catallaxy files

catallaxy in technical exile

Mark Blaug speaks

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A fascinating interview with the man who did more than anyone to generate the cottage industry of  “new philosophy of science applied to economics”. Key players were Spiro Latsis (magnate and philosopher of science), Blaug himself, Wade Hands and a host of others who produced many papers and books, and participated in two major conferences in the Greek isles, funded by Latsis Senior.

The big hope was that the refinements of Popper’s ideas that travelled under the Lakatos imprint – the Methodology of Scientific Research Programs (MSRP) would convert economics into a proper, progressive, evidence-based science. This movement has not lived up to early expectations and the second Greek Islands conference was practically a wake, with more papers critical of the program than in favour.  It was also in the Epilogue of the conference proceedings that Blaug “came out” and recanted some of his previous damning remarks on the Austrians.

Q. Then who is the first person to raise falsifiability as an issue in economics? 

A. Terrence Hutchison, who at an amazingly early age wrote The Fundamental Postulates of Economic Theory. In this book, he criticized the assumption of perfect knowledge in most of economic theory and introduced Popper. Hutchison, who is still alive and in his early nineties, has remained ever since a great disciple of Popper and the application of Popper in economics. I have followed in his footsteps. He was sort of a mentor of mine.   

 Please note, these are only extracts from a long and wide-ranging interview.

Q. In your article in this issue of Challenge you make much of formal modeling and the evolution from the work of Kenneth Arrow and Gerard Debreu. Why do you believe that such formal mathematical modeling has taken such a firm hold? Why has the profession gone in that direction? 

A. I will give you the standard answer, although I think it is a very difficult issue. This is a deep question about the history of ideas. How did we get like this? If I could answer that question–if I thought I could confidently answer it–I would certainly rush to print with the answer. I am not sure that I can confidently answer it. But a standard approach among people who have thought about this is that, sometime after World War II, economics began to model itself after hard science. It wanted to be the one social science that looked exactly like physics. This led to mathematization, mathematical modeling, formal modeling, and the resulting worship of technique and formal elegance. 

But the odd thing is this explanation does not really wash because if you know anything about physics–and I am an amateur physicist–physics is not at all like that… Deirdre McCloskey [see Challenge, January-February 1997], whose writings I do not otherwise like, has said quite rightly that economists look to the math department, not the physics department. That is absolutely true.  Q. Have we learned anything fundamental in, say, the past quarter-century of economics? 

A. Sure. Particularly in macroeconomics, how to deal with inflation, how to deal with unemployment. I think we’ve learned an enormous amount, particularly about steering the economy in a macro sense. We certainly learned a lot from the deregulation and privatization movement. Although there is a lot more to learn, when I contrast what we now know about these things with the days when I was a graduate student in the 1950s, I think we have made forward strides. But to some extent we have also gone backward. 

Q. In what specific sense have we gone backward? 

A. In the sense that economics as a completely formalistic discipline has turned students off from pursuing it. I do not know about America, but in Europe economics unfortunately is attracting fewer students, whereas business studies and business management is attracting more students. It is not just that economics has become technical; it is that economics prizes technicalities above everything else and that is why I call it formalism. Formalism is the tendency to worship the form rather than the content of the argument. That is the kind of subject it has become. We care only about the form in which an economic theory or hypothesis is presented, and we care almost nothing about the actual content of the hypothesis. Q. What are the major issues on which we have not made progress? 

A. Markets and how they actually function; that is, how they adjust to match demand and supply. We in economics know a hell of a lot about equilibrium, but we really don’t know how markets actually get to equilibrium. 

Q. In your view, what can save economics? 

A. I am very pessimistic about whether we can actually pull out of this. I think we have created a locomotive. This is the sociology of the economics profession. We have created a monster that is very difficult to stop. 

Q. Could real-world empirical facts or a severe economic cataclysm change it? 

A. That would certainly change it, but I do not see that around the corner. Perhaps I am too pessimistic, and it is very depressing to stay there. There does not seem to me to be any way out.   


Written by Admin

May 26, 2006 at 3:42 pm

Posted in Uncategorized

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