Go here. His conclusion:
We badly want macroeconometrics to work. If it did, we could resolve bitter theoretical disputes with evidence. We could achieve better forecasting and control of the economy. Unfortunately, the world is not set up to enable macroeconometrics to work. Instead, all macroeconometric models are basically simulation models that use data for calibration purposes. People judge these models based on their priors for how the economy works. Imposing priors related to rational expectations does not change the fact that macroeconometrics provides no empirical information to anyone except those who happen to share all of the priors of the model-builder.
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All of the talk of mathematics in economics confuses the passing data of econometrics with the eternal truths of economics. Since there is none of the passing data in the eternal truths, there are no quantities, and no mathematics.
However essential to econometrics, it is irrelevant to economics, and, its only purpose, to obscure it.
By itself, the data of econometrics is a meaningless jumble. It is only through the logic of economics that we can make sense of it. But while the logic is essential to an understanding of the data, the ever changing data is irrelevant to the eternal logic. So, though the macro-economic plotters of the data and "governors" of the nation's economy use economics, they do not contribute to it. And, however more complex the data of the overall economy than that of the corner grocery store, they are still more like Ma Kettle, adjusting to changes in the data, than Adam Smith, discovering eternal truths, and not economists like Smith, but economic managers, like Ma Kettle, though on a larger scale.
Sounds sort of like the Climate Change models Hanson, Mann and Gore are fond of…
Indeed, statistics only reflect the opinions of those who are paying the bill.
A good example is a TED talk I recently watched, with Biochemist and Nobel Prize winner Kary Mullis.
At the later end of his talk he discusses how climate change is not happening, and that their is empirical evidence and published papers to prove it. Here's his talk:
http://www.youtube.com/watch?v=LNOtiRB3uyk
Go to about 26:00 and thats where he talks about Global Warming… and how it's not happening.
I know it's not related to Arnolds view of macroeconomics but I just had to share the video that has proved to me that climate change is not "settled and undisputed". Just as Keynesian economics is not "settled and undisputed" like I heard some senators say today on MSNBC this morning.
Who cares about the math when you're tilting head-on to all out socialism? All these kind of posts are more whistling past the graveyard.
Predictions should be meaningfully specific and should later be held to account for their accuracy. Julian Simon notwithstanding, if this standard were used, the public would develop a much healthier skepticism of economic policies and predictions.
Since Dr. Boudreaux already mentioned Robert Higgs in an earlier post I'll bring his work up again. He's calling what we're heading for "participatory fascism". Anyway, his post explaining this is over at The Beacon. As usual with Dr. Higgs, very insightful and to the point.
I’ve read the “whistling past the graveyard” notion several times in recent days. I object. We are not distracting ourselves from a fright with entertaining noise.
We are investigating our principles and practicing our arguments. Not because we wish to ignore a scary thing, but because we will likely be called upon to confront it.
This time when Keynesian theory leads to waste and suffering, if we survive, we must quarter the corpse and set the pieces aflame. What sounds like whistling is the sharpening of knives.
Mr foxmarks,
You're a foxy one indeed!
Thank you for that.
I thought the argument was that these priors don't matter, as the models will successively change them to the right value?
What sounds like whistling is the sharpening of knives.
Sharpen away. But don't be surprised when the bureaucrats come for those, too.
Couple things. One about basic logic, and another about informative theories.
Let Ti be the conjunction of a macroeonomic theory with some initial conditions and P be some prediction of Ti. If we suppose that Ti is true, then we can validly infer that P is true. Our deduction can be written formally as A.
If A is true, then the following deduction is also valid.
B is more interesting–it is not just a deduction, but an equation. In fact, we can dispense with the turnstile and replace it with an equals sign.
So how do you get the left side of the equation from the right? Ti is easy, of course, but it is less obvious how to deduce Ti → P, but it can be deduced.
Conditional formulas, like Ti → P, are only be false when their consequent is false; under all other interpretations they are true. It follows that if P is a premise, and therefore assumed to be true, then Ti → P cannot possibly be false, since that would require P to also be false which, as a premise, cannot be so. Therefore, D is valid.
If the above results are true, then by the law of identity, the premises in our original argument A can be replaced by the equivalent set of formula.
Is equal to.
Ti represents our theory and initial conditions and P our prediction. Now, would you accept the premises of E as a good reason to accept its conclusion? If not, then the premises of A cannot fulfil that function either. The premises of A and E are just different ways of saying the same thing. Unless you already happened to agree that Ti is true, then no reason whatever has been provided to think that P is true.
This result is very general, and applies to every science, not just (macro)economics. Any attempt to overcome it is simply a methodological error, and not how science progresses.
Also, the empirical content of a theory (or its informativeness), is not a function of whether you already believe it to be true, but of what empirical observations it precludes (where the theory-ladenness of observation is temporarily ignored). There are many very informative theories which nobody believes, such as that everyone in the world is called Russell.
A theory which does not preclude much leaves open very many possibilities. Even if true, it is, therefore, uninformative. And, in fact, the least informative theories are always true: tautologies. There is nothing inherently wrong with tautologies, but by not precluding any possibility, they offer no help with discriminating among alternatives courses of action.
Oh, by the way, I am not contradicting myself in the above comment. Whenever I explain that problem, someone always notes that my argument is self-referential. While true, it does not follow that any contradiction has occurred. Although my argument, if true, implies that its own premises cannot provide any reason to accept its conclusion (for it would beg the question), the possibility is not precluded that my conclusion is, nonetheless, true. For example, just because P might not be a good reason to accept P, it does not follow that P is false.
Since I never claimed to achieve what my argument deems impossible, no contradiction is present. I merely propose that it is true, regardless of whether or not its premises fulfil the role which others might want them to.
Lee Kelly,
Have you lost your mind?
dg lesvic,
No I have not lost my mind, and I even have Hayek on my side on this one. Read 'justification and revision of traditional morals' in The Fatal Conceit. My argument above characterises in an explicit way what Hayek is talking about. He even cites the work of W.W. Bartley III, editor of The Fatal Conceit, with who I am in full agreement on this issue.
Most people expect argument to achieve a logical impossibility, and I am the one who is losing my mind? No, and what is more, by abandoning those goals, most of the problems of epistemology and methodology which have troubled Russell Roberts in recent months can be solved with relative ease.
Lee Kelly,
I didn't know that you had W.W. Bartley III on your side. That changes everything.
dg lesvic,
Bartley addressed this issues more at length than Hayek. If you check out Bartley's work, then you will find it in accordance with what I wrote. Hayek cites Bartley, and states explicitly that knowledge (whether scientific, moral, or whatever) is unjustifiable, and identifies the quest for justification as one of the key assumptions of scientism.
My comment above simply makes this situation explicit. The equivalence of those two formulas exemplifies the broader fact that every valid argument, when the premises are intended to justify the conclusion, must beg the question, and therefore, justify nothing. I can think of a dozen different ways of explaining the same problem. Arnold Kling's issues stem from this same root.
Lee Kelly,
You were doing fine until you caught the Hayek bug.
So, stop agonizing over the meaning of the meaning of meaning, and just keep doing what you were doing.
And when you have time for it, and are serious about epistemology, go to Mises for it, not Hayek.
dg lesvic,
Mises was wrong, very wrong. Hayek was on the right track.
Lee Kelly,
Please, tell us more.
dg lesvic,
This is not the place. Although agree with Mises with regard to much that he concluded, his methods and underlying assumptions were deeply mistaken. He was a philosophical central planner, as I sometimes characterise those who adopt his assumptions–mostly socialists.
Hayek's epistemology is far superior. But it requires a metaparadigmatic shift to understand. It is methodologically very different from traditioanl philosophy (much of which Mises accepted uncritically). It also holds the key to resolving all of the problems which have recently bothered Roberts and Kling.
This essay might be somewhat informative.
Hayek identifies justificationism as one of the core tenets which leads to the fatal conceit. From my, admittedly limited, exposure to Mises's work, it seems to me that he shared these same mistakes.
Lee Kelly,
Here is the tip-off to all this,
Your prophet wrote,
"This could take years or even decades to overcome. It is a process that is very hard to achieve if one is subjected to the influence of mainstream philosophers."
That is not a scientific but a religious presentation.
No thank you.
Kelly,
I might better have put it this way.
That was not science but mysticism.
Lee Kelly,
Here's the difference between a false prophet and a real philosopher.
Your prophet:
You ordinary slobs will never be able to understand my higher wisdom.
Mises:
"What could easily be explained in a few sentences of mundane speech was expressed in a terminology… unfamiliar to the immense majority and therefore regarded with reverential awe."
and Lesvic:
"There is nothing in economics that could not be explained in mundane speech. For even the most complex theorems are comprised of simple elements, which be explained in simple terms. And if they aren't worth the bother of explaining them, they're hardly worth the bother of trying to understand them."
Just as the most complex organisms can be traced back to single cells, the most complex philosophical theories can be traced back to simple points of departure from their antecedents.
What is that simple point of departure from Mises to your prophet?
"This could take years or even decades to overcome. It is a process that is very hard to achieve if one is subjected to the influence of mainstream philosophers."
This is not a prophetic comment as claimed by dg lesvic, it is made in retrospect after some decades spent trying to explain Popper's ideas about critical rationalism and the growth of knowledge to people who have been trained in the "justified belief" line of thought that is the subtext of most schools of philosophy.
Rafe Champion,
It sure is not a prophetic comment. It is a prophetic excuse for failure.
If not, then you should be able to answer the simple question:
What is the simple point of departure.
Here, in the words of George Costanza, a prophetic answer.
Yes, I stepped right into it.
Rafe nd Lee,
Here is a posting by Sam Grove at a thread below; but, first, the background.
I had contended that inflation was redistribution, taking from savers to give to non-savers.
Martin had contended, to the contrary, that preventing inflation was redistribution, that by preventing investment, it took from the non-savers to give a deflationary windfall to the savers.
Here was Sam's response:
"Holding cash, even stuffing it in your mattress, is foregoing entitled consumption.
The main difference in investing is that the accounting is directed via account transfers to specific targets, while stuffing it in your mattress produces a diffused benefit to everyone.
Stuffing cash in your mattress does not prevent the extension of credit by others. It does mean that less credit is required, because of the downward pressure on prices.
Those who refrain from entitled consumption cannot help but benefit others.
Try envisioning a small scale economy that can operate without cash, say a commune.
If all members consume all that they produce, then there is no available resources to create, say tools that can increase productivity, for every member must then keep working with the current means of production to maintain their consumption.
The only way they can devote resources to improving productivity is to forgo present consumption so that some of their number can expend time and energy on creating tools that will improve their productivity.
It is the foregone entitled consumption that makes this possible, not the accounting."
Posted by: Sam Grove | Feb 11, 2009 1:59:06 AM
That was a perfect example of economics as described by Mises, not empirical but theoretical, not mathematical but logical, an apodictic and incontestable (though not by Martin, of course) argument based upon an imaginary construction.
What more do you need?
The Martin above was Martin Brock.
Since Lee Kelly said Mises was very very wrong, instead of, what more do you need, I should have said, what's wrong with that.
Well, Mr Kelly, what is wrong with that, and, by inference, Mises?
Has anybody here seen Kelly, Kelly of the Emerald Isle, not the Kelly with a frown for economics, but the Kelly with the great big smile?
I can add here that, aside for a number of quotes, I have not read Mises and very little of Hayek.
Believe it or not, some of the insights I used in the argument with Martin came from previous arguments in which I benefitted from Martin's exposition.
Sam,
Real economists don't need Mises or anyone else to tell them how to proceed in economics. They just need good sense.
What they need Mises for is protection from the anti-economists, especially in economists' clothing, the obfuscators and intimidators of the science, the "technical," empirical, and mathematical "economists."
Sam,
Real economists don't need Mises or anyone else to tell them how to proceed in economics. They just need good sense.
What they need Mises for is protection from the anti-economists, especially in economists' clothing, the obfuscators and intimidators of the science, the "technical," empirical, and mathematical "economists."
Sam,
I should have added, the pretenders of the science.
By the way, you're right about Martin, he does challenge us, and force us to sharpen our wits. Still, the sonofabitch is harder to kill than Rasputin. You can stab him, strangle him, drown him in the river, and he'll still come bobbing up, scowling at you.
His exposition provoked me into thinking about things in a certain way, not unlike his own way of thinking about things.
Hey, let's get too sloppy over Martin.
Who's up?
Sam Grove, who, untutored though he be, showed the more learned how to do it.
Who's down?
Lee Kelly, who, after some first rate contributions here, failed to back up or retract his dununciation of Mises.
Shame on you.
Has anybody here seen Kelly,
Kelly from the Emerald Isle?
I meant, let's NOT get too sloppy over Martin.