Renouncing the facts in the name of method (Mankiw channels Lukacs)

That Keynes quote, in context:

http://www.gutenberg.org/files/10612/10612-h/10612-h.htm

That being said, I think Dorman hits it on the head when he writes:

“A huge gap has opened up between the introductory course and the work professional economists are actually doing.  Each departure from the narrative is considered one at a time, even though research has chipped away at all of them. Unfortunately, this feeds back to the self-understanding of the researchers themselves: they get their central narrative from the vision of Ec 10 (or 101 or whatever) and see their own work as deviating in just one specific way from the benchmark model.”

The problem isn’t that Econ 101 doesn’t include Keynes or other departures from the classical model – it just doesn’t adapt the central narrative to fit new information. Departures get turned into mere epicycles – and crucially, many economists revert back to central narrative when they discuss public policy, which distorts public understanding.

[Crooked Timber comments threads are an opportunity to engage in conversation, not the granting of a soapbox for you to promote your private obsessions. Please go away. CB]

Andrew F. “I don’t think Mankiw was endorsing the proposition that a certain method of thought or investigation should be followed regardless of what happens in the actual world. That’s a fairly strong position to impute to him.”

It is? So, would this be a defense of Lysenkonism?

Hidari “FWIW the phrase ‘dialectical materialism’ is not used in any of Marx’s work.”

True. He wrote instead about the “materialist conception of history”. History was, of course, a dialectical process. So I’m not sure you’ve found a distinction here.

Keynes’ideas on the method of economics are best resumed in this letter to Roy Harrod :

http://economia.unipv.it/harrod/edition/editionstuff/rfh.346.htm

A few quotes:

“It seems to me that economics is a branch of logic, a way of thinking; and that you do not repel sufficiently firmly attempts à la Schultz to turn it into a pseudo-natural-science. One can make some quite worthwhile progress merely by using your axioms and maxims. But one cannot get very far except by devising new and improved models. This requires, as you say, “a vigilant observation of the actual working of our system”. Progress in economics consists almost entirely in a progressive improvement in the choice of models. The grave fault of the later classical school, exemplified by Pigou, has been to overwork a too simple or out of date model, and in not seeing that progress lay in improving the model; whilst Marshall often confused his models, for the devising of which [b] he had great genius, by wanting to be realistic and by being unnecessarily ashamed of lean and abstract outlines.”

“Economics is a science of thinking in terms of models joined to the art of choosing models which are relevant to the contemporary world. It is compelled to be this, because, unlike the typical natural science, the material to which it is applied is, in too many respects, not homogeneous through time.”

“Good economists are scarce because the gift for using “vigilant observation” to choose good models, although it does not require a highly specialised intellectual technique, appears to be a very rare one.

In the second place, as against Robbins, economics is essentially a moral science and not a natural science. That is to say, it employs introspection and judgments of value.”

He would definitely not endorse “keep on keeping on, whatever happens in the actual world”.

LOL. Well, even without quoting Kuhn I can say that Keynes is saying things that are to be expected from practitioners of an ongoing research program, and that his quote does not at all entail the “idea that they can just keep on keeping on, whatever happens in the actual world.” It’s just that falsifying some number of predictions made by past users of the model is a partly-distinct enterprise from showing that the model itself is useless.

Lukacs doesn’t seem to leave any room for the latter, but could, if he means “Orthodox Marxist” as something other than a synonym for “correct.” “As long as we retain the conviction in the underlying model of dialectical materialism, we remain Orthodox Marxists notwithstanding the falsification of this or that prediction. It is only when and if dialectical materialism itself becomes insupportable in the face of the facts that we would cease to be such.”

I suspect that the rhetorical purpose of the passage is just to deny that the deviations in the rest of the book should mark him as a heretic– rather than insisting that the method encompasses all, he’s just trying to make sure that the reader still thinks he’s on the inside of the set. The analogous contemporary case would be Steven Levitt’s insistence that he still counts as an orthodox economist because after all people make choices in his studies– not really to be taken as a prescriptive statement about research methodologies.

As a computer scientist (sometimes), there’s a weird disconnect here between data and methods — a not-so-modern idea in CS is that method are also data, and so to say “damn the facts, we still have the tools” forces a false dichotomy between tools and facts.

As a stats/probability guy, ignoring the data smacks of the most cartoonish sort of “orthodox Bayesianism.”

Mankiw also said, “A prerequisite for being a good economist is an ample dose of humility. ”

http://www.youtube.com/watch?v=E0PIdWdw15U

“My fervent hope is that any students who are still protesting the class will return — and that, while recognizing our limitations, they will learn from us what they can.”

With humility, perhaps Mankiw could learn from his students what he can rather than disparaging their criticisms as a “poorly informed… grab bag of anti-establishment platitudes without much hard-headed analysis or clear policy prescriptions.”

But I’m struck by the way that both Mankiw and Lukacs implicitly endorse the idea that they can just keep on keeping on, whatever happens in the actual world.

Well, what, you are an empiricist, and empiricists don’t think they have an ideology?

Ideologues believe that ideology may even create the facts, but certainly determine which facts are relevant and valuable.

Dialectical materialism, I should hunt up a quote from Lefebvre or sumpin, mostly means for by and of labour uber alles. Should the new NAIRU via science be 8% screw science. This isn’t hard and is about the starting position, the stance, ontologically before the accumulation of knowledge or observation of “reality.” Dasein, caring. Don’t really need much Marx.

The problem isn’t that Econ 101 doesn’t include Keynes or other departures from the classical model – it just doesn’t adapt the central narrative to fit new information.

This is an odd thing to say. Keynes is not new — depending what you mean by “Econ 101”, much or most of it is actually more recent than Keynes.

In general, IMO, economics as it was taught 30 years ago was much more realistic and sophisticated than today — just find a copy of Rudi Dornbusch’s 1980 textbook if you can (it’s not easy, unforunately) for an example of how far backward we’ve gone. From where I’m sitting, the problem with most economics textbooks is precisely that they *do* accurately reflect the direction of recent research — there’s more and more emphasis on explicit optimizing “microfoundations.” I’m not sure why Peter wants to argue that economics has a solid progressive research program which economics teaching unfortunately hasn’t caught up to. Seems just the opposite to me.

This is good enough.

Carchedi, Behind the Crisis, 2011

“But, if knowledge is not class-determined, then the working class cannot or does not necessarily produce its own view of reality and thus of the crisis-ridden nature of this
system, which, in turn, deprives the working class of the theoretical guide in its struggle against capitalism. The thesis of the class-neutrality of knowledge has thus devastating effects on the struggle for a radically alternative form of society.”

This is the dialectical part of dialectical materialism. Did you really read Lukacs? Or have you taken the other side of the struggle?

I often reflect on the thesis of the class-neutrality of knowledge while attempting to convince fellow white residents of Arizona that Fedral Gummint Libruls and those dammed Messicans are not in fact at the root of all the evils afflicting them. Afterwards, I try to find a quiet corner somewhere and pour myself a drink. If only I’d stayed in California, thinks I to myself, I could have avoided all this. If only…. I wonder if Digby would agree.

Seconding JK in 19., I think Chris fundamentally misreads Lukacs. Which should be very obvious indeed from reading the rest of that essay, and/or more of History and Class Consciousness. I’m sure Chris has read more of it, so I’m baffled why he would overreach like this – just trying to find a parallel to Mankiw’s nonsense, no matter how strained?

macroeconomics is not all of economics.

Fair enough…

Lemuel, I was referring to Econ 101 today, that the basic narrative as taught in Mankiw doesn’t really integrate Keynes, especially those precepts outside of the neoclassical synthesis.

Hence, the situation described by Tom. Keynes is in there, as I said he was, but only the short-term version of sub-optimal equilibrium, and a side box about the man himself. In other words, the Keynes who argued that the investment function had to be socialized because private finance was an idiot’s casino, or whose ideas about marginal propensities suggested long-term depressions caused by inadequate demand that could be solved by redistributing purchasing power, or who believed that animal spirits fundamentally challenged the rationality of the classical economic actor, isn’t in the central narrative.

In the same way, I highly doubt that Mankiw presents the Adam Smith who posited a fundamental inequality between workers and employers, or who recognized that state intervention in a number of economic spheres would be necessary to compensate for the side-effects of capitalism.

@stevenattewell, #30

Inadequate demand can be, but need not be, solved by redistributing purchasing power. A war e.g. would do too. We may prefer redistribution to war but adjudicating that trade-0ff seems to me beyond the scope of an Ec 101 textbook.

Animal spirits are in Mankiw’s textbook too. The shifts of the aggregate demand may arise because of a wave of pessimism or optimism among consumers or investors e.g.

Among its famous 10 principles of economics, principle 7 says that “Government can sometimes improve market outcomes” either because of externalities or to achieve more equality.

I agree with you however with the fact that “Departures get turned into mere epicycles – and crucially, many economists revert back to central narrative when they discuss public policy, which distorts public understanding.”

I do not have much problem with the epicycles because we have not yet achieved a new synthesis. I am however bothered by the fact “many economists revert back to central narrative when they discuss public policy” instead of just showing the relevant trade-offs, which should be their only job, qua economists.

My problem with Mankiw, however, is not even that one. Rather, my problem is that his position depends on which party is in power. If Republicans are in power and there is a recession, then it is fine to stimulate aggregate demand by reducing taxes (Bush’s tax credit). If Democrats are in power, then we are not so sure anymore about the fact that an increase in government spending will stimulate aggregate demand. But it is not his economics that is at fault, at least if you believe in his new-keynesian synthesis, it is the pick-and-choose approach dictated by his politics that is an issue.

p.s.: sorry for the long comment, it came out longer than I anticipated!

24:Walt, DM is a contingent necessary inevitable starting point for workers, because of their material and class positions. But feminism, anti-racism, etc are also contingent, material, and inevitable. How these overlap and intermix are the subject of study and controversy, Richard Seymour posted on exactly this last week, and got a good discussion.

31: No way. There are plenty of free resources if you seriously want to explore this.

“On the contrary, orthodoxy refers exclusively to method. It is the scientific conviction that dialectical materialism is the road to truth and that its methods can be developed, expanded and deepened only along the lines laid down by its founders. It is the conviction, moreover, that all attempts to surpass or ‘improve’ it have led and must lead to over-simplification, triviality and eclecticism.”

I am most worried by the “only along the lines laid down by its founders” clause. Even if dialectical materialism is useful as a method, why should anybody assume that it can’t be improved as a method?

Keynes is in there, as I said he was, but only the short-term version of sub-optimal equilibrium, and a side box about the man himself. In other words, the Keynes who argued that the investment function had to be socialized because private finance was an idiot’s casino, or whose ideas about marginal propensities suggested long-term depressions caused by inadequate demand that could be solved by redistributing purchasing power, or who believed that animal spirits fundamentally challenged the rationality of the classical economic actor, isn’t in the central narrative.

No argument on any of that. (Is there a text whose presentation of Keynes you like?) What I disagree with is Peter Dorman’s characterization of the situation as the introductory textbooks failing to catch up with the cutting edge of research. I mean, you won’t find any of the stuff you describe in AER or QJE either. Mankiw can be accused of many things, but I don’t think misrepresenting the state of professional consensus in macroeconomics is one of them.

@stevenattewell, #33

Correct, Mankiw does not talk about the efficiency of anti-cyclical policies: anything that supports a shift to the right of the AD is fine.

As to animal spirits, for sure Mankiw does not mention the “inherently flawed capacity of people to predict the future” but talking about waves of pessimism and optimism captures at least some aspect of the “moodiness” of the investors.

Anyway, I also think we are in agreement and my point is similar to the one of Lemuel Pitkin, #38, “Mankiw can be accused of many things, but I don’t think misrepresenting the state of professional consensus in macroeconomics is one of them.” I would use “most popular position” instead of “consensus” as there are quite a few macroeconomists that reject almost completely keynesian economics (e.g. Lucas and the RBC people) but that is what I was getting at.

I don’t think Mankiw was endorsing the proposition that a certain method of thought or investigation should be followed regardless of what happens in the actual world.

Nor was Lukacs obviously. Nice straw man there though, Andrew F.

I think JK @19 is exactly right. The whole point of that Lukacs bit is that “orthodox” needn’t and shouldn’t mean “dogmatic”. We can disagree with his choice of “orthodox”, or with his (to quote JHC @37) “excessively Hegelian interpretation” (not that I necessarily would), but the suggestion that Lukacs is endorsing a blind adherence to the Master seems quite misplaced.

He’s saying, explicitly, that someone could remain a Marxist whilst rejecting everything Marx says about history, social classes, exploitation, revolution, and so on.

No – he’s not talking about an individual rejecting elements of Marxism. He’s saying that one could remain a Marxist even after research had disproved … every one of Marx’s individual theses. Returning to Freud, suppose that research in different fields had demonstrated not only that there’s no such thing as penis envy but that the Oedipus complex doesn’t exist; moreover, there can’t be any such thing as an unconscious, because there’s nowhere in the mind/brain for it to be. There might be wailing and gnashing of teeth, not to mention schisms and recantations, in the Guild for Guarding the Freudian Flame and Keeping Psycho-Analytic Thought Exactly The Way He Left It (it’s snappier in the original German), but what most people consider to be Freudian approaches to understanding & helping to change the ways that people think would go on relatively unimpeded.

Similarly, Lukacs is postulating a world in which research had proved that the rate of profit does not tend to fall, labour does not produce value, etc, and one could no more choose to carry on believing those things than believe in Intelligent Falling – and yet there are still people using Marxist methods & taking Marxist approaches to understanding & changing the world. There’s only one real novelty in Lukacs’s reductio (and there’s a phrase I never thought I’d be typing before the first coffee of the day), although it’s a big novelty. He suggests that the people using Marxist methods in this un-Capital-like world, and not rending their garments over the empirical failure of Marx’s theses, wouldn’t just be a penumbra of post-Marxists or neo-Marxists or Marxists-if-by-Marxist-you-mean, but would actually include orthodox (Lukacsian) Marxists. In other words, floating off the method from the testable propositions isn’t a regrettable occasional necessity, to be accompanied with a cough, a handwave and a prefix, but a perfectly orthodox adaptation to changing times.

There are all kinds of tensions in these arguments – to pick only on my own paraphrase, can you even have an “orthodox adaptation”? (This relates to a point made by other commenters, about Lukacs’s rather anxious insistence that the Marxian method should be developed, but only in the ways that Marx and Engels developed it.) And, where Marx is concerned, the whole thing would rather fall down if one believed there wasn’t anything identifiable as Marx’s “method”. But that’s an empirical question.

when you write that one could be a Freudian and disbelieve in the unconscious

I don’t think in those terms, so I’d be surprised if I did write that. I don’t think of myself as “a Freudian”; I believe that Freud came up with some useful tools. If it turned out that the worldview within which Freud built those tools was unsustainable in the light of subsequent advances in knowledge, I wouldn’t “disbelieve in the unconscious” – I would cease to think the unconscious was a model with a direct correspondence to something that literally existed, while continuing to see it as a model with which some useful work can get done.

DD – I’m not a Platonist, I’m a phenomenologist (if anything); my interest in ideas about “orthodox Marxism” is mainly in the side-commitments that seem to go along with declaring oneself to be An Orthodox Marxist, or for that matter Not An Orthodox Marxist. “I am an orthodox Marxist because I think the same way Marx did” seems like a congenial and possibly even a viable approach – much more congenial (and viable) than “I am an orthodox Marxist because Marx was Right He Was He Was No Shut Up He Was Too”. (And I can’t see much mileage in “I am a Marxist, but I’m not an orthodox Marxist because Marx was wrong”.)

“that both Mankiw and Lukacs implicitly endorse the idea that they can just keep on keeping on, whatever happens in the actual world.”

I don’t think so – if Mankiw is making an “economics is a toolbox” argument, what you do with that toolbox may change dramatically in response to what happens in the read world. For example, since the financial crisis lots of economists (one example) have been trying to understand what happened and how it could be prevented again. They are still using the economics to which Mankiw’s course is a first introduction.

re: being a Freudian while, say, rejecting every thesis Freud put forward beyond the bare existence of a subconscious sub-personality. Wouldn’t this be post- Freudian in one of the senses of ‘post’ recently discussed here?

re: econ 101, neoclassical orthodoxy, econ. research.

Agree via Steve Attewell @4 with Dorman’s that – in respect of the core micro-based neoclassical orthodoxy of GE, EMH etc, anyway – Each departure from the narrative is considered one at a time, even though research has chipped away at all of them. Unfortunately, this feeds back to the self-understanding of the researchers themselves: they get their central narrative from the vision of Ec 10 (or 101 or whatever) and see their own work as deviating in just one specific way from the benchmark model.

(Indeed I’ve been saying the same thing here for years.)

Although, while Ec 101 is a convenient way to describe the orthodoxy it is slightly misleading, because of course the actual intro version to that orthodoxy covers all the token caveats in response to the obvious objections from the questioning young minds who are being indoctrinated. (This follows the same pattern as any other corrupt organisation, like for example MI5 or the police – and part of the process is self-deselection by insufficiently malleable candidates.)

The general thrajectory of the intro courses is to flag up the mad assumption or concede the basic objection, but then to forge ahead at full speed as if nothing had happened. Pretty much the only way to learn the stuff one is being taught – at leat without some pretty cumbersome and strenuous cognitive partitioning – is to treat the core picture of perfect competition, revealed pref, Pareto efficiency etc as basically correct (even though actually it’s neither empirically nor even conceptually adequate) and the crazy assumptions as in some way justified by necessity, even though in each specific case they’ve been more or less conceded to be wildly unrealistic. In that way, Econ 101 is an excellent representation – or a microcosm – of the subject as studied.

The point about the disconnect between research and orthodoxy still holds though, but the orthodoxy is a funny one because no-one will even quite admit it’s the orthodoxy, and you probably won’t ever find it baldly stated in any ‘reputable’ source – it’s like a black hole around that can only be observed indirectly by the constellation that revolves around it.

Just as in the intro course, and in best 2-step or yielding reed fashion, each problem with the orthodox account (still thinking primarily of micro and microfounded macro) is – I expect – conceded piecemeal in the specialised literature, but the whole thing only makes sense if one accepts that the concessions are each and all non-fatal. It’s possible to be realistic about each topic, but once paraded, the caveats are put back in the bottom drawer (another dismally unsuccessful meme of mine) out of sight and out of mind.

(And this is presumably where the sociologists of science like Huhn or Lakatos would get a mention if we hadn’t decoded it would be too infra dig to be explicit about degenerate research programmes, or to mention the P word.)

The variant on EconoSpeak of LP’s #20 here:

It would be nice to believe that there is a genuinely progressive research program that most economists subscribe to, but which introductory courses just haven’t caught up to yet.

But the idea is not that there is a single heterodox account ignored by the orthodox story. This is a scope issue: for any researcher in (micro) economics, there is an aspect of the Official Story they disagree with. That’s not to say there is an aspect of the Official Story such that for any researcher in (micro) economics, they disagree with it. Indeed that’s the problem, and why tnot only does the neoclassical p******* survive, but there has hitherto been little sign that younger generations are even looking for a comprehensive root and branch replacement.

Just dropped back in and noticed ‘Huhn’ – s/b Kuhn of course.

Not a typo, not even the kind of self-dictation homophone-substitution error that comes from silently speaking what you are about to type, and makes people type ‘their’ for ‘there’ etc. (look out for those: you see them quite a bit).

Just some kind of brainstorm, possibly Lib Dem related.

Yeah Chris none of us are exactly shocked that you are dismissive of Marxism and historical materialism in particular. Nothing new there, and while I think you’re utterly full of shit (<– technical term) in this regard it's a position that can be defended. Your reading of Lukacs in the original post, on the other hand, cannot be defended. It's maliciously incorrect. Which isn't to say one has to agree with the Lukacs of History and Class Consciousness – he himself didn't later in his life (yup, too much Hegel in HCC).

straightwood 12.06.11 at 4:01 pm

” Mankiw pretends that his professional work and his personal politics are separated by a Chinese wall of integrity,…”

I always love that term. In finance, it means that two units in a company function independently, even though one of them (‘research and analysis’) would serve the people running the company far better by not being independent.

In history, it refers to a fortress ‘chain’ which, IIRC, was not infrequently crossed through bribery.

“History was, of course, a dialectical process. So I’m not sure you’ve found a distinction here.”

Marx : “The first premise of all human history is, of course, the existence of living human individuals”

“I don’t have respect for those “Marxists” who try to defend the indefensible parts of Marx (e.g. LTV) by recourse to methodological obscurantism, and I think “dialectics” is mostly bs.)”

What’s your view of the temporal single system interpretation?

http://www.google.co.uk/#q=temporal+single+system+interpretation

the thing about “Microfoundations” – it was a good idea (and at the time maybe even a necessary one) that got hijacked for all sorts of ideological purposes. The optimal development – in terms of advancing the existing economic theory – is not to abandon the pursuit of “microfoundations” but instead to take the whole concept back from the “microfoundations people”, and that includes both the RBC/DSGM and Neo-Keynesian peoples, and make it meaningful again.

Things like Modigiliani’s life cycle hypothesis, or Baumol’s money demand model, or Tobin’s q-investment model, or even Friedman’s permanent income hypothesis were all a form of “microfoundations” (hell, even the Marxian and neo-Ricardian folks tend to insist on “microfoundations” within their models, whether they realize it or not) And these shed a lot of light on how the economy functions, illuminated previously ignored nuances and fleshed-out the assumed relationships that were observed in the data. At some point though, “microfoundations” came to mean cramming a whole bunch of silly shit into a silly utility function and then maximizing that fucker until you can “calibrate” the results to match selected data points. And that’s how we got to the sorry state we’re in now.

“microfoundations” in Lucas’ sense was the hijack!

What one ought to get out of Arrow-Debreu is not a model of how the world is, but of how the world is not! It is a useful constrast that highlights features, and shortcomings, of the actual world that should excite our curiosity. Walras’ Law would lead any person of normal intelligence to the conclusion that a general equilibrium in a market economy is a practical impossibility; some markets do not clear, so they are not all going to clear. It certainly would not support the common conviction of mainstream economists that the economy is a naturally self-stabilizing system.

There can never be a fully axiomatic, deductive-logic model of the political economy as a system, as long as that political economy is characterized by bounded rationality, asymmetric information, genuine uncertainty, etc. As long as human beings, to a large extent, do not know what they are doing, then their political economies will be imperfectly adapted to the changing state of their knowledge: it will not be entirely self-stabilizing, or “optimal”, and no professor will master entirely its intricate mechanics as a whole, a priori. The study of the particular, however, ephmeral, cannot be avoided, because that is all there is, to the actual, functional, institutionalized economy. The important thing about human expectations is not whether they are better modeled as rational or adaptive; the important thing is, those expectations are disappointed, and then what?

So, yes, Modigiliani’s life cycle hypothesis, or Baumol’s money demand model, or Tobin’s q-investment model are useful. To the extent, that the word, “microfoundations”, suggests a reductive analysis of function — studying how the gestalt emerges from the interaction of the parts — absolutely, macro-economics needs it.

It doesn’t turn ideological in the “stuffing”, though. It turns ideological, because an elaborate mathematical apparatus is being used to derive essentially qualitative results.

When you’ve oriented your thought to a natural rate of interest or a natural rate of unemployment and to evaluating whether a policy is pareto-efficient in some formal sense, and you’ve abandoned entirely thinking about how money and finance work as mechanism, you’ve lost a grounding in the observable and measurable.

“The central truthiness of Economics is that the distribution of income is perfectly fair and mathematically determined by marginal productivity if only the government stays out of the market.”

There’s a sense in which this is fair and a sense in which it isn’t. One of the first books on economics I ever saw very clearly made the point that, to those unfortunates who have nothing to offer to the market, nothing is offered in return. The trouble is that once you’ve taken that on board, traditional theory itself really has nothing further to offer regarding that problem. It’s one for the politics department really. As Julius Caeser is said to have said to a particularly hard-up client: “you don’t need a loan, you need a revolution.”