Home > Main > Remarkable Paul Krugman admission

Remarkable Paul Krugman admission

September 29, 2011

Remarkable admission from Paul Krugman.

First, he doesn’t like calling it a science.  This is understandable.
But look at his statements about models. They are a bit terrifying, because he is one of the top guys in the field.  He’s basically saying that the models they use are not that great, and they don’t map to the real world.
One of the core premises of MMT is that money accounting really matters.  In fact, it matter so much that all models need to take it into account.  Not only that, the models have to reflect how these flows happen in the real world, and where the stocks end up.
One of the very important things about the world is that to understand something, we need to be able to measure it first.  Economists try to deal with things we can’t measure accurately or even at all.  then they put things into the model that make it even more difficult to measure what’s going on in the world.
So how can we tell if something is working or not working?  We’ve got to measure it.
If you spend your time looking at things that can’t be measured, don’t be surprised if you spend 80 years talking about those things without coming to a conclusion.
Is there any field as important as economics that chooses to argue about stuff it can’t measure, see, or observe?
Update: Noahopinion comes to a similar conclusion and says it more diplomatically.   I was going to name names too, and specifically Scott Sumner on the exact same quote.  You don’t have to look far in the economics profession to find a “hold your nose” approach to both data and models that use measurable observations as their initial basis.
I’ve stated similar ideas  many times here at the TradersCrucible.  Measurement is extremely important.  Observation is extremely important.
It’s good to see someone like Noah get on this bandwagon…

In a few hours Sylvia Nasar and I will have an on-stage dialogue at the 92nd Street Y, centered around her new book The Grand Pursuit, which offers a set of fascinating portraits of the makers of economics. (Irving Fisher invented the Rolodex?) But as I was reading her book I have to admit that I found myself wondering whether there’s much to celebrate.

I’ve never liked the notion of talking about economic “science” — it’s much too raw and imperfect a discipline to be paired casually with things like chemistry or biology, and in general when someone talks about economics as a science I immediately suspect that I’m hearing someone who doesn’t know that models are only models. Still, when I was younger I firmly believed that economics was a field that progressed over time, that every generation knew more than the generation before.

The question now is whether that’s still true. In 1971 it was clear that economists knew a lot that they hadn’t known in 1931. Is that clear when we compare 2011 with 1971? I think you can actually make the case that in important ways the profession knew more in 1971 than it does now.

I’ve written a lot about the Dark Age of macroeconomics, of the way economists are recapitulating 80-year-old fallacies in the belief that they’re profound insights, because they’re ignorant of the hard-won insights of the past.

What I’d add to that is that at this point it seems to me that many economists aren’t even trying to get at the truth. When I look at a lot of what prominent economists have been writing in response to the ongoing economic crisis, I see no sign of intellectual discomfort, no sense that a disaster their models made no allowance for is troubling them; I see only blithe invention of stories to rationalize the disaster in a way that supports their side of the partisan divide. And no, it’s not symmetric: liberal economists by and large do seem to be genuinely wrestling with what has happened, but conservative economists don’t.

And all this makes me wonder what kind of an enterprise I’ve devoted my life to.

Categories: Main
  1. Tom Hickey
    September 29, 2011 at 2:46 pm

    Rob Partineau comments here at Bill’s on economics as theology.

    • TC
      September 30, 2011 at 8:29 am

      That’s a spot on comment by Rob. I think there is a slight distinction that’s important to make.

      I have a hard time blaming people in the U.S. in 1780 for owning slaves, even though I am repelled and sickened by their actions. It’s such a part of the culture that breaking free of it would be extremely difficult.

      I also have a hard time with blaming economists for staying true to their ideas and ideals. They “did the right thing”, worked hard, studied hard, and made it through the program. Just because it turns out they studied the wrong thing doesn’t make them evil. I had the good luck to be born with a flexible mind and raised in such a way to be able to notice the most important parts of ideas quickly, and then had the further good luck to be introduced to MMT.

      Each of the people who are part of the MMT movement have similar stories. It’s similar to growing up white, male, smart, and upper middle class in the U.S. – we’ve been lucky in ways that we don’t even recognize because they are such a part of us.

      Yes we made it through hard work, but we each had advantages that lots of people simply do not have. I am in awe of the ability of the people who comment here and are associated with the MMT movement – and Kris Smith will tell you I am probably the most arrogant bastard about ability and intelligence you’ll ever meet.

      That doesn’t mean we should pull our punches, only that I have a bit of empathy for their situation. Beo has pointed out that you attract more flies with honey than vinegar.

      • Kris Smith
        October 4, 2011 at 5:28 pm

        It’s about brains and ability, huh? I just thought you were an arrogant bastard…Wait, if it’s about intelligence and ability, why do you treat me so arrogantly? 😉

  2. Jason
    September 29, 2011 at 9:17 pm

    Of course only liberals are really wrestling (i.e. capable of self-reflection). Same old partisan.

  3. Oliver
    September 30, 2011 at 9:38 am

    The discussion about whether economics is a religion or a natural science omits the obvious middle ground that it is actually, or at least should be considered, a social science. I’m not a social scientist myself, but the mrs. is, and, from watching and listening to her, one of the fundamental features of her discipline seems to me to always be reflective of quantative, qualitative, descripitve, value or culture based etc. influences in one’s thinking, making it a constant game of de- and reconstruction without the pretence of being able to find one sole truth. I mean, can economists even agree on a common goal or direction of the discipline? Is it reasonable to expect them to? Krugman is very disingeuous in this respect, I find – he fudges his politics and his economics – and your comments above have a positivist (hoping that’s the right philosophical category :-)) ring to them. Not everything can be measured and not everything that can be measured, matters.

    • Tom Hickey
      September 30, 2011 at 10:42 am

      Good point, Oliver. I have noticed the same thing from my own standpoint. As someone trained in traditional philosophy, I found that many thinkers simply attached themselves to a position that reflects their own biases without noticing it, which is surprising since philosophy is supposed to be based on reflection on life (experience), since Socrates defined it as such millennia ago. That is to say, rigorous thought is about giving an account of experience, which is the way the world, including ourselves, appears to us.

      The chief cognitive bias is confirmation bias. Human being have an natural bias toward finding what they are looking for. Overcoming this bias is difficult, since it involves finding things that one is not looking for, in fact, often things that one actively doesn’t want to find. This is one reason the scientific method was devised. It is very difficult for most people to get over this bias. And then there’s a host of other biases.

      In the broadest sociological sense economics is the study of how groups provision themselves materially and how changing circumstances, subjective and objective, affect their pursuit of this vital goal. Without beginning with biology and evolutionary theory and proceeding through the rest of the social sciences, and examining the fundamentals of the discipline in terms of philosophy, this study of material provisioning by groups cannot but be an exercise in confirmation bias. This seems to be borne out by the evidence. It is curious how conservative economics all come to the same conclusions, whereas liberal economists all come to opposite conclusions, supposedly based on objective methodology and the same data. Obviously, there is something wrong here, and it is pretty obviously has to do at least in part with moralizing. That’s fine. Just don’t call it science and don’t represent the conclusions drawn as rigorous.

      As a result, most of what is done in the name of economics is magical thinking and moralizing.

      • TC
        September 30, 2011 at 11:09 am

        I agree – economics pretends to be a science but is really just moralizing.

        Oliver, I agree – not everything can be measured, and not all that can be measured is important. Love can’t be measured, but I find it very important.

        I think what I am saying is some models don’t lend themselves creating testable answers. Our progress in the real world happens mostly through creating stuff that matches what we can measure and see.

        Economics creates models we can’t test, so it can’t make our lives better, or if it does, we can’t know.

        All sciences start by giving simplified answers to complex problems through simple models. Then progress as the data and tools come in that either match or don’t match the models.

        But economics has created models that can’t be tested in a meaningful way. I’d claim at this point, it would be better to map under the lamp first than than wander in the dark for another 80 years looking for the key.

        Maybe if we map under the lamp very well, we’ll stumble across some way to illuminate or observe the areas just outside the lamp.

        It’s happened before, right? Newton’s prism and fiber optics aren’t that far apart…

        • Tom Hickey
          September 30, 2011 at 11:41 am

          There are calls for a new approach to economics. Jeremy Rifkin and ecologists are suggesting that it should be based on distributed systems, sustainability, and ecological holism. Energy experts say that energy needs to be replace market price as a key determinant of measurement. Evolutionary theorist like David Sloan Wilson and economic anthropologists like David Graeber say we have to base economic thinking on what comprehensive historical precedent reveals about us as humans, not just the limited data of a few hundred years of capitalism. Sociologist demand a more rigorous approach to methodology in an field that is dominated by indeterminate data and system complexity. There is a lot of thinking out there already, but economists are not paying attention to it. Instead, mainstream orthodoxy is busy marginalizing heterodox approaches. Meanwhile, the world burns while they fiddle.

  4. Clonal Antibody
    October 7, 2011 at 12:34 pm

    A good article by Brian Davey at Feasta – Economics is not a social science

    What is currently taught as economics cannot possibly be described either as a science or even, for that matter, as a study of society. I make that assertion because the track record of economists in prediction is so poor that it is laughable for them to claim scientific status. This failure of predictive power has been pointed out over and again – particularly after the failure of the bulk of the economics profession to predict the collapse of 2007/8. http://www.prophetsprofit.com.au/dismal.htm

    But this is just what you would expect from a body of ideas that erects a castle of ideas on a set of absurd and limiting assumptions – like markets in which everyone has perfect information. As has been said over and again most economists famously did not see the crash coming – but then why would they when their entire corpus of theory works from an approach in which it is assumed that markets, when left to themselves, will tend towards a static equilibrium and that all the key actors are behaving “rationally”.

    Economics isn’t a science – it isn’t social either

    See also James Galbraith on – Beyond Tweedledum and Tweedledee Economics

    James Galbraith talks about the mechanisms by which obstacles are placed in the way of dissenting and original voices in economics, as well as the failure of most in the forefront of the profession to see the global financial crisis coming

    Galbraith has written about this before; surveying the work of those who got it right, as well as the narrow parameters of prevailing doctrine: “This is the extraordinary thing. Economics was not riven by a feud between Pangloss and Cassandra. It was all a chummy conversation between Tweedledum and Tweedledee. And if you didn’t think either Tweedle was worth much—well then, you weren’t really an economist, were you?

    • TC
      October 13, 2011 at 8:22 am

      Nice one Clonal. We need to find a way to make a TV show or something about MMT and the fight for a reality based economics. All of this comes down to taking the accounting seriously – which none of these mainstream guys do.

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