Quote of the day: Uskali Maki on economics

From the prelude to ‘Fact and Fiction in Economics‘ comes the following gem by Maki:

“Is economics a respectful and useful reality-oriented discipline or just an intellectual game that economists play in their sandbox filled with toy models?”

Variants of these questions fly around all the time. Why are economists making unrealistic assumptions? Why won’t they just assage to “common sense” about the situation? Why are they making the ‘wrong’ choice in some trade-off between looking at the real world and narrative and/or mathmatical beauty?

These questions sound appealing, but in many ways they are often misspecified – not pointless, but without enough content to actually be answerable. As Maki says:

“As soon as one looks more closely, what one starts seeing is fact and fiction, in a variety of combinatory incarnations. One also begins to appreciate both of them as necessary elements in a scientific study of the social world”

The book then heads through essays by a number of prominent writers, discussing the form of models, causal ordering, constructionism (and collective beliefs – I would also note a paper “Why I’m not a constructivist” by Blaug here), and the nature and incentives of economists. I haven’t read every essay in the book yet – but I’ve read most a while back and found them very useful.

Note:  I promise more substantial posts from my end will return – but just not the number I was previously writing.  I am in the throws of adjusting what I write about, and this has limited my posting somewhat!  Luckily it appears a bunch of more interesting people have taken up the slack here – spectacular!  By the way, if any other economists want a sounding board for their views – flick me an email and we’ll work something out ;)

Also you may have noticed that what I have been writing has been about why economics is useful and worth studying (here and here).  This is true.  Hopefully this provides some counterbalance to the poorly put together criticisms floating around about ‘studying economics’ which seem determined to make us all sound like archetypical monsters from some Grimm Fairy Tale.  Saying “we shouldn’t look at trade-offs because then we lose our sense of community” sounds strangely like “we shouldn’t study the natural world or we will lose our sense of faith” don’t you think – and when all the ‘evidence’ is subject to an ignorance about the basic concept of revealed preferences I can’t help but feel that there are some people out there that were bullied by an economist at grad school, and have tarred us all with that brush ;)

Interdisciplinary, group, social science is going to be extremely powerful in the coming decades – let us not undermine it by introducing ill informed prejudices.

Note 2:  Then again, it looks like arbitrary attacks of economics within our own discipline is nearly as wrong-headed.

Seriously, attacking the U-shaped cost curve … it is a framework to allow us to empirically test actual industries FFS.  When teaching it in first year you discuss with students the idea that you can have diminishing marginal product in factors and still have economies of scale.

The understanding and framework provides a base that allows us to actually test things – the theories ARE NOT about the way the world “ought” to work, it is a series of assumptions (a theory) that we can use along with data to perform inductive inference about whether the logical results of the theory hold in the ‘real world’.

We are creating a series of credible worlds, and economics teaching shows us how to do this for a given question – it isn’t a f’ing set of universal rules regarding what we should do passed down from on high, and it is the people who want a discipline that does that who are overconfident in their own knowledge and are frankly dangerous.

  • Andrew Fung

    I find the irony of the Guardian article slightly amusing. Railing against a purported orthodoxy but seemingly jumping on the “economics failed to predict the crash” bandwagon.

    There is just so much in that piece to take issue with (‘scuse the poor grammar). Fully understand your frustration.

    • http://tvhe.co.nz/ Matt Nolan

      Indeed, the guardian piece it just reads as arrogance for anyone who “does” economics – it feeds into strawmen and uses them just to sell whatever the author wants to sell, while making everyone else sound stupid.

      If the author truly views current economic teaching as the study of “what ought to be” he is hanging around with a series of economic teachers who aren’t teaching economics, but peddling their own value judgements. Tarring the whole discipline with this brush is upsetting!

      I should ht you on the psychology piece as well, I’ll give the post a change to do that ;)

  • http://www.tvhe.co.nz/ jamesz

    Sugden and Maki in one post??? Thank God you didn’t include McCloskey or TVHE would have imploded with excitement!

    • http://tvhe.co.nz/ Matt Nolan

      I’ve done it before I think – isn’t that why we had to change the front-end of the site ;)

  • Letting Agents Wavertree

    I find the irony of the Guardian article slightly amusing. Railing
    against a purported orthodoxy but seemingly jumping on the “economics
    failed to predict the crash” bandwagon.

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