Around here I’ve frequently wondered about economics as a predictive science. I’m not alone. John Maynard Keynes, for example, once described the purpose of economic forecasting as to make astrology look good. That’s why I found this article, reproduced at naked capitalism, on the shortcomings of economic statistics very thought-provoking:
The Economist recently had a leader “Don’t Lie to Me Argentina†in which it accused Argentina of some kind of unforgivable treachery for politicising its economic statistics. As if economic statistics aren’t political in their very nature (a heavy bias towards capital and against labour, for instance).
So in contrast to H&H [a fellow MacroBusiness blogger], who enthuses that without economic data we are “naked, bereft of meaning†I wish to present a very different perspective. I wish to briefly examine what it would mean not to have economic statistics.
Here are some of the author’s suggestions about what that would mean:
- We would have to stop being lazy in the way we construct meaning and do the work of creating meaning ourselves.
- We would embrace a broader sense of meaning, one that did not involve just what can be measured.
There are three more bullet points and expansions on them. Read the whole thing.
I think those first two points should be thought of in an old MBA rule-of-thumb: if it can’t be measured, it can’t be managed. But it does make me wonder if, as was originally said about archaeology, economics is not a science, it’s a vendetta.
I love the article. It seems very much in line with the skeptical instincts of a certain math-challenged kid’s book author.
What we call economics is ideology. A person of a particular political bent chooses a school which most identifies with his/her preconceptions and will defend them no matter what the empirical evidence says.
And yet people wonder why I reject mainstream economics.
Ben:
That’s exactly my instinct, much strengthened by reading this blog. When your position cannot be changed by data you’re not doing science.
The same can be said of psychology, sociology, anthropology, biology (as Stephen Jay Gould often complained), and even physics. The difference with physics is that its predictions can be falsified while those of economics or sociology can’t.
Scientists are humans. Every human being, try as he or she might, has an agenda, preferences, an ideology. It goes with the territory.
Rather than throwing out the baby with the bathwater I think the remedy is to avoid the intermediaries, go straight to the sources, and read widely. Read Adam Smith, Karl Marx, John Maynard Keynes, Milton Friedman, and Ludwig Von Mises rather than classical economics explicators, Marxists, Keynesians, monetarists, or Austrian economists. Don’t expect any single source to have the full, complete, crystalline answer. But don’t reject economics out of hand, either.
I have always been struck by the fact that people look at the same numbers and come to many different conclusions. My take on that is that we should be a bit humble and always remember that we might be wrong. Its also good to ask questions. However, I cannot give up numbers entirely. Too many years invested into reading studies and looking for evidence.
Steve
I blame Plato. The desire for generality, for system, propels all of this. For Wittgenstein, the desire for generality is the source philosophical confusion. Perhaps what he wrote about philosophy is equally true of economics:
It goes back to cave man times, at least. We needed to be able to generalize from specific events. Og ate the red berries and died. So let’s not eat the red berries. Of course maybe Og just had an aneurysm. Maybe the berries are fine.
The same feature is responsible for various forms of bigotry. That dude from the next cave who smacked you in the head with a club? He had blond hair. So beware blonds. Or hell, just beware anyone from a different cave.
Looking for big conclusions from small events is necessary but also needs to be balanced with a willingness to re-examine assumptions and challenge long-held beliefs in light of new information. We call those people liberals, which is why liberals are the engine of human progress.
Over to you Drew and Ice.
Not really worthy of a response, Michael.
Over and out.
Drew:
Answer: Not really worthy of a response.
Question: What did Nokia say to the iPhone?
@ Dave Schuler
To an extent I think what you write is true, but there ARE aspects of economics which can be falsified, based totally on empiricism. Our government spends by creating reserves, a fact which should immediately lead one to question the mainstream narrative of how interest rates function, the loanable funds framework and how and why the Fed institutes certain policies.
Yet it doesn’t. In fact if you bring this up to a neo-liberal economist they will almost invariably dismiss it without consideration or zone out from sheer boredom. Yes you read that right, you’d be amazed how many economists have no interest in learning about the financial system and actively exclude it from their models. I do believe economics can move closer to being a science, but not so long as its students consider data and politics interchangeable.
This is somewhat offthread, but I think not entirely. Measuing the pre-Court experience on the Supreme Court over time:
“To determine how the current Justices compare to their historical peers, the study gathered a massive database that considers the yearly pre-Court experience for every Supreme Court Justice from John Jay to Elena Kagan. The results are startling and telling: the Roberts Court Justices have spent more pre-appointment time in legal academia, appellate judging, and living in Washington, D.C. than any previous Supreme Court. They also spent the most time in elite undergraduate and law school settings. Time spent in these pursuits has naturally meant less time elsewhere: The Roberts Court Justices spent less time in the private practice of law, in trial judging, and as elected politicians than any previous Court. The article argues that the change is regretful for multiple normative reasons, including the way these experiences lead to legal complexity in Court decisions, the lack of litigation or trial experience on the Court, and the lack of what virtue ethics calls “practical wisdom.—
h/t Volokh
Completely unsurprising but alarming and, as you may notice, something I’ve complained about in different ways around here from time to time.
It also ties into another recurrent theme here: I think that the present justices’ notions of risk and reward are very, very different not only from Americans’ but from lawyers’ more generally. That’s not so important for lower court judges but its very, very important for justices who serve for life and don’t have anybody looking over their shoulders.
“The Roberts Court Justices spent less time in the private practice of law, in trial judging, and as elected politicians than any previous Court. ”
Sonia Sotomayor is the exception, I think.
SCOTUS should be a ten year term.
Steve
Illinois governor should be a single six year term, followed by a conviction for corruption in office and a twenty year prison term.
Illinois governor should be a single six year term, followed by a conviction for corruption in office and a twenty year prison term.
Couldn’t you just save time by throwing anyone who wants to be Governor of Illinois into jail for 20 years at the get go?
What the fuck does that even mean? Is this some new age trippy crap or what?
Funny, I was just talking about something similar to this to my wife (yes my poor suffering wife who has to listen to me ramble on about things economic). I was discussing costs that are not encapsulated in economic data such as foregoing treatment for a particular ailment. That pain and suffering is a cost, but one that is “external” to the economy in regards to the data. So, many economists are aware of this problem (is this guy even an economist…ahhh Wikipedia says management consulting….). Problem is how do you measure things like the pain and suffering of not getting medical treatment or household production?
Right, nobody ever talks about the broken window fallacy…never ever, and especially with regards to natural disasters. Oh wait, it comes up with practically ever disaster when some layperson makes some dumb statement and people like me (an economist) correct them.
Really? You mean politics had nothing to do with it? Nothing at all?
I know you said read the whole thing, but I really don’t see the point.
Yeah, economic data does not capture the entire picture. Wow, that is a profound conclusion/finding? Ms. Webber, go down to the local hardware store, get a 2×4 write the word “clue” on it, and give yourself a few good whacks upside your noggin.
Ben,
Yes, one can do that…if one is a dogmatist…are you a dogmatist?
I’m pretty libertarian in my views, bordering on anarcho-capitalism even. However, I do acknowledge potential short comings of that position. The problems of externalities and information asymmetries can be very significant barriers to an economy with a considerably smaller government.
I also appreciate the work of guys like Gintis and Levine who are probably far more liberal than myself. I read their stuff and don’t take their conclusions lightly at all. In fact, I find the arguments of evolutionary game theory highly persuasive. In that case, we need to consider things like reciprocity in economic interactions. Something I don’t think many libertarians/anarcho-capitalists have done.
And I’ll go even further those who talk about letting data sway their positions probably don’t. Anybody here looked at Bayesian inference and how beliefs can be tethered to data? Didn’t think so.
So, how is the view from that high horse?