Paul Krugman on the economic culture wars:

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If you try to follow arguments about economics among intellectuals whose politics are more or less left-of-center, you gradually become aware that the participants in these arguments are divided not only by particular issues--deficit reduction, NAFTA, and so on--but by the whole way that they think about the economy. On one side there are those whose views are informed by academic economics, the kind of stuff that is taught in textbooks. On the other there are people like Kuttner, Jeff Faux of the Economic Policy Institute, and Labor Secretary Robert Reich. Some members of this faction have held university appointments. But most of them lack academic credentials and, more important, they are basically hostile to the kind of economics on which such credentials are based.

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[T]he quantitative, algebraic reasoning that lies behind modern economics is very difficult to challenge on its own ground. To oppose it they must invoke alternative standards of intellectual authority and legitimacy.

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There are important ideas in both fields that can be expressed in plain English, and there are plenty of fools doing fancy mathematical models. But there are also important ideas that are crystal clear if you can stand algebra, and very difficult to grasp if you can't. International trade in particular happens to be a subject in which a page or two of algebra and diagrams is worth 10 volumes of mere words. That is why it is the particular subfield of economics in which the views of those who understand the subject and those who do not diverge most sharply.

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The literati truly cannot be satisfied unless they get economics back from the nerds. But they can't have it, because we nerds have the better claim.

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One consequence is that social science models are almost always tied to a specific social setting and are not "laws of nature." Those who advocate that these models be followed as laws are engaging not in social science but in politics.

[ 16 April 2004: Message edited by: MacD ]

1. Assumption of an ideal economic actor.
2. Assumption that it is possible to extrapolate the system from a collection of such actors, given the correctness of 1.
3. Assumption that there has been sufficient data collected to substantiate the systems developed under 1 and 2.

Until these three assumptions are better-substantiated, I remain unconvinced that mathematical models of economics are really as important as Krugman considers them to be.

2) This step is what economic theory does. Given certain assumptions about how the economy is set up (preferences, technology, market structure), we can derive testable implications. We do this all the time - and I do mean *all the time*. It is possible. If you think that we're not doing it properly, or if we're making some crucial methological error, you're going to have to cite chapter and verse. Warning: generations of very smart people who have spent their lives thinking about these issues have gone before you. It may not be as easy as you think.

3) We test them. And we have a very good understanding of statistics; economists routinely publish in (for example) the Journal of the American Statistical Asscociation. Some theories are clearly rejected, some are clearly correct, and many, many theories lie in the grey zone. Again, if you think we're missing something, you're going to have to do some homework.

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Originally posted by Oliver Cromwell:
1) I don't know what you mean by 'ideal economic actor'. In order to simplify the math, we will often make the assumption that there exists a 'representative agent'. We typically assume that the representative household knows its preferences, and that a representative firm knows - or can learn about - its technology.

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This deliberate obtuseness on your part is getting to be annoying. You're clearly intelligent; you're clearly capable of using your brain to figure out what someone else is saying. Pleading ignorance by claiming you really honestly don't know what they're talking about when it's on your turf to begin with is starting to get up my nose.

Does the term "homo economicus" mean nothing to you? Economics, in the introductory levels in particular, makes the gross oversimplification (and which is perpetuated in Robert Lucas's "rational expectations" theory, which results in the laughable conclusion that in the Great Depression, millions of people quit their jobs and laughed about it) that human beings are 100% entirely rational actors, fully possessed of all information they need to make any economic decision whatsoever (contradicted by Sen and Stiglitz, Nobel Winners 2000 and 2002 respectively, if memory serves).

This, of course, is patently untrue and leads to the natural question of why the assumption is used for more than first-order approximations instead of being utilized as the basis for a Nobel-winning theory ("rational expectations", or Milton Friedman's particular theories regarding the NAIRU).

If the rational actor theorem were entirely true, we wouldn't have recessions or inflations at all, because wages and prices would adjust fully and swiftly to changes in economic conditions.

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2) This step is what economic theory does. Given certain assumptions about how the economy is set up (preferences, technology, market structure), we can derive testable implications. We do this all the time - and I do mean *all the time*. It is possible. If you think that we're not doing it properly, or if we're making some crucial methological error, you're going to have to cite chapter and verse. Warning: generations of very smart people who have spent their lives thinking about these issues have gone before you. It may not be as easy as you think.

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Then why do economics instructors talk of "schools of thought", making economics more akin to that of theology, or philosophy?

Why do they say "there is no one -right- answer for many questions; as long as you can defend -your- answer on the basis of a logical structure, it can very well be correct"?

That doesn't sound like a discipline with strict adherence to testable and repeatable empirical data.

Even Krugman has pointed out in his book The Return of Depression Economics that oftentimes some of the best economic thinking does not necessarily require oodles of charts and graphs.

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3) We test them. And we have a very good understanding of statistics; economists routinely publish in (for example) the Journal of the American Statistical Asscociation. Some theories are clearly rejected, some are clearly correct, and many, many theories lie in the grey zone. Again, if you think we're missing something, you're going to have to do some homework.

Your last comment is disturbing. Intellectuals do not reject an argument they don't understand out of hand because its source is someone who is 'not on our side'

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The Keynesians clearly reject some of the basic assumptions of the monetarists and supply-siders, and Krugman himself has shown no love for the Austrian school, even though the latter claims (ludicrously) that they have swept to dominance of all modern economic thought. Or did you miss his broadsides at the "gold bugs" that he takes when he discusses the impossibility of their monomania of pegging every currency to gold? (Even my love of fixed exchange rates is tempered by the pragmatic recognition that the rates should change over time, but at well-timed, stage-wise intervals)

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1) I don't know what you mean by 'ideal economic actor'. In order to simplify the math, we will often make the assumption that there exists a 'representative agent'. We typically assume that the representative household knows its preferences, and that a representative firm knows - or can learn about - its technology.

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2) This step is what economic theory does. Given certain assumptions about how the economy is set up (preferences, technology, market structure), we can derive testable implications. We do this all the time - and I do mean *all the time*. It is possible. If you think that we're not doing it properly, or if we're making some crucial methological error, you're going to have to cite chapter and verse. Warning: generations of very smart people who have spent their lives thinking about these issues have gone before you. It may not be as easy as you think.

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The same issues arise in things like evolutionary biology. Everyone agrees on microevolution, which is observable in small populations over relatively small periods of time. But extrapolating this to macroevolutionary scales is still extremely complex and controversial. And I'm not talking about creationists here.

So from the Ideal Actor (which doesn't exist in evolutionary biology), how do you determine causal relations in large-scale economic phenomena? The idea seems dubious, but I can also see how many people could think they can do it.

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3) We test them. And we have a very good understanding of statistics; economists routinely publish in (for example) the Journal of the American Statistical Asscociation. Some theories are clearly rejected, some are clearly correct, and many, many theories lie in the grey zone. Again, if you think we're missing something, you're going to have to do some homework.

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Your last comment is disturbing. Intellectuals do not reject an argument they don't understand out of hand because its source is someone who is 'not on our side'.

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Deliberately obtuse? No. A reluctance to put words in peoples' mouths. 'Ideal economic actor' is a term I've never come across before. And if you look at Mandos' monst recent post, it's not at all clear he had 'homo economicus' (a term I am familiar with, BTW) in mind.

You're not the only one to confuse rational expectations with perfect information.

If you think that it's laughable that workers voluntarily leave their jobs during recessions, you might want to go look at the sticky-wage Keynesian counterpart to the Lucas model. It says the same thing - only in the Keynesian version, more workers quit and it takes longer for them to realise that real wages hadn't fallen after all. And then you might want to think about whether or not an activist monetary policy based on these theories is really such a good thing. In any case, the most telling criticism of these models is that they predict that output per worker will be counter-cyclical, which is not at all what we observe.

Intro economics instructors talk about schools of thought, but these are not characterised by identifiable groups of people who have withdrawn behind their particular castle (ivory?) walls and who spend their time sniping at each other. In macroeconomics, there still is a Keynesian tradition that makes a special emphasis on the proposition that prices and especially wages are not perfectly flexible, and that these departures from the classical model have important consequences. This proposition is part of the canon, and if a researcher makes use of it in a given application, it attracts little special comment. Sometimes people will make use of models with Keyesian features, sometimes not. But the days when identifying oneself as a 'Keynesian' had a political connotation are long gone: the most prominent academic Keynesian is currently the head of the Bush's Council of Economic Advisors. And the only place where you'll see the terms 'monetarist' and 'supply-sider' are in histories of the debates of the 70s and 80s. Neither have any meaning today, and exist only in op-ed pieces written by non-economists.

"There is no right answer for many questions". I think it's better to say that "We don't know the answer for many questions". Unless economics is the only science that has not conclusively solved all the questions facing it, I'm guessing that other fields will entertain more than one theory at a time, in the absence of convincing empirical evidence one way or the other.

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Originally posted by Oliver Cromwell:
If you think that it's laughable that workers voluntarily leave their jobs during recessions, you might want to go look at the sticky-wage Keynesian counterpart to the Lucas model. It says the same thing - only in the Keynesian version, more workers quit and it takes longer for them to realise that real wages hadn't fallen after all. And then you might want to think about whether or not an activist monetary policy based on these theories is really such a good thing. In any case, the most telling criticism of these models is that they predict that output per worker will be counter-cyclical, which is not at all what we observe.

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Please. Who the hell voluntarily quits a job when economic conditions are less than optimal? This model doesn't take into account psychological factors such as company loyalty or even straight monetary factors such as, y'know, paying the bills on time and avoiding getting collection agencies sicced on you.

Output per worker can go up in recessions precisely because the workers that get fired are a signal to those left behind that they're next unless they do exactly what the boss says. The fact that you didn't even devote one sentence to a possible conclusion like this can only be evidence that you've either forgotten all about what it was like in the days when you waited tables, or you remember and yet believe this balderdash that the productivity statistics somehow correlate with the ridiculous notion that workers don't get laid off en masse in recessions, but instead just all get up and quit their jobs and then show up down at the EI line anyway under the collective delusion that they got fired.

The fact that you could even baldly, at all countenance the ridiculous notion that the 25% unemployment in Canada and the US seen in 1930 and 1931 was in any way attributable to people all deciding to quit their jobs amidst massive economic insecurity is so far beyond ridiculous to me I wonder if we're even on the same planet.

They. were. fired.

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You're not the only one to confuse rational expectations with perfect information.

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So are you denying that rational expectations is clearly founded on such things as assuming that a worker has full and complete information on inflation, the real wage, GDP, and some other factors besides?

Come. On. This is clearly an assumption of access to information on a scale that is not true for all people or even for most people. Human beings just don't work this way.

Even Lucas later abandoned the theory and it has been modified to more accurately take into account something closer to what approximates human behavior - that people are "nearly rational", so that instead of asking for a precise, say, $4.86 per week wage increase, a worker will ask for, say, a nice round number - $4.00 instead.

Sometimes the worker overshoots, sometimes undershoots, expected inflation or national output or whatever yardstick you want.

Same with the employer and setting prices for goods. The employer might not know exactly what the expected inflation rate is, but based on recent trends he or she might go for a $2 increase instead of, say, $2.23.

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And the only place where you'll see the terms 'monetarist' and 'supply-sider' are in histories of the debates of the 70s and 80s. Neither have any meaning today, and exist only in op-ed pieces written by non-economists.

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Two of my economics texts, quite mainstream texts I can assure you, both had entire chapters devoted to supply-side models of economics.

They correctly identified that one of the issues with Keynesian demand management is that it is not capable of simultaneously attacking the problem of insufficient demand and persistent inflation, just for example, and that the solution to that was to identify economic and political variables that allow for an expansion of supply relative to demand.

The monetarist school still shows up in econ texts as well, with references to the NAIRU, and the Fisher Equation, among other things.

Backtracking.

An activist monetary policy is only useless if, as Friedman, Lucas, et al. claimed, people do perfectly adjust wages and prices in accordance with inflation or output.

However, this is clearly not the case. I haven't seen you say that the theory of imperfectly flexible wages and prices lacks validity, so I further assume you think it's true, in which case you know that the obvious conclusion is that just as people are "nearly rational" and not perfectly so, neither do they always perfectly take monetary policy into account.

Your desire to denigrate the workings of monetary policy are simply an abdication of the power of Government to private actors, i.e. Business, which is supposed to be all-wise, not capricious, and would never use its greater power vis-a-vis workers to the detriment of the latter.

[ 17 April 2004: Message edited by: wei-chi ]

So what we do is start with a simple model and compare its predictions with what we observe. It will invariably be the case that it fails in at least one dimension, so we revisit the simplifying assumptions and see which ones should be relaxed. The more complex model is then compared to the data. After a few iterations of this, the model itself may too complex to understand by just eyeballing it, so we sometimes resort to numerical techniques to evaluate its properties.

Generating a complex model of complex phenomona isn't really that hard. What we're looking for is (relatively) simple explanations.

Re: the Fraser Instutute. If that's the example you had in mind, then it makes perfect sense to be somewhat leery of taking what they propose at face value. And when the CAW comes up with a study that shows that the govt should be subsidising the auto sector, that should be taken with a grain of salt as well.

And yes, the Great Depression is often cited as a perfect example of why these theories cannot be take seriously as a general explanation of the business cycle.

These days, the 'real business cycle' (RBC) approach is widely favoured. The idea here is that expansions and recessions are associated with the fact that technical progress is not uniform: expansions occur when technical progress is relatively rapid, and recessions are characterised by productivity slowdowns. At first blush, it makes intuitive sense, and it would certainly explain why output per worker is pro-cyclical. But the standard RBC model generates some puzzling predictions of its own, so much of modern macroeconomics is preoccupied with trying to solve those puzzles.

(It's difficult to explain the Great Depression with this approach as well.)

You see, it was posited that a healthy Canadian agriculture sector in the mid-to-late 1930s was what helped Canada experience a modest recovery (which, in the context of that era, might be termed a "boom" ).

What happened then, however, was some researchers ran a model of the Canadian economy where they took out the effect of agriculture, and the boom still happened.

They asked themselves, "what else can we take out?" So they took out the tendency of people to attend post-secondary education. Canadian economy fizzled in the model.

They concluded from this that a country's commitment to educational progress even in recessions can be an important factor in moderating such recessions, by graduating technically skilled people who can get to work on renewing technological progress.

End sidebar.

[ 19 April 2004: Message edited by: DrConway ]

To be fair, I've no doubt that economics has its uses in predicting certain occurrences and behaviors, as long as there aren't too many variables. But the whole focus on GDP, monetary policy, interest rates and the like leaves me wondering what relevance this stuff to reality.

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But most of them lack academic credentials and, more important, they are basically hostile to the kind of economics on which such credentials are based.

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Speaking as a guy with an English degree and a disdain for deconstruction and postmodernism, I would certainly be quick to back mathematical economists against "literary" "deconstructionist" economic commentators. But I really don't think most on the left are anything of the sort. For that matter, Krugman's not on the left--he's a centrist. He passes for, and doubtless believes himself to be, "left of centre" in the US because the US has drifted so far to the right of late.

Krugman gives exactly two examples of this hypothetical attack by "literary" economic thinkers. One is a headline with the word "deconstructing" in it, in a context where it looks as if it basically just means "tearing apart". The other is a quote taken from unknown context, a quote from Galbraith. Is Galbraith really a deconstructionist, Derrida-following, non-math-literate pseudo-economist?

In fact, left challenges to economics tend to be based in completely different things. There have been elements of the left that are fascinated by Derrida and whatnot, but they're pretty fringe. Most left critiques of mathematical economics tend to concentrate on those economics, whether "real", "academic", or bogus and cooked up by PR flacks, which back up and give legitimacy to extreme free-market views. It is this form of economics which has the most impact on the world, by lending legitimacy to policies which the left abhors.
And the basis for left challenges of these economics is not "literary". It is often anecdotal, but more in the tradition of ethnography than literature: Leftists say "OK, according to the doctrines we see in the newspaper columns, all these people are supposed to be better off because of these policies. When we went and looked at them, it turned out their lives suck horribly and more than they used to. Ergo, there's something wrong with the doctrines."
Generally, leftists throw in some stuff about rising poverty and extreme poverty rates, proportions of people without access to basic needs and so on. The logic of the approach seems difficult to refute:
--Doctrine A says that, due to impressive and elaborate math, application of policy B should make people better off.
--Policy B is applied
--People become worse off
Conclusion: Doctrine A is false, no matter how impressive the math may be.

At this point, the question is not whether economics should use math. Of course economics should use math. The point is, clearly in such circumstances the economics being used by the policymakers is using the *wrong* math.
So then leftists look carefully into the situation and they find basically that not only is the math wrong, but there's a curious reluctance to find better math even when it exists in academic economic circles, or even to admit that anything is wrong. And then they find that while actual people may be getting shafted, the billionaires, who sponsor the economists (and commentators who sound like economists) who advise the policymakers and burble in the media, are making out like gangbusters. And so we conclude that the economics fed to the public through the papers and so on is not bogus by accident and being worked on carefully to improve things . . . it is that subset of economics that gives answers which, while they bear little resemblance to reality, are most useful to those people who are already rich and wish to become richer.
Then we look at the math pushed by that subset and find that it is based on bizarre assumptions and seems ruled by the idea that whenever the results of the math and reality diverge, it is reality that is wrong.

Economists are useful in the same manner earthquake scientists and Tornado Scientists are useful.

All branches of these less, than accurate, sciences should indeed be explored and developed, but the "danger" with economists is that they have the abiity to turn unscientific ramblings into a real effect on real situation . . . if a scientist could bring about an F3 tornado simply by predicting an F5 tornado, then I would be as distrustful of them as much as I distruct economists . . . and as Rufus points out, many of them seem to be bought out by those who have a vested interest in influencing economic trends . . . hardly suprizing that a dicpline dedicated to the idol of money might not have a more than netural take on the whole area of study!

[ 19 April 2004: Message edited by: Oliver Cromwell ]

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Is the request by Reefer to require that political policy advisors never be wrong?

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Wow, Wei, you must be a mind-reader because I didn't actually say that.....
Then again, you're not a very talented mind-reader because I didn't really think it, either.

Oliver -
I have to admire how restrained you've been in response to some fairly strong remarks about your profession. You and I won't agree on much but I hope you stick around.

FWIW, I don't know of any evidence that economists are making predictions to move the markets for their own gains. And billionaires have so many other advantages over small investors, they don't need to get economists to deliberately mislead people for them.

In terms of the other things NY said, however, I think it's fair comment that:
1. economics is far from a perfect science
2. if enough economists predict something, it can affect the outcome (although possibly in the opposite direction)
3. 1 and 2 are probably related.

[ 19 April 2004: Message edited by: ReeferMadness ]

PS: Thanks for the kind words.

[ 20 April 2004: Message edited by: Oliver Cromwell ]

I may not be a mind reader, but you mustn't be a reader at all.

[ 20 April 2004: Message edited by: wei-chi ]

In this thread, robbie_dee said:

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The problem is with your whole discipline [OC edit: economics]: by focusing on the narrow questions you often define out of your inquiry the real heart of the social problems we face, and indeed, may end up legitimizing the worst parts of it.

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Clearly not the most nasty thing ever said about economists, but there was also this bit from this recent rabble column by Greg Inwood:

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It has long been documented in academe that the influence of the mainstream economists on government policy-making is out of all proportion to their numbers. Moreover, that influence is rooted in a striking ideological homogeneity. It is said the range of ideological thought of mainstream economics is reminiscent of Dorothy Parker's description of a play she reviewed as having run the whole gamut of human emotion from A to B.

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that got me to thinking about this issue again. My initial reaction to Inwood’s column was akin to that of one of my favourite Dilbert comics, in which the imbecile boss tells Dilbert: ‘your analysis disagrees with my intuition’. Economists know that the proposition that free trade is welfare enhancing has survived the crucible of two centuries of theoretical inquiry and statistical analysis unscathed. One wonders what Inwood would say about the ‘striking ideological homogeneity’ among mathematicians on the proposition that 1 + 1 = 2.

And then I saw at the bottom if the page that Inwood is a poli sci professor, and I understood his context a little better. I don’t know if I’ve mentioned this here before, but I have BA with a double specialist in poli sci as well as in economics. Political scientists often congratulate each other on the wide range of opinions that are held within their field, but to my mind, they’re just making the best of a bad situation. Baldly put, political scientists have no way of distinguishing good ideas from bad. They have no tradition of a formal axiom-proposition methodology that could be used to point out errors in logic, and since their theories have virtually no predictive content, they can’t use statistical analysis to identify which theories are consistent with the data that we observe and which are not.

So whenever a new idea emerges in political science, it is simply added to the pantheon of existing theories. Older theories aren’t proven wrong; they’re simply demoted to the status of ‘outdated’. Saying that political science incorporates a ‘broad spectrum of thought’ is just another way of saying ‘we have no way of figuring out which of these theories is right, so you might as well pick the one that most closely adheres to your initial prejudices.’

Obviously, that’s a bit of a caricature, but it does explain why I made the switch to economics. It wasn’t a question of whether or not I found the questions raised by political science were interesting – I did. What I found more and more frustrating – that is, as I learned more about economics – was the almost total inability of political science to provide answers to the questions it raises.

Economics has by no means solved all of the problems facing it, but we have established a methodology that allows us to separate bad ideas from good. What you may call a ‘narrow focus’ is what we call ‘analytical rigour.’

[ 11 February 2005: Message edited by: Oliver Cromwell ]

Teaching aids and other cool stuff

[edited to add:] Spoke too soon. There are in fact continuous-time models with altruism, whose predictions take the form of a differential equation.

[ 11 February 2005: Message edited by: Oliver Cromwell ]

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Generating a complex model of complex phenomona isn't really that hard. What we're looking for is (relatively) simple explanations.

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The predictive capacity of all such simplifications are rather poor. They only work in cases where you can actually expect homogeneity, and not always well even in those. You can develop simple, large-scale properties of elemental gases. But extrapolate that to the weather and we're in mysteryland. Obviously, one difference is that the time-scales under which you can measure the behaviour of a gas in a box is quite different from that of the weather. So it is with economics, when we are talking about cycles on the span of decades.

The simplification you seek, connecting large scale behaviours to assumptions about small-scale behaviours, as I said, cannot be well-founded without a general understanding of how individual agents form complex systems. And I am here to tell you the bad news: there is as yet no such science, or we'd be able to predict the specific parameters of any number of systems which we do not have predictions for. The same with economics.

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I had the impression that you'd reject academic studies that had survived the peer-review wringer. Peer review in economics is brutal: acceptance rates for papers in the top journals are in the single digits. Even second-tier journals such as the Canadian Journal of Economics has acceptance rates of 15% or so. If a study can survive the professional scepticism of other academic economists - that is, the people who are most aware of how easy it is to make an argument that is superficially plausible but which is in fact incorrect - then it should be taken seriously. Not swallowed whole, but taken seriously.

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Oh, and O.C. have you read the Ingenuity Gap? Care to share your thoughts?

As slippery as a slope as it is, I have to admit that I sometimes wish economists would just be more honest about cultural effects and values and its impact on potential models, and deliberately set out to quantify them.

I have a half-written, half-researched peice buried somewhere here that attributes Japan's collapse to their conception and reality of space, something a NA would never think of including or needing to include given the very different experiences. Maybe I'll try and find it tomorrow.

My g/f is sleeping so I cant get my quote book but somebody said 'Analyists have predicted 9 of the last 5 recessions'. Or something like that.

Weather: all variables are scalar i.e. measurable variables.
Economics: not all variables are scalar (how do you quantify consumer confidence?)

Weather: functional relations (i.e. the relations between temeprature, humidity, atmospheric pressure, etc.) often exactly known
Economics: they are usually conjectural.

Weather: Uninfluenced by politics or fashion
Economics: influenced by both

Weather: wholly non-reflexive i.e. if you predict what the weather will be tomorrow, your prediction won't affect it.
Economics: highly reflexive i.e. your economic "prediction" can affect the way the economy behaves, changing the prediction or creating "self-fulfilling prophecies".

What’s troubling is the jump from there to ‘economists don’t know anything, so there’s no point in reading anything they have to say. The pet theory that I dreamed up all on my own is just as good, and I bitterly resent any suggestion that I might be mistaken.’ There are ways of evaluating which theories are good and which are not, and it’s all too often that a long-exploded fallacy is presented as serious commentary. In Pop Internationalism, Krugman (I keep citing him because he writes well, and because these references are easy to track down; this is not an Appeal to Authority – it’s an Appeal to Someone who Writes Better than I) offers the following quote from Paul Kennedy, the Princeton history professor and author of such well-known books as The Rise and Fall of the Great Powers and Preparing for the 21st Century:

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Granted, again, that modernization is unstoppable, how does it work when production of an item takes place not just in a specific region like western Europe in the 19th century or East Asia in the late 20th century, but globally … when there are 50 countries, with varying standards of wages, capable of producing soybeans, and 70 countries capable of producing steel? Adam Smith’s argument in favor of free trade and specialization, that it made no economic sense for both England and Portugal to strive to produce wine and textiles when England’s climate made it a better textile producer and Portugal’s climate made it a better wine producer, doesn’t address this reality of multiple, competitive sources – yet it is the basis of modern, free-market economics. What if there is nothing you can produce more cheaply or efficiently than elsewhere, except by constantly cutting labor costs?

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This was written by a well-known and respected author, presented confidently as serious commentary. But as Krugman notes, if you actually understand these issues, the only proper response to this is incredulous laughter.

Here is another example where knowing something about economics would have saved many trees.

I really don’t have a problem if someone looks at an economist’s argument, reflects a bit, and rejects it on the basis of a point of logic, or because there’s data that cannot be reconciled with the argument’s predictions – that’s the basis for a genuine debate, where the rules of logic and evidence apply.

PS: Mandos, when you said

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I have been reading the blogs of economics professors, etc, for a while. There are definitely a set of assumptions that they share that, like I said, I don't believe are well-founded.

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I had to wonder: what did you do when you realised that you disagreed with these assumptions? Did you crack open a textbook in order to get some insight as to why those economics professors make those assumptions? Or did you just decide that they were a forteriori mistaken?

[ 16 February 2005: Message edited by: Oliver Cromwell ]

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Economists know that the proposition that free trade is welfare enhancing has survived the crucible of two centuries of theoretical inquiry and statistical analysis unscathed.

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[ 17 February 2005: Message edited by: Surferosad ]

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I had to wonder: what did you do when you realised that you disagreed with these assumptions? Did you crack open a textbook in order to get some insight as to why those economics professors make those assumptions? Or did you just decide that they were a forteriori mistaken?

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As for free trade = welfare enhancing, again, it is easy to pass all kinds of tests if you are the one defining them... The question you should ask then, when you evaluate our criticisms, is this: does the policy have results that we, in particular, are generally interested in?

And as for the mentality of economics critics that you caricature, I go back to an earlier assertion that yes, indeed, since I think economics is not well-founded, I think an ideologically-up-front theory (ie, one that does not claim to be a neutral policy-generating machine) is at least as valid as one that is generated from economists. I note the vast cognitive dissonance in, for instance, Brad DeLong's position on US Social Security: he is a "liberal privatizer." It's a simple example, in that any force in the US that supports privatization must, by its own privatization ideology, aim to dismantle the system itself... Policies based on certain ideologies seem to have, surprise, results that reflect those ideologies...

Now is economics useless? I don't think so. I think that it has a long way to go before it can be trusted to be the neutral and useful tool it claims to be. I will trust it when it gives me a satisfactory solution to, for instance, this question:

"How would you design a trade policy that enriches workers in poor countries without displacing workers in rich countries and, overall, reducing the inequality between classes within countries?"

I have never seen an answer to this from a "mainstream" economist. Do you have one? If there isn't an answer, than I am forced to suspect that economics has an unacknowledged ideological bias, and is no different from other more openly held ideological positions.

So what is the use of economics? I think it is useful as a branch of history, at the moment. Some of the tools are good for analyzing, measuring, and describing what happened, even though there is little basis as yet for the assertion that this reflect what will happen. Have you heard of Hidden Markov Models? This is a Hidden Markov Model; it needs more training data.

Do I think that economists should give up the predictive project? Of course not. Like any science, it takes time to reach a level of reliability to produce a field of engineering. I am not trying to put you out of a job. But I wish economists would admit the biases in their machine.

[ 17 February 2005: Message edited by: Mandos ]

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The study of resource allocation

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How so? I know a couple of people who study the economics of crime.

[ 17 February 2005: Message edited by: Oliver Cromwell ]

[ 17 February 2005: Message edited by: Mandos ]

[ 17 February 2005: Message edited by: Oliver Cromwell ]

Systems are designed to promote analyses are technically useful to the existing order, and render it difficult for those within the structure even to contemplate that the existing order is not like breathing air.

[ 18 February 2005: Message edited by: Mandos ]

When I was 19, I took Econ. 110. The third lecture, there in bold print in my textbook and repeated on the slide at the front, were the words

PEOPLE ARE HAPPIEST WHEN THEY CONSUME.

Full stop. Little contrarian that I am, I asked if this piece of wisdom had been handed down by say . . .Socrates, Camus, . . . the Bible . . . ?
No answer. None. The professor just literally did not answer me.

Economics ignores the role that force and power play in the allocation of resources. It ignores that consistently resources were not traded between nations rather nations with more military power went in and plundered other nations. The wealth of the western world was dependent on this plunder as well as the asset of forced labour. If you are trying to discuss two hundred years of free trade than obviously you are ignoring or pretending that the forces of imperial plunder are somehow not relevant to economics. These forces of plunder are not questions only of history either the very principles are enshrined in the rules and regulations of international commerce and finance. The enshrinement of these rules were made possible by the theft of resources using military force.

The dynamics of force and power also operate within states as they do between. It is a convenient fantasy that the nature of capitalism either occured spontaneously or arose out of some democatric process. The rules of capitalism are imposed and maintained by force.

I have spoken at other times at the complete lack of construct validity in economics.
Examine a simple economic construct such as employment/unemployment. Employment has no reality as anthropological construct(apart from being a social construct)it has no reality at a human psycho-physiological state (apart from again a social definition of an organism engaged in a survival strategy) You do not speak of a hunter and gatherer being unemployed or a subsistence farmer being unemployed any more than you would speak of another primate being unemployed.

I am certainly not making any arguments of a regressive return to some imagined state of grace. I am merely pointing out that unemployment is not something that occurs naturally rather it occurs when people are forceably prevented from utilizing existing resources. Capitalism and the labour markets operate by actively controlling who has access to resources. This is certainly not trade.

I'm sure OC will only respond with puzzlement or dismissiveness but this is one of my many problems with economics it imagines it's constructed variables are discrete and independent from the existence of other social forces such as the dynamics of power.

Economics unfortunately creates an elaborate mathematical fantasy world whose constructs do not accurately reflect social reality. Not only do economic contstructs not reflect reality but the instruments and indices used to measure these constructs remove the level of analysis even further from reality. Economics can not be said to be empirical if you are only observing your own creation.

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the critiques are not literary but philosophical. I know this is a whole new argument but I don't think it is possible to be genuine in creating models or interpreting results without utilizing philosophical enquiry.

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Another way of summarizing N.R.K's post as a whole would be to say that economics is epistemologically challenged; or that the social sciences in general have never established themselves epistemologically in the way of math or the hard sciences.

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Originally posted by skdadl:
... the social sciences in general have never established themselves epistemologically in the way of math or the hard sciences.

It may be that that cannot be done, of course, but problems arise when practitioners confuse the (often contingently useful) work they are doing with science.

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I fully agree with this. In fact, I would go further to question the epistomological foundations of natural sciences as well. Social science should be renamed social studies.

In my discipline, this extreme positivist bias makes for papers filled with charts that count the number of nuclear arsenal each country has coming to the conclusion that a country that can kill off a population 50 times over is at a disadvantage relative to a country that can kill off a population 65 times over. The math of these analyses has become so divorced from social reality that stops being useful. People are right to question it. Too bad you aren't allowed to until you've proved yourself by playing the game by their rules for 30 or more years first.

And so if economics is about allocation of resources, then why are the forests dwindling world wide ?. Why are sovereign nations being attacked over oil ?. Why are there people in Nova Scotia burning oil for heat while natural gas pipelines cut through their backyards and extending south of the border ?.

Why has 24% of the High Plains agricultural land in the States become barren since 1980 ?.

Why is the important Ogallala acquifer dropping by six feet a year ?.

Why do we feed ten pounds of food to a beef cow to gain one pound of food ?.

Why did Chicago School of Economics fizzle out in Chile, and why are economists still pushing privatisation of whole economies even though it made a basket case of Chile and looking pretty sad in the IMF reformed third world compared to countries where mixed economy and state intervention is the norm ?. Or is laissez-faire a political idiom made new again by conservative politicians ?.

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Originally posted by N.R.KISSED:

Economics ignores the role that force and power play in the allocation of resources.

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And fraud, let's not forget fraud. Most economics seems to more or less assume that there would be no point in, say, spending money on content-free lifestyle ads. How big an industry is that? How deeply ingrained is it in the whole capitalist economic project? Now add in the PR industry, which is not the same. Now talk about the messages preferentially pushed and suppressed in the media in general, with a crumb at the tip of the iceberg being the pseudo-economist commentators that Mr. Cromwell dissociates the real profession of economist from.

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Originally posted by Oliver Cromwell:
it may simply be that no-one thinks the question is interesting. If you do, then you're welcome to contribute.

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Or it may be that the people doing research on that question get rejected from publishing in the major journals, and thus new contributions are not welcomed. I'm not saying "all economics is like (blank)" but if it's anything like IR, you cannot move onto alternative modes of analysis without a) first paying tribute to the establishment and b) making one's way within the establishment (on their rules). I'm not saying "smash the universities" here or anything but it seems a little simplistic to say "you're welcome to contribute", without acknowledging the hegemonic status of the disciplinary establishment.

If I'm wrong and there is such as thing as people making a living in "DIY academics", I'd *love* to learn about it.

Edited to add: If I had read this thread before Greenspan's honorary graduation from my school, maybe I would have actually attended out of sheer interest.

[ 18 February 2005: Message edited by: dokidoki ]

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Or it may be that the people doing research on that question get rejected from publishing in the major journals, and thus new contributions are not welcomed. I'm not saying "all economics is like (blank)" but if it's anything like IR, you cannot move onto alternative modes of analysis without a) first paying tribute to the establishment and b) making one's way within the establishment (on their rules). I'm not saying "smash the universities" here or anything but it seems a little simplistic to say "you're welcome to contribute", without acknowledging the hegemony]ic status of the disciplinary establishment.

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Well, yes and no. My own reading is that if you're using using standard techniques to discuss a new topic, it's not hard to get published; the innovation is the topic itself. If you can create a new field of study, you're only a hop, skip and a jump from Stockholm.

But it is true that there's a great deal of inertia when it comes to introducing new methodologies - I've received some rejection letters that still rankle. Then again, I'd be disappointed if people weren't skeptical about techniques that hadn't been road-tested.

[ 18 February 2005: Message edited by: Oliver Cromwell ]

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But the 'economists ignore [insert phenomenon here]' deserves some comment.

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Granted, there are economists studying everything under the sun, including the impact of power on economics, ... it's just that so often, they do such a piss-poor job of things.

Regarding mathematics, algebra, whatever, .. I stand guilty of illiteracy. But it isn't that I'm confused by the math, so much as I'm unimpresseed with the results.

I once skimmed an article presuming to study the results of resource depletion on energy markets. I skipped the four pages of formulae and got to where the economist proceeded to explain the conclusions of his work. He started off by apologizing for the fact that his formula didn't take into account the fact that as one resource became scarcer, its price would rise, thereby stimulating new exploration.
Having failed to account for what one would normally think would be an elementary point, I decided to dismiss the entire article. I mean, it's useless at that point.

I've no doubt that mathematical models of comparative advantage are true within their own limited parameters, but, and this is the point, their narrow parameters are simplistic and inapplicable to reality.

Political-Economy cannot be a science. It is too much a part of the soup of reality, that a good portion of mumbo-jumbo is required to make any economic policy advice translate into beneficial results.

I found that Krugman's piece was sadly skewed by his smug dishonesty. It is so not the case that the opponents of the lacklustre wizards behind IMF structural adjustment policies and other self-serving claptrap are only opposed by non-academics and university English departments.

I think I read "Pop-Internationalism." Is that the one where he repeats Ricardo's comparative advantage model over and over and over and over, until, in one of the very last articles, he introduces a THIRD item of manufacture, instead of the usual two, to demonstrate the theory's robustness in the real world?

Economists as Hacks

note: I actually like Krugman's ability to "deconstruct" bush jr. regime idiocy. but he always goes off the rails on free trade.

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One satirical device Krugman employs is to tell his readers that he has been accused of being “a hired tool of global capitalism.” This “upset me greatly,” he reports, causing him to ask his “masters” for a raise to compensate for the pain. This cute evasion permits him to avoid discussing the fact that he was indeed “hired” by the New York Times, an institution that is advertising-based and clearly a part of the corporate establishment, and that he was surely vetted by its editors and found to meet their standards, like Thomas Friedman and Richard Bernstein.

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Although Krugman chides those with whom he disagrees as hacks for their carelessness in the use of fact, and for always “singing the same tune,” he doesn’t engage in self analysis on these matters. Thus if everybody important in economics says that the “natural rate of unemployment” is 5.5-6 percent, Krugman says the same, and accordingly, he assured readers of the Times back on February 4, 1996 that this 5.5-6 percent unemployment limit precluded a more expansionist macro-policy. Krugman and this mainstream consensus have been refuted by the economic history of the past five years.

If the growing consensus is that government is a drag on the economy, Krugman agrees: “The evidence suggests that it is difficult for the government to have any visible effect on the economy’s long-term growth rate” (NYT, Op. Ed, September 4, 1996). This is a high-school level misreading of economic history here and abroad; U.S. industrialization in the 19th and much of the 20th century was underwritten by government, and the slowdown of growth after 1970 was almost surely tied to the weakening of public investment in the wake of the bipartisan attack on “big government.” That the long-term growth rate of post-World War II Japan and the Asian “tigers” was successfully promoted by their governments’ aggressive interventionary policies is not part of Krugman’s “evidence” either (see Alice Amsden’s Asia’s Next Giant and Robert Wade’s Governing the Market).

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In the case of the IMF-World Bank controversy, however, Krugman once again reverted to both his uncritical orthodoxy and carelessness with fact as well. He attacked CEPR economist Robert Naiman’s critique of the World Bank’s handling of Mozambique, where the Bank had forced Mozambique to curtail protection of the cashew refining industry and allow freer export of raw cashew nuts. Krugman argued that this protectionism had only helped the powerful refiners at the expense of “millions” of small farmers (“A Real Nut Case,” NYT, April 19, 2000).

But Krugman based his critique on free market ideology and a reiteration of World Bank apolo- getics, and “ignores the 1997 Deloitte & Touche study commissioned by the World Bank, which found that Mozambique’s peasants did not gain anything from liberalized exports of raw cashews” and which recommended that the processing industry, recovering from the crushing war of destabilization by South Africa, be given needed protection. Krugman obviously also failed to read the detailed analysis of the World Bank’s policy and its background by Joseph Hanlon on which Naiman had relied. The quote above is part of Naiman’s letter of response to the New York Times, which the paper chose to cut, as the paper and its employees (including Krugman, Friedman, and the editors) presented a unified phalanx of support for the IMF and World Bank. In reply to all this, Krugman would no doubt point out that he is still free to write what he wants, so he is no mere hired hack.

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Originally posted by Oliver Cromwell:
Baby steps. Models are approximations to reality. And, pretty much by definition, approximations are literally false - but they can still be useful.

Much of our work consists of constructing models that are better and better approximations, so it is standard practice to point out directions for future research.

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I wouldn't claim [not deny!] that every model should be discarded because they don't account for everything. Their might have been some small esoteric use for that article on resource depletion for the experts. The point is to acknowledge shortfalls of the discipline and not be so dismissive of outsiders who point to, oh, i don't know, discrepancies between the claims of free trade-small government theories and the results.

[btw: the above in no way, shape, or form, means that i endorse any and all criticisms of mainstream economics.]

[ 18 February 2005: Message edited by: thwap ]

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Models are approximations to reality.

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Originally posted by thwap:
Edward Herman on Paul Krugman:

Economists as Hacks

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This brings to mind a quote from the opening post in this thread:

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[T]he quantitative, algebraic reasoning that lies behind modern economics is very difficult to challenge on its own ground. To oppose it they must invoke alternative standards of intellectual authority and legitimacy.

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Herman doesn't seem equipped to actually challenge economic theory; he seems content with sly innuendo to the effect that we're all bought-and-paid-for stooges of the Evil OppressorsTM.

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The problem seems to be that neither you nor Krugman can distinquish epistemology, scientific theory, and scientific validity, specifically construct validity from data analysis.

It's always back to the math. Look at my math! see how pretty! Do you wanna see my stats! What you don't seem to acknowledge is that it is quite possible to have mathematically internally consistent or reliable models that are distinctly removed from observable , measureable , discrete and independent variables. Economic constructs do not have an existnece beyond the social definitions assigned to more basic forms of human behaviour and interaction.

Your only response when not resorting to the logical fallacy of an appeal to authority either of the mathematical discipline or the intelligence of those in the field is to insist that only academic economists are able to understand any of the issues that have been discussed in this thread. There is a massive flaw in this reasoning in that in order to become an academic economist you need to accept the prevailing assumption that economics is scientifically valid, to this you need to avoid deeper questions concerning construct validity, not to mention the scales, intruments and indice that proport to measure these underlying constructs.

My early statement concerning colonial plunder, theft of land, and enslavement of labour(all empirical realities) was in terms of obvious confouding variables. The question is a valid scientific query and you do not need algebra to understand it or answer it i would think.

How is one able to speak in terms of free trade when economic prosperity in both europe and north america was not soley dependent on trade and technology but highly dependent on forced removal of resources, conquering of land and enslavement of people? I confess I have not done extensive readings in economics but I have never seen any of these factor discussed as potential confounding variables or heard an arguement on how they might be controlled for.

[ 19 February 2005: Message edited by: N.R.KISSED ]

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Thing is, you haven't dealt with NRK's criticism. ie, that the categories that economists deal with are very far from Natural Kinds. The question here that we are trying to answer is this: why should we listen to economists? If economics as currently practised doesn't answer the questions that we're asking, then...?

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This is too much of a generalization. There are some economists whose models have little to do with physical and social reality, there are some who deal with resource depletion and environmental impact, and there are those that try to deal with physical, biological and social realities in an wholistic fashion.

There are a number of definitions of economics readily available on the web, none of which satify me, as they are not inclusive enough. At least Oliver Cromwell did not define it as "the allocation of scarce resources".

I was perhaps too hard on classical ecomomists like Ricardo, Sey and Malthus, as they had some excuse for not considering resource depletion and environmental impact, if not the negative impacts of imperialism. It is the neo-classicists and their brethren and offspring that that I should have ridiculed more.

It sounds like the "culture wars" that started this topic are fairly moot considering physical, biological and social realities, and that people like Daly have more useful things to say.

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Those who speak, as many do so glibly, even mindlessly, of a return to the Smithian free market are wrong to the point of a mental vacuity of clinical proportions. It is something we in the West do not have, would not tolerate, could not survive. Ours is a mellow, government-protected life; for Eastern Europeans, pure and rigorous capitalism would be no more welcome than it would be for us." - JK Galbraith

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- an explicit statement of all assumptions, and
- a logical and internally-coherent derivation of the implications of these hypothesis, and
- a statistical analysis that supports the hypothesis that the model is a reasonable approximation for what we observe.

I honestly can’t see what’s objectionable there. Is any one really arguing that we should place more weight on arguments in which

- some or all of the assumptions are hidden, and
- the analysis makes errors of logic that may result in internal contradictions, and
- no attempt is made to reconcile the predictions of the model with the data?

As far as I’m concerned, anyone who answers in the affirmative has removed themselves from any intelligent debate on economics.

If you object to certain of the assumptions that are made, if you think that errors of logic have been made, or if you think that you can improve on our statistical analysis, you are cordially invited to join the debate. But first, as a courtesy to those who have gone before you, you are asked to do some background reading.

[ 19 February 2005: Message edited by: Oliver Cromwell ]

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- an explicit statement of all assumptions,

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[There are almost certainly more readable versions somewhere - such as an undergraduate textbook. This was found in a google search for 'assumptions' 'first welfare theorem'.]

[ 19 February 2005: Message edited by: Oliver Cromwell ]

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Alright, here’s my point - again. Economics as it is practiced by economists requires:
- an explicit statement of all assumptions, and
- a logical and internally-coherent derivation of the implications of these hypothesis, and
- a statistical analysis that supports the hypothesis that the model is a reasonable approximation for what we observe.

I honestly can’t see what’s objectionable there. Is any one really arguing that we should place more weight on arguments in which

- some or all of the assumptions are hidden, and
- the analysis makes errors of logic that may result in internal contradictions, and
- no attempt is made to reconcile the predictions of the model with the data?

As far as I’m concerned, anyone who answers in the affirmative has removed themselves from any intelligent debate on economics.

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Let's assume that raw material production and export are the optimal sectors for a nation to concentrate on.

Let's assume that developed nations will not continue to perpetuate their advantages in manufacturing and finance.

Let's assume that developed country farmers will not retaliate against successful underdeveloped agriculture imports.

Let's assume that even if your raw material exports are blocked by developed country protectionism, and your financial sector is dominated by outsiders, and y ... well you get the picture.

And, you didn't really address the substantive parts of Herman's critique of Krugman.

In case it's not clear: I, personally, think that there are insights from the type of economics that Krugman, etc., practice.

But let also be clear: When they dogmatically stick to the same policy recommendations, regardless of the questions asked, and when they glibly dismiss facts from their analysis (whether from other economists or from outsiders) they renounce the right to be taken seriously.

Herman pointed out that the NYT is advertising driven, is very much a corporate entity, and that Krugman's attempts to evade the reality of his position failed in their attempt to belittle his critics.

Krugman said that a 'hack' always comes up with the same answers no matter what the question. Herman shows that Krugman is as guilty of this as the anyone else.

From the title of Krugman's article about Mozamique's cashew farmers, he allowed his name to go under the title: "A Real Nut-Case" about the economist who recommended protectionism for the cashew refineries. Herman shows, quite clearly, how Krugman ignored serious study of the realities of the cashew refining business in that country (with the NYT editing references to the Deloitte & Touche study in the "nutcase's" reply to Krugman) in favour of lining up yet again, with the IMF & World Bank's dogmatic insistence upon free trade.

The rest of the essay has more criticisms. I'm not sure how mathematically challenged an economist Edward Herman is. Perhaps he knows his stuff as well as Krugman?

So far as glib dismissals of fact: I'm not a historian, but I studied the debates on the New International Economic Order in the 1970s, and while there were good points on both sides, there appeared to be far too much 'talking past one another' and not accepting possible truths spoken by each side.

Very much like what appears to be occuring here.

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Originally posted by Oliver Cromwell:

Political scientists often congratulate each other on the wide range of opinions that are held within their field, but to my mind, they’re just making the best of a bad situation. Baldly put, political scientists have no way of distinguishing good ideas from bad. They have no tradition of a formal axiom-proposition methodology that could be used to point out errors in logic, and since their theories have virtually no predictive content, they can’t use statistical analysis to identify which theories are consistent with the data that we observe and which are not.

So whenever a new idea emerges in political science, it is simply added to the pantheon of existing theories. Older theories aren’t proven wrong; they’re simply demoted to the status of ‘outdated’. Saying that political science incorporates a ‘broad spectrum of thought’ is just another way of saying ‘we have no way of figuring out which of these theories is right, so you might as well pick the one that most closely adheres to your initial prejudices.’

Obviously, that’s a bit of a caricature, but it does explain why I made the switch to economics. It wasn’t a question of whether or not I found the questions raised by political science were interesting – I did. What I found more and more frustrating – that is, as I learned more about economics – was the almost total inability of political science to provide answers to the questions it raises.
[ 11 February 2005: Message edited by: Oliver Cromwell ]

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I feel a need to speak up here.

First of all - if I ever have another break with reality and submit myself to another graduate degree, it will likely be in economics. My current work touches on a lot of economic theory (and I have the good fortune to work with and learn from some excellent economists), but I'd like to dig in myself.

Second - I started my education in economics, and moved to political science for almost the exact same reasons OC went in the other direction. In the same way that OC has outlined a fairly popular, and dramatically inaccurate, caricature of political science. I developed much the same opinions about the study of economics from the small set of courses I took.

There is a healthy aspect of political science that uses statistical analysis. We may (or may not) be as advanced as economics has become in much of our analysis, but on the other hand we are working with a somewhat more complex set of variables.

That being said, there are various branches of political science, not the least of which is 'political theory', more accurately termed political philosophy. This is a very important type of thinking, which often provides us with starting points for the more scientific analysis. Much the same as economics started with philosophy, and then evolved into a more evidence based discipline. In both cases, the popular sphere tends to see the politically motivated analysis and theories get the spotlight.

The article is "An Attack On People’s Movements"
by Vandana Shiva.

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I bought Jagdish Bhagwati's book "In Defense of Globalisation" with a hope that it would be stimulating and challenging, and would move the debate on economic globalisation and alternatives to it to the next stage.

I was deeply disappointed and saddened. Disappointed because Bhagwati is recognised as a leading intellectual, but his book is intellectually dishonest and sloppy. Saddened because a fellow Indian is ignoring the farmers suicides, the hunger deaths, the creation of unemployment by the policies of trade liberalization and economic globalisation, and defending the projects and profits of MNC's by attacking those of us who struggle to defend our rights and our freedoms, our planet and our health, our livelihoods and our cultures.

The book should have been called "An attack on peoples' movements" not "In defense of globalisation" because its entire content is an attack on civil society, its institutions and its leaders. There are no arguments in defense of globalisation. There are no empirical facts, no concrete realities. The dominant paradigm has to be loosing when one of its leading proponents spends more time quoting Shakespeare than giving us a picture of people's economic realities.

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Prof. Bhagwati's defense of globalisation is not just based on attacking strawmen. It is based on an imaginary globalisation. He identifies "flows of technology" as an intrinsic component of globalisation. But IPR's block technology transfer and TRIPS promotes monopolies on seeds and medicines and piracy of Third World biodiversity and indigenous knowledge.

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If you had solid arguments and evidence in defense of globalisation, you would have responded to my books Biopiracy, Stolen Harvest and Water Wars. You would have engaged in a serious and informed debate on why Indian peasants are committing suicide in thousands, and how agriculture trade can be regulated to protect farmers livelihoods and consumer health.

When arguments are substituted by such false, ad hominum attacks as you have made on me, you have already lost the intellectual contest. It is time for you to bow out gracefully from the debate. The debate will continue and it is ordinary people defending their rights, who will determine its outcome. Not armchair intellectuals like you.

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Alright, here’s my point - again. Economics as it is practiced by economists requires:

- an explicit statement of all assumptions, and

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- a logical and internally-coherent derivation of the implications of these hypothesis, and

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- a statistical analysis that supports the hypothesis that the model is a reasonable approximation for what we observe.

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If you object to certain of the assumptions that are made, if you think that errors of logic have been made, or if you think that you can improve on our statistical analysis, you are cordially invited to join the debate. But first, as a courtesy to those who have gone before you, you are asked to do some background reading.

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Is it that we are
1. simply uninformed?
2. incorrect in our logic?
3. are starting from incorrect ideological and moral precepts?
4. some combination of the above? If so, what combination?

I think that the answer to this line of questions may go some distance in clearing up these apparent misunderstandings.

[ 19 February 2005: Message edited by: Mandos ]

You have indeed made those point about the logic used in constructing our models, and about the sample size problems that econometrics faces. But since you literally don't know what you're talking about, and since you won't look these things up on your own, I'm losing interest in what you have to say about these matters. It's time for you to do some homework if you want to be taken seriously.

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Originally posted by MacD:
"The math" is a model of the world, not the world itself. The problem (or challenge) of economics, and social science in general, is that the systems they study (i.e. people) have their own ideas and do not feel bound by mathematical models that academics develop. [Stephen Hawking does not have this problem as black holes and photons tend not to be very politically motivated.]

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One consequence is that social science models are almost always tied to a specific social setting and are not "laws of nature." Those who advocate that these models be followed as laws are engaging not in social science but in politics.

[ 16 April 2004: Message edited by: MacD ]

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As for your last question, I do think the problem is that progressives are simply uninformed about what economics has to offer.

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OK, you want background reading, well let's look at the lecture notes you posted. Use of words like "Competitive" and "Market" and "Property Rights" in what appear to be foundational concepts look rather suspect to many of us. We've outlined why they are suspicious.

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You have indeed made those point about the logic used in constructing our models, and about the sample size problems that econometrics faces. But since you literally don't know what you're talking about, and since you won't look these things up on your own, I'm losing interest in what you have to say about these matters. It's time for you to do some homework if you want to be taken seriously.

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I am not planning to get an economics degree any time soon; if that's what you're asking, we may as well stop right there. My objections regarding logic and sample size really come prior to any "economics" project at all. So I have to wonder, what you think I would gain by "looking something up". What would I look up? Do you seriously think that I'd find something that I would agree refutes me? If you really do think so, then, like I said, I'm not an economist, so you'll really have to point out to me where to look. Somehow I don't think that these objections are covered in an intro textbook.

I've told you what I expect of you, but I don't really know how much you expect me to do before you "take me seriously" barring changing careers. One of the problems seems to be that you want criticisms to emerge from within the framework of economics, when some of us (me included) actually find the basic concept to be illconceived.

[ 20 February 2005: Message edited by: Mandos ]

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- an explicit statement of all assumptions

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I would insist on a clear statement, not just an explicit statement.

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Someone's lecture notes on the conditions in which markets will yield optimal results.
[There are almost certainly more readable versions somewhere - such as an undergraduate textbook. This was found in a google search for 'assumptions' 'first welfare theorem'.]

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Is this the best you can do? The first welfare theorem (that every general equilibrium involves a Pareto efficient allocation(there is no other allocation in which some other individual is better off and no individual is worse off)) depends on three basic assumptions, the first of which is crucial:

1. No Externalities: Each agent's consumption decision does not affect the utility of any other agent.
2. Price Taking Behaviour: Each agent in the economy behaves as a price taker.
3. Prices are Known: All the prices for each of the goods must be known to each of the agents. Importantly, the consumers do not have different (asymmetric) information concerning the goods.

Market failure arises when any of these conditions are not met.

There are economists and there are economists. OC has not said what school of thought he belongs to or what his specialty is (at least not in this discussion).

E. Preferences: We assume that each individual has a preference ordering . . .

OK, that's a problem. Oddly relevant to my last post, actually. This assumption is almost certainly dead wrong, and in important ways. And very unsophisticated. As long as we're going to trash the foolishness of literature studies, I'd like to suggest that this assumption is reminiscent of T.S. Eliot's ideas about the nature of literary canon in "Tradition and the Individual Talent"--he assumed that canon just is, and that as a new work is created, the existing order of works from most to least important sort of moves over one to fit it in where it belongs. Sounds kind of weird, doesn't it? Similarly, this assumption seems to say that preferences just are, people are presumably born with a full-blown set which is incapable of alteration and owes nothing to the cultural matrix they're embedded in, to peer pressure, or to advertising. Preferences are not created or shaped, and therefore the flow of information is irrelevant to the market. People want Nikes because they were born wanting them, and solely because Nikes are in some inherent way that has nothing to do with Michael Jordan superior to other footwear. Or at least, any impact that Nike advertising may have is marginal enough in terms of its impact on the shape of the footwear market that adopting this assumption doesn't make us lose any important data--massive branding efforts couldn't possibly cause Nike to become a major force in its market, or give it the ability to influence price-setting, or anything. Wait a minute . . .

Later on, it talks about the "2nd Welfare Theorem". A couple pages after introducing this theorem, it discusses why having this thing around is useful. Apparently, it implies this and that, which implies the other thing, which in the end seems to boil down to:
"The solution to the planner's problem is the C.E. for the private economy with its endowments and system of property rights."

So, that's what the theorem is good for--it gets the answer that's wanted. So, what does that theorem assume?
Mostly some stuff I don't understand, which could be true or could be bollocks for all I know. But I did notice
"Assumption 4: The aggregate production possibility set is convex. (There are no increasing returns to scale)

But i really do disagree with Krugman's point in that article that people coming from his position are right and all his critics are "non-academics" who don't know what they're talking about.

Notice how I have steadfastly refused to rise to the constant baiting of the "literary" on this thread.

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Originally posted by N.R.KISSED:
While we're compiling reading lists perhaps OC might wish to have a look at this epistemology 101 because apparently he's not familiar with the concepts.

It also appears that people well versed in scientific methodology cannot discuss matters of validity across discipline.

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I don't see anything there that contradicts what I've been trying to say here. Especially this bit about models:

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The next stage of development of epistemology may be called pragmatic. Parts of it can be found in early twentieth century approaches, such as logical positivism, conventionalism, and the "Copenhagen interpretation" of quantum mechanics. This philosophy still dominates most present work in cognitive science and artificial intelligence. According to pragmatic epistemology, knowledge consists of models that attempt to represent the environment in such a way as to maximally simplify problem-solving. It is assumed that no model can ever hope to capture all relevant information, and even if such a complete model would exist, it would be too complicated to use in any practical way. Therefore we must accept the parallel existence of different models, even though they may seem contradictory. The model which is to be chosen depends on the problems that are to be solved. The basic criterion is that the model should produce correct (or approximate) predictions (which may be tested) or problem-solutions, and be as simple as possible. Further questions about the "Ding an Sich" or ultimate reality behind the model are meaningless.

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This is by no means the 'best we can do'; its purpose is largely pedagogical, to illustrate how economists make assumptions explicit and how those assumptions can be used to derive certain results. The objections you've raised have already been noted, and there are any number of papers in which people try to see how the results change when assumptions change.

[Edited, because I missed Policywonk's post.]

[ 20 February 2005: Message edited by: Oliver Cromwell ]

Especially the critique of the Ding an sich.

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Originally posted by skdadl:
The splitting of departments like the one at U of T into two -- political science and economics -- happened late and under increasing pressure from new hires from American universities: the discipline called political science in particular was an American invention, more or less contemporary with the rise of respect in departments of economics for statistics as a branch of math, also a recent development.

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I don't know all the reasons for this break up, except to repeat was said in all political science classes: whatever happens in the US happens again 5 to 10 years later in Canada. I think it is ironic though, that just after political science and economics separated, political science began copying economic methods: the "behaviouralism" that became the trend in the late sixties copied economics' positivist bias and produced papers that have endless amounts of charts and graphs, some, IMO, rather unnecessary to prove their point.

Political economy is making a big comeback though. At least on the political science side, not sure about the economics side. People like Susan Strange and others whose names escape me have pretty much had to re-marry the disciplines to adequately explain globalization.

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The only point upon which I would elaborate is on the importance of developing models that can make testable predictions.

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So basically, that says that only positivist models are acceptable. These are fine for descriptive work, but they have to be considered inadequate for prescriptive work. The main problem with the positivist, economics-based model, is that all normative judgements seem to be automatically excluded, leaving us to infer implicit normative judgements, or infer motivations for not making any normative commentary on what is being described. Even if this doesn't take on the rigour of the large political philosophy branch that arborman described, it seems that economists, by leaving out this work, are inviting criticisms that they are either normatively lazy or ethically compromised in some way. Hence the "bought and paid for" accusations levelled against economists.

To understand from where these criticisms, I'll rely on the over-quoted statement from Robert Cox:

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Theory is always for someone and for some purpose.

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