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Monday, March 05, 2018

In the middle of a very courteous, diplomatic, and insightful post about Modern Monetary Theory Simon Wren-Lewis recalls his student days "I was told as a student that neoclassical economics was fundamentally flawed, and would soon be replaced in some kind of Kuhnian revolution. I know how easy it is to follow your political instincts and thereby miss out on so much important and useful knowledge." I first thought "exactly what important and useful knowledge" and "odd that he assumes that rejection of neoclassical economics is based on "political instincts" and not evidence. But now I want to focus on "Kuhnian".

I'd say that, since I was a student, microeconomics has changed fundamentally, but that there hasn't been a Kuhnian revolution at all. Back then courses were mostly theory with occasional empirical examples (which don't come to mind). The key features were well defined utility functions and rational utility maximization. Only later (in then current research) was there a mix of purely theoretical articles (which are still being written) and empirical work. The empirical work would rely on a lot of theory, including typically dubious assumptions needed to identify parameters of interest. Referees and discussants would note that among there interesting critiques there would be the standard questions about identification.

Some economists whom I had the fortune to meet, were looking for natural experiments. They argued that a valid instrument which captured a tiny fraction of the variance of the explanatory variable was more useful than an invalid instrument which gave smaller standard errors and biased estimates.

The point of this post (if any) is that this was not a revolutionary storming of baricades. Each article which used good instruments justified by common sense was uncontroversial. Exactly because the theory needed for identification was plausible and simple -- easily explained to non-specialists who would find the argument convincing and unintimidating -- it wasn't controversial within the profession either. A paper about the effect of unemployment insurance cost of living adjustments on unemployment duration was threatening to no one. The new empirical economics whose (always necessary) theoritical assumptions were plausible and obvious infiltrated and took over. I can't even say when it happened -- it appears as a trend not a break.

OK so I just googled [Noah Smith empirical revolution] and got the perfectly titled "A paradigm shift in empirical economics?"

There is the phrase made famous by Kuhn "paradigm shift" . My answer is maybe yes. I would be better able to answer if I had a clue what people mean when they write "paradigm," but there clearly wasn't a scientific revolution. The field evolved into something almost unrecognizably different. I suspect that this may be the rule rather than the exception. I think the example of the quantum revolution in physics is roughly as extraordinary as it seems to be. Trying to think of other examples, I come up with plate tectonics aka continental drift. Also, I guess, Darwin (and the three independent co-discoverers of evolution by natural selection) were revolutionary.

But now I want to type about Kuhn and "paradigm". I think the very best part of "The Structure of Scientific Revolutions (later editions)" is the afterword in which Kuhn apologises for his abuse of the word. He says he used it with many different meanings in the main body of the book and that he should have stuck to the original definition which is based on the paradigm of a paradigm -- illustrations in texctbooks. This (potentially useful term) shows bow important typical illlustrative examples are to our understanding of theories and the world to which they attempt to correspond. So Special relativity have implications for everyday life which are almost identical numerically, but the typical example of motion in modern introductory textbooks is relative motion of about half the speed of light where they are very different. The revolution triumphs when the typical example is something which had been new and strange. This is a useful point. Sadly this potential useful use "paradigm" was permanently blocked by Kuhn and his many fans. I think it is best to just talk about "the illustrations in textbooks" preferably with examples (paradigms of paradigmatic paradigms).

But the point (if any) of this tangent is that Kuhn was rewarded for his mistake. In fact, he became a super star scholar exactly because of it. His carely abuse of "paradigm" made it possible for others to impress the impressionable by using an oddly spelled word which came to English from Greek not mere Latin or merer German. The vagueness forcess me to use another technical term (which has bovine not Greek origins) Bullshit. Megatons of bullshit.

Which Kuhn regretted (not that he minded being a star).

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