Given American-Crackpot Justin's really commendable and interesting recent posts on one of my own favorite bugaboos, economics, I thought it might be illuminating to turn to Auden's introduction to the old Portable Greek Reader:
The great difference between the Greek conception of Nature and later ones is that the Greeks thought of the universe as analogous to a city-state, so that for them natural laws, like human laws, were not laws of things, but laws for things. When we speak of a falling body "obeying" the law of gravitation, we are unconsciously echoing Greek thought; for obedience implies the possibility of disobedience. To the Greeks this was no dead metaphor; consequently, their problem was not the relation of Mind to Matter, but of Substance to Form, how matter became "educated" enough, so to speak, to conform to law.Justin struggled to make clear that the failure of economics as a scientific worldview is that economics is not scientific in any meaningful modern sense. (I don't, by the way, mean to imply that Justin's writing fell short of making this point, but that the casual readers who happened by to comment struggled to understand it.) Whereas a "law" of physics will surely be descriptive and ideally also be predictive, it is not prescriptive. To use Auden's phrase: there is no possibility of disobedience. As Justin points out, in economics, this situation is often reversed. The observable universe breaks economic law; human behavior is neither accurately described nor accurately predicted by the models and formulas of economists.
The non-regular commenters don't appreciate the distinction, and here is a telling and typical example:
It is easy enough for me to agree that the Tennessee fire episode was both loathsome and stupid.I propose to you that the notion one would apply economic models to this reasonable question is functionally equal to applying alchemy to the lead paint at your neighborhood playground.
But ... given that fires are not put out by a generous human spirit, but by firefighters, suitably equipped with firetrucks, firehoses, and such - how should those things actually be arranged for?
65 comments:
Let me tell you that I once saw a kid in a slum eat a lead paint chip and thereafter shit gold bricks.
So there!
(too bad the bricks were metaphoric and he had to die in order for his family to get a tort suit recovery against the slumlord)
It is a subtle point and I'm not sure you're getting it either. I understand him to be noting that economics is actually a sub-discipline of ethics, i.e. when someone presents a "rational choice theory" it must be understood as a rhetorical device for advocating certain types of choices rather than a description of how human beings operate.
So applying economic models to the question of "how those things should actually be arranged for" is exactly what they're designed to do-- just not in quite the way their designers happen to claim. The alchemy analogy is somewhat misguided, though that is a more complex conversation.
As I read the comments on Justin's posts (which I agree are excellent--he's been on an amazing streak recently), I actually thought, "I hope IOZ reads comment threads." And here we are.
I agree with the above. Alot of present confusion is caused by ignoring the fact that economics is a branch of ethics, as is what is currently called "political science", in fact there used to be no distinction made between the two subdisciplines.
Oh my fucking god those commenters. My niggaz, did you for real not read "Notes From Underground"? I mean no offense to Justin but he is not really offering some radical new way of looking at the world here.
I think Justin's most important point in that post is one that even critics of orthodox economics often miss - not only are our economic models often wrong, economic ideology is actively and materially altering the world to more closely conform to theory.
James C. Scott's Seeing Like A State is a very powerful historical account of how the ideology of rationalization in the modern state disrupted and changed the layout of cities, agricultural arrangements, natural watersheds, and forests, among other instances, in order to make reality more legible for states. The same is occurring now with human society being bent to the mold of our economic models.
See any discussion by technocratic development specialists on "the informal economy," and how it must be mastered and brought into the light of the official, measurable, taxable economy.
you are invited to follow my blog
there were some economists on NPR the other morning reading the latest economic numbers that had just arrived fresh from the cauldron. I lulzed.
I'm sorry. I won't know what to think until I've read what Matt Yglesias and Jonah Goldberg's opinions are on this.
I thought Oxtrot's contribution to that thread was particularly savory.
Justin is a man to watch.
It's like saying thermodynamics says entropy is always increasing, so therefore life shouldn't exist. Hork lulz toke. Or trying to go to the moon with tenth-grade physics, ignoring friction and the weight of the rope. In summary, economics is where physics was circa 400 B.C. Consider a spherical Yglesias.
Oxtrot, I rolled on the floor laughing out loud copter, as the kids say.
You're being overgenerous Pat, although hilariously so. As far as I am concerned, economics today is riding the back of a giant fucking turtle through the universe.
I will not tolerate compliments uttered in my direction!
(but thank you)
See the turtle of enormous girth!
Wow. A fucking turtle. The mind reels.
A turtle rapes a snail.
During the testimony, when the snail was asked to recall the events, it replied, "I don't know. It happened so fast."
Take my wife! Please!
A: Would you say your spouse's behavior was rational?
B: Compared to what?
I propose to you that the notion one would apply economic models to this reasonable question is functionally equal to applying alchemy to the lead paint at your neighborhood playground.
How do you answer that question without some sort of economic model? Seriously? The only way to answer that question in a different way to Yglesias is by suggesting a better economic model. But saying "no models" doesn't look like an option to me once you've conceded that it's a reasonable question.
Whereas a "law" of physics will surely be descriptive and ideally also be predictive, it is not prescriptive.
What if you're an engineer? You have a theory of how the physical world works and that prescribes a certain course of action, right? Obviously the science is worse and its social engineering, but what else is actually different?
Also: lets grant straight out that popularisers like Yglesias will probably use a simplistic model for answering that question and look rather smug about having done so, that economists hide behind their "objectivity" to disguise the fact that they're making all sorts of ideological assumptions, and that the economic answers seem to amount to "Whatever the money wants" far too often for it to be a coincidence.
How does that make it any different from, say, biology?
How do you answer that question without some sort of economic model?
I don't know. How do you answer the question of whether or not a person will become a criminal without some sort of phrenological measurements?
Ethics asks what goals I should pursue.
Economics asks what is the method of pursuing those goals most likely to succeed.
Psychology and sociology asks whether or not real human beings actually employ that method.
The first question is clearly prescriptive. The last question is clearly descriptive.
The middle question is prescriptive only conditional on you having already decided what your goals are, and is descriptive only conditional in that if you choose to follow its advice it predicts you're more likely to find success than if you don't.
Economics has its share of problems, but it's not like ethics, psychology, or sociology are shining beacons of perfection, either.
I feel blessed to read Consumatopia's best work here and at Justin's... economics may suck, but some other things that we're not talking about, they suck too, therefore economics doesn't really suck, except when it sucks, and even then, its sucking is only as sucky as other vacuums of wisdom.
Crystal-clear, that is. Thanks, Consumatopia! Therefore we should rely heavily on "economics" and treat as Gods our "economists." Yes, that's clear!
And you're just as incapable of responding to what I actually wrote over here as you were over there.
I'm just pointing out some misconceptions Justin had about economics as a "prescriptive" or "descriptive" field.
I'm not defending economics, certainly not orthodox economics. Criticize economists--please--but criticize them for what they're actually doing.
I've seen turtles fucking. It's very awkward, but they appear to enjoy it.
We're all sensitive turtles . . . oo-ooo, with so much to give . . .
I came across this a while ago, and found it entertaining. In short, with shitty unfounded assumptions and some deep problems with measurement, then you can throw all the math you want to at the economics problem and it still won't be any more a science...
Now you're giving orders? That's the richest of the rich, right there.
Your inability to imagine a world without economists or economics isn't my problem to solve, Consumatopia.
Your post has nothing to do with anything I said.
Don't worry about it, just keep doing your thing.
Economics asks what is the method of pursuing those goals most likely to succeed.
This statement is utter nonsense that betrays a real ignorance of what economics actually does. That's why no one is taking you seriously, consumatopia.
Call it "game theory" instead of "economics" if you want, but it's clearly what Justin was talking about in his original post, especially regarding Nash.
And if you want to deny that game theory is aimed at choosing the best strategy to achieve your goals...well, okay, have fun with that. Do as though wilt. I'm not giving out any more "orders" ;)
Consumatopia
"I'm not defending economics, certainly not orthodox economics. Criticize economists--please--but criticize them for what they're actually doing"
Pretty sure I made sure to distinguish between economists who treat their work as a science and those who approach economics and jargon as a religion/science. Oh yeah, I did.
"Economists call economics a science, a science intended to predict how human beings allocate finite resources. This is fine, and I have no problem with that as stated. The problem I have is with those who think of economics as a religion. They come to believe that the field of economics does not predict how humans behave, but how they should behave.
...
The religious approach says something different, the people are not behaving as we expect them too, they must be flawed (in this case, ignorant of optimal pricing) and if we could teach them their condition would be improved. This is the approach of the Friedman's, George Wills, Yglesias's and others of their ilk who pick up a few economic terms, learn some of the basics, find some old time religion in that, and go on to tell us not how we are, but how we should be.
Justin, thanks for responding, but...not for ignoring the central point.
It's clear that what you're going after is game theory. And you know, I don't have a problem with that. I'm kind of suspicious of game theory myself.
However, if you want to go after game theory, it's not enough to point out that people don't always follow strategies suggested by game theory--game theory neither assumes nor predicts that they will.
It is also not enough to point out that game theory can be used by evil or amoral people. So can any science.
What you need to show is that game theory gives bad strategic advice. And that's totally possible. But you didn't do that.
I propose to you that the laws of free economy are not much less valid than laws of physics or of mathematics, in the sense that were the world to operate in variance with the laws of a free economy, it would quickly be in a very poor and destitute, just as all collectivist economies in the 20th century did.
There was never any doubt in my mind that the alternative to capitalism is not socialism, but barbarism.
We have a true believer! Maybe he'll try to baptize us.
Consumatopia:
If game theory is about the best strategies to get what we want, then why in the standard 2-player prisoners' dilemma is the only equilibrium both Pareto suboptimal and suboptimal from the perspective of each player?
Within the framework of game theory, even evolutionary game theory (with an indefinite number of iterations and learning so as to provide for signaling), this problem is well-nigh impossible to get around.
But even the secretaries at the RAND corporation got it right the first time.
How do you answer the question of whether or not a person will become a criminal without some sort of phrenological measurements?
But that's my point: trying to build models of inherent criminality is an inherently fucked process, because the question itself is inherently fucked. It wouldn't really matter whether you were looking for bumps on heads or sifting through the human genome - the whole enterprise is compromised from start.
But it looks very much like you're saying that "How should we design a system for apportioning fire-fighting resources?" is a reasonable question with no reasonable answer.
"How does that make it any different from, say, biology?"
The subject matter.
A biological inquiry deals with any number of orders of magnitude and complexity, but it does so with the materiality of the subject in mind. Bodies and chemistry.
Economics, generally, pretends to dispense with bodies and persons as its subject matter, treating instead the ideas, symbols and models of personal behaviors, reduced to numerical constants, as material.
In short, it studies ideas as if they were persons.
If game theory is about the best strategies to get what we want, then why in the standard 2-player prisoners' dilemma is the only equilibrium both Pareto suboptimal and suboptimal from the perspective of each player?
Good question! I endorse this line of thinking. (Not that you'd want my endorsement, just pointing out that Wobjection to OP is narrower than a lot people might thing.)
Within the framework of game theory, even evolutionary game theory (with an indefinite number of iterations and learning so as to provide for signaling), this problem is well-nigh impossible to get around.
Are you familiar with the Price equation?
Sorry, that should read: "just pointing out that my objection to OP is narrower than a lot of people might think".
Weird combination of typos and copypaste errors there.
A biological inquiry deals with any number of orders of magnitude and complexity, but it does so with the materiality of the subject in mind. Bodies and chemistry.
Economics, generally, pretends to dispense with bodies and persons as its subject matter, treating instead the ideas, symbols and models of personal behaviors, reduced to numerical constants, as material.
In short, it studies ideas as if they were persons.
The only sense I can make of that is that you're saying that biology is more empirically grounded and does more experiments. In which case, yeah, fair enough. Economics is a social science, it's more limited in the experiments it can do. I'm not saying that the two subjects are identical. But I don't get this big material/ideal thing - I'm pretty sure that biologists rely on models and abstractions too.
For what it's worth, my candidate for serious difference is that lots of people have a very obvious political or financial stake in the outcome of economic questions, and that means that economics is going to attract more than its fair share of shysters. It's not hard to see that there might be an economic incentive for studies that tell us that CEOs are worth every penny they get. Which is obviously a problem, but it's at least a little less fundamental than the big philosophical differences everyone keeps gesturing at.
Lulz. "A social science."
Pete,
Biology models organisms and their environments, in order to study those organisms and their environments. Though the outcome of the use of a model may in fact distribute errors of understanding and measurement, the model is not an end in itself.
In economics, the model is the end point. Behavioral modes, adaptations, norms are studied so that a model-to-be-believed can be presented as fact, and society can be made to conform to the model. Economics - especially its consciously ethical varieties - is never far from an idealist project which insists that humanity has a nature and this nature must be obeyed.
Economics, generally, supposes that the studying of ideas, lists and numbered charts about persons reveals the motivations and predictable choices of those persons, in the aggregate. It's numerology, with more pretenses.
It's a preference for studying persons by studying ideas about persons and then planning outcomes based on conformity to those ideas.
And, to follow upon the point Justin tackles in the original, the end result of a state's adherence to a set of erroneous biological models and theories is bad biology.
The end result of bad economics is broken mortal lives.
Fuck me, man, he's already spent all of the money!
What's interesting is that some people cannot accept that the result of refuting a theory might be no theory, not a better theory.
There might actually be no basis for any theory.
Hey, guys, I have come up with a number called the Sum of Happiness Adjusted Model that I get by calculating the estimated value of all the happiness created by everything everyone does and then adding it up. I think that we should organize our entire society around increasing this number and that before anyone is allowed to criticize my project they should have to come up with their own happiness-estimation metric.
Your post has nothing to do with anything I said.
Pithy. And wrong. I addressed all your posts here and at Justin's with that short statement I put up. You just can't see it because you're too wrapped up in the glory of Economics As Holistic Savior Even If Most "Economists" Are Wrong.
Amusing, but not for the reasons you would want.
In short, it studies ideas as if they were persons.
Economists treat objects like women.
Seriously, what JC said. A science operates like so:
1. Superficial observation of the world
2. Postulate a hypothetical model for some phenomenon in the world
3. Test the hypothesis
4. Correct the model based on the resulting observations
Economics does fine with steps 1 and 2, but on the rare occasions when step 3 happens, step 4 does not follow. Instead, any negative results are explained away as aberrations: failures of reality, not failures of the infallible model handed down from Chicago. It may be true that lay parishioners in the church of the free market are guilty of the worst of this sort of blind faith: for example, the sort of economic theory used in L&E courses at American law schools rely on economic theories that nobody has taken seriously for centuries. But of course, Jesuits have always been better than peasants at making their faith sound reasonable with complex theological arguments and carefully-worded concessions to observable reality.
Lulz. I think we should arrange our civilization on the basis of the How Spicy You Like Between 1 and 10 scale of the Thai place down the block.
Economics is one of those rare subjects against which one can mount a genuinely devastating critique without knowing anything about it.
"What you need to show is that game theory gives bad strategic advice. And that's totally possible. But you didn't do that"
I'm not trying to do that. I am not saying that game theory doesn't give good strategic advice, just that it is also sociopathic and should not be a universal standard for rational/intelligent behavior in the real world. My case rests in part on demonstrating that there are some people who do just that (see the remark about how if people understood optimal pricing better, they would behave more intelligently.)
If you read me as taking a broad swipe at game theory and arguing that it is giving terrible advice on its own merits, I am either not explaining myself well or you are misreading me.
My point is that the vast majority of us don't make decisions according to the logic of the rational man assumptions. Now, I also understand that a lot of the actual work in economics is found in explaining why the assumptions do not always hold. That is the scientific approach.
It is not the work of economists I going after, but people who pick up a facile and glib understanding of economics and take it to be a system for describing platonically rational behavior rather than economically rational behavior. When humans fail to act according to how they understand economics predicts, they fault the humans for acting against their best interests, being irrational, etc.
To take a non-Yglesian example, the fiscal austerity hawks are championing their cause of suffering, neglect and impoverishment partly by relying on the authority of economics. They tell us people have to suffer because it is important to stay true to the principles of sound economics. Now, you could point out that the actual theories of economics as a science actually say the opposite is the case, but that is my point about the religion/platonic side of the field, as well as characterizing their understanding as glib and facile.
oops, this is the link to Elinor Ostrom
I propose to you that the notion one would apply economic models to this reasonable question is functionally equal to applying alchemy to the lead paint at your neighborhood playground.
Very glib, as one expects from you. Yet wrong. Alchemy in the sense you are using it (the claim that lead can be turned into gold via chemical means) is famously wrong, but it is not outside of the bounds of science. In fact it is within: you can test it, and see that it is not true.
Economics is not a hard science, and it should not be treated as such. There is a grey area in between hard science and not. In said zone lies the modern edifice of macro economics, which is IMO nearly pure bullshit. You can quantify the unquantifiable if you want, but don't expect me to care.
But microeconomics, which is not BS, also lies in grey zone, hobbled by its reliance on introspection, simplified agents, and the inability to run controlled experiments.
As for Justin's aesthetics of wonkery, let me just agree with TGGP in that thread. Namely, that "economics" (micro, anyway) is a natural way for some people, including me, to think. The idea that there is some other kind of way that most people think about stuff like the infamous "Tennessee Burndown Event" is what strikes me as hard to understand. As soon as I read about it, I was thinking in terms of incentives, signalling, etc. Fires are not put out by a generous human spirit, but by firefighters, suitably equipped with firetrucks, firehoses, and such.... I mean, what does Justin want? Prayer? Quietism?
The idea that incentives do not affect how people behave -- now, there is your analog to alchemy, Mr. IOZ. It is both falsifiable and false.
Oxtrot, I can totally imagine a world without economists or economic theory and it contradicts nothing I said. If you think my position is pro-economics, you misunderstood.
Natural, Leonard. I do not think that this word means what you think it means.
Inconceivable.
Justin,
I am not saying that game theory doesn't give good strategic advice, just that it is also sociopathic and should not be a universal standard for rational/intelligent behavior in the real world.
Sociopaths can be intelligent. Perhaps they can't be "rational", in the sense that they don't understand what is truly "good", but we ought to have a standard of intelligence that permits sociopaths, if only so we're capable of protecting ourselves from the occasional intelligent sociopaths.
I know it's absurd to ask "won't somebody care about the sociopaths?!" But game theory's indifference to ethics is what lets us negotiate with people holding opposing ethical systems. Capitalists and Communists can coexist without annihilating the world. I can argue against a war without having to defend the dictator on the other side of it.
see the remark about how if people understood optimal pricing better, they would behave more intelligently.
Okay, here is one place where I totally admit to not understanding what you mean. Surely there exist some people in the world are making pricing decisions with the goal of maximizing profit, but do not actually understand how to do this. If they understood this, they would probably fulfill their goal of making more money. I can tell you right now that I myself am probably one of those people, so there's at least one of us! What would be wrong with you saying that if I understood optimal pricing better I would behave more intelligently?
To take a non-Yglesian example, the fiscal austerity hawks are championing their cause of suffering, neglect and impoverishment partly by relying on the authority of economics. They tell us people have to suffer because it is important to stay true to the principles of sound economics
Actually, I think they tell us people have to suffer because it is important to stay true to the principles of "common sense". They have some vague intuition that bubbles during the boom must be karmically "paid back" with unemployment afterwards. They see that in their own lives they make more money when they work harder, thus they infer that suffering people must be lazy, that people don't have jobs because they aren't looking. They find it distressing when things are more expensive than they're used to, so they oppose inflation because that punishes "savers".
Purge all the economists, and you'd still have the same if not more austerity policies. People say "if I have to tighten my belt the government should too", and that's that.
No, I understood you fine, Consumatopia. Honestly I did. My choice of response-phrasing has more to do with the contorted "reasoning" of your many posts on this subject... though I thought that would have been clear by now.
Still with the Popper v Kuhn, though, I see. Where in this universe do your original thoughts fit? Or do I credit you too greatly by assuming you have some?
Am I supposed to be on team Popper or team Kuhn? ;)
I think you pretend to be the Arbiter between them.
Surely there exist some people in the world are making pricing decisions with the goal of maximizing profit, but do not actually understand how to do this. If they understood this, they would probably fulfill their goal of making more money. I can tell you right now that I myself am probably one of those people, so there's at least one of us! What would be wrong with you saying that if I understood optimal pricing better I would behave more intelligently?
... if your goal ... isn't ... making more money?
(I mean, you spell it out and then leave the conclusion dangling)
@PC, I was talking about myself. And I kind of like making money, at least some of the time.
So, even if I'm the only one, there is at least one person who would behave more intelligently if they better understood optimal pricing.
If your goal is making more money, WTF does "the theory of optimal pricing" have to do with it? Thousands have made fortunes beyond measure before Menger ever proposed his solution to the paradox of value; millions more will make their fortunes when Hayek is forgotten. They made them through conquest, fraud, collusion and intimidation, the deafening symphony of human history to which the notion of Pareto efficiency is a tinny descant.
PC, I don't think that's Justin's position, and I don't want to start a new argument right now.
I hope Yglesias will give us his thoughts on the optimal pricing for Pfc. Manning's forced nudity and isolation. Of course, many economists will agree that if it saves the government money on laundry bills and/or the negative externalities of carbon dioxide emission from excess conversational exhalations, then an argument can be made that such treatment is quite rational.
And if you want to deny that game theory is aimed at choosing the best strategy to achieve your goals...well, okay, have fun with that. ;)
Just FYI, game theory is aimed at getting practitioners of game theory tenure. It does actually succeed in doing that a fair percentage of the time.
As for its broader applicability, it's true that game theory is one of a number of possible abstract conceptual frameworks in which to represent strategic thinking.
Of course, many economists will agree that if it saves the government money on laundry bills and/or the negative externalities of carbon dioxide emission from excess conversational exhalations, then an argument can be made that such treatment is quite rational.
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