Robert's Stochastic thoughts

Friday, March 18, 2011

Ryan Avent is the source of the conjecture that economics is a science.

Read his post.

I tried to be polite at his site and wrote "I think you are totally absolutely wrong" but I honestly think that he is psychotic. I don't know how any sane person could write what he wrote. The only explanation that I can think of is that he has decided to evaluate the economics profession without reading the top ranked journals.

That is I think he only looks at economic research which he considers scientific and then asserts that it is typical of economic research in general out of lazy ignorance.

The rest of my comment.

I think that your claim that economics is based on data is nonsense. For one thing, your claim that economics is one field is nonsense.

Yes there are many economists who test theories with data. Many of them, by the way, perform experiments. Others look for natural experiments. Many change their views because of the data. Many admit they were wrong when their predictions are contradicted by the data.

But that is only one part of the profession. There are also economists who consider economics a branch of mathematics. They do not speculate as to whether their economic results correspond to the real world. That's not the point.

You can look at top economics journals and find many articles which make no reference to data. They are contributions to a theoretical literature whose origin is not based on empirical success. This is simply a fact. I have mystified economists by suggesting that theories should be testable.

Then there is a whole huge literature based on drawing testable implications from a model, testing them, rejecting them and sticking with the model. This is always a problem -- it is impossible to test a hypothesis of interest without auxiliary hypotheses. But in this case, the false model is used and its implications are used to advise policy makers. That is the whole model (with auxiliary hypotheses) which has been rejected by the data.

Rejection of a model leads many (probably most) economists to say that models are false by definition and that a false model can nonetheless be useful. What economic hypotheses have been abandoned because they did not fit the data ? I'd like a complete list. It won't be long. I claim it is empty.

Notice I have avoided the topic of fresh water macroeconomists. They are another breed apart. Their views are much much further from those of Krugman than the average news consumer would ever guess. Their views are so extreme that it is not possible for non economists to believe that they mean what they say (and they rarely say it in public).

4 comments:

Adam Ozimek said...: Robert,

As always, I take your point of view seriously. But I disagree with you here. I think a simplified but reasonable approximation of a "real" science paper is that it has 3 parts: lit review, theory + hypothesis, and empirical test. I take the role of theorists to be specializing in one part, a crucial part, of the scientific method, while not necessarily producing work that in and of itself constitutes science. The same could be said of lit reviews. In short: if you break up the scientific method and intensely specialize, then parts begin to look like not science, but they are.

Is that reasonable?

Also, for an economic hypothesis that has been abandoned because they did not fit the data, how about one of the most famous: the Phillips curve? (At Modeled Behavior I also pointed to 80s RBC models with no money, but Krugman claims people are still doing that, so I'll leave that aside for now).

And as time goes on it becomes increasingly difficult to view economics as a coherent field, but I don't think we're there yet. Most economists come from a grad program that covers a reasonably similar core. What % of programs use Varian, Mas-Collel Whinston and Green, or something similar for the micro core?

I agree certain subfields are largely engaged in un-scientific, but often worthwhile endeavors. Normative pursuits obviously fit here. But I think when critics say econ isn't a science, they're talking about when it's trying to be a science, e.g. when it's making positive statements. So before saying "parts of econ are unscientific", I think it's important to emphasize that the parts that try to be generally are, and some parts that appear not to be (e.g. theory) are part of the scientific process.; 2:34 PM
Adam Ozimek said...: Ah, I see you have replied to the Phillips curve in your post below!; 2:52 PM
Caleb said...: I posted this on Avent's blog and will post it here. I wrote a piece that functions as a response to this arguement. I was a neuroscientist at Harvard for a while and while I have a great appreciation for what economists do, the point of my article is that what they’re studying doesn’t allow actual scientific study in the first place:
http://garlingfiles.wordpress.com/2010/09/17/the-uncertainty-principle-in-quite-certain-economic-opinion/; 7:28 PM
Robert said...: Dear Adam Ozimek

Thanks for coming by. I also admire your polite tone (especially given the very rude tone of my post).

I agree that theorists have a role in scientific enterprises. Obvously the classic example is theoretical physicists who do math all day, never conduct and experiment and play a vital necessary role in a very successful scientific enterprise (an aside -- I think one of the worst problems with economists is that the only natural science most of us consider is physics).

But the interaction of theoretical physicists and data is completely different from the interaction of economists and data. In physics, elegant models which contradict the data are abandoned. Many (perhaps most) theoretical physicists look down on experimental physicists (who they rank above non physicists who they rank above sheep). They clearly resent the fact that their brilliant model development is not appreciated, because it happens to not correspond to this universe. But the field moves on.

This just doesn't happen in economics. The theory basically stays the same no matter what the data say. Consider your example -- economists are taught from Varian or Mas Colell Whinston. The first edidtion of Varian's microeconomic analysis was published long ago (I studied from it). How have the data caused later editions to differ from the first ? (I ask for information I have only opened two editions of the book).

The key point is that economists identify the set of theory with the set of models and note that models are false by definition. Testable implications are developed, tested and rejected and nothing happens. The model with false implications is still used. It's status isn't diminished, because economic theory was never a set of scientific hypotheses.

Consider Lakatos's idea of a degenerative research program. Oddly I can't find a good link. The general view is that all research programs have cores and auxiliary hypotheses and rejection of a testable implication generally leads to abandoning an auxiliary hypothesis. The distinguishing feature of a degenerative research program is that, once the core belief is reconciled with the data that rejected the joint core and auxiliary hyotheses, the matter is settled and nothing else changes.

Each confrontation with the data is local and once the core belief is reconciled with that bit of data, no implications for other phenomena are developed. The new auxiliary hypothesis has served only to protect the core belief from the data.

I read something like this somewhere. I thought it was a perfect description of econmics after the death of Lakatos. He was thinking of Ptolomaic astronomy and epicycles, but that is *exactly* what we do.

So when testing the life cycle- PIH we note that the hypothesis does not implay a representative consumer nor utility functions which are separable in consumption and everything else nor time separable utility functions. But when we put consumption into a macro model, we almost always put in a utility function wich is log(c_t) plus other things. That part of the model is rejected, but so what. The auxiliary assumptions are only a problem when the PIH is confronted with data on consumption and not when it is used to develope models which are used to advise poicy makers.

What could possibly be more degenerative than that ?; 10:03 PM