The other day, after one of those longish back-and-forths over Keynes at Coordination Problem, Mario Rizzo said something that seemed basically right to me, but made me react by thinking "yeah - but who cares?". He wrote:
"The important point for today is that so many economists have little or no knowledge of pre-Keynesian theories of the business cycle and monetary theory. So they think that the macro-paradigm is the only way to analyze problems of inflation, cyclical unemployment and so forth.
This is what I understand some philosophers would call a [Thomas]"Kuhn loss" -- knowledge lost when the paradigm shifts."
Of course what he meant was that economists that don't agree with him have little or no knowledge. But putting that aside, it wasn't immediately obvious to me from a scientific perspective why this even matters. From a historical perspective, sure. I have interest in older ways of thinking about the economy simply from a historical perspective. But paradigm shifts make older knowledge incommensurable for a reason: understandings of the world are bundled, and the new bundle of understanding overall seems to be more useful in describing the world than the old bundle, so any elements of the old bundle that can't be synthesize are better off left relatively ignored (again - for the scientist - for the historian it's different).
But then Don Boudreaux wrote something the other day that changed my mind at least slightly when it came to economics quoting Yeager (sorry - the website is down so I can only see it through my google feed but can't link to it right now):
"Cultivation of the history of thought is more necessary in economics than in the natural sciences because earlier discoveries in economics are in danger of being forgotten; maintaining a cumulative growth of knowledge is more difficult. In the natural sciences, discoveries get embodied not only into further advances in pure knowledge but also into technology, many of whose users have a profit-and-loss incentive to get things straight. The practitioners of economic technology are largely politicians and political appointees with rather different incentives. In economics, consequently, we need scholars who specialize in keeping us aware and able to recognize earlier contributions – and earlier mistakes – when they surface as supposedly new ideas. By exerting a needed discipline, specialists in the history of thought can contribute to the cumulative character of economics."
The first sentence doesn't bother me as much. It's not entirely clear growth even is "cumulative", at least in the sense that it is meant here, where we might worry about forgetting earlier discoveries. He continues to be concerned about "cumulative" knowledge throughout, but I think the bigger point is about the embodiment of economic knowledge. Good natural science is embodied in a host of new technology of course, but also scientific equipment itself. We may have a different way of thinking about sub-atomic particles when we have paradigm shifts further down the road, but we still have particle accelerators that actually produce something, so it's impossible to deny that something like a sub-atomic particle is a part of our experience. The same with telescopes or microscopes, right? We can't unlearn the knowledge that has been embodied in the observations from those instruments. We may interpret the observations differently in the future, but Yeager is right that economics doesn't really embody its knowledge in the same way.
Because the economy is so complex and multiple causes contribute to economic phenomena, economists are more prone to scrapping everything and starting over with a half-developed idea that they try to make work, ignoring even the good historical precedent for that idea that's already been worked into the discipline. Think of PSST or regime uncertainty, which both take points that all economists already agree on, and try to repackage them and promote them as a more totalizing theory than they actually are capable of being. These are usually singular, personal efforts, not the considered opinion of decades and decades of competing scientists.
In this environment, history of thought probably is good not just for the historians among us, but for the scientists among us. Don, I think, has convinced me to be less critical of the original Rizzo point.
I don't think this solves matters, of course. Our side sees these insights running back much earlier than Keynes, through Bagehot, Mill, Say, Malthus. I would go back to the mercantilists - some are less willing to do that. We see a deeper appreciation of history of economic thought as helpful in refuting old fallacies like Say's Law and austerianism. So the arguments don't end. But it is a good point.
More Musings on "Monetary Economics"
2 hours ago