Archive for category: Economic theory

Over at Economist’s View there is an interesting piece from a book named “History of Economic Thought: A Critical Perspective”.

Now I don’t disagree with large parts of this. It is indeed fallacious to state that any CONCLUSION is value free – as it never is.

However, I feel that the piece mixes up its attack on the conclusions of the Austrian and Chicago school with the general neo-classical method – which is, in itself, closer to value free and objective. As the actual article says:

Their science applies everywhere because it applies nowhere. Most theorizing by these schools is purely tautological.

Now this may make the descriptions “unscientific”, but conveniently it also makes them value free.  Remember, the purpose of these “tautologies” is to create statements that we can use to show relationships between things in logical terms – they create a framework that allows us to then apply value judgments and reach conclusions.  Currently, this is one of the main roles of economists – to create a framework that can have value judgments added to it to create descriptions and predictions.  Economists often move a step further and create testable hypotheses, hypotheses that are supposed to describe, or possibly even predict what is going on.  However, another set of value judgments is then required to “prescribe” policy given these descriptions or predictions – this is a bigger step than some economists realise.

Still, for now let us take the implied “argument” that Austrian and Chicago economists are said to use in the above linked article, and see if we can adjust it to suit the way I see things 😛

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In the same post that Dr Doyle commented on, Andrew W linked to an article which he wanted us to discuss here (article is here).

As a critique of applied economics I accept the article (as there is definitely issues associated with the desimenation of economic tools into policy making), as a critique of economic science the article is horrendously off the mark.

One of the main issues I have with the article is the way it view economics vs physics – it is far too simplistic.  For example, the article states:

But statistical regularities should emerge in the behaviour of large populations, just as the law of ideal gases emerges from the chaotic motion of individual molecules

That is just the thing – the behaviour of individuals is not equivalent to chaotic motion (although I am sure many people would disagree 😛 ) because individuals make choices.  This additional element makes the whole study of macroeconomics (which I believe they are attempting the criticise) that much more difficult.

The “axioms” that the article criticises are all assumptions about this choice – factors that economists decided over 100 years ago that they would have to assume because they CANNOT observe choices in a sufficient fashion.  Of course, since then empirical and observational techniques have improved such that “the observation of the process of choice” is becoming avaliable.  As a result, these axioms will be (and in fact are being) challenged and changed.

I think it would have been good for the article to look at work on the methodology of economics before assuming that they could just pull out the critique of 17th century science and apply it directly here.