One example are discussions of free trade, which is strongly favored by an overwhelming majority of economists. The standard justifications for this position are based on models whose connection to reality is tenuous at best, and which ignore a host of potentially relevant factors. (Also, I often see arguments that are clearly unsound even if the models used are assumed to be adequate, as well as naive intuitive arguments that violate elementary logic.) Now, for all I know, the majority opinion of economists on this issue could be mostly correct (though I am sure that it’s wrong on some particulars), but whichever way it is, their existing justifications are far from adequate. Once you start questioning them about this, you are likely to quickly run into sneering, stonewalling, moral posturing, and what looks like ideologically induced blockheadedness.
Another example is the question of how meaningful various economic figures and quantities are. This includes various economic statistics that are often used in arguments and calculations with multiple digits of precision, even though the way they have been obtained clearly makes even the first digit, and sometimes even the order of magnitude, highly questionable. (Oskar Morgenstern’s On the Accuracy of Economic Observations presents a good book-length critique of this phenomenon. This book has been conveniently ignored and forgotten by economists, even though the issues it raised have never been addressed, to my knowledge.)
Even worse, however, are various artificial quantities such as price indexes and the “real” figures based on them, which are typically reified and treated as if they were objectively measurable properties of the real world, whereas in reality they are arbitrary constructs that could be defined with as much (or rather as little) justification in different ways to yield wholly different figures. Again, with a few honorable exceptions, trying to discuss these issues with economists usually leads to frustrating unsuccessful attempts to explain what the problem is, often followed by smug dismissals. You’ll practically never see anything like that from natural scientists.
I generally agree with you; however, some comments:
Even worse, however, are various artificial quantities such as price indexes and the “real” figures based on them, which are typically reified and treated as if they were objectively measurable properties of the real world, whereas in reality they are arbitrary constructs that could be defined with as much (or rather as little) justification in different ways to yield wholly different figures.
I’m sure you’ll agree that long term economic numbers should be adjusted for inflation to be more meaningful, whether this is happening in a reasonable way is another question.
You’ll practically never see anything like that from natural scientists.
Well, in physics you have things like friction and air-resistance that, at least at first, were fudge factors to explain why objects don’t obey Newton’s laws. In fact looking at physics, in order to make progress it was necessary to disentangle the “fundamental behavior” of objects, i.e., how they behave on “frictionless surfaces”, when hung from “strings of negligible mass” and other unrealistic assumptions, from things like friction that cause real objects to behave slightly differently. The same will undoubtedly be necessary in economics.
That having been said, I have no idea whether existing attempts to do this are any good. Physicists, of course, had the advantage that they could do experiments much more easily.
I’m sure you’ll agree that long term economic numbers should be adjusted for inflation to be more meaningful, whether this is happening in a reasonable way is another question.
The problem is that “adjusting for inflation” makes sense only as a rough and vague heuristic, not as an exact measure of objective value which can be computed up to three, four, or more significant digits. The reality is that when you compare the purchasing power of money in different places and times, the differences in a myriad of relevant factors are often so great that it makes no sense at all to express them with a single number, except perhaps for the purposes of some extremely rough, Fermi problem-style calculation.
The idea that you can define some objective and scientific “price index” and then do calculations that will tell you that some “real” values differ by 4.83%, or invent models that will predict such figures by capturing real insight, is completely detached from reality. This is not a simplification of a problem to make attacking it easier; it’s not even an instance of unjustified simplification—rather, it means dreaming up complete fantasies and giving them a pseudoscientific dressing. I simply see nothing comparable among natural scientists, who are generally capable of dissolving the concepts they work with and avoiding getting lost in such elaborate fantasies built of reified artificial concepts.
(From this it also follows that most discussions of economic growth are nonsense on stilts, since they require combining the nonsensical notions of “real” values with GDP and similar figures, which have their own host of problems that normally go unacknowledged, and which are also usually impossible to discuss rationally.)
The reality is that when you compare the purchasing power of money in different places and times, the differences in a myriad of relevant factors are often so great that it makes no sense at all to express them with a single number
That is too sweeping a criticism. We have to model the world somehow when making decisions, and quantitatively. That goes for policy makers also.
Are you familiar with Jared Diamond’s lay account and defense of operationalization, here? I’d be interested to hear what parts of it you object to.
That is too sweeping a criticism. We have to model the world somehow when making decisions, and quantitatively. That goes for policy makers also.
With all due respect, this is exactly the sort of stonewalling, discourse-killing response I commonly see from economists. If you can’t justify your model, then the correct and honest thing to do is to admit that you don’t have a model and try to deal as best you can with your ignorance—not to continue using models divorced from reality with the excuse that you don’t have anything better. An astrologer can use the same excuse, with equal justification.
However, clearly, admitting ignorance in these matters also means admitting that “scientific” policy is in many instances just pseudoscientific dilettantism, which in turn hits all sorts of ideological hot buttons. Of course, some centuries ago, a court astrologer would also likely stonewall if questioned too much about the validity of his astrology, which is an almost perfect analogy.
Are you familiar with Jared Diamond’s lay account and defense of operationalization, here? I’d be interested to hear what parts of it you object to.
There is in principle no problem with operationalization, as long as the models based on it are sound logically and epistemologically. In particular, it is important that the operationalized concepts can be traced back to how exactly they correspond to observable reality, and that the limitations of models are understood and recognized by those who employ them. What I’m arguing is that many concepts used by economists don’t satisfy these basic criteria of validity.
The crucial practical problem here is that attempts to tackle scientifically issues that are relevant for politics, power, and ideology are more likely to lead to the emergence of ideologically-driven pseudoscience than to a real scientific clarification of contentions issues. Clearly, modern economics and other social sciences have not been immune to this problem, which is probably the main reason for their present awful state.
There are two questions here. One is whether economists have a good influence on policy. Another is whether they even understand anything. I don’t have any illusions about the first question, but my interest is in understanding.
We observe that prices tend to go up, and wish to quantify that observation, maybe to test ideas about its relationship to money supply. So we have to operationalize “prices go up.” We do it by sampling commonly purchased things and keeping track of their prices over time. That seems to me to be as innocuous as operationalizations come in social science. If you don’t think we learn anything by doing it, I don’t see how you think we can learn anything about human affairs at all.
You might object that in the details the way inflation is measured and reported is very political. I don’t disagree but that’s not the same thing as saying we don’t know anything.
The crucial practical problem here is that attempts to tackle scientifically issues that are relevant for politics, power, and ideology are more likely to lead to the emergence of ideologically-driven pseudoscience than to a real scientific clarification of contentions issues.
That’s a problem for all domains of knowledge including the hard sciences.
We observe that prices tend to go up, and wish to quantify that observation, maybe to test ideas about its relationship to money supply. So we have to operationalize “prices go up.” We do it by sampling commonly purchased things and keeping track of their prices over time. That seems to me to be as innocuous as operationalizations come in social science. If you don’t think we learn anything by doing it, I don’t see how you think we can learn anything about human affairs at all.
Well, yes, if you just want to operationalize the vague statement that “prices went up,” it makes sense to do it as you describe. What doesn’t make sense is postulating the existence of some reified “real” value of money, and then claiming that it has changed by 2.61% or whatever since last year. (Not to even mention the even more outlandish attempts to evaluate this change in “real” value across decades and centuries, or to compare them across vastly different places, where even the set of things available on the market is largely different, as well as all sorts of further reifications such as the “real” GDP.) However, vast edifices of both theory and practical policy have been built under the assumption that you can do such things, and if one attempts to discuss them by dissolving these nebulous concepts, one encounters confusion and stonewalling.
That’s a problem for all domains of knowledge including the hard sciences.
The problem is far more severe where the questions studied have some bearing on ideology, politics, and power. It’s a matter of incentives, after all.
What doesn’t make sense is postulating the existence of some reified “real” value of money, and then claiming that it has changed by 2.61% or whatever since last year. (Not to even mention the even more outlandish attempts to evaluate this change in “real” value across decades and centuries, or to compare them across vastly different places, where even the set of things available on the market is largely different, as well as all sorts of further reifications such as the “real” GDP.)
I would like to hear a more detailed criticism of the “real value of money” concept specifically. Human height varies over the course of a lifetime, over the course of a day, and geographically, and yet it is fairly clear that people are taller on average now than during the middle ages. And by different operationalizations we can measure how much taller. Isn’t it also clear that people are richer on average now that during the middle ages? Are you arguing that any attempt to measure how much richer is doomed to be misleading?
Statistics about human height are not a good analogy, since the concepts are simple and straightforward enough that they can be readily dissolved and their connection to reality re-evaluated if necessary. But many other “social science” numbers are indeed as bad as those found in economics, in the sense that even a casual rational evaluation of these numbers will reveal critical problems that are nonchalantly ignored in the regular “scientific” practice in these areas. (Though it would probably be hard to find anything as perverse as the epistemic rat’s nest that economists have built around various numbers they operate with.)
As for measuring how much richer people are than in the past, you can provide information that will leave readers with more or less correct intuitions about such things, by describing at length how much people in various occupation had to work and in what conditions, what they could afford with typical wages, etc., etc. But the idea that you can describe this with a single scalar number and then treat this number as a real physical quantity that features in models and theories is obviously complete nonsense.
But the idea that you can describe this with a single scalar number and then treat this number as a real physical quantity that features in models and theories is obviously complete nonsense.
It’s not obviously complete nonsense. It’s obviously part nonsense and part sense, and without further argumentation it’s not obvious how large a part nonsense and how large a part sense.
Just because a quantity is defined in a rather arbitrary way, that doesn’t mean it carries no information. You can take the position that an informal analysis would incorporate the same information and do it better, but you’d have to actually compare the biases inherent in these two approaches. (I haven’t read the Morgenstern book that you’ve linked; maybe it does so.)
There are two questions here. One is whether economists have a good influence on policy. Another is whether they even understand anything. I don’t have any illusions about the first question, but my interest is in understanding.
We observe that prices tend to go up, and wish to quantify that observation, maybe to test ideas about its relationship to money supply. So we have to operationalize “prices go up.” We do it by sampling commonly purchased things and keeping track of their prices over time. That seems to me to be as innocuous as operationalizations come in social science. If you don’t think we learn anything by doing it, I don’t see how you think we can learn anything about human affairs at all.
The crucial practical problem here is that attempts to tackle scientifically issues that are relevant for politics, power, and ideology are more likely to lead to the emergence of ideologically-driven pseudoscience than to a real scientific clarification of contentions issues.
That’s a problem for all domains of knowledge including the hard sciences.
I simply see nothing comparable among natural scientists, who are generally capable of dissolving the concepts they work with and avoiding getting lost in such elaborate fantasies built of reified artificial concepts.
While that’s mostly true today after several centuries of work, Newton would have been hard pressed to explain what a force was without resorting to something that sounds like mysticism. Also calculus was only placed on a firm mathematical footing by Weierstrass two centuries after Newton had invented it and based his physics on it.
That’s not a good comparison. Every physical theory postulates the existence of some fundamental constituents of reality that cannot be reduced further. (And a practically useful theory may well treat that way concepts that we in principle know how to reduce to something more fundamental, but it would be impractical to do so.) The concepts in economics that I’m attacking are a completely different case: they consist of quantities defined in arbitrary ways, whose arbitrariness is then forgotten—leading to their treatment as objective properties of reality that should be calculated and studied in their own right, far beyond the limits of their actual usefulness, and without the ability to work back through the logic of their use as a reality check.
I can’t think of anything comparable in the history of modern physics, from Galileo till present day. I simply can’t imagine a physicist similarly incapable of grasping with the logic of physical theories and their connection to reality.
Every physical theory postulates the existence of some fundamental constituents of reality that cannot be reduced further.
I’ve heard one that doesn’t. It was agnostic on the subject and speculation on what the reason was for having indefinite layers of ‘more fundamental’ was outside the scope of the theory (like a ‘first cause’). It did qualify as a physical theory (but certainly isn’t mine.)
One example are discussions of free trade, which is strongly favored by an overwhelming majority of economists. The standard justifications for this position are based on models whose connection to reality is tenuous at best, and which ignore a host of potentially relevant factors. (Also, I often see arguments that are clearly unsound even if the models used are assumed to be adequate, as well as naive intuitive arguments that violate elementary logic.) Now, for all I know, the majority opinion of economists on this issue could be mostly correct (though I am sure that it’s wrong on some particulars), but whichever way it is, their existing justifications are far from adequate. Once you start questioning them about this, you are likely to quickly run into sneering, stonewalling, moral posturing, and what looks like ideologically induced blockheadedness.
Another example is the question of how meaningful various economic figures and quantities are. This includes various economic statistics that are often used in arguments and calculations with multiple digits of precision, even though the way they have been obtained clearly makes even the first digit, and sometimes even the order of magnitude, highly questionable. (Oskar Morgenstern’s On the Accuracy of Economic Observations presents a good book-length critique of this phenomenon. This book has been conveniently ignored and forgotten by economists, even though the issues it raised have never been addressed, to my knowledge.)
Even worse, however, are various artificial quantities such as price indexes and the “real” figures based on them, which are typically reified and treated as if they were objectively measurable properties of the real world, whereas in reality they are arbitrary constructs that could be defined with as much (or rather as little) justification in different ways to yield wholly different figures. Again, with a few honorable exceptions, trying to discuss these issues with economists usually leads to frustrating unsuccessful attempts to explain what the problem is, often followed by smug dismissals. You’ll practically never see anything like that from natural scientists.
I generally agree with you; however, some comments:
I’m sure you’ll agree that long term economic numbers should be adjusted for inflation to be more meaningful, whether this is happening in a reasonable way is another question.
Well, in physics you have things like friction and air-resistance that, at least at first, were fudge factors to explain why objects don’t obey Newton’s laws. In fact looking at physics, in order to make progress it was necessary to disentangle the “fundamental behavior” of objects, i.e., how they behave on “frictionless surfaces”, when hung from “strings of negligible mass” and other unrealistic assumptions, from things like friction that cause real objects to behave slightly differently. The same will undoubtedly be necessary in economics.
That having been said, I have no idea whether existing attempts to do this are any good. Physicists, of course, had the advantage that they could do experiments much more easily.
The problem is that “adjusting for inflation” makes sense only as a rough and vague heuristic, not as an exact measure of objective value which can be computed up to three, four, or more significant digits. The reality is that when you compare the purchasing power of money in different places and times, the differences in a myriad of relevant factors are often so great that it makes no sense at all to express them with a single number, except perhaps for the purposes of some extremely rough, Fermi problem-style calculation.
The idea that you can define some objective and scientific “price index” and then do calculations that will tell you that some “real” values differ by 4.83%, or invent models that will predict such figures by capturing real insight, is completely detached from reality. This is not a simplification of a problem to make attacking it easier; it’s not even an instance of unjustified simplification—rather, it means dreaming up complete fantasies and giving them a pseudoscientific dressing. I simply see nothing comparable among natural scientists, who are generally capable of dissolving the concepts they work with and avoiding getting lost in such elaborate fantasies built of reified artificial concepts.
(From this it also follows that most discussions of economic growth are nonsense on stilts, since they require combining the nonsensical notions of “real” values with GDP and similar figures, which have their own host of problems that normally go unacknowledged, and which are also usually impossible to discuss rationally.)
That is too sweeping a criticism. We have to model the world somehow when making decisions, and quantitatively. That goes for policy makers also.
Are you familiar with Jared Diamond’s lay account and defense of operationalization, here? I’d be interested to hear what parts of it you object to.
With all due respect, this is exactly the sort of stonewalling, discourse-killing response I commonly see from economists. If you can’t justify your model, then the correct and honest thing to do is to admit that you don’t have a model and try to deal as best you can with your ignorance—not to continue using models divorced from reality with the excuse that you don’t have anything better. An astrologer can use the same excuse, with equal justification.
However, clearly, admitting ignorance in these matters also means admitting that “scientific” policy is in many instances just pseudoscientific dilettantism, which in turn hits all sorts of ideological hot buttons. Of course, some centuries ago, a court astrologer would also likely stonewall if questioned too much about the validity of his astrology, which is an almost perfect analogy.
There is in principle no problem with operationalization, as long as the models based on it are sound logically and epistemologically. In particular, it is important that the operationalized concepts can be traced back to how exactly they correspond to observable reality, and that the limitations of models are understood and recognized by those who employ them. What I’m arguing is that many concepts used by economists don’t satisfy these basic criteria of validity.
The crucial practical problem here is that attempts to tackle scientifically issues that are relevant for politics, power, and ideology are more likely to lead to the emergence of ideologically-driven pseudoscience than to a real scientific clarification of contentions issues. Clearly, modern economics and other social sciences have not been immune to this problem, which is probably the main reason for their present awful state.
There are two questions here. One is whether economists have a good influence on policy. Another is whether they even understand anything. I don’t have any illusions about the first question, but my interest is in understanding.
We observe that prices tend to go up, and wish to quantify that observation, maybe to test ideas about its relationship to money supply. So we have to operationalize “prices go up.” We do it by sampling commonly purchased things and keeping track of their prices over time. That seems to me to be as innocuous as operationalizations come in social science. If you don’t think we learn anything by doing it, I don’t see how you think we can learn anything about human affairs at all.
You might object that in the details the way inflation is measured and reported is very political. I don’t disagree but that’s not the same thing as saying we don’t know anything.
That’s a problem for all domains of knowledge including the hard sciences.
Well, yes, if you just want to operationalize the vague statement that “prices went up,” it makes sense to do it as you describe. What doesn’t make sense is postulating the existence of some reified “real” value of money, and then claiming that it has changed by 2.61% or whatever since last year. (Not to even mention the even more outlandish attempts to evaluate this change in “real” value across decades and centuries, or to compare them across vastly different places, where even the set of things available on the market is largely different, as well as all sorts of further reifications such as the “real” GDP.) However, vast edifices of both theory and practical policy have been built under the assumption that you can do such things, and if one attempts to discuss them by dissolving these nebulous concepts, one encounters confusion and stonewalling.
The problem is far more severe where the questions studied have some bearing on ideology, politics, and power. It’s a matter of incentives, after all.
I would like to hear a more detailed criticism of the “real value of money” concept specifically. Human height varies over the course of a lifetime, over the course of a day, and geographically, and yet it is fairly clear that people are taller on average now than during the middle ages. And by different operationalizations we can measure how much taller. Isn’t it also clear that people are richer on average now that during the middle ages? Are you arguing that any attempt to measure how much richer is doomed to be misleading?
Statistics about human height are not a good analogy, since the concepts are simple and straightforward enough that they can be readily dissolved and their connection to reality re-evaluated if necessary. But many other “social science” numbers are indeed as bad as those found in economics, in the sense that even a casual rational evaluation of these numbers will reveal critical problems that are nonchalantly ignored in the regular “scientific” practice in these areas. (Though it would probably be hard to find anything as perverse as the epistemic rat’s nest that economists have built around various numbers they operate with.)
As for measuring how much richer people are than in the past, you can provide information that will leave readers with more or less correct intuitions about such things, by describing at length how much people in various occupation had to work and in what conditions, what they could afford with typical wages, etc., etc. But the idea that you can describe this with a single scalar number and then treat this number as a real physical quantity that features in models and theories is obviously complete nonsense.
It’s not obviously complete nonsense. It’s obviously part nonsense and part sense, and without further argumentation it’s not obvious how large a part nonsense and how large a part sense.
Just because a quantity is defined in a rather arbitrary way, that doesn’t mean it carries no information. You can take the position that an informal analysis would incorporate the same information and do it better, but you’d have to actually compare the biases inherent in these two approaches. (I haven’t read the Morgenstern book that you’ve linked; maybe it does so.)
There are two questions here. One is whether economists have a good influence on policy. Another is whether they even understand anything. I don’t have any illusions about the first question, but my interest is in understanding.
We observe that prices tend to go up, and wish to quantify that observation, maybe to test ideas about its relationship to money supply. So we have to operationalize “prices go up.” We do it by sampling commonly purchased things and keeping track of their prices over time. That seems to me to be as innocuous as operationalizations come in social science. If you don’t think we learn anything by doing it, I don’t see how you think we can learn anything about human affairs at all.
That’s a problem for all domains of knowledge including the hard sciences.
While that’s mostly true today after several centuries of work, Newton would have been hard pressed to explain what a force was without resorting to something that sounds like mysticism. Also calculus was only placed on a firm mathematical footing by Weierstrass two centuries after Newton had invented it and based his physics on it.
That’s not a good comparison. Every physical theory postulates the existence of some fundamental constituents of reality that cannot be reduced further. (And a practically useful theory may well treat that way concepts that we in principle know how to reduce to something more fundamental, but it would be impractical to do so.) The concepts in economics that I’m attacking are a completely different case: they consist of quantities defined in arbitrary ways, whose arbitrariness is then forgotten—leading to their treatment as objective properties of reality that should be calculated and studied in their own right, far beyond the limits of their actual usefulness, and without the ability to work back through the logic of their use as a reality check.
I can’t think of anything comparable in the history of modern physics, from Galileo till present day. I simply can’t imagine a physicist similarly incapable of grasping with the logic of physical theories and their connection to reality.
I’ve heard one that doesn’t. It was agnostic on the subject and speculation on what the reason was for having indefinite layers of ‘more fundamental’ was outside the scope of the theory (like a ‘first cause’). It did qualify as a physical theory (but certainly isn’t mine.)