Friday, March 10, 2017

Anti-empiricism is not humility

"Faith is the substance of things hoped for, the evidence of things not seen."
- Hebrews 11:1

Empirical economics is taking over the profession. It's very hard to make it in the field these days without doing a hefty amount of empirical work. Lots of job market papers are still theory papers (cough! signaling! cough!), but the number of economists who can make it as pure theorists is shrinking to a rarefied, brilliant sliver.

I see that as a very good thing. That's what natural science looks like - a small number of theory papers, supported by a very large base of applied theory and empirical work. It's the sign of a mature field. I also think it's going to be very important in helping the economics profession recapture some of the public respect that it's lost over the last decade. When people start to see economists as fact-driven scientists grounded in observable reality, rather than mathematical philosophers dispensing Olympian received wisdom, the profession will lose much of its accumulated stigma. And almost every young economist I talk to thinks the same - everyone's excited about new data sources. The kids these days seem to want to know facts about the world, instead of just "organizing their thinking" with models. The future looks bright.

But not everyone is on board. A few older folks, who grew up during econ's Age of Theory, are not so happy about the change. One of these is Russ Roberts, host of the excellent podcast EconTalk. In a recent blog post, Russ explains at length why he thinks the new empirical economics is overrated:
A lot of professional economists...will tell you how many jobs will be lost because of an increase in the minimum wage or that an increase in the minimum wage will create jobs. They will tell you how many jobs have been lost because of increased trade with China and the amount that wages fell for workers with a particular level of education because of that trade... 
[T]here is no simple way to resolve differences in analysis done by professional economists...[T]there is no way of knowing reliably if the consensus reflects the truth...Most economics claims are really not verifiable or replicable... 
I am arguing that the math and science of economic predictions and assessments are nothing like the math and science of space travel. Economics provides the illusion of science, the veneer of mathematical certainty...
He even goes further, and says that empirical economics isn't even really economics at all:
[M]ost of the people I am talking about are not economists. They are really applied statisticians. Economics is primarily a way of organizing one’s thinking in considering incentives and costs and the interactions between individuals that we call a market but is really emergent behavior with feedback loops.
Adam Ozimek has a patient and reasonable response to Russ, noting that even when empirical economics doesn't settle questions definitively or provide reliable point estimates, it narrows the scope of debate and rules out obvious wrong answers. That's certainly true. But I want to go further than Adam. The alternative to empiricism in economics is not agnostic humility, but intuitionism - the idea that we can know about the world by thinking about how it works, and that exposure to evidence will only pollute the truths that we divine from our own minds. And that's something I think economists need to avoid.

Consider the minimum wage issue. Suppose that a city like Seattle is considering hiking the minimum wage. How can we - economists, policymakers, and the general public - predict what the effect of the hike will be?

One approach would be to use theory. Basic Econ 101 labor supply-and-demand theory tells us that the effect will depend on the elasticities of labor supply and demand, which have to be estimated empirically. An economic geography theory might predict that the effect will be overcome by the strength of agglomeration effects, and therefore small. A search theory might predict that search frictions will preclude any sort of large short-term effect in labor markets.

How about stylized facts? Russ says that stylized facts are the only things that economists can really "know":
It is useful to know that 40% of the American work force was in agriculture in 1900 and now the number is 2%. It is useful to understand that that transition (which was most faster in the first half of the 20th century than the last half) did not lead to mass unemployment and starvation. There are indeed roughly 5 million fewer manufacturing jobs today than in 2000.
OK. So what do the stylized facts tell us about the minimum wage? Well, they tell us that places that raise the minimum wage don't tend to lose jobs. Look throughout American history. You won't find any cases where there was a big minimum wage hike and the unemployment rate soared. If we rely on stylized facts rather than careful controls and natural experiments, we'd conclude, as minimum wage proponents do, that the minimum wage isn't dangerous.

A third option is to rely on the kind of empirical studies Russ pooh-poohs. Most empirical studies say the short-term impact of the minimum wage on employment is small. 

A fourth option is to rely on casual intuition - not really theory, but a sort of general gestalt idea about how the world works. If we're of a free-market sort of persuasion, our casual intuition would tell us that minimum wage is government interference in the economy, and that this is bound to turn out badly. Russ seems to be advocating for this when he writes that "economics is primarily a way of organizing one’s thinking in considering incentives and costs." "Organized thinking" seems like just another term for intuition. 

As I see it, the fourth option is by far the worst of the bunch. Theories can be wrong, stylized facts can be illusions, and empirical studies can lack external validity. But where does casual intuition even come from? It comes from a mix of half-remembered theory, half-remembered stylized facts, received wisdom, personal anecdotal experience, and political ideology. In other words, it's a combination of A) low-quality, adulterated versions of the other approaches, and B) motivated reasoning. 

If we care about accurate predictions, motivated reasoning is our enemy. And why use low-quality, adulterated versions of theory and empirics when you can use the real things?

As I see it, a rational predictor should use a combination of theory and empirics. But theory should also be informed by data - there are lots of theories, and in general they can't all apply to the same situation, so you need evidence to tell you which one(s) to use. So a rational predictor's predictions should always be tied as closely as possible to empirical evidence. Discounting empirical evidence, as Russ does, seems inevitably to lead to the use of casual intuition (or to even worse things, like pure ideology).

Anyway, just in case you were curious, Seattle went ahead and hiked the minimum wage, and whether you measure by stylized facts or carefully controlled empirical studies, any negative effect on employment was small or zero. Of course, if you want, you can say that the empirical studies weren't controlled well enough, and the stylized facts are illusions, and the minimum wage hike must have hurt employment because government intervention always hurts employment la la la I can't hear you, but if you say that, who's going to respect you intellectually?

Now I want to turn to a second claim: the idea that discounting evidence represents "humility". Russ writes:
We economists should be more humble and honest about the reliability and precision of statistical analysis.
John Cochrane, in a blog post praising Russ' post as an exercise in "economic humility", writes:
[L]et's call [Russ' attitude] Hayekian humility. This is the hardest one for so many economists to admit, as we all like to play central planner.
This seems to be a bit of a change from when John wrote that "the stars in their 30s are scraping data off the internet." Or when he himself got famous and respected partly for doing careful empirical studies of asset prices. But anyway.

We'd all like economists to be more humble, right? Sure, count me in. But discounting empirical evidence in favor of "organized thinking" is probably not what most people have in mind when they call for economists to be more humble. 

Which is more humble: To try as hard as you can to assess the facts? Or to throw up your hands and say we'll never know the facts for sure, so we should rely on our own intuition about what people's incentives are? 

Russ writes:
[A]n economist when considering a policy of banning autonomous vehicles...would think such a ban will effect the incentives to discover future innovation that might also people out of work. We would think about how putting more power in Washington would encourage lobbying for protection...These ideas are not rocket science. But they come easily to economists and not so easily to non-economists. Thinking like an economist is very useful.
Does that sound humble to you? To me it sounds like the exact opposite of humility. To say that an economist has special insight into simple ideas sounds to me like the opposite of humility. To say that an economist's intuition can yield an understanding of the incentives governing innovation, or the effect of lobbying, and that checking this intuition against the facts would only pollute the truth it yields, sounds to me like the opposite of humility.

Anyway, one final point. Russ cites an empirical disagreement between David Autor and Jonathan Rothwell over the impact of trade on jobs. He writes:
Is Rothwell correct? I have no idea. Here is what I do know. There is likely to no way of knowing which view is correct with anything close to reliability or certainty.
No! No, Russ, you do not know that there is no way of knowing who's right. How could you possibly know that it's impossible to know something?? You can't prove a negative! This is the argument-from-ignorance fallacy. Just because a matter isn't settled doesn't mean it can't be settled.

But even worse than argument-from-ignorance would be an argument-from-personal-ignorance. It doesn't sound to me like Russ has tried very hard to determine the particulars of the Autor-Rothwell dispute. It doesn't sound like he has read the papers closely, studied and understood the statistical methodology, or done anything other than observing that the two researchers disagree. I don't want to put words in Russ' mouth here, but "two people disagree, so there must be no way to tell who's right" is pretty anti-rational.

Imagine if two researchers did experiments to determine the mass of the electron. The first researcher says the mass is 9.1e-31 kg, and the second says it's 4.6e-31 kg. After hearing these two conflicting results, do you say "Here is what I do know. There is likely no way of knowing the mass of the electron with anything close to reliability or certainty."???

No. That is not what you say. Not if you're rational, at any rate. If you're rational, you might say "Let me take a look at these two experiments and see if one of them got something wrong." Or you might say "I'm going to wait until scientists figure out which one of these two experimenters got something wrong, and defer judgment until then." Or you might even say "I trust one of these labs, since they have a great track record, so I'll tentatively favor their result until more evidence comes out." But what you would not say is "Huh, it must be impossible for physicists to determine the mass of the electron."

So I believe economists can do a lot better than Russ seems to think. They can do better than relying on intuition and throwing up their hands at any empirical disagreement. And by and large, they are doing better. Let's hope that trend continues, and doesn't regress.


  1. Another post where Noah's writing suggests theory = intuition and that we can be natural scientists by running more regressions.

    Empiricism can sometimes be a good check on things that are 'obviously wrong', but that's not how empiricism is being employed. Younger economists believe the 'data' can tell them something without acknowledging *everything* is theory driven. You need a theory of measurement to even start empiricism.

    Gary Becker's paper on crime seems like the best combination of theory and 'obviously wrong' empiricism.

    1. Another post where Noah's writing suggests theory = intuition and that we can be natural scientists by running more regressions.

      Well as you'll notice from reading the post, I don't think formal theory - i.e., actually taking a quantitative theory seriously - is the same as vague theory-informed intuition ("organized thinking").

    2. 'doing theory' without comparing with data and adjusting / throwing out bad theory strikes me as the height of arrogance and an obvious dead end. (on a group level - individual scientists might of course prefer to spend their time doing one or the other.) totally agree that analyses are basically never model-free - but the idea that models can be 'data-free' without being irrelevant is also flawed. input from the real world shouldn't just 'sometimes be a good check on things that are obviously wrong', it should be with you every step of the way, otherwise how will you discover that you are 'subtly wrong'?

  2. It's too generous to give Russ the excuse of "growing up during the age of theory." Russ is extremely close in age to David Card, Alan Krueger, Robert LaLonde, etc. He's at least ten years younger than Orley Ashenfelter, Jim Heckman, and Dan McFadden! He "grew up" during the original golden age of credible empirical work! Even the theorists he "grew up" at the same time as don't share his absurd nihilism.

    Lets call a spade a spade: His call for "humility" is just the recognition that modern economics has no place for his usual evidence-free polemics. I understand the need for civility, but Russ says things that are so deeply ignorant, and has the ear of people who think that he's some kind of expert, that he needs to be shouted down, not politely responded to.

  3. Also, calling it "a few older folks" is misleading. Older economists of renown don't express these views--just ideologues like Russ. You certainly wouldn't have heard this from any of the old luminaries of pure theory, like Arrow, whose last working paper before death was a standardly empirical paper.

  4. I read John's piece before Russ or yours. The main positive I took was more in regards to media. In that sense it is humble for big names like them who are sought by journalists or policy people to avoid speaking in certain terms. Even with that point your critique is still spot on

  5. "The kids these days seem to want to know facts about the world, instead of just "organizing their thinking" with models."

    It's always been this way, Noah. Only difference now is that kids have access to much more and better data. This is a welcome development. But to think for a moment that data can be usefully studied without the interpretive lens of theory is naive at best. Power of theory as "thought organizing" tool is indispensable. Theory + Empirics = <3

  6. Noah,

    I understand why you want to use "empiricism" to describe how you want economics to be conducted, but every time I see "empiricism", the philosopher inside me thinks of Hume and 18th century debates about epistemology...

    In that context supporting empiricism means that, while you are rejecting the idea of a priori knowledge, you are also agreeing that there is no solution to the problem of induction, so you may as well stop believing in cause and effect (and throw science out the window while you're at it).

    This kind of skepticism is exactly what the economists who adhere to what you can "anti-empiricism" are appealing to when they argue that empirical economics is worth while. While, of course, they aren't saying causality doesn't exist and that everything is just constant conjunction, they do think not being able to conduct experiments with one dependent variable invalidates most empirical work in economics. (And beyond that they reject their own skepticism by endorsing a purely theoretical approach that rationalists like Leibniz or Descartes would love.)

    Maybe it's more fitting to call Cochrane, Roberts, and others "anti-realist", "rationalist", or something else that better captures their dislike for empirics and obsession with theory/intuition.

  7. A great example of where Ross is wrong is financial economics. The market is clearly not efficient. Quant hedge Funds with good track records prove that statement empirically every day.

  8. What do the quant hedge funds with poor track records prove every day?

    1. Hi The Donk: poor track records are just poor track records. They prove nothing becasue the existence of poor track records doesn't prove the market is efficient. Consistently good track records prove that it is not efficient.

    2. This has nothing to do with efficient market. it goes back to the old Stiglitz paper. Efficient market is a limit concept. Somebody has to make the market efficient. If there are no opportunities, then there is no incentive to collect information, everybody indexes and information arrives from high heavens.

  9. While many of your "thoughts are well organized," overall I think you've actually missed the point. Anti-empiricism is not the point; overconfidence is the point. I think one of economists' major problems has been overconfidence; both on the part of theorists and empiricists. But when econ empiricists hold themselves out to be "fact-driven scientists grounded in observable reality" and then make, or fail to make, an important prediction based on available data, they have the potential to cause econ to lose more credibility from outside observers who have come to expect more precision from people wielding what they thought were data-driven facts than those people they could see were using a more theoretical approach. Empirical economists who fail to admit their facts are often more "squishy" than those of a physicist set themselves, and those relying on them, up for failure.

    There is no question that in econ, especially macro, making good predictions is extremely difficult given the enormous amounts of data and dearth of good natural experiments. Admit it and admit it often!

    This is why, in my opinion, that, in broad terms, the weatherman still has more credibility than the climate scientist. Because the weatherman, while using models derived from sophisticated data, still tells me that on Tuesday, I'm going to get 6-12 inches of snow; while the climate scientist tries to tell me that its going to be 4.3 degrees warmer in 100 years. The implications of the latter are much more important than the former, but the way the information is conveyed, and has been historically conveyed, impacts the credibility.

    As much as empiricists may strive to make econ more credible, as long as there is still strong disagreement, based on each side's "facts", about what "simple" things like the effects of interest rates on inflation are or the impact of minimum wage on unemployment, we're still a long way off. Don't pretend we're not. Under promise and over deliver!

    In the public eye, the weatherman who predicts 6-12 inches of snow before we get 11 is more right than the weatherman who said we were going to get 9.

  10. Anonymous6:56 AM

    "You won't find any cases where there was a big minimum wage hike and the unemployment rate soared."

    What about Puerto Rico in 1938?

  11. I don't know why you aren't more open about the obvious. Roberts' approach to economics is as a political philosophy with good guys and bad guys. "Thinking like an economist" to him is basically imagining a society where everyone gets what they deserve and the only role for government is to protect the property rights of market participants because property is just and and natural. All analysis is based on those foundational positions.

    That's why Cochrane's piece gets a dig in at the New Deal.

    Their problem is some of these empirical findings don't conform to expected outcomes based on their political beliefs. If all the empirical data "proved" raising the minimum wage in Seattle was a nightmare of unemployment, higher prices, and businesses fleeing for the hills they would praise the empiricists all day.

    1. "...the only role for government is to protect the property rights of market participants because property is just and and natural."

      Property is "just and natural"? How about this: property is (pretty much) as much the result of luck as anything else in life. There's inescapable truth in the phrase "born on third base". In the United States, relative to the rest of the world, we're all born on third base. In the United States, relative to each get the picture. Of course hard work can make a difference, but the accident of birth makes a bigger difference in most cases.

  12. As a non-academic, I have to agree that the move to empirical economics is a vast improvement over reliance on theory. How can theory mean anything if it hasn't been tested in the real world? As for the idea that there are too many variables out there to ever know anything for sure, give me a break; however true that is, we still have to make policy decisions, we still have to move in one direction or the other (or not move at all, which is simply another decision).

    Better by far to make those decisions based not on theory alone but on some kind of empirical evidence.

    P.S. One of the comments noted a super-important truth: how much more data is available today, how much better it is. I'd also add that it's available far more quickly, a big boon for policy makers.

  13. By and large, ecologists know that the behavior of ecosystems is too complex to predict reliably. For example,
    accordingto Ian Boyd (Science 337, 306 (2012)): “Predicting the dynamics of real ecosystems—or even of components of these ecosystems—will remain beyond the reach of even the best ecosystem models for the foreseeable future.” Why should the behavior of an economy be any easier to predict than the behavior of an ecosystem?

    Ecologists are also aware of the limitations of their data, but their response is to try to get better data.

    1. Ecologists can't predict the precise dynamics of an ecosystem, but they can calculate an envelope for its behavior. They can study the forces at work and predict general outcomes. They do this fairly often and the results, while not precise, can be quite useful in forestry, fisheries management, agriculture and a host of other fields.

      It's like weather forecasting. We are light years from providing precise forecasts, but people have been making calendars since forever, because we can predict that summer is warmer than winter. More modern forecasting works even better, so we rely on weather forecasts for scheduling, emergency management, flood control and a host of other things.

      For a more esoteric example, consider mathematics where it is impossible to predict whether a theorem is provable or not. This doesn't stop mathematicians from proving all sorts of useful theorems that scientists, engineers, carpenters, accountants and short order cooks use every day.

  14. An interesting example of thinking empirically comes to us from Kevin Drum's blog post dealing with the balance of trade between the US and Mexico (and the US and China):

    Here we have a rather remarkable empirical conundrum, and no amount of theory seems likely to resolve the issue. One of the people on a listserv I'm a part of suggests that part of the answer is entirely empirical:
    Not every country follows the same practices in reporting the value of imports and exports. There is a web page at the UN that links to each country's practices. ( I would guess that some of these differences account for some of the difference."

    Knowing where the numbers come from helps us understand what they mean.

  15. Russ' comment "Economics is primarily a way of organizing one’s thinking in considering incentives and costs and the interactions between individuals that we call a market but is really emergent behavior with feedback loops" utilizes language that refers to general systems theory. No one here mentioned that so I suspect there is a paradigm problem. Systems theory argues that "feedback loops" between phenomena result in a group of phenomena acting as a whole rather than as individual phenomena and this creates a circumstance known as "emergent" behavior where people see the unified behavior without understanding the underlying system. It is characteristic of systems (Jay Forrester had a paper on this) that they have counterintuitive behavior so that attempts to influence the system from the outside results in the system acting in unexpected ways. Just a thought.

  16. "To warn scientists today not to disregard experiment is like preaching against atheism in church or communism among congressmen. It is cheap rabble-rousing. The danger is all the other way. Such a mass of experimental data on everything pours out of organized research that the young theorist needs some insulation against its disrupting, disorganizing effect. Poincaré said, ``The scientist must order; science is made out of facts as a house is made out of stones, but an accumulation of facts is no more science than a heap of stones, a house.'' Today the houses are buried under an avalanche of rock splinters, and what is called theory is often no more than the trace of some moving fissure on the engulfing wave of rubble. Even in earlier times there are examples. Stokes derived from his theory of fluid friction the formula for the discharge from a circular pipe. Today this classic formula is called the ``Hagen-Poiseuille law'' because Stokes, after comparing it with measured data and finding it did not fit, withheld publication. The data he had seem to have concerned turbulent flow, and while some experiments that confirm his mathematical discovery had been performed, he did not know of them."

    -Clifford Truesdell

  17. Great post.

    There's a problem in a field when the theory gets way out in front of the empirical stuff. That's when it's time to get back to "stamp collecting". Observations and measurements are the fuel for building theories. Refusing to observe, measure and learn is definitely not humility.

  18. Bill Ellis10:07 PM

    "Puerto Rico in 1938"...It was Sorta a different kinda "minimum wage" hike...
    OK...Maybe an overnight hike of 100 % to 200% in wages for almost every working person in America might be a problem... (especially if we had little domestic market for the goods we produced...especially if we all worked on plantations...especially if the people who ran the plantations were not willing to operate at lower margins and go "Gault")

    But anyway... most advocates of minimum wage hike call for caution in how fast and how much to raise wages... Everyone recognizes that there is a limit to a minimum wage increases...

  19. In economics, the scientific breakthrough is always just around the next corner
    Comment on Noah Smith on ‘Anti-empiricism is not humility’

    The scientific method is well-defined: “Research is in fact a continuous discussion of the consistency of theories: formal consistency insofar as the discussion relates to the logical cohesion of what is asserted in joint theories; material consistency insofar as the agreement of observations with theories is concerned.” (Klant)

    Logical consistency is secured by applying the axiomatic-deductive method and empirical consistency is secured by applying state-of-the-art testing.

    All this is clear in principle since the ancient Greeks but economists simply never got it. The very characteristic of economics is that it does not realize BOTH material AND formal consistency but oscillates between theory without measurement and measurement without theory.

    After even the dullest economist has realized that DSGE/RBC/New Keynesianism has no counterpart in the real world the flight to empiricism is in full swing: “Empirical economics is taking over the profession.” (See intro)

    The main goals of this new movement are:
    ― To “recapture some of the public respect that it’s lost over the last decade”
    ― “We’d all like economists to be more humble, right?”

    In other words, we have to do something in terms of image branding and customer retention. The general public has enough of arrogant experts, incomprehensible abstractions, pesky mathiness, and the inability to predict the next crash.#1

    Not only this: “That’s what natural science looks like ― a small number of theory papers, supported by a very large base of applied theory and empirical work. It’s the sign of a mature field.”

    The problem with economics, though, is that it is NOT a mature field. Just the contrary. Economics languishes since 200+ years at the level of a proto-science. The representative economist is in a state of incurable self-delusion. Until this day, economists have not even gotten the foundational concepts profit and income right.#2 This is like medieval physics before the concepts of mass, force, energy were consistently defined and properly understood.

    See part 2

  20. Part 2

    Economists claim to do science but obviously lack any deeper understanding. Feynman put is thus: “They’re doing everything right. The form is perfect. ... But it doesn’t work. ... So I call these things cargo cult science, because they follow all the apparent precepts and forms of scientific investigation, but they’re missing something essential.”#3

    What is missing is a proper understanding of what science is all about. The goal of theoretical economics is the true theory: “In order to tell the politicians and practitioners something about causes and best means, the economist needs the true theory or else he has not much more to offer than educated common sense or his personal opinion.” (Stigum)

    Economists do not have the true theory. But without the true theory empirical work is a cargo cultic exercise: “And in the social sciences it is even more obvious than in the natural sciences that we cannot see and observe our objects before we have thought about them. For most of the objects of social science, if not all of them, are abstract objects; they are theoretical constructions.” (Popper)

    The economy is, clearly, an abstract object. Empiricism, realism, common sense, and loose verbal reasoning are always popular but do not cut much ice. Science goes beyond common sense and requires some abstraction. The functioning of the price and profit mechanism for the economy as a whole cannot be observed with naked eyes but only with the third eye of theory.

    The current wave of empiricism and humility is just another instatiation of fake science. The only thing the representative economist can do to further the progress of economics is to throw himself under the bus.

    Egmont Kakarot-Handtke

    #1 See ‘New economic thinking, or, let’s put lipstick on the dead pig’
    #2 See ‘How the intelligent non-economist can refute every economist hands down’
    #3 See ‘Cargo cult science’ on Wikipedia

  21. Anonymous1:24 PM

    Just one reason I discount empirical findings in economics is for the same reason I discount most theoretical results. Researchers aren't always incentivized to find the truth, and peer review is broken.

    Theory without data is useless, but empirical studies that don't replicate (and for which there appears to be almost no outrage about inability to replicate) are also useless, no?

    Come back on this when reproducible research is the standard.

  22. Which analytical strategy works is context dependent and a function of the sample size and the underlying complexity/structure.

    However, a couple things can be said in general: those who interrogate data very hard will inherit noise. You seem to confuse data with facts (or information).

    Depending on the underlying data, option 4 is often optimal. Half-assed, biased models often outperform finely tuned consistent ones.

  23. Economics papers by economists is signaling, for clients, for status, for resume enhancement, nothing more. It's just posturing. More art than science.

    1. "Physics is like sex: sure, it may give some practical results, but that's not why we do it."
      - Richard Feynman

    2. Same as it ever was, see this blurb: “Economists as a whole have no reason for feeling proud of their own record during that period. A year ago I read over the volumes of the Proceedings of the American Economic Association from 1929 to 1933. They are not something to make you feel proud of your profession. While the world was tumbling around the economists’ ears on the outside, there was hardly a sign of it in the papers presented at those annual meetings. They dealt with strictly academic matters, even monetary and long-term banking matters. I remember one study, in 1932, of the failure of banks. It was concerned primarily with what had happened during the ‘20s and stressed the fact that country banks which failed had made poor mortgage loans, whereas in fact the important thing happening at the time was the widespread failure of city banks. “ - - “A Program for Monetary Stability”* by Milton Friedman In Readings in Financial Institutions, Marshall D. Ketchum and Leon T. Kendall, editors, pp. 189-209. Boston: Houghton Mifflin, 1965.

  24. How could you possibly know that it's impossible to know something?

    Ask Gödel.

    You can't prove a negative!

    Sure you can. There are well known techniques for doing just that. Pythagoras did it about 500 BC.

    Of course, those are both more theoretical than empirical, but maybe you should spend more time learning about theory.

    1. Not a fan of transfinite induction, are you then? ;-)

      My point is, you can't demonstrate unknowability empirically. That's a bit different from what you're thinking of.

    2. But I know the Halting problem (for example) is undecidable, so why would I need to do empirical experiments to determine that?

    3. Suppose you're trying to decide between two mathematical models that are both internally consistent given the same set of axioms.

      Is it possible to prove, mathematically, that you can't know which of these theories is more predictive?

    4. Oh, and do people who write stuff like "maybe you should spend more time learning about theory" realize how pompous and unimpressive that sounds? It's not as if I don't know about Godel or the halting problem. Give people a little more credit here, man, or you sound like an ass! ;-)

    5. Anonymous4:13 PM

      If you run a snarky blog you're going to get snarky comments.

    6. Get, and also give! :D

  25. Practical recommendations for economics methodology

    (i) The problem of economists is NOT arrogance but incompetence. Because of this, humility is NOT the solution.

    (ii) If one puts NONENTITIES into the axioms (constrained optimization, rational expectations, equilibrium) one runs with absolute necessity into the identification problem. This problem cannot be overcome with more empiricism or better statistical technique but only by retiring cargo cult scientists who proudly announce “most of what I and many others do is sorta-kinda neoclassical because it takes the maximization-and-equilibrium world as a starting point.” (Krugman)#1

    (iii) The subjective-behavioral starting point of standard economics has to be fully replaced by objective-systemic axioms from which testable propositions readily follow.

    (iv) Economists who have not yet arrived at something akin to Archimedes’s Law of the Lever should not invoke Heisenberg’s Uncertainty Principle in a methodological discussion.

    (v) Economists who cannot handle elementary mathematics#2 should not invoke Gödel’s Incompleteness Theorem in a methodological discussion.#3

    (vi) If it isn’t macro-axiomatized, it isn’t economics.

    Egmont Kakarot-Handtke

    #1 See ‘How Arrow pushed economics over the cliff’
    #2 See ‘How the intelligent non-economist can refute every economist hands down’
    #3 See ‘Economics, Gödel, and a would-be field day for math-Luddites’

  26. Anonymous7:44 PM

    I mostly liked this post, but...

    "You can't prove a negative!"

    Noah you've been spending too much time in the blogosphere and not enough in formal logic textbooks! Here are several negative propositions which you can prove:
    -"Obama is not sitting underneath my table" (I just checked)
    -"5+5 does not equal 11" (I passed my prelims)
    -"Noah is not spelt No-arr" (by inspection)
    Bonus: "You can't prove a negative" is, of course, a negative. So if it's true, there'd be no way to know

    It would be interesting for someone to do a sociological study on how "you can't prove a negative" became part of internet lore. My guess is the "new atheists" (now the old atheists I suppose) are to blame. But Noah you should be above such low grade thinking!

  27. Anonymous12:19 AM

    I have always been fascinated about long entrenched disagreements. We still argue about things Plato argued about. Why is consensus so hard to come by? With regard to the minimum wage, why, with so much data, have we not moved closer to consensus? Sure ideology gets in the way and maybe we can never get rid of such biases and motivations but among honest straight shooters despite all our best efforts it seems to me (a layman for sure) that the literature continues to be too muddled. I would resist saying we can never settle the matter but I do begin to wonder. Our track record at achieving consensus on vexed questions seems poor. I don't know if this is merely a result of objective complexity or if it is the result of subjective complexity. Is the world too complicated or are we too conflicted?

    1. Ideology is certainly a factor, but I think empirical results have definitely moved the beliefs of the econ community with respect to the minimum wage.