Read this brilliant post by Deirdre McCloskey:
"A fine economist of my acquaintance recently told me his scientific credo:
"It is now generally agreed that economic theory, combined with new data as well as historical, statistical and mathematical methods are necessary at the theoretical level, to formulate problems precisely, to draw conclusions from postulates and to gain insight into workings of complicated processes and, at the applied level, to measure variables, to estimates parameters and to organize the elaborate calculations involved in reaching empirical results."
Yes: it has been generally agreed since Koopmans' Three Essays in 1957. But I myself have found repeatedly that "general agreement" is, roughly half the time, a signal that people have not thought through the issue, and are mistaken about it, and don't want to hear anything more about it, and will get indignant and scornful if someone asks them to rethink it. The date of Koopmans' manifesto should make one wonder whether a methodological framework set up long, long before we knew what we were doing in either mathematical theory or in econometrics, and in contradiction to every other scientific program (physics, for example, which depends not at all on Bourbaki-style axiomatization or on statistical significance, even in fields like astronomy with observations similar to ours), is quite what we need now in 2011."
Steven,
David Simon, screen writer of 'The Wire' speaks in general about statistics and how they function in the system. I enjoyed watching this Bill Moyers interview.
"We used to make stuff in America. Now we just put our hand in the next guy's pocket."
http://video.pbs.org/video/1134533920/
Actually, a lot of David Simon's ideas fit together quite well with the issues discussed by Martin Wolf in a recent LSE Ralph Miliband lecture on Ants and Grasshoppers. The idea of the non-financial corporates being the best banks and providers of credit to governments in operation today. The 'corruption' which Wolf pointed towards in America and the mortgages. It is interesting to contrast it with David Simon's views.
http://www2.lse.ac.uk/publicEvents/events/2011/20110316t1830vOT.aspx
The Greeks should sell Plato's Republic to the Germans for 500 Billion, let them have a lesson in morality and social responsibility.
Thanks Brian. I think that's the nature of any target though. Once it's adopted, it sets up a set of diverse incentives for people working in a complex system.
Given that you can get the Republic for free on ibooks, I think they mightn't pay the 500 billion Niall!
Ah you wouldn't know Stephen, they threw money at zombie banks for years, the intellectual "property" rights to the Republic might be worth it.....
Well, that's of course true, but perhaps a better suggestion would be getting every Leaving Cert. student to read the Republic, that might be a better solution?
Stephen,
I tried to scribble something about diverse incentives and complex systems, this evening at this blog entry.
http://designcomment.blogspot.com/2011/06/open-book.html
I agree Stephen, I did Classical Studies, including the Republic, for my own Leaving Certificate and my own son is starting secondary in September and I would love him to be exposed to the philosophy, but not every college offers this. 12 years later i have taken the book back up and I can see the massive value in it.
The political weakness being shown in Europe is very disheartening. We need a big financial push, followed by these fiscal councils you propose. ( The Germans are great really, they just need to show more strength )
I have expressed some similar thoughts in my own blog. It is not only economics where a perverted version of science is leading us astray, to great cost. But I disagree with her:
"Make thus-and-such assumptions, A, about the following
game-theoretic model and you can show that a group
of unsocialized individuals will form a civil society. Make another set of assumptions, A', and they won’t. And so on and so forth. Blah, blah, blah, blah, to no scientific end."
I have found such theories enlightening when worrying about a posible looming or actual crisis. She is also critical of Samuelson. Counterfactually, I wonder what might have happened if governments had taken note of Samuelson's warning: "Somehow it must reassure the broader market that there are backup sources of credit and that the failure of any major financial institution won't trigger a chain reaction ... ." More broadly, Samuelson seems part of the answer, if only people would listen.
Dave,
I think you're right, to a point. The genius Samuelson had was to take an obviously true-in-most-cases social phenomenon like 'People generally prefer more to less' and whack that into a sort of classical physics mould, from which quite testable predictions and properties could be derived. This is all fine as far as it goes as a thought-clarifying exercise. When people start writing down constrained optimisation programs and saying 'here's an economy that does X', believing their 3 equation problem really represents important features of an actual economy and not just important features *they think* the economy should have, then it all goes a little pear shaped, because then nerds who love maths the way I do start getting important jobs telling real people how to do real things based on imaginary models of imagined economies. That's the core of the issue McCloskey is talking about I think.