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>Theories fall in and out of favour, but they never seem to be affected by reality very much either way. It's the opposite. Theories happen, but reality isn't

>Theories fall in and out of favour, but they never seem to be affected by reality very much either way. It's the opposite. Theories happen, but reality isn't affected by them in any way. Part of the reason is because there is no longer a pipeline for public intellectuals or academics to be in any sort of advisory position in government. Those roles are all taken up by career bureaucrats, industry-linked experts from the private sector, or well-connected political flunkies now. The trouble with that is that while these people are usually established with PhDs or whatever in the relevant field, they're usually a decade or more out of practicing in that field by the time people reach the level in their careers where they can end up on a Presidential committee. So they end up with ideas and preconceptions about their own field that are frozen in amber from a long time ago. What's more, they've spent the time since assimilating the values of other people who are even older than them. So all their practice and discipline involves explaining theory that is a decade out of date to get buy in from someone whose understanding of the theory is 2 decades out of date.

netcan 6y ago
I totally disagree. Theories have enormous effect on reality. Coase Theorem^ dictated how radio spectrum was managed in the US, with disastrous results. Monetarism dictates most decisions made by central banks. Unionisation and later union-busting were very closely tied to social science theories. "Romer theory" had profound influence on world bank and UN policies. Reality impacting theory though... Keynesianism remained totally intact when 1980s stagflation disproved it. Monetarism is taught as-is despite the last 10 years of macroeconomic reality. Marxist theories of ancient history and the origins of high civilisation are virtually indisputed despite the discovery of gobleki tepeh, for an example outside of economics. In the 30s, almost all economists predicted a much reduced workweek. Keynes, the most famous, predicted a 15 hour workweek by the 1970s. Most economists agreed: marxists, liberals, keynsians, corporatists.... The prediction was based on some fundamental theories in economics, combined with GDP & productivity assumptions. The assumptions were right. The theories have not changed. The way economists explain the result is by tweaking theory in a non fundamental way. They mostly argue that people (surprisingly) prefered working 40 hrs, earning more and spending more... The in-theory implication is that people place nearly no value on "leisure." No need to rethink theories just because they predict falsities. No problem if the updated parameter values imply a reality that is obviously false. ^Technically, a bastardised form of the theory that reverses the authors' intended conclusions.
- naravara 6y ago
  > Theories have enormous effect on reality. Coase Theorem^ dictated how radio spectrum was managed in the US, with disastrous results. Monetarism dictates most decisions made by central banks. Unionisation and later union-busting were very closely tied to social science theories. "Romer theory" had profound influence on world bank and UN policies. All of these rose to prominence in the 70s, 80s, and 90s, which is my point. Our institutions are stuck there and haven't been able to break out of them even though most of the theory has refined or invalidated many of these claims based on the empirical evidence and natural experiments we now have. The most recent one you cited, the Endogenous Growth theory, is actually the one that has been most open to adaptation and criticism. And this is largely because the organizations to whom it is most germane--like the World Bank and the IMF--are largely staffed by economists and social scientists rather than the career bureaucrats and political/industry flacks that the rest of the government is. But even then, it has lots of trouble being reflected in US government policy (agencies like State/USAID) because of that same issue I mentioned. > No need to rethink theories just because they predict falsities. No problem if the updated parameter values imply a reality that is obviously false. I don't know where you're getting this from. Basically every 101 level Econ textbook mentions this exact thing and how it led to having to seriously reconsider how much agency workers have in actually deciding their labor/leisure mix. Behavioral and Welfare Economists are particularly interested in this question.
  - netcan 6y ago
    Maybe I'm just old, but my 101 econ texbooks made no mention of behavioral economics and very little of welfare economics. Those were in the wishy washy electives bucket. I'd actually like to try this experiment, irl. My guess is that the majority of micro teachers today would deal with "What was Keynes' mistake" in the "tweak and defend" way. At most traditional economics schools, LSE or whatnot, I'd put money on it. Look... I think what you're describing is an effect, not a cause. Social science theories, when faithfully implemented, have had some terrible results. Formal, orthodox economics still holds a lot of power in the most formal bureaucracies like the IMF, central banks, UN agencies, etc. They like legible, citable orthodoxy. They like to have a beyond reproach "scientific basis" or expert consensus for policies. There's a noteworthy principle-agent-ish aspect to this. Social science strongholds tend to exist outside of both market and electoral discipline. A municipality or HR department isn't, so social science doesn't thrive there. All this is a matter of degrees though. Social sciences still do have influence, certainly at the national-political level. Slight tangent: I'm not actually very familiar with Romer, beyond the basics. Was Endogenous Growth Theory the basis for higher education subsidies, or is that a different flavour of human capital theory?

netcan 6y ago

I totally disagree. Theories have enormous effect on reality. Coase Theorem^ dictated how radio spectrum was managed in the US, with disastrous results. Monetarism dictates most decisions made by central banks. Unionisation and later union-busting were very closely tied to social science theories. "Romer theory" had profound influence on world bank and UN policies. Reality impacting theory though... Keynesianism remained totally intact when 1980s stagflation disproved it. Monetarism is taught as-is despite the last 10 years of macroeconomic reality. Marxist theories of ancient history and the origins of high civilisation are virtually indisputed despite the discovery of gobleki tepeh, for an example outside of economics. In the 30s, almost all economists predicted a much reduced workweek. Keynes, the most famous, predicted a 15 hour workweek by the 1970s. Most economists agreed: marxists, liberals, keynsians, corporatists.... The prediction was based on some fundamental theories in economics, combined with GDP & productivity assumptions. The assumptions were right. The theories have not changed. The way economists explain the result is by tweaking theory in a non fundamental way. They mostly argue that people (surprisingly) prefered working 40 hrs, earning more and spending more... The in-theory implication is that people place nearly no value on "leisure." No need to rethink theories just because they predict falsities. No problem if the updated parameter values imply a reality that is obviously false. ^Technically, a bastardised form of the theory that reverses the authors' intended conclusions.

naravara 6y ago
> Theories have enormous effect on reality. Coase Theorem^ dictated how radio spectrum was managed in the US, with disastrous results. Monetarism dictates most decisions made by central banks. Unionisation and later union-busting were very closely tied to social science theories. "Romer theory" had profound influence on world bank and UN policies. All of these rose to prominence in the 70s, 80s, and 90s, which is my point. Our institutions are stuck there and haven't been able to break out of them even though most of the theory has refined or invalidated many of these claims based on the empirical evidence and natural experiments we now have. The most recent one you cited, the Endogenous Growth theory, is actually the one that has been most open to adaptation and criticism. And this is largely because the organizations to whom it is most germane--like the World Bank and the IMF--are largely staffed by economists and social scientists rather than the career bureaucrats and political/industry flacks that the rest of the government is. But even then, it has lots of trouble being reflected in US government policy (agencies like State/USAID) because of that same issue I mentioned. > No need to rethink theories just because they predict falsities. No problem if the updated parameter values imply a reality that is obviously false. I don't know where you're getting this from. Basically every 101 level Econ textbook mentions this exact thing and how it led to having to seriously reconsider how much agency workers have in actually deciding their labor/leisure mix. Behavioral and Welfare Economists are particularly interested in this question.
- netcan 6y ago
  Maybe I'm just old, but my 101 econ texbooks made no mention of behavioral economics and very little of welfare economics. Those were in the wishy washy electives bucket. I'd actually like to try this experiment, irl. My guess is that the majority of micro teachers today would deal with "What was Keynes' mistake" in the "tweak and defend" way. At most traditional economics schools, LSE or whatnot, I'd put money on it. Look... I think what you're describing is an effect, not a cause. Social science theories, when faithfully implemented, have had some terrible results. Formal, orthodox economics still holds a lot of power in the most formal bureaucracies like the IMF, central banks, UN agencies, etc. They like legible, citable orthodoxy. They like to have a beyond reproach "scientific basis" or expert consensus for policies. There's a noteworthy principle-agent-ish aspect to this. Social science strongholds tend to exist outside of both market and electoral discipline. A municipality or HR department isn't, so social science doesn't thrive there. All this is a matter of degrees though. Social sciences still do have influence, certainly at the national-political level. Slight tangent: I'm not actually very familiar with Romer, beyond the basics. Was Endogenous Growth Theory the basis for higher education subsidies, or is that a different flavour of human capital theory?