"Words ought to be a little wild, for they are the assault of thoughts on the unthinking" - JMK
- Paul Krugman with good thoughts on David Hume. Krugman highlights a quote of Hume's that I really like. Hume critiques people that latch onto singular explanations of the world: "I have long entertained a suspicion, with regard to the decisions of philosophers upon all subjects, and found in myself a greater inclination to dispute, than assent to their conclusions. There is one mistake, to which they seem liable, almost without exception; they confine too much their principles, and make no account of that vast variety, which nature has so much affected in all her operations. When a philosopher has once laid hold of a favourite principle, which perhaps accounts for many natural effects, he extends the same principle over the whole creation, and reduces to it every phænomenon, though by the most violent and absurd reasoning." Ironically, of all the people I find myself largely in agreement with, I think Krugman is the most guilty of this problem. Sometimes I think that's strategic. Krugman is not an insular thinker at all, but in the position that we find ourselves he feels the need to hit the fiscal policy in a liquidity trap point hard. It's not something that he's been parroting year after year after year. When the facts change, he changes his mind. So I can somewhat understand his singular focus. But the point is, in a complex system lots of processes are occuring at once and anyone who claims that there's only one explanation or one interesting process is fooling themselves.
- Noahpinion cheers Shiller and Mankiw for defending economics as a science and for defending the idea of humility in science. I cheer them too on this. Noahpinion writes: "It seems to me that all too few economists view their field the way natural scientists do their own - as a potential tool for understanding and mastering the Universe. Plenty of economists value models that are "interesting" or "thought-provoking," that tell "good stories," or that have a priori plausible assumptions. That is how journalism or philosophy works, but it is not how Science works. So it is extremely gratifying and refreshing to hear leading economists stick up for two of the key elements of science: observation and doubt."
- The blogger "Lord Keynes" asks "why are so many economists wrong?" I'm a little curious about why he thinks so many economists are wrong. Certainly there are open questions - "what will fiscal or monetary policy do to the economy?" is one of them. There are open questions in any science. There is real division over that question (although considerably broader agreement on monetary policy). But in terms of understanding how the economy works I'm not sure "so many economists are wrong" - incomplete and still learning perhaps, but not blatantly wrong. This sort of fatalistic view that economics is in some hopeless position is really disconcerting - and it's especially prominent among heterodox commenters, like LK or Russ Roberts. We have a very good understanding of the economy and we have more predictive powers than other sciences of complex phenomena. What we've run across is a rare event which we have had little opportunity to study, so certainly we don't understand it as well. One should not infer from the puzzling over the last two or three years that somehow the science itself is adrift.
Monday, May 9, 2011
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I remember that Krugman refused to cut some slack for Kocherlakota and co. who were saying that central bankers can not solve structural unemployment.
ReplyDeleteKrugman said that such appeals to structural unemployment were trying to hide from the problem, especially in a post-recession era.
Partly, that is true.
However, consider his lack of a modest concession that could have been given. United States has had one of the most rapid rises in worker productivity in the industrial world.
So much so that IBM has fewer employees on roll than it did 30 years ago. Considering America's rapid technological progress, and increasingly larger stock of a population above 45 i.e. higher levels of human capital among the working population, any business can simply retain current profit levels with fewer workers.
Looking at the technological advancement in the knowledge economy even during the recession, we see Facebook - an enterprise running on merely 2000 employees.
It may well possibly be less likely for some of those fired more than a year ago to get rehired again.
Certainly that is one single obstacle (among many) to employment levels rising back faster. He could have conceded that much.
Right? RIGHT?
Daniel,
ReplyDeleteKrugman is the guy who made a bunch of noise about people being "traitors" to the planet.
Anyway, Hume found that political ideologies were inherently dangerous and that they were a relatively new development in human affairs.
Of course, unlike most people who use this quote, I have actually read "Essays, Moral, Political and Literary" and I know what follows this paragraph (well, besides the sentence that follows "absurd reasoning."):
But if ever this infirmity of philosophers is to be suspected on any occasion, it is in their reasonings concerning human life, and the methods of attaining happiness. In that case,
they are led astray, not only by the narrowness of their understandings, but by that also of their passions. Almost every one has a predominant inclination, to which his other
desires and affections submit, and which governs him, though, perhaps, with some intervals, through the whole course of
his life. It is difficult for him to apprehend, that any thing, which appears totally indifferent to him, can ever give en
joyment to any person, or can possess charms, which altogether escape his observation. His own pursuits are always, in his account, the most engaging : The objects of his passion,
the most valuable : And the road, which he pursues, the only one that leads to happiness."
"But would these prejudiced reasoners reflect a moment, there are many obvious instances and arguments, sufficient to undeceive them, and make them enlarge their maxims and principles. Do they not see the vast variety of inclinations and pursuits among our species ; where each man seems fully satisfied with his own course of life, and would esteem it the greatest unhappiness to be confined to that of his neighbour? Do they not feel in themselves, that what pleases at one time, displeases at another, by the change of inclination; and that it is not in their power, by their utmost efforts, to recall that taste or appetite, which formerly bestowed charms on what now appears indifferent or disagreeable? What is the meaning therefore of those general preferences of the town or country life, of a life of action or one of pleasure, of retirement or society ; when besides the different inclinations of different men, every one s experience may convince him, that each of these kinds of life is agreeable in its turn, and that their variety or their judicious mixture chiefly contributes to the rendering all of them agreeable."
Now imagine Hume looking at the collection of hobby-horses which are enforced by the power of law today and comparing it to Hume's vision of a "agreeable" human society.
"I have long entertained a suspicion, with regard to the decisions of philosophers upon all subjects, and found in myself a greater inclination to dispute, than assent to their conclusions. There is one mistake, to which they seem liable, almost without exception; they confine too much their principles, and make no account of that vast variety, which nature has so much affected in all her operations. When a philosopher has once laid hold of a favourite principle, which perhaps accounts for many natural effects, he extends the same principle over the whole creation, and reduces to it every phænomenon, though by the most violent and absurd reasoning.
ReplyDeleteFrom the guy who hated first principles so much he doubted causation of events.
Find someone else to disparage aprioristic thinking. Kant killed Hume on this.
"But in terms of understanding how the economy works I'm not sure "so many economists are wrong" - incomplete and still learning perhaps, but not blatantly wrong."
ReplyDeleteI would say the financial collapse in 2008 and 30 years of neoclassical mischief has shown a great deal of wrongheaded ideas in mainstream economics - whether we talk about New Classicals, monetarists, and even New Keynesians.
"We have a very good understanding of the economy and we have more predictive powers than other sciences of complex phenomena."
ReplyDeletehttp://www.bloomberg.com/news/2011-05-04/u-s-ism-services-index-decreased-to-52-8-in-april-from-57-3.html
73 out of 73 economists fail! Happens regularly. At least they're all failing in much the same vein so that we can agree that they're doing some fancy predictive-type science.
Mattheus -
ReplyDeleteI could be completely wrong, but I don't think he's disputing apriorism here.
LK -
What do you mean by "neoclassical mischief"? What exactly is your concern with neoclassical synthesis Keynesianism, which seems quite able to explain the recession? Why can't you accept New Keynesianism as good solid theorizing for "normal times"? Why does a downturn even demonstrate the error of a theory? Does the fact that we continue to have earthquakes demonstrate that seismologists are all wrong?
mobsrule -
First, I appreciate the fact that this comment is substantive. Second, I'm not sure what you expect me to say. Forecasts fail. If you search the history of this blog you'll know that I think the accuracy of forecasts in complex system is going to be low and you know I don't think that has any implications for whether it is a science. The fact is, we can do with reasonable accuracy some short term predictions. One unexpected drop doesn't change that.
There is one mistake, to which they seem liable, almost without exception; they confine too much their principles,
ReplyDeleteThat's not disparaging rationalism?
Also the end of the quote:
ReplyDeleteWhen a philosopher has once laid hold of a favourite principle, which perhaps accounts for many natural effects, he extends the same principle over the whole creation, and reduces to it every phænomenon, though by the most violent and absurd reasoning.
Daniel, I think he is trying to find political villains and conflating all of them under one group.
ReplyDeleteI tire of this same old rehashed story.
The world was a paradise between 1948 and 1973. Then the western industrial nations stopped adding new radical legislations after 1973. Then in 1980, Reagan and Thatcher came to power. And then everything went down the tubes.
All of it is such nonsense. Reagan and Thatcher merely continued existing policies of previous Labour and Democratic governments of 1974-79, but used different kinds of rhetoric. To continue the same policy but use different rhetoric while doing so is some kind of a collapse of the postwar social democratic system.
It's also futile to blame it on economists. Carter deregulation and Callahan privatization happened not because of changing economic thought, but changing requirements of the place and time, and the inability of the previous advocates of industrial policy and state control to continue those things.
"If you search the history of this blog you'll know that I think the accuracy of forecasts in complex system is going to be low and you know I don't think that has any implications for whether it is a science."
ReplyDeleteBingo! It may not produce useful output, but economics (even macroeconomics) is still a real science. You've set the bar really low... cargo cult low, because as long as the trappings of science are there, it should be viewed as science.
Slow down there - who said it doesn't produce useful output???
ReplyDelete