In Praise of Generalized Non-Parametric Deconvolution

I wonder what this Larry chap thinks of epidemiology and biomedical research, then? Don’t let him near the statistical literature on genetics research – and of course, one can only assume that if he thinks signal processing is meaningless garbage he doesn’t open many jpegs on the internet (the poor chap – he’s forced to resort to buying his porn in magazines!)

It’s nice to see you segue from a defense of generalised non-parametric deconvolution to a defense of post-modernism. Very swish.

“The problem with the high priests of mathematical ecnomics was not the fact that they used mathematics – it was that they allowed the ideology to drive the theory.”

That’s a problem, not the problem. There’s a larger problem of democracy – if economics is to be the most powerful and influential intellectual method for judging public policy, then there has to be an economics that ordinary people can understand, canlearn as amateurs to a reasonable (undergraduate) level of mastery, can debate openly and thoroughly in the media, and vote accordingly. We’ve had in this in the past – you’d be amazed to read the sophisticated economic thought and imagination of the greenbackers or the Farmer’s Alliance, or the Progressives, or the New Deal generation.

But these days, that kind of academics doesn’t really exist – Freakanomics and the like don’t really fill the void, Krugman and DeLong come close, but they tend to be read by a mostly middle-class well-educated population.

Wither the spirit of John Dewey?

Uh oh, I have a little hobby project that involves dynamic programming. What’s its catch?

“Nonparametric statistics has been around at the cutting edge for ages (and longer than fifteen years if you count Bayesian methods)”

Certainly longer than 15 years, I was being conservative in my guess. It seems to me that Silverman’s 1986 “Density estimation…” got things really rolling, especially from a descriptive point of view. It’s been a long time since anyone blinked at casual use of a kernel density estimate.

But “it has only really broken into the mainstream in the last couple of years” is still bollocks, unless you define “mainstream” so carefully as to render the term meaningless. If packages like Stata and Matlab have dozens of pre-canned nonparametric estimation tools (and they do), you can be assured it’s been mainstream for years. Those aren’t early adopters.

Copulas etc notwithstanding, there’s a fair amount of nonparametric time series in finance too (google “George Tauchen” for example). But I bet you’re right that these will become *more* popular.

The statement about nonparametrics is just ridiculous. The reason it hasn’t been commonly used is simply because, with your average data set and even a very fast computer, you’re not going to be able to compute more than a few independent variables (the “curse of dimensionality” applies here, much as it does to Davies’ hated DP). Further, even nonparametrics involves some assumptions – the bandwidth choice in particular, but also the kernel. That said, semiparametric techniques are quite usable at the moment, usable to the point that I can’t see serious research using parametrics at all a few years from now.

But as noted above, this has nothing to do with Taleb. Pagan/Ullah is a decade old, and any econ grad student sees nonparametric techniques quite heavily.

Finally: in relation to this post, how about some defense of modeling in social science? Economic journalists from Nocera to the FT and Guardian have, over the past year, been making ridiculous claim after ridiculous claim about models missing some part of reality. Well, yeah, that’s the point, isn’t it? Tractability and simplicity are virtues.

“I don’t think we’re really disagreeing here. If you showed up at, say, the Bank of England or NIESR with a suggestion that their main forecasting model needed to be retooled to use more nonparametric methods, my sense is that you’d get a much better reception today than you would have done two years ago.”

It’s truly hilarious that you give *that* example, since nonparametric density approaches to inflation forecasting has been a staple of the Bank of England for yonks. Google “fan chart”.

Three cheers D2, that Elliot article made me grind my teeth to dust. That man has not business being economics editor.

[I think you’re wrong about most general equilibrium models being a tragic waste of time too, but hey ho]

ejh

solely on the basis of the bloody stumps that are my molars.

“Mate, I used to help produce that fan chart, and you’re only right in as much as “sitting round a table arguing” is a nonparametric method (which it is, but not in the relevant sense).”

OK, got me there. You’re right, at the Bank of England they’re subjective fan charts. What I should have said is that there’s quite a lot of work on nonparametric inflation forecast densities (eg, Tom Sargent’s work comparing Bayesian predictive densities to subjective fan charts) and presumably that some of this informs central bank practice.

“The problem with the high priests of mathematical ecnomics was not the fact that they used mathematics – it was that they allowed the ideology to drive the theory. The commitment to general equilibrium and to rational expectations was a founding belief, and all the rest of the modelling had to bend its way around that.”

Sure, but we shouldn’t underestimate the degree to which the maths made the theory appear real, tough, hard-core, rigorous, better than that soft stuff. I can imagine a billion awful articles on the fetishization of math, but that don’t meant it’s not happening.

My knowledge of the chronology of early modern science is not what it might be, but I don’t believe that the astronomers who did the complicated mathematical models that tried to make the Ptolemaic system work were Jesuits.

Indeed the Jesuit astronomers appear to have been on the side of the angels..

http://galileoandeinstein.physics.virginia.edu/lectures/gal_life.htm
“In 1611, Galileo went to Rome and met with the Jesuit astronomers. Probably he felt that if he could win them over, he would smooth his path in any future problems with the Church. Father Clavius, author of Gregorian Calendar and undisputed leader of Jesuit astronomy had a hard time believing there were mountains on the moon, but he surrendered with good grace on looking through the telescope (Sant., pages 18, 20)
One archbishop wrote (p 20): “Bellarmine asked the Jesuits for an opinion on Galileo, and the learned fathers sent the most favorable letter you can think of …” Bellarmine was chief theologian of the Church, and a Jesuit himself. Bellarmine wrote in a letter to A. Foscarini, 12 April 1615:
Third, I say that if there were a true demonstration that the sun is at the center of the world and the earth in the third heaven, and that the sun does not circle the earth but the earth circles the sun, then one would have to proceed with great care in explaining the Scriptures that appear contrary, and say rather that we do not understand them than that what is demonstrated is false. But I will not believe that there is such a demonstration, until it is shown me.”
(Quote from Feldhay, Galileo and the Church, Cambridge, 1995, page 35)
This was far from a mindless rejection of the Copernican picture—it just demanded a more convincing demonstration.”

It seems the problem was not mathematical misalignment with reality, and the construction of complex mathematics to avoid heresy: they simply refused to believe it. This of course has its latter-day parallels.

The problem with economics isn’t just the modelling and the maths per se, but the way in which the models are untouched by empirical observation.

In the Chicago view, this is a feature, not a bug.

#28 ‘The problem with economics isn’t just the modelling and the maths per se, but the way in which the models are untouched by empirical observation.’

‘Experience without theory is blind, but theory without experience is mere intellectual play.’ (Kant)

Many of us suspect that much/most of neo-classical economics is ‘mere intellectual play’.

#32: quite right. I have a post in draft on that very subject and will try to remember to credit you.

On the subject of Jesuit astronomers, my source is “The Da Vinci Code”, by Dan Brown – are you trying to tell me that he’s wrong or something?

Thanks, Daniel.

However, if he wanted to find an economist who would say whatever is necessary,
he’d be well advised to go to Harvard or Chicago, where the leading lights of the discipline are lined up for his inspection and purchase. And they aren’t doing it to feed their starving children; they do it because they’re right-wingers with no morals at all, and the current system within the economics professoriate doesn’t seem to provide any negative incentives

Contra Daniel I don’t think this is right, really, and I’ve got a couple of reasons:

a. isn’t it the case that – very generally speaking – Economics is interested in production and the creation of wealth, and that much or most of the time the free market proves quite an effective way of doing this? It’s not very good at producing a fair or equitable society, or at looking after the vulnerable,- but although many economists are individually interested in these questions, it’s not necesarily Economics’ job. There’s therefore an inbuilt bias towards whatever produces (or seems to produce) the most tins of beans, as opposed to any other questions that may exist.

b. most currently-practising economists will surely have grown up during and after the period of the collapse of the command economies and the move away from more statist models by nearly all societies. It’s therefore not wholly unreasonable if they take the economic superiority of the free market pretty much as a given – after all, everybody else seems to.

c. more cynically, the free market works much, much better for people with advantages of birth than people without, and I don’t reckon there’s too many economists from poorer backgrounds. And they’re no more likely to see how important those advanatages are than most people who enjoy them.

EJH – I entirely disagree. Economists’ fixation on individual rationality, general equilibrium, and other basic foundational concepts of the discipline can be found in many different time periods – even in the midst of the Great Depression, there were many advocates of the “Treasury view,” even at the height of WWII, there were economists who insisted that what was going on was theoretically impossible, and now, you can still find people who will deny the very possibility of stimulus. In fact, if you go even further back, and look at struggles between neoclassical and institutional/historical economists, you can see how nakedly ideological this can get – Yuval Yonay’s Struggle for the Soul of Economists about struggles within the discipline between the 1880s and 1910s.

“Isn’t the real issue here between Rationalism and Empiricism?”

I think you’re actually missing an important class of player — the Engineers. In physics you can ignore them because the invention of the cell phone won’t change your theoretical model of wave mechanics or your empirical observations of light difraction. In economics the fact that someone is using your model of economic behavior to govern their economic behavior is rather important, especially if routine use of the model becomes ubiquitous, as it will if it has any predictive power.

Intuitively, I think there’s an analogy to Godel’s incompleteness theorem — your model is incomplete if it lacks the self-descriptive power to model the impact of its use as a predictive tool, or necessarily inconsistent otherwise. Another intuitive leap: those regions of incompleteness and/or inconsistency will be fertile breeding grounds for black swans.

Economists’ fixation on individual rationality, general equilibrium, and other basic foundational concepts of the discipline can be found in many different time periods

So they can, but not, I think, in quite the same proportion. What was the prevailing economic wisdom in, say, 1928 or 1998 was not what it was in 1958.

EJH – right, but as I’ve noted, the prevailing wisdom isn’t always what’s delivering the goods at that point in time, and the transitions are nowhere as smooth as they would be if it was merely a matter of seeking the models with the most production. Instead, you had political wars within economics, with neoclassicals warring against institutionalists from the 1880s-1910s explicitly because institutionalist economists supported labor unions and other “communard” ideas, the “Treasury school” shrieking imprecations against Keynesianism as it was delivering, and Keynesianism remaining quite strong throughout the years of stagflation until brought down by the neoclassicals.

I agree about a trailing effect. Where we disagree is what mechanisms drive that transition. I’m of the opinion that this process is driven primarily by ideology and politics, and you seem to be suggesting that it’s driven by: a. a search for increased production, b. generational divides, and c. class privilege within the discipline. I don’t necessarily disagree about b and c, although I think they’re less important factors (c for example doesn’t explain why some privileged sons of the Yankee gentry went into economics in the 1880s and became die-hard neoclassical economists and some went into the same discipline at the same time (often studying under the same professors), and became die-hard institutionalist/historicist economists).

I do, however, think that ideology and politics are a more important factor than the search for increased production – in no small part because increased production is an inherently political and ideological question. To give some examples – both a John Bates Clark and a Thorstein Veblen would say that, all other things being equal, they want a system that produces more. However, Clark would say that competition will get you where you want to go and that any attempts to interfere with it would make things worse, and Veblen (his student, ironically), would say that competition is actually going to create artificial scarcity to maintain administered prices, and that a soviet of engineers would move beyond the limits of corporate capitalism to embrace technological innovation and full production.

Barry: However, if he wanted to find an economist who would say whatever is necessary,
he’d be well advised to go to Harvard or Chicago, where the leading lights of the discipline are lined up for his inspection and purchase.

What is the record of economists at Harvard and Chicago in saying what the political powers of the day want to hear?

Let’s quote Milton Friedman, in an interview:

ROBINSON: So Bush is wrong? Cutting taxes would not stimulate the economy?

FRIEDMAN: No, it would not stimulate the economy. Look, if you want—I can give you a long theoretical argument as to the problem—but let me just turn to one dominant fact: you have Japan, which has been in a kind of rolling recession for 10 years. In that period it’s hadeither 4 or 5 major fiscal stimuli programs.

ROBINSON: That is to say, increases in government spending?

FRIEDMAN: Increases in government spending and reductions in government taxes. They’ve been an utter failure, they haven’t had any affect on the economy whatsoever.

Or that the letter against the bailout back in September 2008, while George Bush was still in power and before the November elections, was signed by quite a few Chicago and Harvard economists.
http://faculty.chicagobooth.edu/john.cochrane/research/Papers/mortgage_protest.htm

This doesn’t look like the leading lights of Harvard and Chicago have been purchased.

And they aren’t doing it to feed their starving children; they do it because they’re right-wingers with no morals at all, and

Lovely to see this display of open-mindedness here.

SteveAttwell:
The problem with economics isn’t just the modelling and the maths per se, but the way in which the models are untouched by empirical observation.

But hold on. Standard economic paper these days appears to be:
1. This is the problem.
2. This is our model.
3. Here’s some empirical data supporting this model.
For example, take Volume 29, Number 4 of The Energy Journal, published by the International Association for Energy Economics. First article, Papers Affecting an Economy’s Tolerance and Delay of Response to the Impact of a Positive Oil Price Shock, is an empricial paper using regression analysis. Second paper: High Frequency Export and Price Responses in the Ontario Electricity Market. Again an empirical paper.
Now the advantage of these papers appear to be that you don’t need to have any brillant insights to what is going on in the economy. There’s nothing earthshattering in these papers, they always strike me a bit as grind the wheel, put in the regressions, and get your paper out the other end. (They are probably better than what I would have produced had I decided to go into academia and some university been so foolish as to hire me). But they are most obviously looking at empirical observations.

Now the models taught in Econ 101 are generally untouched by empirical observation. But the early learning stages of a profession don’t tell us much about what the top professionals are doing. (High school chemistry would greatly annoy me because it seemed to follow the pattern of “learn a rule”, next year “learn the exceptions to that rule”, the next year learn that the first rule was entirely wrong and you have a new rule to learn, the year after that you learn the exceptions to the second rule, and then I fled to the comforts of engineering.) Perhaps Econ 101 should be taught completely differently. Perhaps high school chemistry should be taught completely differently. But Econ 101 is not what’s happening at the forefront of economics.

If that’s the case that economists are down with empiricism, then why did David Card’s work on minimum wages cause such an uproar?

Ummm, because it was surprising and didn’t fit in with the theory? What did you expect? Economists to be emotionless about their subject? You are aware that economists are human beings, aren’t you?
Anyway, this statement appears to conflict your original thesis. If your thesis is that modern economics didn’t care about empiricism, then surely there wouldn’t have been an uproar, the data would just have been ignored.

Why did Alan Blinder get ripped for straying from the line on free trade?

You mean Alan Blinder, the bloke who is a Professor of Economics at Princeton University? If that’s being ripped, I think most economists would adore that sort of suffering. And why are you worried about economic theories being attacked? Isn’t that what we want to happen? The process may get emotional, but that’s the problem with any science that has to be done by human beings.

Why are historical and institutional economists – the most empirically-minded schools – not the dominant force within the discipline?

Why do you say that they are more empirically-minded than the data-mining papers like the ones that I listed? In other words, what metric are you using?

And why would you expect economics to have one dominant force within the discipline? There are several problems in economics, in the sense of ones that governments are willing to pay for research on:
1. Stablity of the whole economy in OECD countries.
2. Why are some countries rich and others poor?
3. What to do about environmental problems.
4. What conditions create economic growth within rich countries?
5. Lots of smaller-scale policy decisions, eg IP growth, support for the arts, that have some economic effect.

The variety of issues makes it seem unlikely to me that there would be one dominant force. Why do you think there would be one?

The point I’m making isn’t that economists don’t do empirical work (although I would argue that the high-status positions go more to theory)

I would say that that is because original thinking that proposes likely-sounding hypotheses explaining various empirical facts is more useful, and rarer because it’s harder to do. I mean, it’s one thing to collect together facts, but it’s another to provide a glimpse of an underlying framework. Mendeleev’s periodic table in chemistry was a great leap forward because it allowed the prediction of other elements and made patterns reocurring. Einstein’s relativity papers were important because they explained a series of puzzles that other researchers had noticed. Why would you expect economics to be different to other sciences?

but that there isn’t step 4. “Holy shit, the basic model doesn’t work – abandon [Major Premise of Necoclassical Economics].”

Hold on. In my microeconomics 401 class, the lecturer started off with the expectations theory of decision-making under uncertainty, showed us that it didn’t work, using us as proof, and then went on to some other theories proposed to explain actual human-decision-making. I was quite impressed, mostly my engineering lecturers left the proof of their assertions until the lab, they didn’t do them within the lecture. So in this case the step did happen.

Or take the response to the Great Depression. The conventional macroeconomics that couldn’t explain the prolonged slump was dumped and Keynesianism took over, then Friedman came up with monetarism as an alternative theory, and the neo-classicists started proposing alternative theories, then Keynesian economics as then understood collapsed because of stagflation, so that was abandoned and people started working on neo-Keynesian theories.
How do you explain these sorts of events?

Now the problem with macroeconomics is two-fold: 1. It’s a hard area to make scientific progress in as you can’t build a macroeconomy in a lab, indeed you can’t even see a whole macroeconomy, all we have is statistics that measure bits of it with an unknown error rate, 2) politicians want advice about what to do now about conditions in the macroeconomy, and can’t wait until economists have come up with a theory that has survived all sorts of harsh tests and explains everything about the macroeconomy. So applied economists muddle along with what they’ve got.

“Ummm, because [David Card’s work on minimum wages] was surprising and didn’t fit in with the theory? ”

The above claim about what the theory states is false. Good economists have known the above claim is false for about half a century. Clicking on my name explains.

‘Einstein’s relativity papers were important because they explained a series of puzzles that other researchers had noticed.’

This has an element of truth, but the major reason Einstein’s relativity papers were important was that they made testable predictions. And if Einstein had made predictions which turned out NOT to be the case, then his theory would have been falsified and thrown in the bin, no matter how pretty the maths was.

Examples of special pleading by economists:

‘1. It’s a hard area to make scientific progress in as you can’t build a macroeconomy in a lab, indeed you can’t even see a whole macroeconomy, all we have is statistics that measure bits of it with an unknown error rate’.
True but so what, and in what was is this different from, say, astrophysics? You can’t build the cosmos in the lab either. We don’t ‘only’ have statistics either: there is now a school of experimental economics (although its emphasis on empirical work means that it tends to be looked down upon by neo-classicists). There is also reams of data about human economic behaviour from anthropology, psychology and sociology (not to mention economic history) that economists could make use of but generally speaking, don’t.

‘2) politicians want advice about what to do now about conditions in the macroeconomy, and can’t wait until economists have come up with a theory that has survived all sorts of harsh tests and explains everything about the macroeconomy. So applied economists muddle along with what they’ve got.’

This is a restatement of the ‘economics is a young science, that’s why we have made so little progress’ argument, is it not? But actually people have been thinking about economics for millenia: it’s not a particularly new field .Moreoever economists now have access to astonishing amount of computer power to run simulations and model the economy. If they aren’t making progress it’s more likely to be because of conceptual confusion than because politicians ask them to make their theories able to survive ‘harsh tests’ (like bearing some resemblance to reality, for example).

This has an element of truth, but the major reason Einstein’s relativity papers were important was that they made testable predictions. And if Einstein had made predictions which turned out NOT to be the case, then his theory would have been falsified and thrown in the bin, no matter how pretty the maths was.

Nope. Newtonian physics has not been thrown in the bin even though it made predictions that turned out to be false. Newtonian physics is still taught in physics classes. That’s because it’s a useful approximation to relativity theory for most situations well below the speed of the light, and the maths is easier.

Einstein’s theory of relativity conflicts with quantum mechanics, but it hasn’t been thrown in the bin, nor has quantum mechanics because it conflicts with relativity theory.

Examples of special pleading by economists:

Oh don’t be silly. I gave reasons for the distinction. You even yourself said directly below that one of them was true. I may be wrong in my arguments, but I’m not commiting the fallacy of special pleading.

True but so what,

The reason that the inability to perform proper experiences matters is that we can’t propose a hypothesis and then test it directly, we have to propose a hypothesis and scrabble around looking for historical data to disprove it. This is harder than, say, engineering, where you can just ask “well, have you got it to work?”. I hope this answers your “so what”. If not, can you please explain what is unclear to you?
and in what was is this different from, say, astrophysics?
I am quite happy to agree that astrophyiscs is like macroeconomics in respect of the difficulty in doing experiments.
I will note that astrophysics is slightly different in that its reuslts have a less-obvious effect on policy-making, so ideologies probably have a smaller effect on astrophysics than they do on economics. Although I am not an astrophysicist, so I admit there is a possibility that either or both of these two statements will cause real astrophysicists to laugh at me.

We don’t ‘only’ have statistics either: there is now a school of experimental economics (although its emphasis on empirical work means that it tends to be looked down upon by neo-classicists).

You appear to be reading my statement as one about economics entirely, as opposed to a statement specifically about macroeconomics. I have read a lot of behavioural economics papers and assisted one of my lecturers in conducting some behavioural economics experiments. I have never seen or read of any attempt to create a whole macroeconomy in a lab.

You also don’t mention the name of any of those neo-classicists who look down on the school of experimental economics. Can you please state the names of these neo-classicists? I would be interested to read their arguments. I didn’t read any critical responses to Vernon Smith getting the Nobel prize.

There is also reams of data about human economic behaviour from anthropology, psychology and sociology (not to mention economic history) that economists could make use of but generally speaking, don’t.

This is possibly due to limited mental power. We need some genius to come along and incorporate all this reams of data into, say, a good theory of macroeconomics that can be used for policy-making. In fact, I wonder why you yourself don’t do so. Could you please do us the honour of enlightening those foolish idiots by showing us how easy it is to incorporate all these reams of data from anthropology, psychology and sociology into macroeconomic theories?

This is a restatement of the ‘economics is a young science, that’s why we have made so little progress’ argument, is it not?

No, it isn’t. A clue to this is that I never used the word “new”. The claim is that macroeconomics as a science is hard because you can’t do experiments (note that is a claim about macroeconomics specifically) and also because macro economies are hard to see all at once, so we don’t really know what is going on in them. This is not related to the newness or otherwise of economics.

Moreoever economists now have access to astonishing amount of computer power to run simulations and model the economy. If they aren’t making progress it’s more likely to be because of conceptual confusion than because politicians ask them to make their theories able to survive ‘harsh tests’ (like bearing some resemblance to reality, for example).

It’s quite possible that economists’ inability to make progress is because of conceptual confusion. That doesn’t mean that that conceptual confusion can be easily solved. And this sort of limited progress despite massive computing power occurs outside of macroeconomics as well. Artificial Intelligence for example has struggled becuase of the difficulties in developing a computer that can see visual information and process it into a form usable for walking across a room without walking into something, or picking up a cup randomly placed on a table without spilling it, something most of our brains do unconsciously. Given the difficulty in programming vision, let alone all a whole artificial intelligence that’s the equivalent of the human brain, I think it’s rather optimistic to think that modelling an economiy would be easy just because we now have astounding amounts of computer power.

And I would hardly call “bearing some resemblance to reality” a “harsh test”. I would say that for a macroeconomic model to be very useful for what politicians want to do, it needs to bear a lot of resemblances to reality. For a start, I would say, a really useful macroeconomic model should be able to predict every recession and also not to predict recessions when they don’t happen. I don’t know of any macroeconomic model that meets both those goals, although that may be a reflection of my ignorance.

Hidari: “This is a restatement of the ‘economics is a young science, that’s why we have made so little progress’ argument, is it not?”

Note that ‘economics is a young science’ is an excuse for a lot, but that it also carries an obligation to be humble.

Sorry about that earlier post. To try again:
Start with Gregory Mankiw of Harvard.

The guy who roundly disagreed with President Bush about the effect of Bush’s tax cuts on economic growth? See Mankiw vs Bush. If this is brought and sold then Republic presidents really suck at shopping.

Then go to everybody who supports the ‘Treasury view’. And everybody who kissed Greenspan’s *ass.

Names please of those people who supported the “Treasury view” and who you also believe are available to be bought and sold by Republican presidents.

I also note how your claim has morphed from the leading lights of the economics profession at Chicago and Harvard to one named person (who you are wrong about) and a set of unnamed persons at unnamed universities who support an undefined view and also engage in what I presume you mean to be the metaphorical act of kissing Greenspan’s ass. You are moving into less and less falsifiable claims, rather than trying to defend your original claim, which in my experience is a good sign that you just made stuff up in the first place.

StevenAttewell : Now that’s going beyond mere academic interst, and I think your comment about being emotional is important – if all this was a case of pure disinterested science, this wouldn’t be happening.

And of course it happens in other sciences. See for example the reactions to the continental drift theory. http://www.scientus.org/Wegener-Continental-Drift.html

Science in reality is not pure and disinterested. It’s human and messy. But it’s the best we can do. And I will add in a defence of emotion in science. To be really tested a theory not merely needs to be thoroughly attacked, and enemies are the best at this:

One way of dealing with errors is to have friends who are willing to spend the time necessary to carry out a critical examination of the experimental design behorehand and the results after the experiments have been completed. An even better way is to have an enemy. An enemy is willing to to devote a vast amount of time and brain power to ferreting out errors
both large and small, and this without any compensation. The trouble is that really capable enemies are scarce; most of them are only ordinary. Another trouble with enemies is that they sometimes develop into friends and lose a great deal of their zeal. It was in this way the writer lost his three best enemies. Everyone, not just scientists, needs a good few enemies. РGeorg von B̩k̩sy ( physicist and psychologist)

If a physicist and a psychologist can think that enemies are useful, this strikes me as an argument for them in economics as well.

So sure, people do empirical economics all the time, but the basic theoretical fraemworks – the ones that are used to structure public policy – don’t change.

So you think that there has been no change over recent decades in the influence of neoliberal thought on policy-making? How do you explain the introduction of inflation-targeting and central bank independence in the 1980s then?

Here, I admit, I’m more out on a limb here, because I don’t do economics,

In other words, you just made up your assertion that “historical and institutional economists” are the most empirically-minded schools.

Institutionalists and historicists explicitly disavow modeling and abstract theorizing and believe that only empirical observation of institutional or historical development of economic activity should be done.

There are three problems with this sort of approach:
1. How do you decide what economic activity should be empirically observed without any abstract theorising? How do you even know what economic activity is without abstract theorising?
2. If you don’t do any abstract theorising or modelling, you can’t offer anything useful to policy-makers.
3. You’ve committed your science to lacking a certain sort of wonder. You’ve ruled out ever discovering the economic equivalent of the law of evolution, or Newton’s three laws of motion, or the periodic table, or recessive genes, or the subconscious.

I think this explains your question why historical and institutional economics is low, low on the totem pole. They’ve adopted a philosophy that is unlikely to attract funding because it can’t offer either useful practical advice, or a feeling of wonder and awe. Of course if they want to do that, that’s their choice, I believe in freedom, but I also think that people have the freedom to ignore their research.

Of course, I am relying on your statement that institutionalists and historicists explicitly disavow modelling and abstract theorising. Since you just made up your earlier statement that these were the most empirically-minded schools, it strikes me as entirely possible that you just made this statement about their beliefs up too.

If it’s simply the case that economists are constantly revising and re-evaluating core truths,

Why do you think it’s simply the case? I asked you before about this when you seemed surprised that economists might react emotionally to the minimum wage theory. I still don’t get why you expect economics to be all non-emotional. Have you ever met any human beings in real life?

why is that we saw a re-emergence in economic doctrines like the ones that John Quiggan has been writing about in his “Refuted Economic Doctrine” series?

John Quiggins doesn’t get to define what is true and what is refuted. He can put forward his arguments, but he’s only one.

Why have Brad DeLong and Paul Krugman been talking about a “Dark Ages” in economics, where ideas like the Treasury view are being espoused by major economists?

Brad DeLong and Paul Krugman are human beings, as well as economists, and thus respond emotionally, like other economists.

Again and again, you seem to have this view that real sciences operate all dispassionately and economics is somehow inferior becuase it doesn’t. Am I right? Why do you believe that real sciences operate dispassionately?

Tracy-

Ok, I feel we’re talking around in circles here. I am disputing that what you call emotion is actually ideology; what’s your argument to the contrary?

Enemies are a good thing, when they are attacking on disciplinary grounds, but not when they’re attacking you for “abandoning the cause of economics.” That’s not ferreting out errors or probing the weaknesses of arguments – it’s a political assault, because they didn’t like the empirical results of Card’s work. You haven’t really addressed this point.

Since the 1980s, I would argue that neoliberal influences have gotten stronger, not weaker, and that to me is a sign of ideological politics at work – your examples are good on this. Central bank independence is not non-ideological; there’s a strong element of the argument that suggests that economists need to resist popular pressures for looser monetary policy, because inflation is worse than unemployment. Likewise, inflation targeting suggests that economic stability is a higher-order value than economic growth.

“you just made up your assertion that “historical and institutional economists” are the most empirically-minded schools.” This is flat-out disingenuous; in the very next sentence, I say that I’ve read a lot of the history of economists, and I know that the debate was pitched directly at the issue of whether abstract modeling or empirical observation was better – read Yunal Yuvay’s Struggle for the Soul of Economics if you don’t believe me.

Regarding your 3 points, I think I over-stated my argument; institutionalists/historicists didn’t disavow theory or models per se, but thought that it should flow inductively after observation. As for public policy, well I think Gardiner Means was pretty damn influential during the New Deal, and he was a straight-up institutionalist.

“Have you ever met any human beings in real life?” This is non-responsive. I was taking issue with your statement:

Or take the response to the Great Depression. The conventional macroeconomics that couldn’t explain the prolonged slump was dumped and Keynesianism took over, then Friedman came up with monetarism as an alternative theory, and the neo-classicists started proposing alternative theories, then Keynesian economics as then understood collapsed because of stagflation, so that was abandoned and people started working on neo-Keynesian theories.
How do you explain these sorts of events?

And suggesting that changes were not merely the product of theories not working in response to crises (a sort of Kuhnian theory), but rather there has been significant influence from the political ideology of economists.

Again, what’s your rationale for claiming that political disputes are actually emotional disputes? If that’s the case, why are economists talking about the “cause of economics”?

Re: Krugman/DeLong, this isn’t just a question of emotions. Krugman and DeLong are both self-identifying progressives, who are reacting to what they see as disciplinary backsliding – the revival of the Treasury view – that lacks a good disciplinary rationale. I don’t propose that there aren’t emotional subtexts here, but I think the primary conflict is political.

I am disputing that what you call emotion is actually ideology; what’s your argument to the contrary?

I don’t have one. I think ideologies cause people to get emotional (and of course many other things cause people to get emotional as well). Even before you started this line of argument I was entirely convinced that ideology is part of what causes economic debates to get heated. I am not going to say it’s all, because I’ve seen debates get heated in engineering circles where political ideology doesn’t come into it, but I think the ideological motivation explains a lot of the emotion, though I can’t give you a percentage.

Enemies are a good thing, when they are attacking on disciplinary grounds, but not when they’re attacking you for “abandoning the cause of economics.” That’s not ferreting out errors or probing the weaknesses of arguments – it’s a political assault, because they didn’t like the empirical results of Card’s work. You haven’t really addressed this point.

I agree that attacks should be focused on the quality of the work, not on political grounds like “abandoning the cause of economics”. But that sort of attack doesn’t convince me that economics is not a science. It’s just a science done by humans, who do get emotionally involved and do launch attacks based on extraneous factors and do not like results. Consider for example the heated debates about research into the benefits or costs of childcare, or abortion, or the inheritability of IQ.

As I said earlier, “Science in reality is not pure and disinterested. It’s human and messy.” I don’t know how I can address your point any more than I already have.

Since the 1980s, I would argue that neoliberal influences have gotten stronger, not weaker, and that to me is a sign of ideological politics at work – your examples are good on this.

But your original argument was, to quote:

So sure, people do empirical economics all the time, but the basic theoretical fraemworks – the ones that are used to structure public policy – don’t change.

How can you combine this argument here with your statement just above that neoliberal influences have gotten stronger? Things can’t both not change and also get stronger. Getting stronger is a change.

Central bank independence is not non-ideological; there’s a strong element of the argument that suggests that economists need to resist popular pressures for looser monetary policy, because inflation is worse than unemployment.

You’re stuck on the Philips curve hypothesis that there is a stable trade-off between inflation and unemployment. In fact, the theory behind central bank independence is that the more you make the trade-off towards unemployment the less-effective the trade-off gets, as market participants start to expect inflation and adjust their plans accordingly, so you eventually wind up with the stagflation of the 1970s, high inflation and rising unemployment. So, if people have low inflationary expectations you can use unexpected inflation to boost employment at low cost, but it’s a once in a generation trick (or however long you think market participants remember). The more you use it, the less effective it gets.

So a stronger argument for central bank independence is to resist the short-termism of politicians, particularly shortly before elections.

Likewise, inflation targeting suggests that economic stability is a higher-order value than economic growth.

Perhaps it suggests that to you. The stronger argument for inflation targeting I know of is that “we can’t get richer by just printing more money, we get richer by producing more goods and services.” I don’t know of any particular work on the possible trade-off between economic stability and economic growth, this of course could well be a reflection of my ignorance, not of the absence of such work.

These arguments may be wrong, of course, but they are less ideological than the arguments you stated.

This is flat-out disingenuous; in the very next sentence,

Actually yeah, on thinking about it, you’re right. I withdraw my accusation of just making stuff up. My apologies. I still however remain unconvinced that the work of the institutionalists and historists is more empirical than the articles I quoted. (I’m not arguing that it isn’t more empirical, I’m saying that we don’t know.)

As for the value of the institutionalist and historicist work, Ronald Coase, Douglass North and Robert Fogel won Nobel Prizes in economics, which is pretty high on the totem pole.

There’s probably some interesting sociology research on why various hypothesis get tested and firmly debated in science and others don’t, but beyond my knowledge of the interests of politicians in economics, and the cognitive attractions of theories that seek to explain a variety of empirical results I don’t know much about it.

Again, what’s your rationale for claiming that political disputes are actually emotional disputes?

Firstly, I will say that I think that while political disputes are emotional, they are not merely emotional, there are often topics of substances discussed. I am not claiming that all political disputes can be explained merely in emotional terms.
Secondly, as to why I think that political disputes are also (though often not merely) emotional disputes, I’ve engaged in political disputes and I’ve felt my emotions running pretty high. I’ve also seen signs of emotions in other people, eg raised voices, changes in complexion, tense body postures, insults being hurled. I suppose I could be completely wrong about this, I would be interested in an alternate hypothesis explaining these observations.

As for Krugman/DeLong, I agree with you that ideology probably drives a lot of the conflict. I think this is good. Perhaps DeLong and Krugman are so self-driven internally that they would just as excellent work even if not exposed to ideologically-motivated attacks, but neither of us can see inside their minds. (If I’m wrong about this, I’d be fascinated to know.) But if their work survives the attacks of their opponents who hate their guts for ideological reasons, we can have some more confidence in Krugman and DeLong’s results even without being able to see into their minds. Of course it would be better to be able to test their theories in a lab, but we can’t build macroeconomies in labs and test them that way. Perhaps Vulcans could do that testing in a pure and disinterested way, but as Star Trek makes clear, humans aren’t Vulcans.

Dear Dsq,

I got this link from Brad DeLong’s blog.

How very well you express your points. Rarely does one see such an example of hitting the nail absolutely on the head.

Larry Elliott has for years been displaying his lack of knowledge of economics written since 1975, and on policy he is just a disaster: for example, we all know that he’s against the Euro but only because sometimes because it’s too strong and sometimes because it’s too weak: what next?

Two points for readers of Larry to consider:

1. his attempt at a “first eleven” in economics that fails in effect to mention a Nobel prize winner or a John Bates Clark medal winner (wonks will understand or can Google or Wikipedia), is just risible: read the lists and disagree, I challenge readers. You and others are far better suited to argue this with Larry Elliott in detail,.

2. I know of no serious economist who argues that the answer to “How Much Maths” is not “As Much As You Can Manage” as a student, and “As Much As You Need” as a researcher or teacher. Very few economists can achieve work of value without much maths, Paul Krugman or Thomas Schelling perhaps, but even their work inspires mathematical extensions of great value. And this has been true since 1945 or earlier.

Regards,

Barry

I think that was George Packer’s point on the Iraq War II.

Nassim

There is no such thing as “Islamic Science”.

David, StevenAttewell was saying that the arguments for central bank independence and inflation targetting were about values – a value that inflation was worse than unemployment, and a value that economic stability was a higher-order value than economic growth. What I was saying is that the best arguments I know for central bank independence and inflation targetting were not so value-driven as the ones that SteveAttewell outlined, the arguments were more technical ones about things like “building inflation expectations reduce the effectiveness of any trade-off between inflation and unemployment”, and technical arguments about whether you can stimulate sustainable economic growth by printing more money. (There’s a lot of detail in these arguments that I’m not covering here, eg there’s a distinction between level changes and ongoing economic growth).
The arguments I have outlined are indeed based on value judgments that economic growth is good and unemployment is bad, but applied science is always based on a value judgment (eg “dying of cancer is bad”, “being able to talk to your Mum in another country is good, or at least profitable”, “saving the Chathams Island robin from extinction is good”), and those two value judgments are ones that elected politicians keep making, which means that has been lots of funding for and attention paid to economists who do work on how to create or maintain economic growth and low unemployment. And to the extent that this sort of work attracts civil servants’ and politicians’ attention it attracts media attention, raising its profile relative to say the work of very empirically-focused historical or institutional economists.
I think the reasons that politicians keep favouring economic growth is that it results in rising tax revenues, reducing the need for them to make tough political decisions, such as raising tax rates or cutting funding to politically-popular programmes, or failing to fund their election promises. The reasons for favouring low unemployment are fairly obvious – not only are employed people typically happier, and pay more taxes, but low unemployment allows people to shift jobs more easily, allowing more life-flexibility (eg if both in a couple work). Of course I could be wrong about this and am interested in other hypotheses.