Rizzo on “Methodological Exclusivism”

22 July 2009 at 9:02 am Peter G. Klein 3 comments

| Peter Klein |

Great anecdotes on contemporary social-science methodology in Mario Rizzo’s post, “The Failure of Macroeconomics” (including the comments). Young economist to senior scholar: “All that is in Adam Smith.” Senior scholar: “Maybe — but until my theory it was not science.” Deepak Lal asks distinguished colleague what should be done about the current crisis. Reply: “I do not consider that an intellectually respectable question.” My own beloved dissertation adviser indulged my quirkier interests, but stated plainly: “Methodology is a swamp.” And of course there’s the famous Ed Leamer analogy.

Here’s Mario’s take:

This is the great problem with economics today: methodological exclusivism (or in my more intemperate moments I call it “methodological fascism”).A young person goes to graduate school. He or she is filled with the excitement of ideas. Today, in particular, some may come with a great desire to understand what has happened in the real world of the bailouts, recessions, stimulus, and so forth. And then academic reality hits.

Formal modeling, axiomatic foundations, tractability, technical power, and topological studies. Shall I get an MA in mathematics? Do I need to take a third semester of macro-econometrics? . . .

It seems pretty clear that what we have is a collective insecurity. If we open the floodgates to methodological inquiry, or even worse, to methodological pluralism, we shall become like political science, or God forefend, like sociology. So let’s keep those with disruptive instincts out of the profession. If this is not possible, then let’s at least keep them out of the good schools.

If you’re feeling subversive, you can browse our methodology/theory of science archive for more forbidden thoughts.

Addendum: My former classmate and former colleague Menzie Chinn responds to Mario’s complaints about macroeconomic models. “I won’t deny that in the past 20 years, [I’ve] seen more than a few models that struck me as pretty irrelevant for analysis of real world issues. . . . [But] one can think of completely irrelevant frameworks for looking at the world even without a [formal] model, just as one can with a model.” True, but I don’t think this gets at Mario’s point, which is not that formal models per se should be abandoned, but that it’s okay to question their use in particular contexts, and to examine methodological issues more generally. Adds Menzie:

Furthermore, perhaps my experience in a Ph.D. program is atypical but I don’t remember being forced into a particular mode of analysis in writing my dissertation. . . . We studied Euler equations as well as the market for lemons. We knew what Arrow-Debreu markets were, but we also learned about the Great Depression (from Bernanke’s paper as well as Friedman and Schwartz). The time series econometrics taught did not presuppose optimizing behavior. We even studied models with sticky prices (gasp!). Doesn’t sound too doctrinaire to me.

That was my experience as well. But this is simply saying that there are many flavors of “orthodox” macroeconomics and many families of formal models, and some graduate programs teach more than one. It still begs the question of what counts as orthodoxy, whether other modes of theorizing (e.g., verbal logic) or empirical analysis (e.g., case studies) are legitimate, and so on. I think that is what Mario is getting at.

Entry filed under: - Klein -, Bailout / Financial Crisis, Methods/Methodology/Theory of Science.

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3 Comments Add your own

1. srp | 22 July 2009 at 5:15 pm

Far be it from me to defend macroeconomics, which I always studied with distaste, but to blame its problems on the use of *math* seems completely wacky. Take the same theories, translate them into purely verbal formulations and they would be no better, except that perhaps we wouldn’t be able to figure out what they actually predicted so their errors would be hidden. Come to think of it, that’s what happens with most purely verbal theories.
2. william | 23 July 2009 at 4:03 pm

Macroeconomics would be in a satisfactory state, if it could have taken the Wicksell-Keynes-Leijonhufvud approach; that is, the Treatise on Money (Wicksellian) re-formulation of the Quantity Equation.
That re-formulation, meaning a splitting of the general price level into two pieces (price sub-levels), enables economic analysis to follow in “real time” the relation between Money (Banking) markets, and Capital markets, a relation which, as taken within this or that Monetary (containing Exchange Rate, among other elements) Regime, empowers enormously the insight of real economies.

If one pays a little atention, one may find that almost all macroeconomic modelling (mathematically or not) depends always on a General Price Level.

Such a stance, does enables to take the (standard) so-called macroeconomics, as microeconomics, in the end.
3. william | 23 July 2009 at 4:20 pm

Take as an example, the (inflationary and liquidity-trap like) performance of argentinian economy in the last five years (from the devaluation onwards).

It had turn a common (in fact, the only) point of view, the one of blaming the growth in fiscal expending as the very cause of inflation.

But, keeping the nominal exchange rate fixed during the international boom while the boom had co-existes with a gradually inverted yield curve, at a time when almost all of the emerging economies let it float, turned the growth of fiscal expending as “endogenous”, in the sense that such a fixing policy constrained ex-ante, its domestic yield curve, letting the argentinian economy to manage to real-grew within a bear capital market and at the same time and for that reason, a wildly bullish MONEY market, therein causing inflation.