizek while lounging in Singapore.
It’s a joke.
Pretending you’re in control, when history has made you irrelevant.

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Henry 06.01.07 at 3:20 pm

Seth – wouldn’t it make life easier for everyone if we just stipulated that you don’t like John Holbo, you don’t like Brad DeLong, you don’t like Franco Moretti etc etc, and left it at that? A substantial amount of your comments seem to be off-topic excursions into broad ranging philosophical musing that don’t have much obvious point beyond identifying, again and again, the people on your enemies list. I’ve no doubt that this is personally entertaining, but I don’t really think it constitutes contribution to an ongoing conversation.

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seth edenbaum 06.01.07 at 4:38 pm

I wonder (and I do so consistently) at the ability of people to respond to complex ethical and moral questions with claims of technical proficiency. In Tyler Cowen such claims result in a sensibility that is almost Eichmanesque.

The moral seriousness of political realism comes not from the understanding that idealism is wrong in any absolute sense but that it is mistaken in a temporal one. It’s not a question therefore of keeping your hands clean but of knowing how and when they become dirty. Realism is not a technical philosophy: one can be a realist and wish that it were not necessary. A classical economist could teach his or her children that the acquisition of wealth was less than noble, but that you need to protect yourself. This again is not technical, only the ideology of optimism, (another temporal rather than absolute category) has made it so. The discussion of John Quiggin’s post on heterodoxy are interesting.

You consider my non-technical comments personal, “meta” and therefore uninteresting, but all I’m doing is contexualizing what others have said. If you don’t like the context you should take it up with them.

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Henry 06.01.07 at 4:42 pm

I consider them personal because they show every sign of being so, especially wrt John Holbo, where you’ve made a series of rather incoherent criticisms that are undeniably personal (e.g. your peculiar insinuations about the fact that he lives in Singapore). Your comments often read like extracts from an internal monologue – it may be that there is some consistency or underlying argument being made, but it certainly escapes me (and judging from puzzled reactions and non-reactions I suspect it escapes others too).

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seth edenbaum 06.01.07 at 5:27 pm

I supppose we can end this up here.
But if no one responded to my comments on Cowen, I’d like to think that’s because there isn’t one to make.

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Brad DeLong 06.01.07 at 6:36 pm

I thought nobody responded to Seth’s comment on Tyler because it was a Godwin’s Law violation…

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seth edenbaum 06.01.07 at 7:18 pm

Another person who conflates realism and idealism. It’s the realist in you that hates Chomsky, Mr DeLong, and the idealist who’s left to find an explanation.
Life is conflict.

If you’re going to play the wise-ass here then you should at least back it up with something. Talk me about the brilliance of Tyler Cowen.

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engels 06.02.07 at 9:09 am

Cian – I’m not completely sure what you mean when you say “economics has removed human nature from the models” but as far as I see you are just repeating what EJH said above. I think this is wrong for the reasons I already gave. You haven’t given any reason for why it should be a particular problem for economics that it makes assumptions about its objects of study which are “inaccurate”.

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engels 06.02.07 at 9:18 am

I think you mean Jon Elster, not David.

Actually, no I was thinking of Buddy Roemer, or Randy Cohen.

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Cian 06.02.07 at 9:21 pm

Engels,
Actually I found your point a little bizarre, which maybe why my response was a little weak.
Economics doesn’t remove human nature. Rather it uses in its models actors that are supposed to be representative of human beings, but behave very differently to real human beings (as in wealth of evidence in other fields contradicting it). Not more simply, differently. Not really a problem if economists want to play with toy worlds, but if they’re going to pretend this stuff means anything… You could build models with more sophisticated actors (though you’d also have to ditch the idea of a representative actor for many situations), but so far don’t seem to have done so.

I also find the idea of static equilibrium rather silly, but that’s a seperate problem I guess.

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engels 06.03.07 at 7:51 am

Actually I found your point a little bizarre, which maybe why my response was a little weak.

Okay, I’ll have to remember use that one next time I say something silly.

Not more simply, differently.

Not true. They are both simpler and different, as I’m sure you would agree if you thought about it for a second. For the last time, it really isn’t a powerful criticism, nor is it news, merely to point out that idealised economic agents “behave very differently to real human beings”.

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engels 06.03.07 at 8:41 am

I think a good bit of why “mainstream economists” don’t pay much attention to heterodox view is simply that the signal extraction problem is so severe. The signal to noise ratio ain’t that high. There’s good heterodox folks who have important things to say but the group, being heterodox, also tends to attract a lot of cranks, folks with axes to grind, bruised egos and just plain ideologous who have no clue as to what they’re talking about. In those circumstances it just becomes really costly for your average mainstream economist to weigh through all that to in order to seperate the wheat from the shaff. So most stick to what they know works decently well.

Radek, your “average mainstream economist” appears to be about as interested in the truth of his beliefs as the average shamen circa 1000BC. I have to say that the economists I know are not as lazy and stupid as your comment implies, but in any case it’s fortunate that not everybody adopts your strict cost-benefit approach to the pursuit of truth or we would still be rubbing sticks together to make fire.

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notsneaky 06.03.07 at 9:37 pm

Engels, I think you’re missing the point. There are many paths to truth and hey, we don’t even know if some possible paths aren’t dead ends. It takes considerable amount of time and effort just to keep up with all the newest research in one’s field. Nothing about stupidity or laziness there.

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engels 06.04.07 at 2:42 am

Radek, it is lazy and stupid to dismiss an entire subfield because of misgivings about the personal qualities of some of its practicioners. And scientific advance depends on people taking risks with new ideas which in all probability will not come to anything.

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Walt 06.04.07 at 3:42 am

Notsneaky engages with heterodox ideas about 100 times more than his fellow economists.

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