David Segal asks
Why do economists argue at all? Given that Fed members and economists are looking at the same data, and given the reams of evidence accumulated over decades — not to mention a few centuries of great minds, great theories and thick books that preceded this crisis — why isn’t a right answer self-evident?
George Bernard Shaw once said, “If all economists were laid end to end they would not reach a conclusion.” How come? What prevents economics from yielding answers the way that physics, chemistry and biology do?
Isn’t Segal puzzled as to how physicists could manage to disagree about something so fundamental as whether we live in a single universe in which observation induces the collapse of the quantum wave function or whether we live in a possibly infinitely pronged mutli-verse? I mean either there are trillions of copies of Segal floating around “somewhere” or there is only one. Why can’t physicists agree on something so basic?
Or a bit more on the mundane side, why is there still so much controversy among chemists on exactly how water is put together.
And, why can’t biologist agree on where the green stuff in plants came from.
Perhaps, Segal isn’t puzzled at these controversies because they have no political significance. However, let hundreds of billions of dollars be connected to whether water is tetrahedral or ringed and watch the knives come out. By the way, you hate America if you say “ringed.”
The very subject matter of Monetary Economics is how the government should throw around billions of dollars. It is amazing that we have the consensus we do. Stiglitz, Krugman, Sumner, Bernanke, and Plosser may all disagree about the right course of action but if you asked them whether the reversal of disinflation was central to whether the economy will remain mired in a rut or turn around, I am betting they will all say yes.
Also, I have to react to this
“Pride is not in the model. Revenge is not in the model. Fear is not in the model. Even simple things like the disenchantment of people who are fired from their jobs — the model doesn’t account for how devastating that experience can be,” and what that sense of devastation will mean for the economy, he said
But, it’s not not in the model. That is, there is no variable for devastation. However, we do measure hysteresis. This is the study of how past unemployment affects future unemployment. If you asked me casually what the causal mechanism was I would include things like emotional devastations, disaffection, etc.
However, practically what we have are data on past unemployment rates in various places and among various groups and the current unemployment rate. So, that’s what is modeled.
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Friday ~ October 29th, 2010 at 2:31 pm
sardonic_sob
Here’s the real cause of the confusion:
When you study the physical sciences in public school, they teach you, really, the history of the physical sciences, and unless you’re in a very good school with a very good teacher they don’t put in the part about how what they’re teaching you is *wrong.* Newton’s laws are WRONG. The common understanding of what the theory of evolution says about how life forms evolve is WRONG. Et cetera. You get to the part where they teach you what is currently understood and what we currently understand that we don’t understand much later, and it’s really complicated. And once you understand THAT, then you’re ready to start contributing to the discussion (i.e., to start arguing.)
Never having studied economics at a graduate level, I’m not sure how much of a comparison to this process there is. But it does not surprise me that even a fairly sophisticated economist thinks that the physical sciences are basically a solved problem compared to economics.
Friday ~ October 29th, 2010 at 4:48 pm
jazzbumpa
Karl -
Your physical science examples are horribly misplaced.
The physical sciences continue to advance at a nuanced detail level. The basic tenets are not being challenged (they are not Wrong, they are incomplete and/or inexact*) – at least not very often. The reason for this is scientists are able to devise and run controlled experiments and reach a fundamental understanding of principles, and specifically, cause and effect. The growth of scientific knowledge over time is something like an asymptotic approach to reality. The things that are difficult to know and understand are the new things that are being discovered.
* Relativistic mechanics does not refute Newtonian mechanics; rather, it subsumes it.
The agreement you cite among the economists you listed is at the level of “Which way is up?” Where they disagree is on whether you can get there more effectively by climbing a ladder or digging a hole, because they do not agree on the basic nature of ladders and holes.
Economics is now revisiting the same battleground as it was 80 years ago. It seems not to advance because past lessons are relatively ineffective at informing current thought. It happens this way because economic thought is contaminated by political ideology, and ideology trumps reality far too much of the time.
That really is dismal,
JzB
Friday ~ October 29th, 2010 at 7:33 pm
sardonic_sob
I admit my examples were a bit off the cuff, but no, they are not “inexact or incomplete,” unless by “inexact or incomplete” you mean, “Will never give you the right answer because they are inexact or incomplete, though they’ll be darn close at many scales because they work along the right idea.” That latter is true, but in my universe it is close enough to wrong to make no never mind. To me right != close enough, right = !wrong.
Friday ~ October 29th, 2010 at 9:44 pm
jazzbumpa
sardonic bob -
unless by “inexact or incomplete” you mean, “Will never give you the right answer because they are inexact or incomplete, though they’ll be darn close at many scales because they work along the right idea.”
That’s pretty much it, though I wouldn’t phrase it that way. What they give you is as right an answer as can be attained at the current state of knowledge. This is being 90 or 95 or 99% right, and certainly nowhere close to wrong.
Contrast the various responses of economists to the current GDP report. Krugman and Thoma want fiscal policy, though they recognize QE II as better than playing Rip van Winkle. For monitarists, fiscal policy solutions aren’t even worthy of a thought or a word.
Ideology!
JzB
Friday ~ October 29th, 2010 at 8:18 pm
Rebecca Burlingame
Money is but a small part of the reality, and economics has only looked in the first galaxy – so to speak – to understand the complexity of resource use. If it can look further and understands what it finds, we have a far better chance of preserving both complexity and a productive equilibrium, when things have finally settled down at some point in the future. And yes, government is part of complexity, but the idea of government needs to evolve as surely as the potential of human capital.
Saturday ~ October 30th, 2010 at 10:23 am
jazzbumpa
Here’s Krugman:
But here’s the thing: I see no signs of a rethink among most players. The slide toward deflation despite huge increases in the monetary base hasn’t shaken either the paleomonetarists who still predict hyperinflation or the it’s-all-the-Fed’s-fault crowd. The failure of interest rates to soar hasn’t shaken the deficit hawks. Instead, the usual suspects have taken the failure of an inadequate stimulus to produce a solid improvement in employment — a failure I, among others, predicted! — as proof that they were right.
It’s disheartening, to say the least. You really have to wonder if economics has become completely unmoored from evidence, whether anything can ever convince anyone that they were wrong.</i?
Ideology! I don't wonder anymore.
JzB