Thursday, May 21, 2015

Discussions of mathiness of economics

Peter Dorman in Econospeak (where there are many more posts recently on the topic):
"Paul Romer’s eruption against mathiness has been quite a spectacle.  Here you have an iconic name in modern economic theory throwing a fit in public, naming names (some of them also iconic) and denouncing his adversaries as enemies of scientific and ethical norms.  It’s a bit over the top, a bit overdue and a bit underconsidered.

I want to focus on the underconsidered part.  I was alerted to this aspect of Romer’soriginal paper by his sideswipes at Joan Robinson and the UK faction of the Cambridge capital controversy.  Now, it happens that I take a middle position on this dispute: I think they were both in some sense wrong.  The British Cantabrigians, along with their Italian comrades, were arguing from a model whose equilibrium assumption (equal rates of profit in all processes) is meaningless, in a mathiness sense, in an intertemporal context.  (If you think Lucas rational expectations is a stretch, Sraffa rational expectations is even crazier.)   But the MITers were also defending an aggregation of physical capital and its equivalence to a sum of financial capital that was also shown to be mathy—see here and here.  Romer’s attack on Robinson was signaling that a double standard was at work."
The second link at the end is to an expensive book, but it is available for free download at A shorter version in a 2014 paper The Aggregate Production Function 'Not Even Wrong'. A quote
 "The “aggregate production function” Solow diffidentlyintroduces (he is not really diffident: he is pretending to be for rhetorical effect) says the making of our daily bread is like a mathematical function’ (McCloskey,1998, p. 48). Put like this, it seems incredible that a function with only two arguments, K and L, together with a shift factor, can adequately represent the total output of an economy."

That is similar to my reaction as an outsider when I first came across Solow Model. See also The superiority of Economics by M.Fourcade and others as to how the profession came to be dominant in spite of dubious foundations of some of the main areas in it.

Seth Ackerman in his review of Piketty also praised the book and some of the difficulties in Piketty's book seem to be due to using these dubious methods in theory parts.

One more from Econospeak 'Napoleon Solow and the Phantom Mechanism'.

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