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In this video[1] Varoufakis takes on modern economics and their models as a way of understanding the real world and predict what's going to happen. On a higher

by atmosx 10y ago

In this video[1] Varoufakis takes on modern economics and their models as a way of understanding the real world and predict what's going to happen. On a higher level, I believe that he speaks for most (if not all) social sciences and what happens when they cross mathematical models who blindly try to understand and predict the real world through a flawed, limited mathematical model. [1] https://youtu.be/L5AUAIzciLE?t=1355 https://youtu.be/L5AUAIzciLE?t=1355

pdkl95 10y ago
Mark Blyth says basically the same thing. https://www.youtube.com/watch?v=hmWbkPezgtU https://www.youtube.com/watch?v=hmWbkPezgtU
ntoshev 10y ago
There is a problem with the simple economic models that don't claim to predict real world behavior because they capture only one aspect of reality (everything else being equal...). They are not really scientific because they are not falsifiable. Math works and it seems to reflect reality, but we have no epistemic mechanism to verify this. If we can do this eventually, then perhaps we can make our way to models that capture a larger fraction of the truth and can be tested against reality.
- x5n1 10y ago
  If you have big data about all transactions occurring in real-time, along with socioeconomic factors on all the actors, it is not difficult to verify models and see how well the relationship between their dependent and independent variables holds up in the real world.
  - mjohn 10y ago
    That is a big if. Nobody has data for all transactions occurring in real time and nobody knows all the socioeconomic factors for all the actors. Even if you did have all of that data, you would still be missing a lot of data. For example, an important factor in economics is asymmetric information. An actor's decision may be optimal given the information available to them at the time even if the decision is suboptimal given perfect information. So for an even more accurate model, you would also need to have data on what each actor knows at any given point in time. Furthermore, an actor probably does not have the ability to calculate the optimal outcome given the information available and there are innumerable subjective factors in economic decision making. Big data will help you find some kind estimate, but it will not suddenly make economic modelling simple.
- mjohn 10y ago
  Economic models that don't claim to predict real world behaviour are like thought experiments (with more maths). Their purpose is to help people understand that small isolated part of the whole, because a model that includes all the complexities of the real world would be incomprehensible. Nonetheless, many of these models are still falsifiable. For example, the textbook model of the benefits of trade due to comparative advantage only contains two countries and two goods. Although extremely simplistic, the theory does have falsifiable predictions and there is good empirical evidence supporting the broad theory. But this simple model will not be able to accurately predict how much a particular country will benefit from free trade.
vezzy-fnord 10y ago
Criticisms of mathematical modeling in economics were most definitely given by Mises and Hayek. Historian of economic thought Mark Blaug was also very critical of how neoclassical production theory (particularly Edgeworth's formulation) distorted the meaning of "competition" from a dynamic process to a quantity. Ironically, it is the same far-left heterodox demagogues like Varoufakis (though he's hardly the worst) who nevertheless use it in this sense to argue for mercantilist programs. Neoclassical when it suits them, heterodox when it doesn't. Anyone who uses the term "neoliberalism" is a charlatan. It is an absurd conspiracy theory that has since blown into an amorphous meme out of Marxist historiographers who struggle with the explanatory power (or lack thereof) of their framework. Mathematical models do have their uses in formalizing assumptions and analyzing dependencies, so they're not all bad, even if the Cowles Commission did go overboard. (Also let's not forget that the modern methodology of economics came as a result of the Keynesian research program, particularly since Hicks (1937)'s introduction of IS-LM, first modeled by Keynes himself in 1933 as four simultaneous equations.)
- AimHere 10y ago
  What makes the use of the term 'neoliberalism' to be a conspiracy theory? I thought it was a blanket term for the sorts of laissez-faire capitalist ideologies that sprang up since the 1980s, and whose proponents did have a big thing for namechecking Adam Smith and other classical liberal economists of the 19th century. You're surely not going to deny that there has been some sort of ideological drive in favour of free market reforms, privatization and "free trade" agreements of the WTO/TTIP ilk, are you? I don't think people who use the term think it refers specifically to shadowy cabal of free marketeers conspiring with each other over some hidden agenda. It's just a term for what a bunch of people, many of whom are in positions of power, happen to openly think and do.
  - pessimizer 10y ago
    "Neoliberalism" is just an Americanism for economic liberalism, because the word liberalism is overloaded in the U.S., and is an autoantonym. That part of vezzy-fnord's comment is just a reflexive libertarian expulsion.
conjectures 10y ago
Varoufakis' philosophy is contra Chomsky I believe. When I've heard him speak, he attacks overly simplistic mathematical models which badly fit complex real world behaviour. If Chomsky's generative grammar provided a better model of language, Google translate would be running of that rather than statistical models. Chomsky's ideas don't explain the butterflies. In the same way Varoufakis targets theory led economics which don't explain recent events. Stats led models take the opposite approach, explaining the butterflies very well. The trade off is decreased ability to act in novel situations.
- asdasd23232sd 10y ago
  I would argue that this entire debate is about what it means to "explain".
- kposkdf 10y ago
  > If Chomsky's generative grammar provided a better model of language, Google translate would be running of that rather than statistical models. You realize google translate is utter crap right?
- YeGoblynQueenne 10y ago
  >> But isn't that the nature of scientific hypotheses? They are tenuous, only valid until you come across some data that tells you "aha, there's another piece to this rule". Chomskian grammars (CFGs) are used widely in compilers and similar tools to model computer languages and even for limited subsets of natural language they don't do half bad. The problem with phrase structure grammars is that they're very costly to develop and maintain and so far there's never been one such grammar that can model the whole of a natural language. If there was a way to learn CFGs with good coverage from text they'd be in much wider use, but unfortunately grammar induction is hard. Also, Google has its own political reasons not to want to use grammars. They champion neural networks and statistical AI. It's their schtick, innit.

by atmosx 10y ago

pdkl95 10y ago

Mark Blyth says basically the same thing. https://www.youtube.com/watch?v=hmWbkPezgtU https://www.youtube.com/watch?v=hmWbkPezgtU

ntoshev 10y ago

There is a problem with the simple economic models that don't claim to predict real world behavior because they capture only one aspect of reality (everything else being equal...). They are not really scientific because they are not falsifiable. Math works and it seems to reflect reality, but we have no epistemic mechanism to verify this. If we can do this eventually, then perhaps we can make our way to models that capture a larger fraction of the truth and can be tested against reality.

x5n1 10y ago
If you have big data about all transactions occurring in real-time, along with socioeconomic factors on all the actors, it is not difficult to verify models and see how well the relationship between their dependent and independent variables holds up in the real world.
- mjohn 10y ago
  That is a big if. Nobody has data for all transactions occurring in real time and nobody knows all the socioeconomic factors for all the actors. Even if you did have all of that data, you would still be missing a lot of data. For example, an important factor in economics is asymmetric information. An actor's decision may be optimal given the information available to them at the time even if the decision is suboptimal given perfect information. So for an even more accurate model, you would also need to have data on what each actor knows at any given point in time. Furthermore, an actor probably does not have the ability to calculate the optimal outcome given the information available and there are innumerable subjective factors in economic decision making. Big data will help you find some kind estimate, but it will not suddenly make economic modelling simple.
mjohn 10y ago
Economic models that don't claim to predict real world behaviour are like thought experiments (with more maths). Their purpose is to help people understand that small isolated part of the whole, because a model that includes all the complexities of the real world would be incomprehensible. Nonetheless, many of these models are still falsifiable. For example, the textbook model of the benefits of trade due to comparative advantage only contains two countries and two goods. Although extremely simplistic, the theory does have falsifiable predictions and there is good empirical evidence supporting the broad theory. But this simple model will not be able to accurately predict how much a particular country will benefit from free trade.

vezzy-fnord 10y ago

Criticisms of mathematical modeling in economics were most definitely given by Mises and Hayek. Historian of economic thought Mark Blaug was also very critical of how neoclassical production theory (particularly Edgeworth's formulation) distorted the meaning of "competition" from a dynamic process to a quantity. Ironically, it is the same far-left heterodox demagogues like Varoufakis (though he's hardly the worst) who nevertheless use it in this sense to argue for mercantilist programs. Neoclassical when it suits them, heterodox when it doesn't. Anyone who uses the term "neoliberalism" is a charlatan. It is an absurd conspiracy theory that has since blown into an amorphous meme out of Marxist historiographers who struggle with the explanatory power (or lack thereof) of their framework. Mathematical models do have their uses in formalizing assumptions and analyzing dependencies, so they're not all bad, even if the Cowles Commission did go overboard. (Also let's not forget that the modern methodology of economics came as a result of the Keynesian research program, particularly since Hicks (1937)'s introduction of IS-LM, first modeled by Keynes himself in 1933 as four simultaneous equations.)

AimHere 10y ago
What makes the use of the term 'neoliberalism' to be a conspiracy theory? I thought it was a blanket term for the sorts of laissez-faire capitalist ideologies that sprang up since the 1980s, and whose proponents did have a big thing for namechecking Adam Smith and other classical liberal economists of the 19th century. You're surely not going to deny that there has been some sort of ideological drive in favour of free market reforms, privatization and "free trade" agreements of the WTO/TTIP ilk, are you? I don't think people who use the term think it refers specifically to shadowy cabal of free marketeers conspiring with each other over some hidden agenda. It's just a term for what a bunch of people, many of whom are in positions of power, happen to openly think and do.
- pessimizer 10y ago
  "Neoliberalism" is just an Americanism for economic liberalism, because the word liberalism is overloaded in the U.S., and is an autoantonym. That part of vezzy-fnord's comment is just a reflexive libertarian expulsion.

conjectures 10y ago

Varoufakis' philosophy is contra Chomsky I believe. When I've heard him speak, he attacks overly simplistic mathematical models which badly fit complex real world behaviour. If Chomsky's generative grammar provided a better model of language, Google translate would be running of that rather than statistical models. Chomsky's ideas don't explain the butterflies. In the same way Varoufakis targets theory led economics which don't explain recent events. Stats led models take the opposite approach, explaining the butterflies very well. The trade off is decreased ability to act in novel situations.

asdasd23232sd 10y ago
I would argue that this entire debate is about what it means to "explain".
kposkdf 10y ago
> If Chomsky's generative grammar provided a better model of language, Google translate would be running of that rather than statistical models. You realize google translate is utter crap right?
YeGoblynQueenne 10y ago
>> But isn't that the nature of scientific hypotheses? They are tenuous, only valid until you come across some data that tells you "aha, there's another piece to this rule". Chomskian grammars (CFGs) are used widely in compilers and similar tools to model computer languages and even for limited subsets of natural language they don't do half bad. The problem with phrase structure grammars is that they're very costly to develop and maintain and so far there's never been one such grammar that can model the whole of a natural language. If there was a way to learn CFGs with good coverage from text they'd be in much wider use, but unfortunately grammar induction is hard. Also, Google has its own political reasons not to want to use grammars. They champion neural networks and statistical AI. It's their schtick, innit.