Monday, February 13, 2017

Lars P. Syll — Dani Rodrik a heterodox economist? You must be joking!

Lars writes:
Economics students today are complaining more and more about the way economics is taught. The lack of fundamantal diversity — not just path-dependent elaborations of the mainstream canon — and narrowing of the curriculum, dissatisfy econ students all over the world. The frustrating lack of real world relevance has led many of them to demand the discipline to start develop a more open and pluralistic theoretical and methodological attitude.
Dani Rodrik has little understanding for these views, finding it hard to ‘understand these complaints in the light of the patent multiplicity of models within economics.’ Rodrik shares the view of his colleauges Paul Krugman, Greg Mankiw and Simon Wren-Lewis — all of whom he approvingly cites in his book Economics Rules — that there is nothing basically wrong with ‘standard theory’ and ‘economics textbooks.’ As long as policy makers and economists stick to ‘standard economic analysis’ everything is fine. Economics is just a method that makes us ‘think straight’ and ‘reach correct answers.’
There are several major problems with conventional economics.

The first is that results are gained from very narrow scope conditions. The scope of the model is limited to areas where there is regularity accounted for by the model. Where irregularities occur, which is most most needs to be explained, is put outside the scope of the model and dismissed as unforeseeable exogenous shocks. That's just a cop out.

A second problem is assuming static conditions when conditions are dynamic and change significantly over time. Societies are historical phenomena and when conditions change significantly, then the time frame needs to be set to zero to capture the new conditions. For example, in finance and economics, the global monetary system changed when Bretton Woods was adopted and again when Nixon ended the convertibility of the dollar into gold at a fixed rate for international settlement. Reinhart and Rogoff made this error in their historical study of debt that became the foundation for the "expansionary fiscal austerity" that was supposed to lead to recover after the Global Financial Crisis. NOT!

The third problem is even more serious in that they it undercuts the whole enterprise of pseudo-science that tends to affect social science including economics, especially when the natural sciences are taken as a standard to be emulated in social science. The subject matter is deeply different. The operation of the laws of nature in natural science is necessary logically, whereas human behavior is contingent and regularity is based on habit structure, custom, cultural tradition and institutional arrangements, none of which are necessary and change historically. This making this mistake by conflating natural and social science substitutes ideology for science and constitutes pseudoscience.

Philosopher of social science Daniel Little explains this in his post, Ideologies, policies, and social complexity, at  his blog Understanding Society.
According to the premises of this approach, we are not well served by imagining that there are simple, largescale forces that drive the outcomes in history. Examples of efforts at overly simplified explanations like these include:
  • Onerous conditions of the Treaty of Versailles caused the collapse of the Weimar Republic. 
  • The Chinese Revolution succeeded because of post-Qing exploitation of the peasants.
  • The Industrial Revolution occurred in England because of the vitality of English science. 
Instead, each of these large outcomes is the result of a large number of underlying processes, motivations, social movements, and contingencies that defy simple summary. To understand the Mediterranean world over the sweep of time, we need the detailed and granular research of a Fernand Braudel rather than the simplified ideas of Johann Heinrich von Thunen in the economic geography of central place theory.
In situations of this degree of underlying complexity, it is pointless to ask for a simple answer to the question, "what caused outcome X?" So the Great Depression wasn't the outcome of capital's search for profits; it was instead the complex product of interacting forms of private business activity, financial institutions, government action, legislation, war, and multiple other forces that conjoined to create a massive and persistent economic depression.
This approach has solid intellectual and ontological foundations. This is pretty much how the social world works. But this ontological vision about the nature of the social world is hard to reconcile with the large intellectual frameworks on the left and on the right that are used to diagnose our times and sometimes to prescribe solutions to the problems identified.
An ideologue is a thinker who seeks to subsume the sweep of history or current events under an overarching narrative with simple explanatory premises and interpretive schemes. The ideologue wants to portray history as the unfolding of a simple set of forces or drivers — whether markets, classes, divine purposes, or philosophies. And the ideologue is eager to force the facts into the terms of the narrative, and to erase inconvenient facts that appear to conflict with the narrative....
This approach only works empirically restrictions are introduced, e.g., by choosing scope conditions are so limited that that the assumptions are confirmed in a narrow range, or by making ad hoc adjustments after the fact, or by selecting data to fit the model, or by handwaving.

Lars P. Syll’s Blog
Lars P. Syll | Professor, Malmo University


AXEC / E.K-H said...

Economics is a science? You must be joking!
Comment on Lars Syll on ‘Dani Rodrik a heterodox economist? You must be joking!’

What ― roughly ― is an orthodox economist? An OE believes that ...

(OE1) “There is nothing basically wrong with standard theory and economics textbooks.” (see intro)

(OE2) “An aspiring economist has to formulate clear models.”

(OE3) “These models can incorporate a wide range of assumptions.”

(OE4) “If it isn’t modeled, it isn’t economics.”

(OE5) “Newer generations of models do not render the older generations wrong or less relevant.”

What ― roughly ― is a traditional heterodox economist? A HE believes that ...

(HE1) “There is a lack of fundamental diversity and a narrowing of the curriculum.”

(HE2) “There is a frustrating lack of real world relevance.”

(HE3) “A more open and pluralistic theoretical and methodological attitude is needed.”

(HE4) “We really don’t want to be force-fed with mainstream neoclassical deductive-axiomatic analytical formalism.”

(HE5) “The slogan ‘If it isn’t modeled, it isn’t economics’ is not pluralism but a methodological reductionist straightjacket.”

(HE6) “Analytical formalism and mathematical methods often makes the analysis irrelevant from an empirical-realist point of view.”

(HE7) “Variations of the same old mathematical-deductive ilk are not heterodox in any substantial way.”

See part 2

AXEC / E.K-H said...

Part 2

What ― roughly ― is a theoretical economist (= scientist in contradistinction to the agenda pusher of political economics) or constructive heterodox economist. A cHE holds that ...

(cHE1) “In order to tell the politicians and practitioners something about causes and best means, the economist needs the true theory or else he has not much more to offer than educated common sense or his personal opinion.” (Stigum)

(cHE2) Neither Orthodoxy nor traditional Heterodoxy has the true theory. Economics is a failed science. The four main approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, and all got the pivotal economic concept profit wrong.#1

(cHE3) Standard theory and economics textbooks are scientifically worthless.#2

(cHE4) Since Adam Smith economic policy guidance never had a sound scientific foundation.#3

(cHE5) Economics is in need of a paradigm shift from false microfoundations and false macrofoundations to consistent macrofoundations.

(cHE6) If it isn’t macro-axiomatized, it isn’t economics.

(cHE7) The pluralism of false theories is indefensible.

(cHE8) The true theory is characterized by material and formal consistency. The true theory is not a matter of belief, credibility, authority, tradition, majority, political color or opinion but of proof.

(cHE9) A materially/formally consistent theory is the best mental representation of reality that is humanly possible. There is only one true theory, the rest is either proto-scientific rubbish (storytelling, political economics) or provable false or undecidable/inconclusive wish-wash, that is, it belongs forever to the intellectual swamp where “nothing is clear and everything is possible.” (Keynes)

(cHE10) Theoretical economics has to be judged according to the criteria true/false and NOTHING else. The criteria like/dislike or good/bad or good/evil or useful/useless or right/left do NOT apply. They apply in the political sphere but not in the scientific sphere.

(cHE11) Theoretical economics has been hijacked since the founding fathers by political economics. Politics cannot do other than to corrupt science. In order to eliminate the ultimate cause of the failure of both Orthodoxy and traditional Heterodoxy a strict separation of politics and science has to be established in what hitherto counted as economics.

(cHE12) The claim as expressed in the title “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel” cannot be upheld. Currently, economics does not satisfy the well-defined criteria (material/formal consistency) of science. Both Orthodoxy and traditional Heterodoxy is proto-scientific rubbish or what Feynman called cargo cult science.

Egmont Kakarot-Handtke

#1 See ‘The Profit Theory is False Since Adam Smith’

#2 See ‘The father of modern economics and his imbecile kids’

#3 See ‘Unemployment is high because economics is false: period, full stop, end of story’

Ralph Musgrave said...


Thanks for your very long comment directing us to your even longer blog posts. I've had a look at some of them and decided they are nonsense. So I won't be looking at any more of them. There are loads of other people out there with far more interesting things to say.

As for my own comment on Dani Rodrik, all I can say is: "Imitation is the sincerest form of flattery"...:-)

AXEC / E.K-H said...

Ralph Musgrave

There is no need to wreck your brain with my longer posts. Here is the 209 character summary of ALL posts for people with a reduced attention span:

The four main approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/formally inconsistent, and all got the pivotal concept of the subject matter, i.e. profit, wrong.

Economics is a failed science and both orthodox and heterodox economists are incompetent scientists. This applies to Rodrik, Syll, Musgrave, to name only three, otherwise this is going to get an overly long post.

Egmont Kakarot-Handtke