Posts filed under ‘Methods/Methodology/Theory of Science’
The History of Economic Thought is Alive and Well (Outside Economics Departments)
| Peter Klein |
Jeffrey Young, reviewing Leonidas Montes and Eric Schliesser’s New Voices on Adam Smith (Routledge, 2006) for EH.Net, opens with the following observation:
George Stigler began his banquet speech at the Glasgow University bicentennial of the publication of the Wealth of Nations with the now frequently quoted salutation, “I bring you greetings from Adam Smith, who is alive and well and living in Chicago.” (quoted in Meek, p. 3) Thirty odd years later the remark remains true, though ironically not in the Economics Department. Of the fourteen young scholars whose work is published in this book, five earned their Ph.D.s at the University of Chicago, none in economics. Indeed of the fifteen only four are economists, despite the book’s placement in Routledge’s Studies in the History of Economics series. This is reflective of the fact that Smith scholarship has largely moved away from seeing WN and its seminal role in the nineteenth century development of economics as a discipline as Smith’s crowning achievement. The focus today is largely on seeing Smith’s system as a whole, of which The Theory of Moral Sentiments is the foundational work.
This is undoubtedly true, but surely reflects not only this particular trend in Smith scholarship, but also the lack of interest in the history of economic thought more generally among economists, a theme we’ve touched on before.
Is Game Theory in Trouble?
| Peter Klein |
Yes, say John Quiggin and Flavio Menezes, and it cannot be saved. Game theory, they write, “has failed to deliver on its original promise of generating sharp predictions of behavior in situations where neoclassical microeconomics has little to say. . . . Experience has shown that in most situations, it is possible to tell a game-theoretic story to fit almost any possible outcome.”
Taken cumulatively, the folk theorem, the Klemperer-Meyer analysis of oligopoly and the more general analysis of economic interactions presented here demonstrate that, given a description of an economic interaction and a feasible outcome consistent with individual rationality, a strategy space can be chosen for which the given outcome is a Nash equilibrium (under fairly weak conditions, the unique Nash equilibrium). Any symmetric outcome for a typical aggregative game can be represented as an Nash equilibrium for strategies defined by some strategic variable that may be interpreted as a function of price and quantity, and there is in general, no warrant for preferring any particular choice of strategic variable.
See the commentary and discussion here and a related exchange here. One possible response, which I haven’t seen raised in the discussion, is that even if game theory is not useful for prediction, it could be valuable for understanding. (Not everyone appreciates the distinction, however.)
Economic Imperialism
| Peter Klein |
This item in Tuesday’s W$J, “Is an Economist Qualified To Solve Puzzle of Autism?”, is required reading for those interested in the scope and methods of modern empirical economics. The piece focuses on Michael Waldman’s paper (with Sean Nicholson Nodir Adilov) linking autism to television, a link vehemently denied by other autism researchers and advocacy groups. More generally,
Prof. Waldman’s willingness to hazard an opinion on a delicate matter of science reflects the growing ambition of economists — and also their growing hubris, in the view of critics. Academic economists are increasingly venturing beyond their traditional stomping ground, a wanderlust that has produced some powerful results but also has raised concerns about whether they’re sometimes going too far.
Ami Klin, director of the autism program at the Yale Child Study Center, says Prof. Waldman needlessly wounded families by advertising an unpublished paper that lacks support from clinical studies of actual children. “Whenever there is a fad in autism, what people unfortunately fail to see is how parents suffer,” says Dr. Klin. “The moment you start to use economics to study the cause of autism, I think you’ve crossed a boundary.”
Moreover — how unusual is this for a newspaper story — there’s also an extended discussion of instrumental-variables estimation. (more…)
Those Arrogant String Theorists
| Peter Klein |
What do mathematical economists and string theorists have in common? Consider this characterization of the latter from Lee Smolin’s The Trouble With Physics, as summarized by reviewer Kenneth Silber in Reason (March 2007, not yet online):
Smolin portrays string theorists as tending toward arrogance, insularity, and groupthink; they value technical ability over original thought, follow faddishly the ideas of a few top physicists, and look down on adherents of other theories. This culture, in Smolin’s telling, eschews the philosophical bent of Einstein and quantum theory’s founders, preferring the “shut up and calculate” attitude of later particle physicists.
OK, the comparison to mathematical economists is a cheap shot, but I’m following Nicolai’s lead here. Anyway, Smolin suggests a useful taxonomy for scientists, distinguishing “craftspeople” from “seers.”
[Craftspeople are] focused on technical problems, [seers] on deeper meanings and new ideas. [Smolin] makes a plausible argument that physics institutions have become too geared toward producing craftspeople rather than seers. The way for young physicists to get jobs, tenure, and grants, he notes, is to fill in the details of research lines established by their elders.
Wow, does that sound familiar! Substitute economics and economists for physics and physicists and the statement rings equally true. (By the way, “seer” is a much nicer term than “puzzler,” the label used by Hayek to distinguish himself from the systematic, methodical “master of his subject.”)
Reputations Die Hard
| Peter Klein |
This debunking of Pythagoras (via Lew Rockwell) reminded me of our recent attempt at Galileo revisionism. Apparently Pythagoras was a cult leader and political activist but not a serious mathematician or philosopher. He didn’t even discover the Pythagorean Theorem!
As debunker M. F. Burnyeat observes, “beloved historical traditions die hard.”
Other debunkings that might interest our readers: Murray Rothbard on Adam Smith, Richard Rumelt on the “Honda Effect,” Ronald Coase on Fisher Body, and Phil Rosenzweig on Peters and Waterman.
Life Among the Econ
| Peter Klein |
A colleague and I were just discussing Axel Leijonhufvud’s delightful ethnographic satire, “Life Among the Econ” (Western Economic Journal 11, no. 3, September 1973: 327-37). (Can’t find it on JSTOR; here is a scanned PDF version with a few minor errors.) Though slightly dated, Leijonhufvud’s essay remains a treasure trove of wit and wisdom on economics and economists. Here are a few passages dealing with issues recently debated at O&M: (more…)
Agreeing With Omar
| Nicolai Foss |
Geoff Hodgson is in many ways an extremely interesting scholar. His work is penetrating, he is extremely widely read, his critique of mainstream economics is often well taken, and he is a lucid writer. However, he (like all of us) entertains at least one heavy idiosyncracy, namely a chronic penchant for picking on the notion of methodological individualism. Some of us think methodological individualism is almost trivially true, but Hodgson certainly wouldn’t agree. Many of his writings contain attacks on MI. A recent issue of Organization Studies contains a major diatribe against MI penned by Hodgson. (more…)
Twilight of Sociology?
| Peter Klein |
I haven’t seen anything from our sociologist friends at orgtheory.net about Wilfred McClay’s piece in last Friday’s WSJ, “Twilight of Sociology,” so I’ll take a stab. (The gated version is here; this public link should work for a few days.) Ruminating on Seymour Martin Lipset’s death in December, McClay wonders “whether the discipline of sociology itself may now be ebbing away, as so many of its leading practitioners depart the scene without, it seems, anyone standing ready to replace them.”
McClay blames the decline of sociology on two factors: politics and scientism. (more…)
Blogroll for Social-Science Geeks
| Peter Klein |
New items for your blogroll:
- Social Science Statistics Blog
- Causal Analysis in Theory and Practice
- Statistical Modeling, Causal Inference, and Social Science
- Complexity and Social Networks Blog
- Political Science Methods
Wow, the web really does offer something for everyone.
Built to Regress to the Mean
| Peter Klein |
Of 35 “Excellent” companies studied in In Search of Excellence, 30 declined in profitability over the 5 years after the authors’ study ended in 1979. . . . Similarly, of 17 of the 18 “Visionary” companies studied in Built to Last, only 8 outperformed the S&P 500 market average for the 5 years after the authors’ study ended in 1990.
This is from Phil Rosenzweig’s The Halo Effect (Free Press, 2007) (I’m quoting this summary in CFO Magazine). Rosenzweig’s book reads like a primer on research methods for producers (and consumers) of popular management literature. Rosenzweig, a management professor at IMD, explains the problem of selection bias, the difference between correlation and causality, the need to compare rival explanations, the difference between absolute and relative performance, and more.
“Some of what I talk about in The Halo Effect is Research Design 101,” Rosenzweig tells CFO. “You gather your independent variables, independently of the thing you’re trying to explain. You don’t confuse correlation with causality, and you don’t confuse ends with means. You control for other variables. It’s basic stuff.”
But that basic stuff is hard to translate into a BusinessWeek best-seller.
Thanks for the link to Gary Peters, who notes that the book might be good reading for a doctoral seminar on research methods.
The Galileo Legend
| Peter Klein |
We noted previously how little most practicing scientists know about the history and philosophy of science. In many cases this is harmless; does the average chemist really need to know Lavoisier from Priestly? However, when scientists speak and write about the meaning of science, the role of science in society, public policy toward science, and such broader issues, such ignorance can be devastating.
An example is the legend that Galileo Galilei was persecuted by the Catholic Church for his heretical belief that the earth revolves around the sun. In popular myth Galileo represents the lone crusader, the revolutionary with the courage to speak out against the Establishment and the popular fallacies of his day. Don Boudreaux titles an (otherwise excellent) item on free trade “What Galileo Must Have Felt,” writing that “[w]hen I read or hear protectionists such as Sen. Byron Dorgan, I think that I can imagine what Galileo felt as he listened to the Leaders of his day insist that the sun revolves around the earth.”
The problem is that the leaders of Galileo’s day didn’t think the sun revolves around the earth. My former colleague Thomas Lessl is an expert on Galileo, and from him I learned that virtually every aspect of the Galileo legend is false. (more…)
Macroscope
| Steven Postrel |
Peter’s recent post about macroeconomics and macro vs. micro approaches in organization theory stirs up not-so-fond memories. From my first exposure to Samuelson’s version of the Keynesian synthesis, I found the whole thing off-putting. This feeling was a mixture of impatience with the aggregation assumptions and frustration with the seemingly backward causality of the Keynesian worldview, where production is a trivial matter and the only problem is making sure there is enough effective demand. The latter frustration was somewhat alleviated by learning about adaptive and then rational expectations, aggregate supply, sunspot and other coordination theories, and the host of microfoundation arguments that either got rid of the Keynesian assumptions or at least made some of them plausible. The impatience about aggregation never really went away. (more…)
Arrow on Microfoundations
| Peter Klein |
Michael Greinecker shares this illuminating comment by Kenneth Arrow, quoted in Colander, Holt, and Rosser, ed., The Changing Face of Economics: Conversations with Cutting Edge Economists, (University of Michigan Press, 2004):
I’ve never understood [macroeconomics]. What I mean by this is that my idea of understanding is having a model that captures what is going on. In macro we don’t have that; instead we have empirical generalization, and those generalizations tend to break down rather quickly. The question is, can you get some understanding of the empirical evidence from the models? One attempt has been to generate empirical work out of very simplistic models- essentialy they are micro models blown up. I don’t give much credence to those models. One of the things that microeconomics teaches you is that individuals are not alike. There is heterogeneity, and probably the most important heterogeneity here is heterogeneity of expectations. If we didn’t have heterogeneity, there would be no trade. But developing an analytic model with heterogenous agents is difficult.
This sounds a lot like our critiques of “macro”-level explanations in organization theory (1, 2, 3, 4, 5, 6). Macroeconomics, labor economics, and industrial organization have become increasingly “micro” in the last two or three decades. Will organization theory follow, or is the resistance to economics in some quarters strong enough to block the move?
Physics Envy and All That
| Steven Postrel |
We often hear (sometimes on this blog) that mainstream economics suffers from an excess of mathematical modeling. Supposedly, math is distracting, or misleading, or limits the questions one can study. Occasionally it is asserted that math serves the purpose of disguising the triviality of one’s thoughts, or that it serves as a guild’s protectionist barrier against the worthy but unschooled. In my view, all of the same critiques may apply to any use of technical language (say in philosophy); one can find examples of all of these pathologies even when no math is involved.
Our problems, when they occur, do not lie in our tools but in the quality of our ideas, and our honesty in expressing them. And given the extreme difficulty in thinking clearly or precisely without mathematics about things like supply and demand, or optimal investment, or contingent contracts, or network structure and growth, I’m more than willing to entertain mathematical approaches. At least I can figure out what people’s assumptions are. (Of course, once you have the mathematical intuition down, it’s a good idea to try to translate your new understanding into verbal form, as long as everyone understands that something is always lost in translation.) (more…)
More on Walras
| Peter Klein |
Regarding Walras and the development of mathematical economics, Don Lloyd sends along these quotes from The Origin of Wealth: Evolution, Complexity, and the Radical Remaking of Economics by Eric D. Beinhocker (HBS Press, 2006):
The young Walras had a very shaky start to his career, and there was little foreshadowing of his later greatness. As a student, he was twice rejected from the prestigious Ecole Polytechnique due to poor mathematical skills. He instead went to the Ecole des Mines but failed as an engineer, then tried his hand as a novelist but was unsuccessful at that as well. One evening in 1858, a depressed Walras took a walk with his father, a teacher and writer, discussing what he should do with his life. The elder Walras, a great admirer of science, said that were two great challenges remaining in the nineteenth century: the creation of a complete theory of history, and the creation of a scientific theory of economics. He believed that differential calculus could be applied to economics to create a “science of economic forces, analogous to the science of astronomical forces.” The younger Walras was inspired by his father’s vision of a scientific economics and decided to make achieving that vision his life’s work (p. 29).
[I]t was particularly from chapter two of [Poinsot’s Elements of Statics], titled “On conditions of equilibrium expressed by means of equations,” that Walras imported the concept of equilibrium from physics into economics and laid the foundation for the Traditional Economics found in textbooks and journals today. This historical detail is noteworthy, because, as we will see in the next chapter, some critics argue this borrowing of equilibrium from physics was a crucial scientific misstep that has had lasting consequences for the field (p. 31).
Rubinstein on Behavioral Economics
| Peter Klein |
Ariel Rubinstein (discussed here and here) isn’t high on behavioral economics:
1. The behavioralists’ models are just as unrealistic as the traditional models. “[Matthew] Rabin goes out of his way to beat, if I may use his own phrase, the ‘dead parrot’ of full rationality. Of course there are many facts that are hard to reconcile with full rationality. But the psychology and economics literature has replaced a dead parrot with one that is equally dead. If the ‘time consistent’ model is wrong, then [Rabin’s present-bias model] is equally wrong.”
2. The papers are long and messy. “A major drawback of the behavioral economics models is that they lack both the elegance and generality that characterize the literature of General Equilibrium and Game Theory. The typical paper is messy and terribly long. Simple ideas are lost in poorly formulated models and numerical examples.” (Of course, if you don’t rank elegance and generality as your top theoretical criteria, this criticism isn’t likely to be compelling.) (more…)
Pomo Periscope VII: Are We All Pomos Now?
| Nicolai Foss |
As I noted in the first post in the Pomo Periscope series, pomo is increasingly placing its tentacles within the very citadels of reason, that is, economics. However, so far only rather peripheral areas have been invaded, such as the history of economic thought.
Case in point: Ernesto Screpanti and Stefano Zamagni’s An Outline of the History of Economic Thought (OUP, 2005). (more…)
Top Posts of 2006
| Peter Klein |
As 2006 draws to a close we reflect on our most popular posts of the year. (Actually, we’ve only been in operation since April, so these are our most popular posts of all time, but you get the idea.) Here’s the list, followed by some commentary:
1. Is Math More Precise Than Words?
2. Intellectual Property: The New Backlash
3. Dilemmas of Formal Economic Theory
4. We Need Some Economics of Pomo
5. The New Bashing of Economics: The Case of Management Theory
6. Has Corporate Corruption Increased?
7. HRM in Heaven and Hell
8. Yale’s New MBA Curriculum: “Perspectives,” Not Functions
9. Malthus and the “Dismal Science”
10. Formal Economic Theory: Beautiful but Useless?
11. Why Do Sociologists Lean Left — Really Left?
12. The SWOT Model May Be Wrong
13. Multi-Culturality and Economic Organization
14. What Do We Really Know About Organizations?
15. Academic Insults: CCSM Edition
16. A Nobel for Entrepreneurship?
17. Price as a Signal of Quality
18. Economics: Puzzles or Problems?
19. Another Irritating Practice
20. Market-Based Management
Now, we’re talking small numbers here — the Drudge Report we ain’t — so the ranking is highly sensitive to random events, like an incoming link from Marginal Revolution. Nonetheless, some clear patterns emerge. (more…)
I Am the Walras
| Peter Klein |
Was Léon Walras a Walrasian? “Walrasian” usually describes general-equilibrium models with instantaneous market clearing (guided by the famous “Walrasian auctioneer”). However, according to Donald Walker, Walras’s main interest was not the systems-of-equations approach for which he is best known, but what Walker calls Walras’s “mature comprehensive model.” This model features disequilibrium, process, path dependence, and is based on observation and experiment, rather than deduction. Maybe it’s time to give Walras a fresh look. (HT: Roger Backhouse)
The Missing Literature Review
| Peter Klein |
There’s a discussion at Marginal Revolution about Ariel Rubinstein’s paper that I mentioned here. The discussion focuses on the nature of mathematical economics. Does Rubinstein correctly characterize what formal theorists do? What are the strengths and weaknesses of formal methods? Etc.
This is fine, but a secondary issue, which I find particularly interesting, has been missed. It’s that one can write an article on economic methodology for a premier economics journal without knowing any of the literature on economic methodology. Imagine writing a paper on, say, labor economics, describing some features of a particular labor market, analyzing those features, and drawing conclusions, without including a single reference to prior studies of the labor market. A research paper with no literature review! (more…)
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