Posts filed under ‘Methods/Methodology/Theory of Science’
Dilemmas of Formal Economic Theory
| Peter Klein |
In “Dilemmas of an Economic Theorist” (Econometrica, July 2006) Ariel Rubinstein reflects on the meaning, implications, and relevance of formal economic modeling:
What are we trying to accomplish as economic theorists? We essentially play with toys called models. We have the luxury of remaining children over the course of our entire professional lives and we are even well paid for it. We get to call ourselves economists and the public naively thinks that we are improving the economy’s performance, increasing the rate of growth, or preventing economic catastrophes. Of course, we can justify this image by repeating some of the same fancy sounding slogans we use in our grant proposals, but do we ourselves believe in those slogans?
Rubinstein goes on to identify four dilemmas facing the formal economic theorist: (more…)
Is Math More Precise Than Words?
| Peter Klein |
Commentator Michael Greinecker suggests below that mathematics, as a language for expressing economic arguments, is more precise than words. Indeed, Samuelson’s landmark Foundations of Economic Analysis (1947) opens with this statement from J. Willard Gibbs: “Mathematics is a language.” Samuelson felt he had to justify his translation of conventional economic analysis into mathematics — a defense hardly needed today!
As Roger Garrison once noted, mathematics is indeed a language, but so is music:
There is no reason for economists to observe a categorical prohibition against either mathematical formulation or musical expression. The relevant question is: What sort of language — music, mathematics, or, say, English — allows economists best to communicate their ideas? Which language serves the economist without imposing constraints of its own upon his subject matter?
Garrison argues for English (or French, German, Spanish, whatever) on the grounds that mathematics cannot express causality, and economics — here Garrison follows Menger and Mises — is essentially a causal science. (I make this point about Menger here.) That is a subject for another day, however. (more…)
Levels Issues II — Do Levels Exist?
| Nicolai Foss |
As I indicated in my earlier post on levels issues in social science research, I am confused by these and I suspect that many others are also confused. Perhaps this merely reflects my lamentable lack of serious philosophical training, and it is therefore with very considerable hesitation that I venture into issues of ontology, explanation, and causation that pertain to levels of analysis. (In fact, the following to some extent has the character of a bleg).
Do levels of analysis exist? Well, obviously levels of analysis only exist in our models. Still, there may be some stuff reality that is “like” our analytical levels. If so, is there some kind of mapping from the levels of analysis of our theoretical accounts to the levels (conceivably) existing in social reality? Or, are levels (of analysis) “merely” methodological devices — features of our model — that are not necessarily mirrorred by anything in reality? (more…)
Mechanistic Analogies in Economics
| Peter Klein |
Paul Ormerod, in “The Fading of Friedman” (American Prospect, December 2006), compares the macroeconomic views of Friedman, Keynes, and Hayek and prefers the latter:
Both [Friedman and Keynes] believed that suitably empowered clever chaps could work out rules of behaviour that would smooth the fluctuations of the business cycle. Friedman came up with the rule of an independent central bank controlling the expansion of money at a fixed rate. Keynes essentially thought that if he and other old Etonians were put in charge, everything would be fine. . . . But Hayek sharply disagreed. He believed that there are inherent limits to knowledge in human social and economic systems which no amount of intellect can overcome.
Developments in economics are taking the subject in the direction of Hayek rather than Friedman and Keynes.
These remarks came to mind when I read Monday’s EH.Net review of Harro Maas, William Stanley Jevons and the Making of Modern Economics (Cambridge University Press, 2005). Jevons, in this regard, was the anti-Hayek. (more…)
More on Quantitative Methods in Social Science
| Peter Klein |
Thanks to Cliff Grammich for his reading suggestions in the comment below. Let me add some details and links:
Richard Lewontin’s “Sex, Lies, and Social Science” (New York Review of Books, April 20, 1995; online version for NYRB subscribers only), savages three books on sex by sociologists. The resulting replies and rejoinders (here and here) make for interesting reading. In one rejoinder, Lewontin describes “the central methodological issue” raised by one set of authors under review:
It is their view that, although people may lie or exaggerate in autobiographies because they are trying to create a public persona, they will tell the truth in anonymous interviews, because there is no motivation to manipulate the impression that strangers have of us. Is it really true that quantitative sociologists are so divorced from introspection and so insensitive to social interactions that they take such a naive view of human behavior? Do they really believe all those things they hear from the person on the next bar stool or the seat next to them in the airplane? The Yellow Kid, who made a living from fleecing the gullible, used to say that anyone who could not con a banker ought to go into another line of work. Maybe, but before giving up, they should try professors of sociology.
Friedman on Method
| Peter Klein |
There is a huge secondary literature on Friedman’s 1953 essay “The Methodology of Positive Economics” (one summary of the various debates is here), and I have little to add to it. Two quick notes, however:
1. Samuel Brittan’s lengthy and informative obituary in today’s Financial Times includes this interesting remark:
The very modernity of Friedman meant that he was vulnerable in his technical findings to new researchers claiming to refute his work by still more up to date statistical methods. Indeed, Friedman lived long enough to see a reaction against basing economics on discoverable numerical relationships and the revival of so-called Austrian methods which concentrated on predicting general features of interacting systems on the lines of biology and linguistics.
2. Hayek reports (Hayek on Hayek, p. 145), that “one of the things I most regret is not having returned to a criticism of Keynes’s [General Theory], but it is as much true of not having criticized Milton Friedman’s [Essays in] Positive Economics, which in a way is quite as dangerous a book.”
Micro-Foundations and Realism
| Nicolai Foss |
As readers of O&M know, I have often endorsed the search for the badly missing micro-foundations in management research (e.g., here, here and here). Building micro-foundations means providing accounts (whether formal or verbal-logical) of how human action and interaction produce collective outcomes (whether intended or unintended).
To me such an approach is inherently mechanism-oriented. Accordingly, I tend to think of methodological individualism and mechanismic explanation as close philosophical allies. I also think that in terms of theorizing, attention to micro-mechanisms rooted in individual action and interaction requires close attention to behavioral assumptions. Apropos Milton Friedman the one part of his thinking that I have never made peace with is his methodological instrumentalism.
Until recently, I thought that virtually nobody in management research — with the exception of Teppo Felin — entertained similar views (OK — a bit over the top, but not much), until, that is, the advent of the November issue of the Strategic Management Journal features an article, “Behavioral Assumptions and Theory Development: The Case of Transaction Cost Economics,” by Eric Tsang that is explicit about how behavioral assumptions link to realistic explanation. (I just noticed that Tsang also has an earlier paper on critical realism). (more…)
Randomness and the Black Swan
| Peter Klein |
I’m on a private discussion list where the subject of resampling/bootstrapping techniques, and their application to empirical social science research, is being discussed. A commentator pointed to a 1988 New York Times article in which Stanford’s Jerome Friedman calls bootstrapping “the most important new idea in statistics in the last 20 years, and probably the last 50.” Murray Rothbard invoked bootstrapping, indirectly, in a 1989 article criticizing empirical methods in economics:
As improbable as this may seem now, I was at one time in college a statistics major. After taking all the undergraduate courses in statistics, I enrolled in a graduate course in mathematical statistics at Columbia with the eminent Harold Hotelling, one of the founders of modern mathematical economics. After listening to several lectures of Hotelling, I experienced an epiphany: the sudden realization that the entire “science” of statistical inference rests on one crucial assumption, and that that assumption is utterly groundless. I walked out of the Hotelling course, and out of the world of statistics, never to return.
The “crucial assumption” to which Rothbard refers is the assumption of normality. Of course, it is possible to do statistical inference without assuming data are normally distributed, and the central limit theorem tells us not to worry about distributional properties as samples become “large.” But how large is large? (more…)
Pomo Periscope VI: Performativity
| Nicolai Foss |
Teppo Felin at orgtheory.net has an excellent post today on Donald MacKenzie’s An Engine, Not a Camera: How Financial Models Shape Markets — a book that has received praise from Michel Callon, Karin Knorr-Certina — and Paul Samuelson!
As the title of the book indicates, the book puts our old friend here at O&M — reflexivity (cf. this post) — to work in the context of the interplay between financial markets and financial economics. It sounds as if this will be a great read for the Ferraro-Pfeffer-Suttons of this World. (I haven’t read the book yet myself, so I cannot judge the accuracy of what Teppo says about it). (more…)
Science and Public Funding
| Peter Klein |
As discussed previously on these pages, the relationship between scientific research (basic and applied) and public funding is more subtle and complex than is usually assumed. The current issue of the Independent Review features an article by William N. Butos and Thomas J. McQuade, “Government and Science: A Dangerous Liaison?”, exploring this relationship in detail. Write Butos and McQuade:
There are serious reasons . . . for thinking that the liaison between government and science carries with it unrecognized dangers for the functioning and integrity of science as a reliable generator of knowledge. It is not so much that government seeks to exert a blatant and crude control over the content and direction of scientific inquiry — although such heavy-handed intrusion has precedents, most notably in the USSR — but that the structure and conduct of seemingly benign and generous government funding of science has side effects that generate instabilities in scientific activity in the short run and corrode the structure and adaptability of the system of science itself in the long run.
Dan Klein’s fine EconJournalWatch has published two recent pieces on the effects of public funding on research in two branches of applied economics, by Larry White on monetary economics and E. C. Pasour, Jr., on agricultural economics.
The Wizard of Oz as Monetary Allegory
| Peter Klein |
In recent remarks on literature in economic discourse (here and here) I forgot to mention Hugh Rockoff’s classic “The ‘Wizard of Oz’ as a Monetary Allegory” (Journal of Political Economy, August 1990):
The Wonderful Wizard of Oz, perhaps America’s favorite children’s story, is also an informed comment on the battle for free silver in the 1890s. The characters in the story represent real figures such as William Jennings Bryan. This paper interprets the allegory for economists and economic historians, illuminating a number of elements left unexplained by critics concerned with the politics of the allegory. It also reexamines Bryan and the case for free silver. Far from being monetary cranks, the advocates of free silver had a strong argument on both theoretical and empirical grounds.
Another good resource is Michael Watts’s The Literary Book of Economics (Intercollegiate Studies Institute, August 2003).
Grounded Theory
| Nicolai Foss |
At least until recently I considered “grounded theory” to be one of my favorite Hermann Göring words (“When I hear the word ‘grounded theory’ I reach for my Browning”). I know that this is an assessment that many practicioners of a, dare we say more “positivist” research methodology share. Too often I have witnessed presentations where “grounded theory” comes across as a bad excuse for not knowing the relevant literature. Epistemologically, grounded theory sometimes stands out as a variant of naïve inductivism. (more…)
Pomo Periscope V: Motivation Theory Under Attack
| Nicolai Foss |
As we know pomo is placing its tentacles virtually everywhere. Having long ago attacked and partially conquered organization studies, pomo is now increasingly visible in the organizational behavior field. Here is an extract from the blurb for a recent book, The Passion of Organizing: (more…)
Volleyball and Equilibrium
| Lasse Lien |
What exactly is the role of equilibrium in the competitive process? Believe it or not, I have found the answer. It plays the same role as gravity does in a volleyball match.
Think about it! The ball is continuously bounced in ways that direct it towards new states of rest (new equilibriums), but it hardly ever settles down in any of these, because it is subject to new bounces, sending it towards yet another equilibrium. Moreover, about half the time the ball is moving opposite of what gravity would dictate, i.e. it is moving upwards, but unless it is bounced again it will start falling downwards and settle in the position gravity dictates (operating on the last bounce). Of course, this never occurs because the ball is continuously bounced. So a theory of gravity alone would not provide a good prediction of where the ball is, nor where it is headed, or even how the game got started. But mind you, think about how absurd it would be to try to understand a game of volleyball without any notion of gravity!
Pomo Periscope IV: A Rothbard Classic
| Nicolai Foss |
Pomo had no greater enemy than the late Murray Rothbard. Here is a hilarious comment on “the hermeneutical invasion of philosophy and economics,” which was originally published in 1989 in the Review of Austrian Economics (and published a bit later in Danish translation by yours truly in the rather short-lived Danish Austrian economics journal, Praxeologica). (more…)
Bleg: Parsons, Popper, and the Austrians
| Peter Klein |
From Rafe Champion:
I am working up a paper on the way Talcott Parsons rediscovered the Austrian wheel of methodological individualism and the “action frame of reference” during the 1930s when he wrote “The Structure of Social Action” (1937). Karl Popper also picked up some elements of the Austrian approach (not surprisingly) including methodological individualism and “situational analysis” which is essentially the action frame of reference including subjectivism.
Can people help out with any cross references and citations between those three lines of work? The volume of literature in each of the three is immense, and in my reading of the principals there is next to no cross referencing.
I am not aware that Parsons ever cited Mises or Popper and their associates. Popper in personal communication described Parsons as a contributor to verbalism in the social sciences but did not cite him in print. Jarvie (of the Popper school) referred briefly to Parsons in the course of a protracted debate by sociologists and anthropologists over MI involving associates of Popper (mostly Watkins) and others. In that context Hayek was cited as an exponent of MI but there was no reference to Mises or the Austrian tradition generally. This appears to indicate a high degree of fragmentation in the field or at least a lack of collegiate spirit in recognizing the contribution of scholars in other schools of thought who are fellow travelers in some respects.
Any Parsons scholars out there who can help him out? If so, please write Rafe or, even better, post a comment below.
What’s So Great About Tacit Knowledge? — Cont’d
| Nicolai Foss |
Peter asks, “what’s so great about tacit knowledge?”, pointing out that there is a tendency in the KM literature (and, I may add, parts of the strategic management literature as well) to exalt tacit above explicit knowledge. He correctly points out that tacit knowledge may well be errorneous, to which it may be added that errorneous tacit knowledge is usually more of a problem than errorneous explicit knowledge, since the latter is presumably easier to correct. In a comment on Peter’s post, JC Spender points out that “for the most part the discussion of tacit knowledge is sheer obscurantism.”
I agree with both Peter and JC. But I may want to be even more radical, and ask “What’s — analytically speaking — so great about tacit knowledge?” (more…)
Pomo Periscope II: Recommended Reading
| Nicolai Foss |
Here is an old but excellent paper by the great French sociologist Raymond Boudon, “The Freudian-Marxian-Structuralist (FMS) movement in France: variations on a theme by Sherry Turkle,” Revue Tocqueville, vol. II, no. 1 (Winter 1980), pp. 5-24. (Unfortunately, the paper doesn’t seem to exist online, but your library should be capable of getting it for you). The paper is highly recommended, not only for its dissection of the FMS, but also because so much of what says about the FMS fits more contemporary pomo trends perfectly. (more…)
Pomo Periscope I: “Economics and Narrative Form”
| Nicolai Foss |
Here at O&M we try to keep a keen eye on pomo tendencies in economics and management (e.g., here, here and here). Indeed, we do this with such frequency that we, as of this post, will have a regularly occurring feature — The Pomo Periscope.
We kick off by letting the Periscope zoom in on a “Call for Papers on Proposed Panel on Economics and Narrative Form, Society for the Study of Narrative Literature, Georgetown, 03/07.” Here is the full call: (more…)
Sharpe Rethinks CAPM
| Peter Klein |
A core Kuhnian principle is that scholars never change their minds. This is especially when their original views lead to Nobel Prizes. So what a surprise to learn that Nobel Laureate William Sharpe, co-creator (with Harry Markowitz) of the Capital Asset Pricing Model (CAPM), is rethinking his views on asset pricing.
[Sharpe’s] latest book, “Investors and Markets: Portfolio Choices, Asset Prices and Investment Advice,” may send investors and academics scurrying. Published this month by Princeton University Press, the book eschews mean-variance analysis — the mathematically complex formula that relates rewards to risks of securities or portfolios — in favor of a “state preference” approach that relies on an easy-to-understand simulation. That approach is based on a model closer to that used in financial engineering than in the ivory tower.
Markowitz, apparently, is not convinced, and will debate Sharpe at an upcoming conference. (Via Mark Thoma)
Organizations and Markets 
Recent Comments