Alternative theoretical practice
March 22, 2015
If theoretical models assume uncertainty, however, and assume that agents have epistemic and ontological beliefs consistent with this state of affairs, the proper way to approach the course of economic phenomena should be very different. Particularly in place of mechanisms or economic regularities that keep running independently of agents’ expectations, the decisive role of lobbyists within open-ended processes based on expectations should be incorporated into the analysis. Such an alternative approach to economics could be based on the following set of assumptions which focuses on the lobbyist role of agents and the special kind of practical knowledge and skills they need. Choosing this approach means abandoning the pretense of scientific status desired by Lucas, which is obtainable at the price of assuming PTF. I suggest that the following assumptions could be the philosophical core of a new conceptual framework for economics:
1) There are economic processes based on expectations and characterized by radical uncertainty. Agents involved in such processes act in two different ways (as decision-makers or as lobbyists)
2) Ex-ante knowledge of invariant sequences of events is generally not possible (because there are few if any sequences of this kind); more importantly, such knowledge is unnecessary as support and justification for the implementation of economic policies.
3) The role of theoretical practice is to identify the many feasible “branches” of a “tree of plausible outcomes” as well as the restrictions that each sequence of events faces.
4) It is not known (and it is not possible to know) ex-ante what “branches” of the tree (what sequences of feasible alternative events) will prevail. Science cannot help us with this.
5) Other types of knowledge (common and practical knowledge as well as practical skills) are crucial for shaping those processes. It is a sort of know-how knowledge, closer to management and administration than to scientific economics.
6) Although – as was shown in point (3) – theoretical practice has an important role to play in shaping processes, what is crucial in this endeavor is another practice, which we denote as lobbyist (interventional) practice (LP). As mentioned above, LP is performed by a wide range of economic players (mostly different kinds of interest groups who are able to operate in the relevant context and on agents’ expectations).
A theoretical practice compatible with all these assumptions and that also incorporates uncertainty, new key players – as lobbyists – and new forms of rationality, knowledge and skills will be a huge contribution for an understanding of economic processes.
Gustavo Marqués “Six core assumptions for a new conceptual framework for economics”
Reply
unfortunately , epistemic uncertainty is not consistent with your argument. If the economic system is ergodic (i.e., system processes are stable over time) then the occurrence of future events are already preprogrammed in the ergodic system. [Note Paul Samuelson asserted that for economics to be a “science” the system must be ergodic.]
If humans do not know the system is ergodic [probability distribution do nto vary over time] then humans are epistemologically uncerain. Nevertheless the path of the economy is already determined and nothing the humans including lobbyists can do will change the future outcome. The example I always give is that the movement of heavenly bodies are determined –since the Big Bang- by ergodic natural laws and nothing humans can do can change their paths. Accordingly, if congress, having epistemological uncertainty, believes it can pass a law outlawing solar eclipses to provide more sunshine and help increase crop yield. it will pass thid bill to increase GDP. But this law will not change sunshine or GDP or solar eclipses. [Note that Frank Knight had a concept of epistemological uncertainty — yet this did not affect the University of Chicago’s laissez faire philosophy of leaving it to the market to determine the future
Thus epistemological uncertainty about the future outcome of decision made to day have no effect on the long run path of the economy. you might as well leave the future to decisions made by market players, But if the economic system is ontological uncertiain, then humans by their actions can create the future — and government policy is relevant!!
Paul, the political-economic-ecologic systems are ontologically *indeterminate*; it makes no sense to assert systems are uncertain. Epistemic agents are uncertain; trees, rivers, buildings, balance sheets are not. Hence, the current exploration of performativity; the non-ergodicity of the systems puts the emphasis on creating-reproducing-transforming systems.
The rise and decline of US median family income
March 23, 2015EditorLeave a commentGo to comments
The functions of the lobbying industries
March 22, 2015EditorLeave a commentGo to comments
Before the industrial era, was the agrarian era, when the chief type of property whose inheritances determined the aristocracy consisted of land. With the onset of industrialization, after around 1600, corporate stock emerged increasingly to become the chief form of property whose inheritance determined the aristocracy. No longer was the aristocracy the possessor of the landed estates, which collectively constituted the given nation; the aristocracy increasingly became instead the possessor of the vast corporations, which collectively controlled the nation’s economy. Instead of a nation consisting primarily of its land, it came to consist increasingly of its corporations.
However, just as there was an agrarian-era conflict between the masters and their serfs; that is, between the aristocrats and the public; there came now to be an industrial-era conflict between the corporate owners and their hired servers; that is, between the aristocrats and their workers.
In both eras, there has been this same conflict for control of the government, or of the “State” – the body-politic. Dictatorships during the agrarian era were kingdoms, in which the owners of the landed estates chose the king or equivalent monarch as the supreme ruler. Dictatorships during the industrial era are instead nations, in which the owners of the corporations choose the Duce, Fuehrer, Shah, or other supreme ruler.
Both during the agrarian era, and during the industrial era, there have been political movements for the public, or the demos, to control the government, via democracy – no dictatorship at all. The methods whereby the aristocracy crushes the public have changed with the transition from feudalism (agrarian-era dictatorships) to fascism (industrial-era dictatorships). Whereas formerly, the method was the simple debt-bondage of the serf to his master, backed up by the military and police, it now became the aristocracy’s lobbying industries, which purchase the votes from the supposed representatives of the people or “Volk” who elect the government, and also purchase the media and the other means to sway the outcomes in those public “elections.” Consequently, there arose with fascism the nativist concept of the “Volk” or equivalent, as the supposed basis for the authority of a fascist state, in order to control the public, and in order to organize the public as the aristocracy collectively wants them to be organized. Fascism (like feudalism before it) accepts the aristocracy’s basic principle, hereditary rights and obligations; and it extends that hereditary concept to the public itself, via a supposed hereditary superiority of one people over other peoples, or “races,” so that the public won’t notice that the real threat to their welfare – the aristocracy – is already controlling “their” government, against their interests. Thus, while this actual enemy is already in control, exploiting the public, it is the “inferior peoples” who become blamed by the majority, the “superior race.” The majority blame those minorities for the problems that aristocrats have actually caused; and those elite therefore continue to be respected, no matter how much suffering they have caused. Minorities become escape-valves for the incoherent anger of the majority. Whereas previously, the authority of the feudal state was based upon God’s having supposedly simply chosen the existing potentates as the blessed-by-birth, whose children would inherit their blessing (e.g., Popes anointed Emperors, who could then pass on to an “heir to the throne” their power); the authority of the fascist state has come to rest instead upon the Volk or “race,” whom fascist leaders claim to represent. Aristocrats are hardly noticed in fascism, they are behind the scenes; whereas aristocrats were “nobility” – highly noticed and publicly honored – in feudalism.
The functions of the lobbying industries in fascism are, thus, as representatives of the aristocracy, to bribe politicians, and/or to control the public’s votes or vote-counting, so as to achieve effective control over the nominal representatives of the Volk or “the people,” whose interests the state supposedly advances, like a “Big Brother.” The news-media are controlled by the aristocracy, in order to sway the public toward voting for the people whom aristocrats want to write and enforce laws; and, so, the “free press” represent actually the aristocracy, not the public (who, after all, don’t own the press, and who mainly want to be entertained). This dual function of lobbying – buying the government, and fooling the public – is the successor to that of the feudal era’s military and clergy, which formerly retained the aristocracy’s control through the application of sheer brute force, military arms (which existed even before there was any “press” whatsoever). In that era, physical force, using violence and the threat of violence, predominated over mental force, using deception. Clergy used deception, but were always actually subordinate to the military power. During the modern era, the aristocracy’s control of the state relies more on lobbyists (deception), and less on police (violence). Force against the mind now predominates over force against the body. However, the world is still early in its transition from feudalism into fascism; and, so, there still remain many predominantly agrarian economies, in which the police retain their role as the primary means by which aristocrats control the public.
Eric Zuesse
On the value of theoretical models in economics
from Lars Syll
Chameleons arise and are often nurtured by the following dynamic. First a bookshelf model is constructed that involves terms and elements that seem to have some relation to the real world and assumptions that are not so unrealistic that they would be dismissed out of hand. The intention of the author, let’s call him or her “Q,” in developing the model may be to say something about the real world or the goal may simply be to explore the implications of making a certain set of assumptions. Once Q’s model and results become known, references are made to it, with statements such as “Q shows that X.” This should be taken as short-hand way of saying “Q shows that under a certain set of assumptions it follows (deductively) that X,” but some people start taking X as a plausible statement about the real world. If someone skeptical about X challenges the assumptions made by Q, some will say that a model shouldn’t be judged by the realism of its assumptions, since all models have assumptions that are unrealistic …
Chameleons are models that are offered up as saying something significant about the real world even though they do not pass through the filter. When the assumptions of a chameleon are challenged, various defenses are made (e.g., one shouldn’t judge a model by its assumptions, any model has equal standing with all other models until the proper empirical tests have been run, etc.). In many cases the chameleon will change colors as necessary, taking on the colors of a bookshelf model when challenged, but reverting back to the colors of a model that claims to apply the real world when not challenged.
Paul Pfleiderer
Reading Pfleiderer’s article reminds me of what H. L. Mencken once famously said:
There is always an easy solution to every problem – neat, plausible and wrong.
Pfleiderer’s perspective may be applied to many of the issues involved when modeling complex and dynamic economic phenomena. Let me take just one example — simplicity.
When it come to modeling I do see the point emphatically made time after time by e. g. Paul Krugman in simplicity — as long as it doesn’t impinge on our truth-seeking. “Simple” macroeconomic models may of course be an informative heuristic tool for research. But if practitioners of modern macroeconomics do not investigate and make an effort of providing a justification for the credibility of the simplicity-assumptions on which they erect their building, it will not fulfill its tasks. Maintaining that economics is a science in the “true knowledge” business, I remain a skeptic of the pretences and aspirations of “simple” macroeconomic models and theories. So far, I can’t really see that e. g. “simple” microfounded models have yielded very much in terms of realistic and relevant economic knowledge.
All empirical sciences use simplifying or unrealistic assumptions in their modeling activities. That is not the issue – as long as the assumptions made are not unrealistic in the wrong way or for the wrong reasons.
But models do not only face theory. They also have to look to the world. Being able to model a “credible world,” a world that somehow could be considered real or similar to the real world, is not the same as investigating the real world. Even though — as Pfleiderer acknowledges — all theories are false, since they simplify, they may still possibly serve our pursuit of truth. But then they cannot be unrealistic or false in any way. The falsehood or unrealisticness has to bequalified.
Explanation, understanding and prediction of real world phenomena, relations and mechanisms therefore cannot be grounded on simpliciter assuming simplicity. If we cannot show that the mechanisms or causes we isolate and handle in our models are stable, in the sense that what when we export them from are models to our target systems they do not change from one situation to another, then they – considered “simple” or not – only hold under ceteris paribusconditions and a fortiori are of limited value for our understanding, explanation and prediction of our real world target system.
The obvious ontological shortcoming of a basically epistemic – rather than ontological – approach, is that “similarity” or “resemblance” tout court do not guarantee that the correspondence between model and target is interesting, relevant, revealing or somehow adequate in terms of mechanisms, causal powers, capacities or tendencies. No matter how many convoluted refinements of concepts made in the model, if the simplifications made do not result in models similar to reality in the appropriate respects (such as structure, isomorphism etc), the surrogate system becomes a substitute system that does not bridge to the world but rather misses its target.
Constructing simple macroeconomic models somehow seen as “successively approximating” macroeconomic reality, is a rather unimpressive attempt at legitimizing using fictitious idealizations for reasons more to do with model tractability than with a genuine interest of understanding and explaining features of real economies. Many of the model assumptions standardly made by neoclassical macroeconomics – simplicity being one of them – are restrictiverather than harmless and could a fortiori anyway not in any sensible meaning be considered approximations at all.
If economists aren’t able to show that the mechanisms or causes that they isolate and handle in their “simple” models are stable in the sense that they do not change when exported to their “target systems”, they do only hold under ceteris paribus conditions and are a fortiori of limited value to our understanding, explanations or predictions of real economic systems.
That Newton’s theory in most regards is simpler than Einstein’s is of no avail. Today Einstein has replaced Newton. The ultimate arbiter of the scientific value of models cannot be simplicity.
As scientists we have to get our priorities right. Ontological under-labouring has to precede epistemology.
You simply cannot compare Newton to the neoclassical nonsense! That is actually outrageous. Neoclassical models are inconsistent, totally unrealistic in the sense that they use absolutely false and ridiculous assumptions, and obviously are not confirmed at all by any experience.
How is that anywhere closely related to a physical model that is rather correct for most use cases?
Let’s face it. Neoclassical economics is ideologically motivated garbage.
Please don’t insult real scientists by comparing their work to neoclassical economics.
From STTPML:
https://sttpml.org/some-research-materials-for-scholars-of-the-political-economy-of-plutocracy-and-elites/
https://sttpml.org/some-research-materials-documents-and-sources-imperial-penetration-co-optation-control-systems-engineering-and-regime-change/
https://sttpml.org/some-research-materials-for-scholars-of-imperial-propaganda/
https://jimcraven10.wordpress.com/2012/07/19/some-lectures-in-china-2/