Tuesday, March 22, 2011

Economics and Biology Again

A couple biology blogs picked up an old post by Russ Roberts on how economics is like biology (here, here, and especially here, by Mike). As I've said many times, I agree that the biology analogy is apt, but I think Russ largely butchers it for many of the reasons pointed out in the last link.

Russ writes: "But we would never ask of biologists what the public and media ask of economists. We do not expect a biologist to forecast how many squirrels will be alive in ten years if we increase the number of trees in the United States by 20%. A biologist would laugh at you. But that is what people ask of economists all the time."

Mike responds: "Erm, no. Actually, ecologists not only answer those types of questions for regulatory purposes all the time (e.g., forestry biologists, fisheries biologists, pest control, crop management), but they routinely answer much more difficult questions, such as how does a temperature increase combined with less rainfall affect pine populations due to a change in bark beetle populations. Biologists have been running simulations (which are different from models) for a very long time."

Mike is exactly right, and I made this point to Russ initially. A lot of people that are down on economics as a science don't really understand what they're talking about when they talk about the complexity of an economic system. Complexity doesn't mean that you aren't able to predict the behavior of something, it simply means that there are certain dynamics that can emerge unpredictably. You can think of it like the classic difference between risk and uncertainty in the economic system. Certain events can have probability distributions fitted to them, but you have to allow for fundamentally uncertain process, and ultimately that prevents you from projecting too far into the future. But you can simulate things and you can forecast. You just have to know what processes are subject to the fundamental complexity of the system and what aren't. Biologists can predict what will happen when an ecosystem that is understood experiences a shock. Biologists cannot predict what animals will have evolved 10,000 years from now. Economists can predict growth paths for the economy. Economists cannot predict what specific firms will still be successful in 100 years.

The post then gets into a discussion of natural selection and the role of natural history in biology. His point is simply that both disciplines deal with historical contingency and rely on theory to be both confirmed by history, but also to reconstruct historical narratives. This section is all good.

Finally, I have to take issue with a point that this post ends on. Mike writes: "But where Roberts goes off the rails is his statement that economists try to predict specifics and that's impossible to do. I personally wouldn't blame an economist who didn't get the timing exactly right on the collapse of Big Shitpile. But what was disturbing was that very few economists--or at least those that interacted with the public--were saying that the combination of rapidly rising housing prices, high personal debt and stagnating wages were a disaster waiting to happen."

I have two contradictory responses to this. You may choose one.

1. I think more people noted the housing bubble was a bubble than for some reason people generally admit. I heard it referred to as a "bubble" around the Urban Institute long before it popped. Everyone has their lists of their buddies who saw it coming. The housing bubble was not that much of a surprise to anyone, I don't think. What was a surprise was what it did to the rest of the economy, which was largely based on the what the finance industry had done with the mortgages. People were sounding the alarms about the debt build-up too - lots of mainstream people. But the debt loses some of its cogency when you don't know how liable everyone was to movements in sub-prime mortgages. That was the real surprise, but I don't think it says anything about economics as a science that we aren't privy to the portfolios of major banks.

2. And as Scott Sumner and others have pointed out - there's no good way to point out a bubble when you're in one. If there was, you probably wouldn't have bubbles. It's one thing to say "gee, house prices look overvalued". It's another thing to say what that overvaluation means, and it's yet another thing to say what implications it has for the economy.

*****

The question of science boils down to this - what method do economists use to chase after useful knowledge? Well, we have an iterative deductive/inductive process where theory is tested against data and the tests inform new theory construction. Replication of results is required to convince the community of economists of a claim. Good economists don't let their normative judgements influence their conclusions. We deal with complex systems and we deal with the interactions of a specific mammal, so it's not surprising we are similar in character to biology. If someone studied the same sort of thing in another species they would actually be called a biologist, after all.

37 comments:

  1. "What method do economists use to chase after useful knowledge?"

    How is this iterative process different when applied to knowledge as such? After all, all knowledge is useful in one way or another, depending on the subject under study.

    What if the subject of study was reality as such? If you think you live in Plato’s cave then what you like to call your "normative judgments" must be nothing less than your conclusion that what you see around you constitutes "useful" knowledge.

    In other words, the fact that you have observed and identified "things" to "describe" necessarily means that you find them "useful" otherwise what you have claimed to identify cannot possibly, under any circumstances whatsoever, be considered as "normal"

    contrary to Hume and the rest, "judgments" of observations of the facts of reality cannot be dichotomized into categories such as "normative" or "descriptive", they are either both normative and descriptive or they are not observations of reality.

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  2. So when I say "useful knowledge" it might not even be "knowledge" strictly speaking at all. How we do science often doesn't pass epistemological muster, not because "useful knowledge" is only a subset of knowledge, but because in many cases it's not what philosophers would consider "knowledge".

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  3. if the science does not pass epistemological muster then on what grounds can you call it science as opposed to mysticism? clearly the difference between the two is that some "thing" is being observed and conceptualized i.e. "epistemologicalized".

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  4. Well, perhaps it is just mysticism.

    My point is only that much of science is indicative and corroborative empirical work rather than proof, per se. And while it attempts to push the boundaries of that which we can perceive (substituting telescopes that can pick up different pieces of the electromagnetic spectrum for out plain eyesight, for example), there isn't a great deal of concern with understanding the "reality" behind our perceptions. If our perceptions are well behaved and consistent enough, that's good enough. Who cares what is real?

    If that makes it mystical, then it's mystical. But it's a very useful mysticism. Mysticism, though, implies a degree of naivete and futility and for that reason I wouldn't personally use it to describe science. But I can see how a philosopher might.

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  5. When I look at complexity in the social sciences it appears to be driven as much by sensitivity to enormous numbers of variables as by unexpected interactions or feedback loops. Sure, there's recursive looping with distortion combined with tipping points, and those things diminish predictability. But worse still there are innumerable variables, most of which are not measured, which all have real effects, and which do not simply cancel out (e.g. they are not normally distributed random variables).

    A good analogy is to trick shots in pool. As the number of bounces increase (cue ball strikes another ball which strikes another ball, etc.), the significance of 'minor' variables increases. It's a small number of ball to ball collisions before minor surface imperfections on the balls and on the table, or even the gravitational effects of spectators in the room start to affect the outcome.

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  6. "well behaved"?, "consistent"? "useful" with....what? for what? eality? why is that important if you dont care what is real or are not concerned with understanding? how naive of you.

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  7. RS - I didn't quite get that ... say it again differently.

    It seems obvious why someone might care how they experience things a lot more than they care about how "real" their experiences are in a more transcendent sense. I am concerned with understanding - but I'm concerned with getting a good grasp on the world that I'm going to be living in.

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  8. if it is obvious then in what sense is it not real? if you are concerned, what is it that you are concerned about? if you are not living in the real world then there is nothing you should have to consider or care about.

    you use these words (e.g. well behaved, consistent, useful etc.) to refer to the things you think are important i.e. relevant, normal, good etc. but deny not only the source of such knowledge but even your identification of it.

    well, if all of this is so then why dont you correctly identify everything you say or write as nothing more than dogma and not truth?

    clearly you believe something you say is true but by your own premise you say not only that you cannot be sure but that you cannot know. well, that is dogma, plain and simple. why should anyone put more weight to your words than to any witch doctor from the jungle? clearly you think they should or you would not bother with this blog or going to school. why?

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  9. I see you deleted my previous response to this post so I wont bother with another.

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  10. please disregard, my computer must have had a hickup, sorry.

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  11. re: "if you are not living in the real world then there is nothing you should have to consider or care about"

    What could possibly lead you to say something like this?

    re: "but deny not only the source of such knowledge but even your identification of it"

    You seem to be very confused here, RS. I am saying that out experience is subjective, contingent on our perceptions, etc. - that's the source of it. Whether that is "reality" or not is something I don't claim to know or care about.

    "well, if all of this is so then why dont you correctly identify everything you say or write as nothing more than dogma and not truth?"

    Well I never claimed it was "truth" in any ultimate sense and on many occassions I explicitly say it isn't. What I say is it seems to be true given my experiences and if you seem to be experiencing things how I experience things that probably means something to you. Why are you saying that is "dogma"????

    re: "well, that is dogma, plain and simple"

    So speaking and speculating without absolute certainty is dogma? This is silly, RS. You're talking yourself in circles.

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  12. RS - it's not your computer, it's the blogging software. It sometimes identifies comments as spam, but I can identify them as not being spam. If you ever think this happens and I don't catch it, just let me know and I can check the spam filter.

    I've only deleted a comment twice, I think, and it was because it was inappropriate not because it challenged me. The worst I'll do is start ignoring you after a while :)

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  13. "I am saying that out experience is subjective, contingent on our perceptions, etc. - that's the source of it"

    Is this an absolute truth i.e. a fact or just your subjective opinion based on your perceptions?


    If it is an absolute truth then how did you come to know it? divine revelation?

    If its your subjective opinion then it does not correspond to reality. supreme dogma?

    Either way the statement contradicts itself and is nothing more than mysticism.

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  14. How should I know if it is an absolute truth or not, and why should I care?

    Now, you claim that makes it "dogma". Why? "Dogma" is typically a word we reserve for something for which there is neither an objective foundation of absolute truth (whatever that is) nor experiential evidence. You seem to be using it here differently. You seem to be saying that if we have experiential evidence for something but not objective affirmation of absolute truth, it is "dogma". That's an odd use of the word "dogma" my friend. One usually doesn't subjectively experience "dogma". One simply asserts it. I am not doing that. I have experiences. How "real" those experiences are isn't something I'm privy to, but going through life as if they were "real" seems to have worked well for me (experientially, at least).

    As for mysticism - as I said earlier, I can see why someone might call that "mysticism", but again that seems to use the word in a completely different way from how people normally use it.

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  15. You seem to be saying that if we have experiential evidence for something but not objective affirmation of absolute truth, it is "dogma".

    Not really, consider what you mean by "objective affirmation". Affirming something objecitvely requires both experiential evidence AND the volitional comparison to a standard of truth i.e. metaphysical fact, something that can only be done conceptually, not perceptually.

    Perceptually, all you have is a bunch of sensations experienced over time and integrated into basic conceptions automatically by your subconscious (e.g chair, tree, flower etc.).

    The iteraive process of deductive/inductive reasoning only happens after that and it requires the abstract identification of a an objective standard for it to be affirmed as true, a process that you are explicitly asserting to be inherently subjective in nature. Well, if so, then how do you know it?

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  16. "Well, if so, then how do you know it?"

    1. What do you mean by "know it"?

    2. When did I claim to "know it" in the sense that you are using that term?

    3. Why should I care about "knowing it" in the sense that you are using that term?

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  17. 1. I am assuming that when you say "x IS y " or "knowledge IS subjective" that you are making a categorical statement that you believe has some truth element to it.

    2. see answer to 1 and compare to your previous responses.

    3. that is entirely up to you and it is why I say that if you dont know the reasons why x is true or false but are simply just asserting it regardless of reason then that is properly called dogma. no more important or scientific or relevant than scripture.

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  18. Hmmmm... I think "is" is used far more casually than you're trying to make me use it.

    Put it this way - would someone that thinks like I do always be using "is" as a categorical statement that I believe has some truth element (in the sense of an "absolute truth") to it?

    You are taking a very unnatural, absolutist use of these words and trying to catch me in a contradiction by assuming I'm using them in that way. The more reasonable assumption is that I'm using the word how most people use it and not how someone who thinks how I have already claimed not to think would use it.

    When someone says "the desk IS brown" they're describing their experience of the desk, but the absolute truth of the situation is the furthest thing from their mind. This is how I'm using the word.

    We've raised the issue here of epistemology, ontology, and more absolute truths. I've rejected that exercise as futile. I'm not sure citing my use of one of the most common words in the English language constitutes proof that I'm being inconsistent.

    How would you even establish an absolute truth? On what do you base your "standard of truth" that you mentioned earlier? How is that NOT dogma and mysticism?

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  19. Just because you cant or wont see the contradiction does not mean you are not making one.

    On what grounds can you assert that other people's experiences are not true? Only on the grounds of your own experience right? You make an inductive generalization, going from the few to the many, by applying what you experience to everyone else must also experience and assume such an inductive generalization is true, i.e. that it really truly applies universally to everyone right?

    Except that, according to you, your own experiences are also not true so whatever you are generalizing about is also not true.

    In other words, you are generalizing from what you say you dont know to what you say no one can know all the while asserting that you do in fact know it. If that does not qualify as dogma then nothing does.

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  20. "according to you, your own experiences are also not true"

    RS, I don't recall ever saying this. Where did I say this?

    "while asserting that you do in fact know it"

    What is "it" and when did I say I know "it"?


    You keep telling me that I've asserted that I know the absolute truth of certain things when I don't recall ever making such an assertion!

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  21. They are implied in your statements. If someone describes a desk as "brown", how do you know that what they are describing is NOT the absolute truth? The presumption is is that "truth" is something outside of someones ability to perceive. If this is TRUE, then how do YOU know it?

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  22. OK... one of my pet peeves is when people say I imply something after a long chain of me denying I ever said anything, which should have clearly demonstrated that you inferred it - I never implied it.

    re: "how do you know that what they are describing is NOT the absolute truth"

    I don't know it's not the absolute truth. It may be.

    re: "If this is TRUE, then how do YOU know it?"

    When did I claim to know it? It seems reasonable to act on it rather than tie myself in knots over proving the unprovable. I'm not claiming to know it. All I'm saying is that if we chase understanding that is useful to us experientially, and act AS IF that is "real", we seem to do well by ourselves.

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  23. again, it is the same. in one breath you assert truth as unprovable but claim to not know if it is provable or unprovable so you tell me what I should "infer" from that.

    you make categorical statements that have broad epistemological implications of which you deny implying but which I should refrain from inferring so as not to draw your ire. great. I see that this is nothing more than word games to you but it is about what I expected, given your philisophical premises.

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  24. "you make categorical statements that have broad epistemological implications of which you deny implying but which I should refrain from inferring so as not to draw your ire"

    You're the one bringing the epistemological implications to the table, RS. I've never claimed any epistemological import to my use of the word "is", etc. Do you interrogate everyone on the assumption that they're making categorical statements with broad epistemological implications when they use these words?

    I'm not the one trying to prove something with word games here. I'm not the one making declarative statements. Things may be "provable" in some ultimate sense that I don't understand, but that's not something I have any confidence in claiming.

    I'm not even sure what you're trying to argue here. My point has always been this deeper epistemological inquiry is fine as far as it goes but it strikes me as a waste of time and we can't tie science to that. Science is and always has been a lot more utilitarian and experiential than it has been epistemological.

    You seem to be trying to pick a fight with me and trying to frame me as someone that is attempting to overthrow epistemology.

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  25. I’m not trying to pick any fight. I do however take people I do not know personally at their stated word and when they do make categorical statements with broad epistemological implications I treat them as such, even if the person speaking does not realize that is what they are, anything less would be dishonest and disingenuous.


    This is yet another example of one of those statements.

    "Science is and always has been a lot more utilitarian and experiential than it has been epistemological."

    Epistemology is a base branch of philosophy that deals with how we know what we know and it rests on the other base branch of metaphysics. Both are required for science to progress as a science, even if the people who practice the field only follow it implicitly.

    Philosophy deals with the widest of all abstractions so all philosophical questions are necessarily interrelated. It is the reason why I take your statements literally and universally. If you don’t understand why or think it a waste of time to find out then there is nothing else I can tell you that you would choose to understand.

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  26. re: "This is yet another example of one of those statements."

    What I am saying is that you are reading historical, cultural, or practice claims and reading them as categorical and epistemological claims. I've told you several times now I'm abstaining from epistemological claims.

    There's a kernel of truth packed in this statement of yours: "Both are required for science to progress as a science, even if the people who practice the field only follow it implicitly." I agree that acting as if we were perceiving some absolute truth is very important for science to work well. But I haven't heard you or anyone else provide any good reason for thinking or caring that that working assumption or useful fiction is actually accurate or even why it needs to be accurate.

    When I stop and think about how I perceive and talk about and study things, I can say I'm not sure if I'm perceiving absolute truth - but when I actually perceive and talk about and study things, I sure as hell act as if it is absolute truth. That's how we get on in the world.

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  27. First off, you cannot abstain from making epistemological claims, it is impossible, as in, beyond your control, outside of your choice, part of your (and my) nature as conceptual beings.

    Second, the reason it is important is the same reason why you think acting on those ideas is important, the consequences and outcomes of those ideas depend on it. What those consequences are and which outcomes are preferable over others depend on it. If they matter then so do the ideas that produced/chose them.

    Third, ALL inferences on the nature of your perceptions through introspection can only come from the data provided by your senses through extrospection so any conception of "truth" (the "absolute" truth as you are using the term) that is somehow above/beyond/outside of your senses artificially injects a mystical standard into your conception of what "truth" (i.e. facts) you think your perceptions "should" refer to, but fail to do.

    In other words, "truth" can only be a concept that describes a consciousness’s successful attempt to identify a fact of reality (i.e. correspondence theory of truth). It cannot be a concept that is used to setup reality as something outside of man’s perception which he then fails to perceive. Such a concept injects omniscience into the standard of truth and since man is not omniscient he will necessarily fail to meet it. This is the colossal straw man that Plato and a long line of Kantian philosophers have setup to invalidate reason. Reason cannot be used to invalidate reason.

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  28. RS -

    I agree completely with this:

    "In other words, "truth" can only be a concept that describes a consciousness’s successful attempt to identify a fact of reality (i.e. correspondence theory of truth)."

    But think you misdiagnose the situation with this:

    "It cannot be a concept that is used to setup reality as something outside of man’s perception which he then fails to perceive."

    I am not "setting up" reality at all. All I'm suggesting is that while truth can only be a concept that describes a consciousness's successful attempt to identify a fact of reality, I have no way of establishing whether such an attempt was ever successful. That is the sum total of all that I am saying here.

    I see no basis at all for these claims:

    "Such a concept injects omniscience into the standard of truth and since man is not omniscient he will necessarily fail to meet it. This is the colossal straw man that Plato and a long line of Kantian philosophers have setup to invalidate reason. Reason cannot be used to invalidate reason."

    How is this a strawman? Waving your hands at our lack of omniscience as if it didn't matter seems like a far more dangerous approach than confronting its implications.

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  29. Tell me, at what point in your life did you come to accept as an absolute truth the proposition that your mind is fundamentally incapable of interpreting reality from the data provided by your senses?


    Omniscience, like the concept of god or a squared circle, cannot exist. It is a fantasy concept used to project a human consciousness not limitted by anything i.e. by reality.

    Wherever did you get the notion that truth requires omniscience? What facts did you truly identify in order to arrive at this conclusion? NONE. So as a conclusion it must be invalid and is simply dogma, as I have been stating all along. I am waiving my hand at it because it is an arbitrary assertion not based on any factual evidence experienced by any human consciousness as you so like to use term. It is by far much more dangerous to allow the arbitrary to guide your judgements as to what is possible and what is not. Just look at where it has gotten you ;-).


    What you are doing is using the concepts of "truth", "fact", "establishment", "success" etc. as what Ayn Rand termed "stolen concepts".

    See here for a more detailed description:

    http://aynrandlexicon.com/lexicon/stolen_concept--fallacy_of.html

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  30. "Tell me, at what point in your life did you come to accept as an absolute truth the proposition that your mind is fundamentally incapable of interpreting reality from the data provided by your senses?"

    I have yet to accept this position as absolute truth and your repeated insistence that I have is why this conversation hasn't ended yet. It could be capable. I live life as if it were capable. If someone asks me if it's capable I really have no reason to assert it is and I'm going to be up front about the fact that I have no reason to assert it is. It seems safe to emphasize the very real possibility that I am incapable. I may be capable, though.

    "So as a conclusion it must be invalid and is simply dogma, as I have been stating all along."

    Sir, this may be the case but I continue to be confused about why you think this is my conclusion.

    You are trying to juxtapose me with you and put me in the position of Kant. My view is this: you seem to be naive and have an outsized view of what you can say, and Kant was overly cautious. I'd prefer to note with Kant that I don't know what you think you do, and I'd prefer to note with you that Kant is unnecessarily giving himself an ulcer.

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  31. this quote is particuarly applicable...

    "Observe that Descartes starts his system by using “error” and its synonyms or derivatives as “stolen concepts.”

    Men have been wrong, and therefore, he implies, they can never know what is right. But if they cannot, how did they ever discover that they were wrong? How can one form such concepts as “mistake” or “error” while wholly ignorant of what is correct? “Error” signifies a departure from truth; the concept of “error” logically presupposes that one has already grasped some truth. If truth were unknowable, as Descartes implies, the idea of a departure from it would be meaningless.

    The same point applies to concepts denoting specific forms of error. If we cannot ever be certain that an argument is logically valid, if validity is unknowable, then the concept of “invalid” reasoning is impossible to reach or apply. If we cannot ever know that a man is sane, then the concept of “insanity” is impossible to form or define. If we cannot recognize the state of being awake, then we cannot recognize or conceptualize a state of not being awake (such as dreaming). If man cannot grasp X, then “non-X” stands for nothing.

    Leonard Peikoff, “‘Maybe You’re Wrong,’”
    The Objectivist Forum, April 1981, 9.

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  32. You make much of the fact that by asserting that your mind is capable of these things you don't run into any inconsistencies. I'm not clear on what's so great about not running into any inconsistencies.

    Not that being inconsistent is a good thing - it's not. But being consistent doesn't strike me as being especially important either.

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  33. and yet you chose, as the title of your blog, out of all the multitued of possibilities:

    "FACTS and other stubborn THINGS"

    What are you referring to by "facts" and "things" if not your grasp of truth?

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  34. Perception of the world we live in that other people seem to share.

    You're really obsessed with knowing truth. You fret over knowing what insanity is if we can't identify sanity. All I'm saying is "we make do with these words and sometimes we have problems with their application but that seems like a dumb thing to worry about". You're projecting your obsession with absolute truth on me.

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  35. Sure, I run into inconsistencies. I am not claiming omniscience nor am I claiming to be infallible. I am claiming to know truth and to know absolute and certain knowledge about some things but not all. If I find an inconsistency I attempt to resolve it logically and cease to draw any further conclusions on the given issue until the inconsistency is resolved, just as any rational person would do.

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  36. I am not projecting any obsession. I am adhering to a standard, just as a scientist would adhere to a law of physics in designing an experiment or in solving a problem only in this case the problem is perception of truth. You are perfectly free to say or think what you want only so long as it does not adhere to any standard it cannot qualify as truth, only as dogma.

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  37. I guess we are done with this discussion, having beat the horse to death too many times. I will leave you with this article I just found that you may profit from. I have not read the whole thing but the first few pages offered a good critique of Hume, Kant, and Popper along the same lines I have been arguing so enjoy...or not. til next time.

    http://www.libertarian.co.uk/lapubs/philn/philn065.htm

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