ECON JOURNAL WATCH, GEORGE MASON, AUSTRIANS, STATS & MATH

Over the years I have seen some interesting work from Econ Journal Watch (EJW), but had not visited their actual site in a long time. In some ways the purpose of their site is the same as mine. I was surprised to notice they even have a similar logo. Theirs is of course related to their mention of journals, whereas mine is a reference to Keynes. As far as I can tell, and despite theirs being specifically an economic website, I could not find any reference to the Keynes quote that is the reason for my logo. Indeed, there are few references to Keynes on the whole site, which is not surprising given its Austrian economics leanings and what seems to be a close association with George Mason University academics. At any rate, the site has some excellent critical views on mainstream economics and I highly recommend it.

Seeing EJW gave rise to several thoughts on GMU, the Austrian School, statistics and academic debates as a source of knowledge.

As an undergraduate interested in economics I felt that mainstream economics made little sense. I looked to heterodox approaches to see if they were any better.
I did not find what I was looking for in Austrian economics but I did find that it has some very good criticisms of mainstream economics, especially the infatuation with mathematical modeling. Years before it was published Bryan Caplan’s excellent Why I am not an Austrian Economist was available online and probably has done more to highlight what is both good and bad about Austrian economics to a generation than any other single paper, and helped shape some of my early views on economics. (At the end of this post I provide a brief excerpt on the use of math in economics).

This brings me to my second thought: How debates such as those between mainstream economists and Austrians, even when both parties are wrong, are highly informative. Mainstream (and other) economists show the flaws, shortcomings, fetishes and blind spots of Austrians, but Austrians quite effectively helped do the same with the mainstream.
Similarly, I came more and more to see that there are fundamental problems with the way inferential statistics are often used in the social sciences. My understanding of the deeper problems with the application of inferential stats to economics came partly from reading debates between frequentists and Bayesians. Basically both schools of thought on statistics are correct in their critique of the other. The clearest writing on what is wrong with each came from the opposing school of thought. That is why Academic Scribblers seeks to document fully as many academic controversies as possible. They are highly instructive (besides the fact they can make for far better reading than the average textbook).

The final thought after looking at EJW – I remembered a fun article (The Secret of George Mason: What its Final Four basketball team and its unusual economics department have in common).on how George Mason became such an influential economics department so quickly from very humble beginnings – it was written at the same time that George Mason surprised everybody in basketball and made it to the 2006 NCAA Final Four.

"GMU has excelled on the court and in the classroom by daring to be different. Its basketball team and academic programs began with the (correct) assumption that they couldn't hope to compete against the top schools in their fields—say, Harvard Law School or the Duke Blue Devils—by directly imitating their methods…instead, GMU has hunted for inefficiencies in its markets. Coach Jim Larranaga follows the Moneyball model of recruitment: hunting for the undervalued players—the ones who everyone else thought were too short, too thin, or too fat—and then building them into a team.

~~~~~~~~~~~

 (Here is the bit from Caplan I mentioned. This excerpt quoting him is from my Why Inferential Statistics are Inappropriate for Development Studies, PDF, 2011).

Among economists perhaps the strangest aspect of the prevalent insistence on mathematical and econometric modeling as opposed to simpler causal language is that the former have perhaps not been near as important to the development of economic theory as is commonly perceived. Discursive arguments rather than mathematical models were the basis for such important concepts as Coase’s theory of the firm, Mundell’s optimal currency area (OCA) theory, and the consideration of the market for ‘lemons’ in used-automobile markets which was the basis for the theory of imperfect competition by George Akerlof, all of which led to Nobel prizes in economics.

Economist Bryan Caplan lists ten of the most influential ideas of mainstream academic economics since 1949:

1. Human capital theory
2. Rational expectations macroeconomics
3. The random walk view of financial markets
4. Signaling models
5. Public choice theory
6. Natural rate models of unemployment
7. Time consistency
8. The prisoners’ dilemma, coordination games, and hawk-dove games
9. The Ricardian equivalence argument for debt-neutrality
10. Contestable markets

Almost none of these ideas originated with mathematical models, but instead through observation of the real world and/or descriptive statistics, intuition, and discursive arguments. ‘Out of the whole list, there are few plausible cases where mathematics was more than an afterthought: maybe idea #2, and possibly #3. Even there, intuition, not math, probably played the leading role.’ (Caplan 2003)

Caplan continues: ‘The contributions of econometrics to economics are similarly meager—particularly because econometrics has "crowded out" traditional qualitative economic history…When simple econometrics failed to yield universal agreement among informed economists, this merely provided the impetus for econometric theorists to supply increasingly complex estimators and other tools. Truly, this is a case of looking for car keys underneath the streetlight because it is brighter there. (Caplan 2003)

[from Ballinger 2011]

TECHNOCRACY, BUREAUCRACY, CREDENTIALISM & SOCIETY. IS IT WORTH IT?

The social sciences raise, of course, all kinds of issues related to ethics, democracy (who decides what, if anything, is 'better' then the current situation? And how to try to change society?), unintended consequences and so on.

But how about just the sheer exhausting tediousness of it all? Do we really want to move in the direction it would take to successfully fully understand and intervene in social outcomes? Would it really make us happier as a society?

Just two examples I ran across recently made me think of this issue again. The first is on the math that would be needed to model financial markets (as the math currently used has obviously proven not up to the task). The econophysicist (who has some excellent criticisms of economics) suggests

that the economists revise their curriculum and require that the following topics be taught: calculus through the advanced level, ordinary differential equations (including advanced), partial differential equations (including Green functions), classical mechanics through modern nonlinear dynamics, statistical physics, stochastic processes (including solving Smoluchowski-Fokker-Planck equations), computer programming (C, Pascal, etc.) and, for complexity, cell biology. Time for such classes can be obtained in part by eliminating micro- and macro-economics classes from the curriculum. The students will then face a much harder curriculum, and those who survive will come out ahead. So might society as a whole. (McCauley 2006, PDF)

The second is from a “professional” aid worker arguing against amateur aid workers and organizations.

There are certain very specific things that you need to know in order to do good aid work. There is a large body of aid theory that you need to know, and there is an even larger body of raw information. You need to know (fluently) standards like Sphere, HAP, or those related to your area of technical expertise/interest. You need to know grant management (not just management,grant management). You need to know the latest thinking in community assessment, organizational learning, and maybe child protection….You need to understand R2P (don’t know what that is? Better Google it…) and why it matters. You need to know industry best-practices related to humanitarian protection. You need to know the difference between OCHA and UNOPS and UNHCR. You need to know how humanitarian coordination works and where to find information about it…you may need to know basic logistics, financial management, communications or security.

So – to recap – to understand the economy you need to know:

• calculus through the advanced level
• ordinary differential equations (including advanced)
• partial differential equations (including Green functions)
• classical mechanics through modern nonlinear dynamics
• statistical physics
• stochastic processes (including solving Smoluchowski-Fokker-Planck equations) computer programming (C, Pascal, etc.). 
• and, for complexity, cell biology. 

And to do aid work:


"You need to know (fluently) standards like

• Sphere,
• HAP,
• or those related to your area of technical expertise/interest.
• grant management (not just management, grant management).
• the latest thinking in community assessment,
• organizational learning,
• and maybe child protection….
• To understand R2P (don’t know what that is? Better Google it…) and why it matters.
• to know industry best-practices related to humanitarian protection.
• to know the difference between OCHA and UNOPS and UNHCR.
• to know how humanitarian coordination works and where to find information about it…
• basic logistics, financial management, communications or security.

Somehow I think technocracy (in the first example) and bureaucracy and credentialism (the second example) are not the way forward. 

M.B.A.s - a menace to society

The rise of the business-school-trained M.B.A... is “a menace to society.”


The New York Times 

The Anti-MBA

By D. D. GUTTENPLAN

Published: May 20, 2012

http://www.nytimes.com/2012/05/21/world/europe/21iht-educlede21.html?_r=1&pagewanted=all

IMF economist accuses Fund of suppressing information (Link)

IMF economist accuses Fund of suppressing information

By Lesley Wroughton | Reuters – 2 hrs 18 mins ago
http://news.yahoo.com/imf-economist-accuses-fund-suppressing-information-011551565--business.html

WASHINGTON (Reuters) - A veteran economist at theInternational Monetary Fund has accused the global lender of suppressing information on difficulties in dealing with the global financial meltdown and euro zone crisis.

In a resignation letter to the IMF's board and senior staff, dated June 18, Peter Doyle said the IMF's failures in issuing timely warnings for both the 2007-2009 global financial crisis and the euro zone crisis were a "failing in the first order" and "are, if anything, becoming more deeply entrenched."

STRING THEORY & THE SOCIAL SCIENCES

Are the social sciences like string theory? Some of the controversy surrounding string theory in physics sounds familiar...

"Here are some of the most significant criticisms levied against string theory (or the string theorists who practice it):

• String theory is unable to make any useful prediction about how the physical world behaves, so it can’t be falsified or verified.
• String theory is so vaguely defined and lacking in basic physical principles that any idea can be incorporated into it.
• String theorists put too much weight on the opinions of leaders and authorities within their own ranks, as opposed to seeking experimental verification.
• String theorists present their work in ways that falsely demonstrate that they’ve achieved more success than they actually have. (This isn’t necessarily an accusation of lying, but may be a fundamental flaw in how success is measured by string theorists and the scientific community at large.)
• String theory gets more funding and academic support than other theoretical approaches (in large part because of the aforementioned reported progress).
• String theory doesn’t describe our universe, but contradicts known facts of physical reality in a number of ways, requiring elaborate hypothetical constructions that have never been successfully demonstrated.

(Excerpt from The String Wars: Outlining the Arguments by Andrew Zimmerman Jones and Daniel Robbins Link ).  

ARE THE SOCIAL SCIENCES USEFUL?

In 2002 Stanford and NYU political scientist Russell Hardin published an article that asked a number of questions about political science, including whether the fact that much of its academic work may seem obscure and irrelevant to the public is a problem, in PS: Political Science and Politics (Whither Political Science?).

Hardin wrote that an economic consensus had occurred on important policy issues and asked

“Has the less apparently relevant work of modern economics contributed to that concurrence? A similar question would be worth tackling not only in economics but in many other disciplines. The huge number of people working on economics and economic problems suggests that most of them cannot be doing anything that rises to the level of public awareness, so few of them can have had much direct effect on public debates or policies. That might be too quick and dismissive a claim, however, because someone such as Larry Summers, whose economic advice was centrally important for several years during the Clint administration, could not likely have achieved his own understanding without the large enterprise of academic, research institute, industrial and governmental research on economic issues. It is not trivially easy and maybe not analytically possible to ferret out the connections between the thousands of journal articles over the past 50 years and the counsel that a Summers has had to offer. Yet it would be absurdly presumptuous to dismiss the relevance of all that work, as abstract or minutely focused as much of it was. Somehow, the enterprise of economic science has been fundamentally important." (Hardin 2002, 183).

Hardin defends the vast amount of seemingly irrelevant or unproductive work in academia on the grounds that it does indeed inform policy in an important way, at least in the long run. The “thousands of journal articles over the past fifty years” were "fundamentally important” to modern economic policy decisions. It would be hard to choose a better example than this to illustrate the point of this blog. 

By 2008 the US economy was in a financial meltdown and the crisis in which we are still in began. It is widely attributed to the polices (with their intellectual roots in Milton Friedman) of Alan Greenspan along with Summers, who while at Harvard, the World Bank, and as Secretary of the Treasury of the United States was in the forefront of the academic argument for deregulation, in favor of ever more complicated derivatives, and the repeal of the Glass-Steagall act.

In 2010, from among the 11,000 subscribers of the heterodox Real World Economics Review, 7,500 voters chose Summers as one of the top ten economists most responsible for the modern financial crisis, third behind Greenspan and barely behind Friedman himself. Although (purposefully) over-the-top, the economic website zero-hedge was able to ask “Is Larry Summers an Economic War Criminal?” (Zerohedge.com. Link).

Summers’ policies have been utterly disastrous for the US economy (more on the Economics page). If this is what, in the words of Hardin, “the large enterprise of academic, research institute, industrial and governmental research on economic issues” and “thousands of journal articles over the past 50 years” leads to, then the utility of the social sciences (at least economics in this case, but the problem is wider) must be questioned. 

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

This webpage, then, asks the question: Are the social sciences useful?
  In the wake of the financial crisis of 2008, economics as taught in most departments has been argued to be useless, or worse still, "dangerous to know", its theories leading to wrongheaded policies that caused the current economic crisis and continue to make it worse.
  Development aid and public policy initiatives are frequently shown to be ineffective, and like economics, often worse than doing nothing due to serious unintended consequences. Sociology, Political Science, Human Geography - all have been argued to be suffering from crises of progress, failing to provide useful policy advice, nor do they engage, inform and enrich the public (the common defense of the Liberal and Fine Arts). Political scientists failed to predict major events such as the fall of the Soviet Union and the Arab Spring. Architects and urban planners' policies  led to dysfunctional, antisocial, unhealthy, environmentally unfriendly and unsustainable built environments, especially in the United States, ("new urbanism" concepts that are reverting to traditional human friendly building forms were laid out, to a striking degree singlehandedly, by anti-academic Jane Jacobs).
  In the UK, for example, "Social scientists hoping to influence government policy are likely to find that their pearls of wisdom fall on deaf ears. An independent review of the state of social sciences finds that, while the volume and quality of UK research is second only to the US, the “real world” of government and wider society remain unconvinced of its value." ("Antisocial Science?" 2003).  
   This website seeks to consider this point of view. Are the social sciences in crisis? If so, can they be better? Can they help in the creation of a better society? What are the worst aspects of modern social science, and what are the best?
  At the moment the site is mainly focused on linking to other material. There are many excellent critiques of the social sciences, and I wanted to put them all on one site, as a resource, and to see what is common between them.
  Much of the site is focused on macroeconomics ( and development / international aid), and urbanism. These are two areas where mainstream academic approaches have not only shed little light, but have actively caused significant harm. Mainstream economics and the policies it has developed is directly responsible for the current financial crisis in the developed world. International aid has largely failed and frequently caused negative unintended consequences in the developing world. And academic influences on urban policy, especially in the United States, were a major cause in the decline of the quality of life in the United States. I also look at political science, sociology and other areas of the social sciences.
                              ~~~~`~~~~~~~~~~~~~~~~~~~~~~~~~
The goal of this project is to document both successes and problems with the social sciences. The following sources highlight some problems in the various disciplines. They are listed first to support the contention that there is indeed a problem. Successes will be considered later. Also, these are mostly "big picture" critiques. Of course there are many more specific internal disputes within social science disciplines. Some of these will be considered in greater detail at a later date. I am mainly looking for more recent criticisms, although some older ones are included as well.
There are at least three classes of critiques of the social sciences: 

• As an endeavor at all
• In their current form
• Criticism within a particular discipline - one branch against another. 

Currently these are not distinguished clearly here. The focus of this website is primarily on the first two points. The third point is of course extensively covered within disciplines themselves. However, often critiques between opposing viewpoints within a discipline expose problems relevant to the first two points. 

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