3 ms·

(Full disclosure: Economics and Pol.Sci. major here.) One Daniel Hausman, introducing Cambridge's Philosophy of Economics [1] anthology edited by him: > > P

(Full disclosure: Economics and Pol.Sci. major here.) One Daniel Hausman, introducing Cambridge's Philosophy of Economics [1] anthology edited by him: > > Premises assumed without evidence, or in spite of it; > > and conclusions drawn from them so logically, that > > they must necessarily be erroneous. > > – Thomas Love Peacock, Crochet Castle > > Ever since its eighteenth-century inception, the science > of economics has been methodologically controversial. Even > during the ﬁrst half of the nineteenth century, when > economics enjoyed great prestige, there were skeptics like > Peacock. For economics is a peculiar science. Many of its > premises are platitudes such as "Individuals can rank > alternatives" or "Individuals choose what they most > prefer." Other premises are simpliﬁcations such as > "Commodities are inﬁnitely divisible," or "Individuals > have perfect information." On such platitudes and > simpliﬁcations, such "premises assumed without evidence, > or in spite of it," economists have erected a > mathematically sophistical theoretical ediﬁce, whose > conclusions, although certainly not "necessarily > erroneous," are nevertheless often off the mark. Yet > businesses, unions, and governments employ thousands of > economists and rely on them to estimate the consequences > of policies. Is economics a science or isn’t it? A theory in human sciences will be as persuasive as its postulates are verisimilar. Many schools of economics have encoded such verisimilar postulates into hosts of mathematical formulas and derivations which only add to the overall appearance of soundness. To guard yourself against accidentally lending these postulates too much credit, I think the best technique has been described by an economist [2]: > So in answer to the current question I am proposing that > we now change the usage of the word Aether, using the old > spelling, since there is no need for a term that refers to > something that does not exist. Instead, I suggest we use > that term to describe the role of any free parameter used > in a similar way: that is, Aether is the thing that makes > my theory work. [...] > > Aether variables are extremely common in my own field of > economics. Utility is the thing you must be maximizing in > order to render your choice rational. > > Both risk and risk aversion are concepts that were once > well defined, but are now in danger of becoming > Aetherized. Stocks that earn surprisingly high returns are > labeled as risky, because in the theory, excess returns > must be accompanied by higher risk. If, inconveniently, > the traditional measures of risk such as variance or > covariance with the market are not high, then the > Aetherists tell us there must be some other risk; we just > don't know what it is. That book has some rhetorical elegance, and it certainly hides away is Aether, but if you look at it closely (and really, the chapters aren't so long that you'd be wasting time to read a couple), and try to substitute Aether for whatever hasn't been argued for or scientifically established (and that is a fine exercise in reading), you'll see there are a lot of holes in the reasoning which you may or may not be willing to invest your beliefs into. [1] isbn:0521709849 [2] http://edge.org/responses/what-scientific-concept-would-improve-everybodys-cognitive-toolkit#descshort_1689 http://edge.org/responses/what-scientific-concept-would-impr...

dpatru 15y ago
Of course we should all read critically. We already know that. Is there anything in particular that you think Hazlitt got wrong?
- rufibarbatus 15y ago
  From his Minimum Wage chapter [1]: > It is unfortunate for clarity of economic thinking that > the price of labor’s services should have received an > entirely different name from other prices. This has > prevented most people from recognizing that the same > principles govern both. If a given theory treats wages as merely prices, and ascribe them no role in the theoretical model other than that of a price of labour, then it's perfectly reasonable to protest or at least question their getting a special name. But he gets everything wrong in his second sentence. There's a word for wages as opposed to prices because of how language evolved: put simply, we intuitively perceived wages as something different from prices and felt the need to give them a name of their own. This has nothing to do with science. So in fact, when we're confronted with a theory where two concepts turn out to be the same thing, that can mean one of two things: - IF the theory is sound, and grounded on enough evidence as to demonstrate that our intuitive perception was wrong all along, THEN indeed wages are no more and no less than prices. That would be an "aha" moment worth a prize or something. - ELSE, if the theory isn't sound enough, or doesn't have enough evidence as to defend the notion that wages are merely prices, THEN we're forced to conclude that the theory is merely construing that, and opt-into that belief at our own discretion. So far we see no theory, so his argument that the two names have "prevented most people from recognizing that the same principles govern both" wages and prices has no meaning whatsoever. And where is his theory? Nowhere to be seen, he's using some commonsense assumptions about prices [2], but he doesn't establish anything scientific enough to defend the ambitious notion that wages are no more and no less than prices. In fact, whenever he applies those vague notions he has of prices to wages, he's begging the question that this gratuitous cross-application of concepts is sound. Now, since the whole chapter is based on an assumption which the author fails to defend and the application of that assumption to a number of discrete case studies which don't paint the whole picture of what happens once a minimum wage is established (betraying also the much defensible premise of the entire book that we should look at all the consequences of policies to all groups of people through all time)... then I can only assume that the whole chapter is scientifically worthless, and whatever resonates with me in it has to do with my ideologies and not with evidence or soundness of reason. [1] http://steshaw.org/economics-in-one-lesson/chap19p1.html http://steshaw.org/economics-in-one-lesson/chap19p1.html [2] Which might as well not hold against evidence on their own, come to think of it. EDITED for clarity (as this is a long comment), added a new thought as footnote #2.

dpatru 15y ago

Of course we should all read critically. We already know that. Is there anything in particular that you think Hazlitt got wrong?

rufibarbatus 15y ago
From his Minimum Wage chapter [1]: > It is unfortunate for clarity of economic thinking that > the price of labor’s services should have received an > entirely different name from other prices. This has > prevented most people from recognizing that the same > principles govern both. If a given theory treats wages as merely prices, and ascribe them no role in the theoretical model other than that of a price of labour, then it's perfectly reasonable to protest or at least question their getting a special name. But he gets everything wrong in his second sentence. There's a word for wages as opposed to prices because of how language evolved: put simply, we intuitively perceived wages as something different from prices and felt the need to give them a name of their own. This has nothing to do with science. So in fact, when we're confronted with a theory where two concepts turn out to be the same thing, that can mean one of two things: - IF the theory is sound, and grounded on enough evidence as to demonstrate that our intuitive perception was wrong all along, THEN indeed wages are no more and no less than prices. That would be an "aha" moment worth a prize or something. - ELSE, if the theory isn't sound enough, or doesn't have enough evidence as to defend the notion that wages are merely prices, THEN we're forced to conclude that the theory is merely construing that, and opt-into that belief at our own discretion. So far we see no theory, so his argument that the two names have "prevented most people from recognizing that the same principles govern both" wages and prices has no meaning whatsoever. And where is his theory? Nowhere to be seen, he's using some commonsense assumptions about prices [2], but he doesn't establish anything scientific enough to defend the ambitious notion that wages are no more and no less than prices. In fact, whenever he applies those vague notions he has of prices to wages, he's begging the question that this gratuitous cross-application of concepts is sound. Now, since the whole chapter is based on an assumption which the author fails to defend and the application of that assumption to a number of discrete case studies which don't paint the whole picture of what happens once a minimum wage is established (betraying also the much defensible premise of the entire book that we should look at all the consequences of policies to all groups of people through all time)... then I can only assume that the whole chapter is scientifically worthless, and whatever resonates with me in it has to do with my ideologies and not with evidence or soundness of reason. [1] http://steshaw.org/economics-in-one-lesson/chap19p1.html http://steshaw.org/economics-in-one-lesson/chap19p1.html [2] Which might as well not hold against evidence on their own, come to think of it. EDITED for clarity (as this is a long comment), added a new thought as footnote #2.