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Is neoclassical economics a Mafia?
Here is my short essay on that topic, riffing on Christopher Hayes's recent article. You'll find other related essays and links here (David Warsh and Paul Krugman will be joining in at some point). Here is my bottom line:
There's much talk in Hayes' article about discrimination against heterodox economists, but he gives surprisingly little attention to which of their valid propositions have been neglected. I'd like to see a simple list and start the debate there.
Addendum: James Galbraith is mad at me and responds. And Max Sawicky has much to say about me.
Posted by Tyler Cowen on May 29, 2007 at 04:41 PM in Economics | Permalink
Comments
Tyler,
You write "The door is open to anybody with a better approach, and it is circular to claim a gap exists because heterodox approaches have been kept down."
I think there is evidence that this was more true of the top journals thirty years ago or so than it is today; the evidence is clear that critical commentary has declined remarkably over this period. Of course it is true that EJW has stepped into the void, but this is a different door. In the long run the reputation of EJW may well come into parity with the top journals, but it is new and does not currently have the same impact on the profession. This comment is generic; that is, it does not apply only to "heterdox" papers, but to all papers challenging existing ones that have been published at the journals "top of the food chain."
Posted by: indiana jim at May 29, 2007 5:39:02 PM
The heterodox approach is largely ignored by mainstream economics (re: neoclassical) because most of the insights are situation-dependent -- that is, critical insights from the heterodox school lack the generality upon which neoclassical economics is based on. Most economists cannot and will not tolerate ad hoc explanations to human behaviour. One reason is because the math breaks down, and becomes mostly irrelevant.
Posted by: Econometron at May 29, 2007 6:12:01 PM
As an outsider, what I observe is that economists tend to fall closer on the logic-facts cognitive dimension to mathematicians than to historians. Economists like logic a lot; facts, not so much. They like to believe that having a good theoretical model allows them to economize on knowing facts, which they aren't all that enthusiastic about in the first place.
This helps explain to outsiders why a fact-oriented economist like Thomas Sowell is treated condescendingly by the economics profession.
Posted by: Steve Sailer at May 29, 2007 7:04:47 PM
One problem here is exactly as Tyler put it in his article: "Neoclassical" economics is used as a synonym for "mainstream" economics, and of course the mainstream, as in any science, absorbs new ideas and approaches...thus the mainstream remains mainstream pretty much by definition.
I thought the Nation article was poor.
Posted by: Mr. Noah at May 29, 2007 8:01:58 PM
Steve,
You would be correct except that the cost of manipulating data and
running empirical tests have fallen dramatically over the past 20
years or so.
But you ARE correct about some pure theorists who
puruse beautiful abstractions unrelated to ugly facts.
That is, there appear to be contrasting strands of literature: one that
pursues "pure" theory, and another that is leveraging new statistical
tests and databases made possible (and usable at low cost) by the
information revolution.
Posted by: indiana jim at May 29, 2007 8:34:37 PM
which of their valid propositions have been neglected. I'd like to see a simple list and start the debate there.
To be fair I can think of one item on that list; cambridge capital controversy. Yes, the neoclassicals conceded many points but the word used here was "neglected". And the CCC has generally been neglected since the 70's.
Of course part of that is because there's little alternative. Another part is that people really got sick of pure theory after the 70's. The third part is that the thinking about growth/development has moved from focus on capital accumulation to thinking about institutions, technology and other factors.
Posted by: notsneaky at May 29, 2007 9:20:23 PM
Much of the uneasiness with neoclassical econ seems to come from it's mathematical intensity. The heterodox economists tend to purely conceptual explanations, and view such explanations as better than ones that invoke a mathematical model. The question is, why should economics be purely (or mostly) conceptual? Mathematical models trump conceptual explanations in plenty of other sciences (physics being the obvious one, but fields like population genetics and computational neuroscience being others), why should economics be any different? The world is a complicated place, and our cognitive mechanisms may not be able to parse all the incoming data and patterns into neat little conceptual categories.
Posted by: Urstoff at May 29, 2007 10:27:41 PM
Great reads in classical economic theory
http://www.optimates.us/Greatbooks.htm
.
Posted by: Great reads in classical economic theory at May 29, 2007 10:38:06 PM
Ah, Tyler playing the contrarian Whig. Everything is fine, the Notre Dame department deserved to have their grad program shut down, they publish too many books and not enough AER articles. Move along, folks, nothing to pay attention to here.
I will grant that there has been a lot of loosening up in the micro area. Approaches that were not published much in very top journals because of the methods they used, e.g. experimental, are now OK to publish in those top journals, although QJE and AER seem a bit more open than JPE and Econometrica, despite the presence of Levitt and List at Chicago (and they seem to favor field experiments over lab ones anyway, at least somewhat).
The more problematic area seems to be in macro, where there has been the emergence of this neo-orthodoxy with the dynamic stochastic general equilibrium (DSGE) model. It embodies many of the worst sorts of ideas left over from the old, now getting discredited, neoclassical orthodoxy, representative agents with rational expectations operating in intertemporal general equilibrium. And, please Tyler, do not tell us that it is easy to publish a macro paper in the JPE if one does not do the appropriate hand kissing to this approach or its close relatives, even as its underlying assumptions are simply being shown to be baloney in general at the micro level.
I think this is why Hayes found the kvetching by the people at the Friedman do about George Akerlof's talk on macro. He showed what happens when one dispenses with these micro neoclassical fantasies that the experimentalists have been undermining for years, but which a lot of macro people are quite enamored of. I would say that there is still quite a bit of methodological repression going in parts of the profession.
So, the answer to notsneaky's question is that everyone has simply decided to ignore the Cambridge Capital theory controversy (pretend it never happened and publish lots of articles and textbooks using Cobb-Douglas or CES production functions with aggregate capital). But, my answer to your query, Tyler, is alternatives to DSGE. Are journals like the JPE really willing to even give the time of day to papers that pose alternatives to this approach?
Posted by: Barkley Rosser at May 29, 2007 11:33:20 PM
phew, well that sure stung Galbraith. He doesn't feel neglected, mark you, just ignored! And as for you Cowen, your prose drips with the evil self-assurance of a Bond villain. Galbraith better watch out he doesn't stand on any concealed trapdoors if he visits the AER secret underground layer.
And what's Galbraith's great heterodox hypothesis? Inequality is not caused by technological change. That's it? Sounds like a perfectly sensible hypothesis to me, is that really such an anathema to the mainstream? I'm sure I've heard that idea raised in labour economics lectures, and isn't that just what Card argues? He seems to be doing OK. Mind you, I haven't tried to get a paper published on the subject, so maybe I'd find the gatekeepers are not open for business.
As to the Cambridge controversy and the dubious micro foundations of the neoclassical model etc. Am I missing something? Since when did neoclassicists start taking their models literally? Every time I questioned whether you can really add up captial like so many apples, or whether people really behave like optimising agents, I got told no of course you can't and no of course they don't - it's all just a first approximation, a vastly simplified model that may (or may not) do a reasonable job of informing us about the world. None of the lecturers I've ever had pretended that dynamic stochastic general equilibrium come close to completely describing how the real world works, but some of them would say that it's the best tool we have right now, and can tell us a number of useful things. Even if it pretends you can add up captial and that representative agents solve dynamic optimisation problems.
That said, if journals do turn away perfectly good papers just because they don't fit the current fashion, then that obviously goes against a truth-seeking scientific ethos (Popper would not approve) and if Card really did get ostracised for daring to suggest that the minimum wage might not actually destroy jobs (he says he did and I've no reason to doubt him) then those economists who behaved like that toward him should be very ashamed, and it's really troubling to hear that happened.
I think people inevitably form cliques and fall prey to group-think and so forth, so it's sad but not surprising to see that behaviour among those who control the profession (the best journals and the top deparments). It would be great to find ways of mitigating that tendency. But I bet the 'heterodox' crowd are just as guilty of it as those they attack - they're just in a different group. Are they any more open to the idea that they might be full of crap than their opponents are?
Posted by: Luis Enrique at May 30, 2007 5:55:34 AM
Every time I questioned whether you can really add up captial like so many apples, or whether people really behave like optimising agents, I got told no of course you can't
IIRC, Hayek did develop a theory of disaggregated capital. The issue is extremely complex and not really amenable to statical analysis, so the claim that valid approaches are being neglected is unsupported.
Posted by: guest at May 30, 2007 7:40:57 AM
[it's all just a first approximation]
but the whole point of the CCC is that it isn't even a first approximation.
Posted by: dsquared at May 30, 2007 7:42:34 AM
I think the new reality is that disciplines are increasingly defined by their methods not their "topics". There are plenty of outlets for heterodox economics, but these are economic sociology, econ. geography etc.. Economics has become defined by its (neoclassical) methods, and just because you have a paper about an economic topic does not make it economics, so seems to be the implication.
As Econometron says, alternatives to neoclassical economics are situation-specific, again more like sociology or anthropology.
Posted by: Jack at May 30, 2007 7:47:27 AM
Thomas Sowell is treated poorly by economists? Please elaborate!
Posted by: jason voorhees at May 30, 2007 7:47:29 AM
Thomas Sowell is treated poorly by economists? Please elaborate!
Posted by: jason voorhees at May 30, 2007 7:47:40 AM
D2
Well you've caught me out skating on thin ice there. My impression was that the defence against the CCC was that the neoclassical model is still a workable approximation or perhaps mathematical metaphor (huh?). Wasn't that about it? (even though the CCC lot did claim otherwise).
One day I would like to think a lot more about this, perhaps starting here:
http://eaepe.org/eaepe.php?q=node/view/233
But I have been advised to wait a couple of decades or so, when I might be in a position to spare a few years.
Posted by: luis_enrique at May 30, 2007 7:56:16 AM
but the whole point of the CCC is that it isn't even a first approximation.
Why? The approximation is that roundabout methods of production are more productive: That sounds quite acceptable to me.
Posted by: guest at May 30, 2007 8:03:16 AM
and it is a secret layer by the way, a bit like floor 7 and a half.
Posted by: Luis Enrique at May 30, 2007 8:03:39 AM
Luis, you wrote "if Card really did get ostracised for daring to suggest that the minimum wage might not actually destroy jobs (he says he did and I've no reason to doubt him) then those economists who behaved like that toward him should be very ashamed, and it's really troubling to hear that happened."
Quite the contrary, I believe he got the best-economist-under-40-award, not ostracised. It took a long time for the AER to publish a critique of his paper, some would say WAY, WAY too long; but then the AER was officially "hostile" toward critical commentary (the publication of comments, replies, and rejoinders) at the time that it published Card's co-authored paper. So albeit it after substantial delay, the AER allowed the science of that paper's analylsis to be challenged; this is anything but shameful. The publication of critical commentary is one of the checks and balances that long kept those at the top of the food chain from behaving like the mafia. Thankfully the EJW has stepped into the void left by the drastic downsizing of critical commentary that has taken place at the top general-interest journals. But again, Tyler, this is, given the newness of EJW, still a "different door."
Posted by: indiana jim at May 30, 2007 8:07:27 AM
oh - well what explains his (Card's) description of the virulent reaction that paper received? (I can't find the link to the interview, but it's quoted in the orginal Nation article that started all this)
Posted by: Luis Enrique at May 30, 2007 8:11:56 AM
Maybe Card thinks that his wage is too low? Just kidding; I actually have no idea why he would be upset about the open exchange of ideas that his co-authored paper aroused (if that is in fact what he is upset about).
Posted by: indiana jim at May 30, 2007 8:57:21 AM
Card's wage is (much) too low given his status in the profession.
I thought the responses on TPM were pretty silly. The person who corrected Tyler for using "Democrat" instead of "Democratic" was particularly awash in delicious irony.
The people who complained about Democrat - I feel comfortable using that term since I belong to a, dare I say it, heterodox third party - economists being pro-market are missing the obvious implications. When people who care a lot about inequality actually study economics, they reject the standard solutions of the hard statist left.
I think it would help the lefties to always keep the Austrians in mind. Their exclusion from the mainstream clearly indicates that the gatekeeping is not based on politics but on the quality of the research. Also, there is nothing amiss in the fact that it took the public choice folks or the behavioral folks a while to gain mainstream acceptance. The optimal barrier to entry is not zero given the time cost associated with reading and absorbing papers.
Jeff
Posted by: Jeff Smith at May 30, 2007 9:31:40 AM
If Robert Murphy is saying reswitching (more generally, recurrence of techniques) depends on there being "only two ways of producing a particular good", he just has gotten his arithmetic wrong. Anyways, it is wrong to say that economists know that, approximately, roundabout methods are more productive. Not that that approximation would justify the use of an aggregate production function in which the interest rate is equal to the marginal product of capital. (I don't know of any empirical work using Champernowne's chain index for measuring capital.)
I don't see what's heterodox about any of my links above, other than that I get my arithmetic correct. Nor do I understand the unwillingness, seen above, of mainstream economists to learn price theory.
There's plenty of neglected and ignored ideas in heterodox economics.
Posted by: Robert at May 30, 2007 9:36:57 AM
CCC is just one part of the critique. The problems with capital aggregation purely from a mechanically mathematical angle have been well documented by Franklin Fisher (a Bates medal winner to boot). The problems with capital aggregation are so deep that it is not even ok as an approximation.
The problems with aggregating the representative consumer are even deeper. Anybody who has been through grad school micro should know that. And I am not even getting into stuff like the use of expected utility maximization and the problematic axioms underlying it. These are serious problems that cannot be waved away. The argument that these are just models just doesnt wash. I think any paper using representative consumer and representative firm needs to be rejected outright just as any paper using a old style Keynesian macro equation (not founded on micro optimization) would. That whole macro program should be discredited. Unfortunately, that is not going to happen anytime soon. There is just too much sunk human capital invested in that program.
Posted by: srinivas at May 30, 2007 10:02:00 AM
Louis Enrique,
Ridiculing a great person is not a good quality, you neo-classical (nonsense) admirer.Galbraith stands tall in economics.
Posted by: GVV at May 30, 2007 10:38:27 AM
Louis Enrique,
Ridiculing a great person is not a good quality, you neo-classical (nonsense) admirer.Galbraith stands tall in economics.
Posted by: ppk at May 30, 2007 10:40:27 AM
Louis Enrique,
Ridiculing a great person is not a good quality, you neo-classical (nonsense) admirer.Galbraith stands tall in economics.
Posted by: ppk at May 30, 2007 10:45:38 AM
Without a doubt Galbraith towered over many in physical stature; take Milton Friedman as an example. But there no doubt in my mind which "stood taller" in economics; interestingly, I'd guess from the posts of ppk and GVV that their ranking of Friedman's versus Galbraith's contribution to economics would be different from mine.
Posted by: indiana jim at May 30, 2007 11:07:03 AM
Cross-posted from TPM:
It is probably not polite to point it out, but given the anger displayed by James Galbraith and others at the refereeing process and at being shut out from top journals, I feel the need to offer the observation that the vast majority of the work in heterodox economics is of truly miserable quality.
What do I mean by that? I am a behavioral-ish economist and referee several times each year for the AER, JPE and QJE. Once or twice in a year I receive papers for review that are truly heterodox, and so far every single one of them was really bad -- logically flawed, non-identified econometrics (without realizing that to be the case), ignorance of the existing literature, ignorance of the available evidence, and so on.
My own work combines elements from neoclassical economics with elements from psychology and sociology. I am perfectly open to enriching economics with all kinds of new ideas, but I have a strong aversion against bad research. Since I don't want to be rude in my referee reports and hence don't like to write "you have no idea how to do empirical research, so please stop doing it", I often make a few substantive points and then end up saying something to the effect that "this paper goes against current trends in empirical economics" and recommend it for rejection. I am fully aware that this probably re-enforces the heterodox economist’s conviction that s/he is the victim of the bloody mainstream’s conspiracy to ignore the brilliance of his / her work, as so beautifully expressed by Galbraith at TPM.
Since James Galbraith likes to paint mainstream economics with a very broad and pretty offensive brush, let me apply the same brush to heterodox economics, where I believe it represents a closer approximation to the truth: Most heterodox economists are simply not good enough at what they are doing to break into the mainstream. Those that are good enough get absorbed into the ever-changing mainstream and end up re-defining what the mainstream is. The heterodox economists that remain outside the mainstream convince themselves that they are way smarter than all those fools working at Harvard / MIT / Chicago / Princeton / Yale / Stanford and without any doubt the victims of a conspiracy to silence them. Reality is that most of their work is either simply wrong or badly done or both.
Posted by: Commenterlein at May 30, 2007 11:25:26 AM
Commenterlein,
You wrote: "The heterodox economists that remain outside the mainstream convince themselves that they are way smarter than all those fools working at Harvard / MIT / Chicago / Princeton / Yale / Stanford and without any doubt the victims of a conspiracy to silence them. Reality is that most of their work is either simply wrong or badly done or both."
and
"I often make a few substantive points and then end up saying something to the effect that "this paper goes against current trends in empirical economics" and recommend it for rejection. I am fully aware that this probably re-enforces the heterodox economist’s conviction that s/he is the victim of the bloody mainstream’s conspiracy to ignore the brilliance of his/her work, as so beautifully expressed by Galbraith at TPM."
and
"I don't want to be rude in my referee reports. . . "
Why do you think that more transparency as a referee would be "rude"? Although I do not consider myself a heterodox economists, what I can tell you is that I would much prefer to have errors in my work put right in my face when they occur. This way, I can learn from them and overcome them in the future. This is exactly the reason that I keep posting comments about what a travesty it is that the top journals have dramatically downsized the opportunities for errors to be corrected (via comments, replies, and rejoinders) on their pages (that is, right in the faces of those who err).
I would encourage you to be more transparent and straightforward in your referee reports; I do not think that this would have to be mean-spirited or rude. Honestly, unvarnished, would seem a better policy for the long-run, as you seem to suggest in your post.
Posted by: indiana jim at May 30, 2007 11:54:09 AM
1) Galbraith and Sawicky mostly use ad hominem arguments in their posts, which implies they have no substantial points or criticisms to make.
2) 99% of economists don't get to publish more than once, say, in the top journals. Does that make them victims of bias? If you take 1% of the truly heterodox economists, you're not left with many data points. The few heterodox papers that do get published, once in a blue moon, probably match the number you'd expect.
Posted by: Jack at May 30, 2007 11:59:10 AM
ppk,
Why you copy my posting word by word?
Posted by: GVV at May 30, 2007 12:06:01 PM
Srinivas,
Rejecting a theory by saying that it is not founded in micro-optimisation is not good.Why should one adhere to optimisation always?
Posted by: GVV at May 30, 2007 12:11:15 PM
Indiana Jim,
You are making a very good point, and re-reading my own comment I did not express myself well.
What I was trying to express is that many of the heterodox papers I have refereed were so fundamentally flawed that no advice would salvage them. Since I know how much a harsh referee report can sting (having been on the receiving end of quite a few), I try to cushion my assessment as much as possible. And there really aren't any non-painful ways of expressing the sentiment that your work over the last 12-36 months was a really bad idea and you would have been better off not doing it.
Posted by: Commenterlein at May 30, 2007 12:23:29 PM
srinivas:
The problems with capital aggregation are so deep that it is not even ok as an approximation.
The problems with aggregating the representative consumer are even deeper... These are serious problems that cannot be waved away.
If you think it's just a matter of "discrediting the existing program", why don't you try building a disaggregated model and coming up with some useful science? At the very least, heterodox economists should make sense of these anomalies and explain how they matter.
Posted by: guest at May 30, 2007 1:12:24 PM
Commenterlein,
I happen to agree with you about the quality of "heterodox research." However, let us take what you state, "I have refereed were so fundamentally flawed that no advice would salvage them." and apply to DSGE models with representative firms and consumers. Your assessment pretty much applies to them as well. Now, if we were to apply that yardstick to AER and JPE, half the papers would not be published.
While I happen to agree with your contention that many detect a bias when it is just shoddy quality that begets rejection, part of the reason why the bias perecption gets fostered is because DSGE type models are unquestioningly accepted when 40 years of research shows that they are utterly and irredeemably flawed. I don't know how smart they are at Harvard and Chicago, but they sure dont seem to recognize a fundamental issue.
GVV,
I didnt mean to imply that papers that dont use optimization must be rejected. Rather my implication is that just as they "ARE" rejected currently in mainstream journals, so should those using DSGE because they are fundamentally flawed.
Posted by: srinivas at May 30, 2007 1:14:25 PM
"1) Galbraith and Sawicky mostly use ad hominem arguments in their posts, which implies they have no substantial points or criticisms to make."
your statement rests upon the unproven and idiotic assumption "ad hominem arguments imply insubstantial criticisms".
Posted by: The Tsunami at May 30, 2007 1:57:05 PM
Srinivasan,
I am an empirical micro person and hence not part of the discussion about the merits of DSGE models, and certainly not qualified to comment on them. The last time I dealt with macro models was in grad school, and I have to admit to back then having a strong suspicion that the DSGE approach might be nonsense. But as an undergrad I also had a strong suspicion that much of Quantum Physics might be nonsense, so my feelings are probably not a good guide to assessing models.
In any case, you may believe that you understand something about DSGE models that the producers of them don't, but more likely you simply disagree with them about the importance of issues they are fully aware of. I count at least two producers of such models as personal friends going back to grad school, and have had quite a few conversations with them about their research program and my inuitive problems with the representative agent / representative firm approach. The bottom line is that they simply disagree with you whether the obvious simplifications in their models render them useless.
Posted by: Commenterlein at May 30, 2007 2:16:20 PM
Commenterlain,
when you find a paper that you consider "fundamentally flawed" then it is all the more important to describe to the author(s) (and yourself) what you believe this flaw to be. Your discovery of such a fundamental flaw might be an indication of a fundamental assumption on your part that needs reexamination.
Heterodox papers are difficult for those editors steeped in the neoclassical tradition to read critically (in the sense of critique not criticize). The economic-theoretical world in which the editor works and thinks is usually significantly different from that in which the heterodox author works and thinks. Heterodox papers than serve the valuable purpose of providing "external" criticism to the mainstream method. Top journals should host such a forum for discussion, vitriol-laden attacks on the orthodoxy can only be improving if it is worth doing so. On the other hand, weakness and failings can be scrutinized and jettisoned. If as economists we truly believe in the prudence of competition, then we should have a marketplace for ideas that is not carelessly pre-screened for permission to enter. Let the letters to the editor and responses from other researchers do the job of tearing to shreds faulty arguments. Knowing rejection as the dominant strategy given the existing neoclassical game, the editor and the referees take a debate off the table before the community has had a chance to engage in it.
Posted by: The Tsunami at May 30, 2007 2:42:05 PM
1) While the commentaries were vigorous, I did not see ad hominem
attacks in either the remarks of Jamie Galbraith or Max Sawicky, nor
for that matter in those of Tyler either. The same cannot be said for
the comments both here and there on both sides.
2) Commenterlein, Max has called you out to identify yourself, unless
you lack tenure or are a grad student or are somehow in an insecure
professional position, which, given how frequently you claim to be
refereeing at top journals, I doubt is the case. Do you wish to defend
your continued anonymity given the nature of the charges you make?
BTW, I agree that there are lots of bad papers being done in one
or another heterodox traditions that those getting rejected probably
think is due to conspiracy, when it is not.
3) I think there is a division of labor between editors and referees
(speaking as a journal editor). Given their (usual) anonymity, referees
are free to be very critical, and should be, if it is deserved. Do not
soft soap or play pollyanna, although there is no point in being personally
and gratuitously insulting. "You are an ignorant idiot," or equivalent is
not useful. Keep the criticisms concrete and constructive, "This is an
inappropriate econometric technique for this question, see the papers by
.... for better ways to approach this."
Editors are the ones who should be nice and diplomatic. After all,
most of us are actually sympathetic to most authors, although some behave
like raving assholes and do not deserve any sympathy. We know that people
are trying to publish and that their jobs, promotions, careers, merit pay
increases, etc. etc. are often on the line. So, we are more likely to soft
soap and offer kind words when rejecting (which is what we do most of the
time as the majority of papers submitted even to mid-tier journals get
rejected), leaving as it were, the dirty work of pointing out the problems
harshly and directly to the referees.
4) I will repeat what I said above. I think micro is more open right now.
Macro is much less so, and the dominance of the DSGE model, especially at
certain journals, is the clear sign. I know that at certain journals,
failure to obey the rules of the DSGE game will lead to automatic rejection
without even being sent out for review ("You do not have an equilibrium
model," "Your agents do not have rational expectations; this is not scientific,")
and similar drivel. So, I repeat this one as an example, and such alternative
as agent-based complexity models, referred to in the lengthy and favorable
review by Gintis of the Handbook edited by Tesfatsion that Tyler linked to, is
a good place where some of these alternative models appear (and I know they
are being taken seriously in some policymaking centers, e.g. the ECB, even
as certain leading journals simply throw them in a trash can without even
looking twice).
Posted by: Barkley Rosser at May 30, 2007 3:25:21 PM
The Tsunami,
You wrote: "Top journals should host such a forum for discussion, vitriol-laden attacks on the orthodoxy can only be improving if it is worth doing so. On the other hand, weakness and failings can be scrutinized and jettisoned." I agree with you in part; I don't think that "vitriol-laden" challenges are superior to simply straightforward challenges. As I said elsewhere (above) this is a generic point that is not limited to the heterodox/orthodox debates that are the focus of this blog line.
Beyond our opinions, there is evidence that those in charge of the top journals once assigned a much greater value to discussion in the form of comments, replies and rejoinders than they do at present; for a discussion of the decline and debate about its causes see the following(hat tip to Barkley Rosser for persuading me to be less lazy about providing links to what I post):
www.econjournalwatch.org/pdf/CoelhoetalEconomicsInPracticeAugust2005.pdf
www.econjournalwatch.org/pdf/WhaplesEconomicsInPracticeMay2006.pdf
www.econjournalwatch.org/pdf/CoelhoMcClureEconomicsInPracticeMay2006.pdf
Posted by: indiana jim at May 30, 2007 3:27:41 PM
Barkley,
The things I put my name to are carefully thought through (or at least I try to), then written, then read and re-read many times, then put onto the shelf for at least a month, then re-written, and then maybe finally shown to other people. Even with this approach, plenty of stuff which I regret five years later has made it into my published work.
My commenting on blogs is something I do while waiting for a slow regression to converge, and is certainly not at the level of quality I would like to see associated with my name. I understand and respect that you and many others think differently about this issue, but now you know why I don't want to reveal my identity.
Posted by: Commenterlein at May 30, 2007 3:58:12 PM
C.,
I would say a bit too shy, but at least you are honest.
I am aware that at least one very heterodox economist,
also very famous, advocated closing the access to the
archives of a heterodox internet discussion list by
outsiders for pretty much the same reason.
Posted by: Barkley Rosser at May 30, 2007 4:02:08 PM
"Commenterlein" is very careful about releasing research that has his or her own name on it, but he or she feels free to dispense off the cuff, blanket condemnation of the professional qualifications of the undifferentiated multitude of heterodox economists because he will not be held responsible for it.
Jesus Fucking Christ.
Posted by: Miracle Max at May 30, 2007 4:26:59 PM
Speaking of mafia-like behavior, when is the economics profession going to punish superstar economist and editor Andre Shleifer for his corruption in Russia in the 1990s?
Posted by: Steve Sailer at May 30, 2007 4:54:36 PM
Commenterlain,
I am not talking about my "feelings," intuitive or otherwise, about DSGE models. The fundamentally flawed nature of those models are proven facts--just refer to CCC, Franklin Fisher for capital aggregation and Alan Kirman for consumer aggregation, not to speak of problems with expected utility maximization. It is for DSGE propenents to show that these are truly marginal objections and that the models are "reasonably" accurate. Just stating them is not good enough. I know of no paper that quantifies the impact of the simplifying assumptions. Old Keynesians too can simply state that Lucas Critique and Time Inconsistency are marginal critiques in practise and "rigorous" microfoundations add only marginally to understanding or accuracy.
Please don't compare Quantum Physics to DSGE. There is nothing complicated or counterintuitive at all about DSGE at a theoretical level whereas Quantum mechanics raises several fundamental issues with respect to the nature of matter, measurment, etc.--these could not be explained by classical mechanics and classical electromagnetism. If anything DSGE is simplified GE stuff.
Posted by: srinivas at May 30, 2007 5:02:15 PM
I have endless problems with Mr. Sailer, but he is right to raise the Shleifer case in this context. It has been thoroughly ventilated on my own gigantic site, mostly by Barkley.
Posted by: Miracle Max at May 30, 2007 5:12:06 PM
Regarding Shleifer, I will simply note that Harvard did take away his chaired professorship.
Of course they had to shell out $26.5 million due to his conduct. I think that I noted on this
blog that it was mistatements about his connections with and handling of the Shleifer case that
were the real final straw in bringing down Lawrence Summers from his Harvard presidency, not his
remarks about women in science, much as those annoyed a lot of people.
Posted by: Barkley Rosser at May 30, 2007 5:40:14 PM
Galbraith mentioned high interest rates. Where are the interest rates high? Inquiring investors want to know.
Posted by: Person at May 30, 2007 5:41:25 PM
He says "in the world economy" so presumably not here in US. Here in US it's about unemployment. Currently at 4.5% and low since mid 80's even as inequality increased.
Posted by: notsneaky at May 30, 2007 5:58:53 PM
He says "in the world economy" so presumably not here in US. Here in US it's about unemployment.
1) That's a non-answer.
2) I still want to know where in the world economy I can get a high interest rate on my investments. Oh wait, there aren't any.
Posted by: Person at May 30, 2007 6:12:33 PM
Srinivasan,
I have already stated that I don't want to engage in a discussion about DSGE models since they are not in my area of expertise, but I want to point out that no proponent of DSGE models whom I know defends the underlying assumptions as accurate descriptions of the world. We all know that a model can be extremely useful even if many of its assumptions are empirically wrong. Hence your criticism of the assumptions behind the DSGE models would leave their proponents unfazed. (Also, I did not compare DSGE models to quantum physics, and I was not talking about your feelings but mine.)
Miracle Max,
Yes, I am trying to be careful in my research, and yes, I am perfectly happy to anonymously state my perception of much of heterodox economics. You may find this offensive, but by the standards of the internet it’s pretty harmless.
Posted by: Commenterlein at May 30, 2007 6:13:55 PM
On day 1 in our PhD macro class, the instructor essentially said, the Keynesian framework is plausible, sensible, empirically grounded but it does not enable us to answer questions. The DSGE/RBC framework is just the opposite. Somehow it works pretty well, even though it shouldn't. That seems to go along with the position of Commenterlein's former classmates.
Posted by: Jack at May 30, 2007 8:02:04 PM
There are many neo-classical macro people who study models with heterogeneous agents. Including many influential economists. There are lots of finance people now working on models with heterogeneous firms and no notional of aggregate capital/production functions to study asset prices. There is an active research field in macro and finance studying non-expected utility, now even with heterogeneous agents. Greg Mankiw is pushing 'sticky information.' Not non-rational expectations, but neither is it fully rational 'rational expectations,' either. And ofcourse the revolution in information based models.
That article discussed 1980s-early 1990s mainstream economics, at best. When economicsts were still figuring out how many models worked.
I always thought the rules of modern economics were simple. Explain what the people in your model are trying to achieve clearly, and explain what constraints they face (technological/infromational, etc) in their decision making. A solution to your model is one where all the players do the best they can, the outcome is technogiclly feasible, and people have no incentives to change their plans, so that what you predict is internally consistent, or you at least have a sensible story why it is not internally consistent. In the last 20-30 years, economists have developed the tools to build and analyze such models, either computationally or analytically. Last, but not least, take the model seriously. No fudge factors. Explain what facts the model can and cannot explain, and clearly explain why.
Posted by: econ-person at May 30, 2007 11:54:00 PM
sorry for the typos: I was too excited, I guess.
Posted by: econ-person at May 30, 2007 11:55:25 PM
sorry for the typos: I was too excited, I guess.
Posted by: econ-person at May 30, 2007 11:55:42 PM
econ-person,
Huh? What article?
Mankiw's work fits into the DSGE mold. It is supposedly a synthesis.
New classical in its rational expectations/representative agent approach,
Nee Keynesian in allowing for sticky wages/prices, and neoclassical in
assuming general equilibrium.
Yes, there are lots of heterogeneous agents models out there, and I for
one see them as the big rival to the DSGE model. That is what I challenged
Tyler on when he asked his big question as to a rival that is being kept out.
And it is. You do not see such models in AER, Econometrica, QJE, or JPE,
except on very rare occasions (Brock and Hommes, Econometrica, 1997, "A
Rational Route to Randomness").
They are indeed all over the place in finance because people realize they
work. But this is Santa Fe complexity and econophysics, naughty naughty in
the clean JPE room of the DSGEers.
Posted by: Barkley Rosser at May 31, 2007 12:37:19 AM
Posted by: guest at May 30, 2007 1:12:24 PM
"If you think it's just a matter of "discrediting the existing program", why don't you try building a disaggregated model and coming up with some useful science? At the very least, heterodox economists should make sense of these anomalies and explain how they matter."
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To me this is the difference between those that consider themselves "heterodox" and those who in the mainstream using what were once or still are heterodox approaches. It is not enough to say "this is all crap". Build a better mousetrap! Noticeably those who are successful at changing the mainstream are those least likely to lead polemical attacks on it. They see the mainstream as the state of the art and they seek to improve it. Of course improving things means something was "wrong". You have to provide me with a better tool if you want to take away my hammer. This is how science works. Wash-rinse-repeat. Will there be vested interest who might fight you, sure. But if your approach is "this is my refinement" then I think most economist will listen and even the entrenched status quo won't begrudge you. The problem for most heterodox is that the disagreement is ideological (and I throw the true blue Austrians in this mix too). So there is no room for refining the status quo, it must be supplanted. Combine that with the fact that often the "spokes people" for these movements are not the most diplomatic. Why are they surprised when the mainstream has no time for them. While scholars who take a more constructive approach while say very non-mainstream things can find themselves at the top of a hot job market (like when Game Theory, Experimental Econ and Behavioral Econ broke).
I am not a macro guy. But it is a field that seems to go through a revolution every 15-20 years. So if you dislike the status quo, get to work and convince the discipline that there is a better mouse trap (for my money its complexity that will provide the next big innovation)
Posted by: GoodneesOfFit at May 31, 2007 11:54:53 AM
GoodnessOfFit,
You wrote "Of course improving things means something was "wrong". You have to provide me with a better tool if you want to take away my hammer. This is how science works."
My question here is: A better tool for what?
When a tool being used to explain observational reality is replaced by a tool that is better in this regard, then yes "this is how science works [advances].
But what if a mathematically elegant model that is non-operational (non-falsifiable on the basis of observable reality) is generalized (say a calculus based model is reworked in terms of set theory)? Would you say that science has advanced if the generalized model, like the initial one, is non-operational?
Posted by: indiana jim at May 31, 2007 12:34:13 PM
goodnessoffit: "So if you dislike the status quo, get to work and convince the discipline that there is a better mouse trap"
If you dislike the status quo, you won't get hired (or will be hired with extreme difficulty), and along the way will be forced to learn and do much that you disagree with before you are even in a position to be listened to. People who are capable of challenging the status quo and have the ambition to do so are pretty smart by definition; there are a lot of things they could be doing with their lives. Beating their heads against a dogmatic neoclassical wall is not an attractive option, and only the truly fanatical would pursue it.
Posted by: DarrenMc at May 31, 2007 4:33:03 PM
Barkley:
Do any of these decade-old papers count as heterogeneous agent macro models published in top journals?
Aiyagari "Uninsured Idiosyncratic Risk and Aggregate Savings," QJE 1994, 500+ cites
Constantinides and Duffie, "Asset Pricing with Heterogeneous Consumers," JPE 1996, 300+ cites
Krusell and Smith "Income and Wealth Heterogeneity in the Macroeconomy," JPE 1998, 400+ cites
etc etc etc (cite counts from Google scholar).
These are not obscure articles, they're covered in first year graduate macro in many programs. I've taught Aiyagari's paper to advanced undergraduates. As should be obvious from the cite counts, there are hundreds of articles that build on these contributions.
I think it's fair to say Barkley that you don't know much about mainstream macroeconomics. Why do you pretend that you do?
Chris Edmond
Posted by: Chris Edmond at May 31, 2007 6:59:07 PM
"commenterlein: I feel the need to offer the observation that the vast majority of the work in heterodox economics is of truly miserable quality....I referee several times each year for the AER, JPE and QJE...so far every single one of (the heterodox papers) was really bad -- logically flawed.... "
My God, this arrogant lecture on what constitutes quality work in empirical economics is coming from someone who presumably thinks that null hypothesis significance testing is a legitimate and useful means of statistical inference (since he regularly referees for journals that are full of such rubbish, as McCloskey has repeatedly shown).
Posted by: DarrenMc at May 31, 2007 8:43:56 PM
Posted by: indiana jim at May 31, 2007 12:34:13 PM:
"But what if a mathematically elegant model that is non-operational (non-falsifiable on the basis of observable reality) is generalized (say a calculus based model is reworked in terms of set theory)? Would you say that science has advanced if the generalized model, like the initial one, is non-operational?"
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First of all I am not sure what a non-falsifiable model is. I guess I don't think of models this way. I think of (mathematical) models as ways of laying out a theory in a clear, precise and "all assumptions on the table" way. The model can then be used to generate a falsifiable hypothesis. So I am not sure what you mean, and so I can't really respond. As two the second part of your question. I think that science for the sake of science is important too, and even if someone is just generalizing an existing model that there is value in that. Think of all the discoveries in the hard sciences that were not seen as impotent in their day but decades (centuries?) later these things were picked up by some grad student and were an important part of some new discovery.
Posted by: DarrenMc at May 31, 2007 4:33:03 PM:
"If you dislike the status quo, you won't get hired (or will be hired with extreme difficulty), and along the way will be forced to learn and do much that you disagree with before you are even in a position to be listened to. People who are capable of challenging the status quo and have the ambition to do so are pretty smart by definition; there are a lot of things they could be doing with their lives. Beating their heads against a dogmatic neoclassical wall is not an attractive option, and only the truly fanatical would pursue it."
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I think you are wrong for the most part. As I said before I think that those who rail against the discipline will find it hard, but those who work within the framework of the discipline and bring in "heterodox" tools or theory into their work are often rewarded (or at least not "punished").
I am sorry you have been "forced to learn and do much that you disagree with before you are even in a position to be listened to." Thats just the way it goes in almost all aspects of life, even outside the academy. If you do not understand the current state of the art I say you are in no position to critique or even improve upon it.
Posted by: GoodneesOfFit at Jun 2, 2007 8:45:03 AM
I should mention that there are large parts of my research that would fall into the "heterodox" camp, and I am early in my career. I am not part of the neo-classical man keeping the heterodox people down.
Posted by: GoodneesOfFit at Jun 2, 2007 8:46:58 AM
GoodnessOfFit,
you wrote:"I think that science for the sake of science is important too, and even if someone is just generalizing an existing model that there is value in that."
I agree that "science" for the sake of "science" is important (because I think of "science" as the pursuit of explanations having to do with observational reality), but what I was trying to explore was whether or not you think that unambiguously inapplicable models are worth making, and subsequently generalizing.
Posted by: indiana jim at Jun 2, 2007 3:02:32 PM
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Posted by: 謝文豪 at Apr 2, 2008 3:52:13 AM
