[Sivad]

Models have failures, we don't understand economics or indeed biology or physics to explain a great many phenomenon.

That our understanding is limited and our models incomplete does not mean they have no predictive power at all. Newtonian physics is a great way to model motion and orbits and a great many things, it's a terrible way to understand quantum mechanics.

It's unreasonable to expect perfection from economics and not physics and declare economics unmodelable by mathematics.

Earth to mikema63, come in mikema63... Models are useful for gleaning modest insights, they're not oracles and shouldn't be taken as such. There's always deep uncertainty with vast complexity.

[mikema63]

Sure but his claim was that economic models have no predictive power, which simply isn't true. He also seems to claim that we can't use scientific modeling and mathematics in economics which seems kind of silly to claim.

You seem to think I'm making a stronger claim than I am. I am not saying that we have perfect or even good models for economics in the same way we have great models for physics or good models for evolution. All I'm saying is the project to model economics isn't futile and can certainly bear useful fruit.

[Sivad]

Sure but his claim was that economic models have no predictive power, which simply isn't true. He also seems to claim that we can't use scientific modeling and mathematics in economics which seems kind of silly to claim.

The utility of models is not in predicting the future, they only show how a [simulated] system behaves on a set of assumptions. You can't predict or control the real world with models ...not yet anyway.

You seem to think I'm making a stronger claim than I am. I am not saying that we have perfect or even good models for economics in the same way we have great models for physics or good models for evolution. All I'm saying is the project to model economics isn't futile and can certainly bear useful fruit.

They already do bear useful fruit, they give us insights into complex systems. What they don't do is capture reality, but that doesn't mean they're useless.

[mikema63]

I got disconnected from the internet and lost my longer reply.

The utility of models is not in predicting the future, they only show how a [simulated] system behaves on a set of assumptions. You can't predict or control the real world with models ...not yet anyway.

Depends on the model, there isn't really any unified model of economics floating around just a bunch of little models modeling specific situations. Some are better than others. I'd also add that models are a mathematical representation of a hypothesis and make conclusions about the future based on premises which we can then confirm or deny to test the validity of the premises.

They already do bear useful fruit, they give us insights into complex systems. What they don't do is capture reality, but that doesn't mean they're useless.

I think this is a philosophical problem. Even physics models can't be said to map onto real reality in a fundamental way, they are just very very useful until we find a place they don't work.

I've been reading this (which is a review of a book, which I now want to read) that shares some of the thoughts I have about economics as a field and some of my thinking on this topic. It's also relevant to the OP at the end and you might be interested.

https://drodrik.scholar.harvard.edu/fil ... models.pdf

[Sivad]

Thanks for the link, I hadn't seen that paper.

And I don't really disagree with any of your points, I think I'm just much more skeptical of the power of science(especially the soft sciences).

[mikema63]

Ambiguity surrounds us all and all of our actions, knowledge, values, and beliefs. I'm just doing the best I can and hoping I don't fuck everything up to much.

Ultimately I have to base my beliefs about reality on something and I'm more comfortable relying on fields of study than my own intuitions or more difficult to understand philosophers. I'm well aware that anything I choose to believe is subject to god knows how many hidden biases and variables. I just take it as I go and reserve the right to change my mind on just about anything.

[Sivad]

I'm more comfortable relying on fields of study than my own intuitions

To be fair, no serious critics are suggesting that we rely solely on intuition. There were quite a few economists who foresaw the collapse despite the consensus, do you really think that was just intuition?

[mikema63]

Well no, but also I can't know which economists to individually trust because I fundamentally can't make those judgments via intuition so I can only take the field as a whole into my understanding and even then my understanding is limited.

My criticism about intuition more applies to people in the day to day world who don't really think about or question their own values or presuppositions about the world. Since that's the type of political person I end up working with in my day to day life they tend to pop up in my mind even though they aren't particularly relevant to or well represented on PoFo.

[Sivad]

Well no, but also I can't know which economists to individually trust because I fundamentally can't make those judgments via intuition so I can only take the field as a whole into my understanding and even then my understanding is limited.

That's all the more reason to be skeptical. If you don't really understand something you probably shouldn't put too much stock in it unless you know from experience that it's reliable. Economics, by and large, is not reliable.

My criticism about intuition more applies to people in the day to day world who don't really think about or question their own values or presuppositions about the world. Since that's the type of political person I end up working with in my day to day life they tend to pop up in my mind even though they aren't particularly relevant to or well represented on PoFo.

Most people are just idiots, there's not much to be said or done about that.

[mikema63]

That's all the more reason to be skeptical. If you don't really understand something you probably shouldn't put too much stock in it unless you know from experience that it's reliable. Economics, by and large, is not reliable.

It takes a leap of faith to reject an entire field of people who spend their lives studying something. I remain as skeptical as I can possibly be and when any particular narrow topic comes up I do my best to research it but I'm not willing to reject it all totally or accept it all totally.

Most people are just idiots, there's not much to be said or done about that.

Well, true enough.

[Sivad]

It takes a leap of faith to reject an entire field of people who spend their lives studying something. I remain as skeptical as I can possibly be and when any particular narrow topic comes up I do my best to research it but I'm not willing to reject it all totally or accept it all totally.

I'm not suggesting total rejection, just take it with the requisite grain of salt.

[Wellsy]

Models are nice but the models are ideal abstractions posited for which reality is to fit to in order to hide away the real historical content of our economies under a guise of ideal universality when it simply presupposes things of bourgeoisie ideology.

Marginalism can abstract away all of society from economic theory because of its claim that capitalism corresponds to a formal rationality rather than a substantive rationality. Formal rationality is a purely technical calculation of means and ends as opposed to substantive rationality which is oriented around values or higher aims. For instance, in Human Action Mises claims that the basis of economics is the natural quantitative relations between objects… so much input can produce so much output, etc. For marginalism any constraints or limits to the system are purely technical, a result of natural scarcity in relation to our timeless wants, not social, and the market is the best mechanism for organizing these desires. This means that the marginalist model will fail if it can be proven that capitalist institutions have a ‘necessary substantive significance in subjecting individuals to social constraint’. In other words, if the limits and constraints of our society can be shown not the result of technical aspects like scarcity but rather the result of social institutions with particular values oriented toward the interests of certain groups of people (ie the capitalist class) than marginalism has not justification for its formal rationality, for its abstraction of society from economics, and the entire edifice of marginalism falls. It is not enough just to point to this abstraction as proof of the ideological nature of marginalism. We have to prove that it is an illegitimate abstraction. This is the common thread underlying all of Clarke’s specific critiques of different aspects of marginalism. (3)

I think it's false to frame it as simply a lack of understanding, the naiveity that simply places faith in the progress of science. Faith is exactly what is asserted there, because we wish to maintain hope that the problem is merely one waiting to be solved through time and effort. But I think the history of the political economy and it's replacement by marginalist economics shows that whilst it had progressive elements in understanding the economy it is largely an edifice of apologetics.
The presuppositions of such models are to obscure any criticism of capitalism itself, naturalizing such relations and actions within it, measuring our reality against it's ideal society like the alienated afterlife of an Abrahamic religion. It is largely unconcerned with the world as it is which is the problem.
Many things are abstracted away within such models which are quite relevant to the historically specific characteristics of capitalism as a mode of production.

[mikema63]

Sometimes you use such unnecessarily obtuse language. I'm not entirely sure what the actual criticism is here.

I'll try to respond to what I think your saying and you can correct me.

1. you seem to suggest that economics is in some fundamental way impossible to model in the same way biology is. That some fundamentally important aspect of the relationships between variables cannot be captured mathematically.

I fail to see how this is true. When you make a model to test your premises and hypothesis if it misses something fundamentally important than the future predictions will falsify that hypothesis. Where the limited models we do have that work do in fact work I see no reason to believe this is true.

There is no gestalt property of the economy that is fundamentally magically seperate than the interactions of it's part and it must be in some way fundamentally modelable in mathematical terms. Refusing to even attempt to do so seems the more conservative approach since when we try to describe the economy in entirely linguistic terms we can fit the theory to any outcome or circumstance or data point because of the less exact nature of language. Which is the fundamental criticism of marxism that Karl Popper leveled against it.

Marxism, if true, should be able to provide mathematical models of interactions in the economy and create predictions that can be falsified. If it in some way fundamentally cannot render any mathematically representable absolute predictions than the idea itself has some flaw that renders it impossible to analyze and thus ought to be rejected.

2. you seem to suggest that any attempt to model the economy is a conservative effort to entrench current relations of labor and capital. Insofar as economics describes things as they are to try and understand human interactions I don't see how this would be true by itself. You have to start from what is after all to find out what was or might be. Biology did the same thing. We had to understand how animals varied, find fossils, and understand reproduction before we could look back at history to find evolution.

If marxist theories about social development are true then by understanding the current organization we can tie it to past forms of economics and look towards the future of how they can be better organized. Simply describing things as they are does not entrench those things as eternal principles anymore than studying living organisms as they are now entrenched perfect creation by god of each animal.

Indeed the study of biology as it is ended up destroying that idea, in the same way if we come to understand the economy as it is better and you are correct we will be forced to admit that capitalism is not some eternal economic relationship between labor and capitalists.

[Rugoz]

Economics peaked with the classical era of political economics.

Jesus, what an utterly ignorant statement. Back then they just theorized a little because they didn't have the statistical tools to do more.
Last time I checked they didn't even have a computer back in the 19th century.

@Wellsy

Nobody is going to read 270 pages of "Clarke's specific critiques".

But let me return the favor:

http://www.nber.org/chapters/c5974.pdf

If reading that doesn't make you despair you're a bad economist.

[Wellsy]

Spoiler: show

Sometimes you use such unnecessarily obtuse language. I'm not entirely sure what the actual criticism is here.

I'll try to respond to what I think your saying and you can correct me.

1. you seem to suggest that economics is in some fundamental way impossible to model in the same way biology is. That some fundamentally important aspect of the relationships between variables cannot be captured mathematically.

I fail to see how this is true. When you make a model to test your premises and hypothesis if it misses something fundamentally important than the future predictions will falsify that hypothesis. Where the limited models we do have that work do in fact work I see no reason to believe this is true.

There is no gestalt property of the economy that is fundamentally magically seperate than the interactions of it's part and it must be in some way fundamentally modelable in mathematical terms. Refusing to even attempt to do so seems the more conservative approach since when we try to describe the economy in entirely linguistic terms we can fit the theory to any outcome or circumstance or data point because of the less exact nature of language. Which is the fundamental criticism of marxism that Karl Popper leveled against it.

Marxism, if true, should be able to provide mathematical models of interactions in the economy and create predictions that can be falsified. If it in some way fundamentally cannot render any mathematically representable absolute predictions than the idea itself has some flaw that renders it impossible to analyze and thus ought to be rejected.

2. you seem to suggest that any attempt to model the economy is a conservative effort to entrench current relations of labor and capital. Insofar as economics describes things as they are to try and understand human interactions I don't see how this would be true by itself. You have to start from what is after all to find out what was or might be. Biology did the same thing. We had to understand how animals varied, find fossils, and understand reproduction before we could look back at history to find evolution.

If marxist theories about social development are true then by understanding the current organization we can tie it to past forms of economics and look towards the future of how they can be better organized. Simply describing things as they are does not entrench those things as eternal principles anymore than studying living organisms as they are now entrenched perfect creation by god of each animal.

Indeed the study of biology as it is ended up destroying that idea, in the same way if we come to understand the economy as it is better and you are correct we will be forced to admit that capitalism is not some eternal economic relationship between labor and capitalists.

My issue isn't with the possibility of effective modelling (I'd describe abstractions about reality as 'working models') and it isn't as strong as to dismiss economics in one foul sweep as simply ideology nonsense (which I'll summarize also in a quote below).
My issue is with the way in which economists abstract about the economy in a way that naturalizes capitalism and assert it's inherent rationality as opposed to irrationality.

Rather, the presuoppositions presume the rationality of capitalist economy in a way that reality is at fault instead of the ideal.
p. 7-8, 141, 146, 158

Spoiler: show

Marginalism derived the rationality of capitalism from the subjective rationality of the economic actor. However the abstraction of the economic actor from the social relations of production continued to rest on the liberal theory of private property, the naturalistic conception of production, and the rationalistic conception of exchange, which had been the objects of Marx’s critique of political economy. Thus marginalist economics is as vulnerable as was classical political economy to Marx’s critique — all that the marginalist revolution achieved was to reformulate the theory at a higher level of abstraction.

The marginalists were quite conscious of the abstract character of their economic theory, and took pains to make the basis of its abstraction explicit. While this allowed the marginalists to claim the universal applicability of their economic laws, it also created the space within which complementary disciplines, appropriate to other orientations of action, could develop. Thus, where classical political economy claimed to offer a social theory adequate to the reality of capitalist society, marginalist economics self-consciously developed a theory that abstracted from the particular social and historical context within which economic activity takes place. In this sense marginalism claimed to offer not a social theory but a pure theory of rational choice.
...
The ideological limitations of the new economics were no different from those of classical political economy. They lay not in the apologetic character of its answers, but in the restricted character of its questions. Like classical political economy, the new economics recognised the deficiencies of actually existing capitalism. But like classical political economy, it did not see these deficiencies as being inherent in the social form of capitalist production, but in the gap which separated the mundane reality of capitalism from its ideal model, a gap which, like political economy, it attributed to human intellectual and moral weakness which could be remedied by appropriate institutional reform. Marginalist economics was no more and no less ideological than had been classical political economy. The fundamental change lay not in the motivation of its proponents, or in the scientific status of its procedures, but in the questions which it posed.

If the marginalist revolution is not simply an ideological revolution, the orthodox Marxist critique, which reduces marginalist economics to its apologetic function, cannot be regarded as satisfactory. In this chapter I will explore in more detail the relationship between science and ideology in marginalist economics, in order to establish the continuity underlying the apparently radical break between marginalism and classical political economy.
...
Although it presented itself as a positive science, and insisted on the strict separation of facts from values (in which it followed and was influenced by John Stuart Mill), the new economics arose directly from a concern with evaluation. The evaluative orientation of the new approach to the economy stands out very clearly when we consider just what were the prices to be explained. The marginalists were no more concerned with the determination of the actual prices that ruled on the market than were the classical economists.1 All the innovators emphasised the abstract character of pure economic theory, in which the intervention of chance and uncertainty, of specific historical institutions or political interventions, could all be ignored and their consideration deferred to subordinate empirical and policy studies. Pure theory was not concerned with the determination of actual prices but with their determination in an ideal world of perfect knowledge, perfect foresight, perfect competition and pure rationality. It is against this ideal world that the real world, and proposed reforms in the real world, are to be measured.
...
This claim to value-neutrality on the part of marginalism would appear to be belied at once by the observation that the capitalist system as presented by marginalism was not simply a fact, but was also an ideal. The free market system was claimed to represent the perfect self-realisation of individual rationality in achieving the optimal allocation of resources on the basis of a given distribution of tastes, skills and resources. The apparent paradox is resolved when we realise that the society the marginalists described was ideal not because it corresponded to the evaluations of the theorist, but because it offered the most perfect expression of the preferences of the members of the society. The exchange economy was simply a rational instrument, a means through which individuals could seek to achieve their economic ends. It was the most perfect such instrument in the sense that anything that could be achieved outside the market economy could be achieved more economically within it, while it remained purely an instrument, so that it imposed no constraints on the ends that could be achieved through it.

The marginalist model was formulated at a very high level of abstraction. It did not describe capitalist society as it was, it described an idealised version of capitalism. On the one hand, it was based on the ideal concepts of the rational economic actor, perfect competition, etc. On the other hand, it was an abstraction from the historical reality of capitalist society, which idealised reality in abstracting from all those features that disfigured the reality of capitalism and that offended liberal sensibilities. It was therefore not a theory that could be applied directly to the reality of capitalism, although its vulgarisers did so apply it for their apologetic purposes.

The marginalists were well aware that their abstractions did not correspond directly with reality and they did not seek to defend them as such. Thus Menger stressed that the pure theory rested on certain assumptions, including assumptions about perfect knowledge, perfect foresight and an absence of constraint, that did not necessarily apply in reality. In the real world ‘real prices deviate more or less from economic ones’, while the laws of economics were those ‘holding for an analytically or abstractly conceived economic world’ (Menger, 1963, pp. 71–3). The pure theory offered an abstraction that represented an ideal world against which reality could be measured and against which proposed reforms could be evaluated. It is therefore no criticism of the marginalist analysis to note that reality does not correspond to its abstractions: insofar as the real world does not accord with the abstractions of marginalism it is not the economic theory that is in error, but the real world that is in need of reform.
...
The foundation of the marginalist abstraction of the ‘economy’ from ‘society’, of the ideal rationality of capitalism from its contingent social forms, is its demonstration of the ‘formal rationality’ of the fundamental institutions of capitalist production, distribution and exchange. The rationality of these institutions is formal in the sense that they have a purely instrumental significance in relation to human action, providing only a technical means through which individuals can most efficiently achieve their ends, and so impose no substantive constraints on the ends pursued. It is only on this basis that social values can ultimately be reduced to the subjective evaluations of individuals. On the other hand, if the fundamental institutions of the capitalist economy could be shown to have a necessary substantive significance in subjecting individuals to social constraint, the marginalist abstraction of form from content, formal from substantive rationality, economy from society, would be deprived of any coherent foundation, and its ideal model would cease to have any explanatory validity.

The way in which the economy is abstracted is done in a way that as already mentioned, simply obscures many things, it increasingly restricts itself, suddenly economy is a neutral area of study distinct from society where values are to be implemented. As if the economy was as enduring as the laws of nature it self.
Issues with the way it abstracts is for example the illusion of barter.
In the real world, money mediates exchange and money is a commodity whose value is based in relation to all other commodities. But not so in the bartering illusion where apparently we directly trade known objects and money is nothing else but apparently something to stream things along more easily.
But this is apparently prominent in marginalist economics
p. 151

The elaboration of marginalist economic theory is an attempt to show that its essential results can be extended from the case of the isolated individual making subjective private decisions about the management of her scarce resources to the case of an exchange economy considered as a whole. The method generally adopted was to consider firstly the simple case of barter of two goods between two individuals and then progressively to elaborate the model to include many individuals, many goods, money, the production of goods on the basis of fixed and then variable technical conditions, and of fixed and then variable factor supplies to show that the essential results continued to hold throughout this elaboration, on certain not unrealistic assumptions about technical conditions and the ordering of preferences.

But because we live in capitalist economy and markets, not one of bartering individuals, we engage with a market of commodities whose value is in relation to one another and not in isolation (something Ricardo was unable to resolve for himself).
Money is more pivotal than it seems to be considered in marginalism.

Spoiler: show

https://kapitalism101.wordpress.com/2011/09/30/marginal-futility-reflections-on-simon-clarkes-marx-marginalism-and-modern-sociology/

Marginalists begin with the isolated individual making choices in a vacuum and erect all of their basic ideas upon some simple observations about these choices. As the model becomes increasingly complex, adding in more people, more commodities, money, the division of labor, private property, etc. it is claimed that all of their basic observations still hold. The expansion of the model is seen as just a formal matter. But Clarke argues that when we move from individual exchange to a system of exchange we are actually dealing with different phenomenon. In a market economy exchange is no longer and exchange for direct utility; in other words, we aren’t measuring our actual utility for the commodity we give up with the utility for the commodity we buy. Money intercedes as a mediary. We exchange things against money. Use-values are exchanged for values which are socially determined. Any claim to the formal rationality of the individual’s behaviour becomes dependent upon the rationality of the system as a whole

The existence of money demands that we immediately abandon the basic principles of marginal utility. marginal utility. In the simple barter models posed by marginalists both actors can fully judge the use-values of items they are trading. But when we are exchanging things for money we are not just trading two commodities in isolation. Money links each commodity to an entire of world of commodities. Now if it was possible to know the future values of all commodities then it would be possible to generalize the marginalist barter model into a theory of indirect exchange. But we don’t know the future values of things. These are entirely uncertain. In fact, If the values of all commodities were always known we wouldn’t need money because any commodity could serve as money. This compromises the entire marginalist model.

And much of the real relations of capitalism in production and such are abstracted away from economics, so the models end up based on an unreality.
https://kapitalism101.wordpress.com/2011/11/15/law-of-value-8-subjectobject/

Welcome to Subjectivist Island. Here lives Eugene, our happy island barbarian. Everyday Eugene makes choices. He decides to spend his time building his teepee, catching fish, or practicing his backstroke. He likes the backstroke most of all, but after so many laps around the island he gets tired of it and starts to prefer catching fish or teepee building. Intent on maximizing his utility, Eugene gets out some paper and a pencil and makes himself a preference scale so that he can figure out the exact proportions to devote to all 3 activities each day. He cherishes this preference scale because it is the source of his freedom. It’s just like the preference scale you carry around in your pocket everyday….. you carry one don’t you? (2)

Ok, now setting aside the fact that most of us don’t carry around a preference scale in our pockets, there is a bigger problem: Subjectivists want you to believe that this little story about Eugene and Subjectivist Island is all that you need to know in order to understand the functioning of modern capitalist society. Funny then, that we had to abstract away all of capitalism, all society in fact, in order to arrive at our theory of preferences. Were we to think critically we might begin to suspect that there is something fishy going on with this abstraction. That fishy something is the stink of an ideological abstraction.

The point of a dominant ideology is to make it seem like the present order of things is a universal order; that the status quo is the natural expression of things, unchangeable. How convenient then, for our bourgeois theorists, that our natural, universal man, Eugene, happens to contain the seed of modern capitalist society in all of his preferenc-ing and acting. It’s as if every choice made by every human since the dawn of time was just an expression of innate capitalist instincts, waiting to come into being in our modern society.
...
The parable of Subjectivist Island leads one to think that human desires are formed privately, independent of society. But this has never been the case. Desires are taught, socially constructed, and can’t be understood independently of society. How do subjectivists respond? They say “Yes desires may be constructed but this is out of the scope of economics so we don’t have to consider it.” In fact, this is how modern economics deals with all criticism- it ignores it and says it’s the topic of another discipline. How convenient! It’s like saying that we don’t have to consider the fact that the earth is round because that’s beyond the scope of flat-earth theory.

We can’t understand desire without also understanding the ways in which we go about attaining our desires. Here’s where the abstraction of Subjectivist Island breaks down. On the island Eugene attains his desires by directly acting to get the things he wants. But these are not the sort of choices we make in a capitalist society. In capitalism we have to sell our labor to someone else so we can make a wage that we can then spend on the things we want, but only after we’ve given most of our wage to the landlord, the mortgage company and the state. Subjective value theory has to prove that it can move this abstract model of choice from Subjectivist Island to a full-scale capitalist economy. It does this through the fantasy of barter.

Thus, we can see that something very sneaky has been done. Hmmm… what is it? We were trying to form a theory of barter based solely on subjective preferences when all the sudden we realized we needed to assume a certain type of property relation in order to make any sense of it. Thus, abstracting away property relations and forming a theory of exchange without them is impossible and illegitimate.

https://kapitalism101.wordpress.com/2011/09/30/marginal-futility-reflections-on-simon-clarkes-marx-marginalism-and-modern-sociology/

In abstracting away the social relations of capitalism marginalism must assume that these abstract individuals enter exchange with given needs and given resources. Where do these needs and resources come from? The marginalist answer is that this question is outside the sphere of economics- that it doesn’t matter to economic theory where these needs and resources come from. But what if our economic system actually reproduced these needs and resources? If we could show that capitalism produced the hedonistic consumer as well as the conditions of scarcity the consumer confronts then we could expose a disastrous feedback loop at the core of marginalism. It seems that when we just assume given needs and resources we are actually only pretending to abstract away from capitalist social relations. While on the surface marginalists appear to be talking about a universal individual in universal conditions, in actuality they are sneaking all of the social relations of capitalism in the back door.

I like the way Clarke develop his proof this problem: Commodity exchange presupposes individuals with different needs and different resources because if everyone had the same stuff there would be no reason for exchange. Thus exchange presupposes differences. If exchange is systematic these differences must also be systematic. Thus the formal equality and freedom of exchange is founded on different resource endowments. This means that the content of exchange can’t be reduced to its form (free, juridically equal relations between people) but must be found outside of exchange in the realm of production and property.

Ultimately, my distaste here is the sense in which when I read your posts, it felt as if in the vein of economics as neutral scientific study that simply needs time to work some of it's kinks out when it's kinks are inherent to it. Which I consider nonsense, the limitations were imposed and it need not any conscious intent to obscure things, other than they are simply naive to their own abstractions and think them satisfactory and will be simply baffled by certain occurrences and always undergo a crisis when their predictions fail to predict real world crisis which as often asserted as simply necessary and the product of human faults rather than the system. Hence it's simply the bankers, if we reform that capitalism will avoid crisis or if we stop the restrictive government it'll be better, flip flop flip flop. Never acknowledging nor explaining that it's capitalism that is inherently irrational and as such, there can be no rational individual economic actors as idealized in economics models.
But of course they're self aware that homo economicus isn't real, and why sociology had to pick up the slack but it of course fails in that society isn't separate from the economy and the bifurcation reflects the sort of divided mind of such thinkers and their inability to abstract the essential relations of the existing world.

The bias of economics is the illegitimate abstractions which largely do not correspond to capitalism as it. AS such, no amount of time will necessarily improve the field when the issue lays in it's foundation.
It's like in another thread where Wittgenstein asserts that the problem with psychology is conceptual/philosophical confusion as opposed to simply being a young science.
Things are limited to the confines of their axioms/presuppositions and many intelligent people do a lot of work but strictly within those co-ordinates. This is something prominent in ideology in that it isn't about being true or false as much as it makes certain thoughts, and questions inconceivable, you are free to do as you please, but please don't touch the abstract walls and press on them.

Perhaps one might assert that some of these criticisms no longer apply but it's not apparent to me that this is the case. It seems that such concerns remain relevant and considered relatively recently, except of course by the field itself which will continue to plod along and hopefully strike it rich within it's confined area of study.

[mikema63]

I'm supper busy right now so I don't really have time to give what you posted a good read so I'm only going to give a superficial reply, apologies.

Rather, the presuoppositions presume the rationality of capitalist economy in a way that reality is at fault instead of the ideal.

The marginal theory of value does include presuppositions, we can debate rather or not those suppositions presume capitalist rationality is the best or whatever else but I'd make a different point as my main reply.

The point of mathematical modeling is to in a logical form take hypothesis and all their suppositions and extend them to conclusions that must be true if those suppositions are true. So the assumptions and necessary conclusions of Marginal theory of value or the labor theory of value can be tested against reality.

The marginal theory of value can be disproven in the real material world.

Insofar as the marginal theory of value and the labor theory of value cannot be tested because they cannot make testable conclusions they are philosophical problems and should be outside the discipline of economics as it is currently practiced in economic departments.

I'm not going to argue that the marginal theory of value in particular or any other hypothesis coming out of modern economic departments doesn't have presuppositions from withing the mindset of people who grew up and never really question the capitalist framework. That is after all how most people are and we shouldn't really expect professional economists to be particularly unlike normal humans.

I would posit that potentially we are looking at a thomas Kuhn type problem where we are describing things as they are and making hypothesis withing a capitalist ideological framework and are waiting for a fundamental paradigm shift in how we think about economics. We had such a revolutionary shift when Evolution was first fully posited and many of the problems that we tried and failed to explain within the framework of an ideological environment pointed towards a fundamentally different paradigm posited by religious doctrine. Indeed it helped destroy that false ideology.

The point I'm getting at is that economists certainly are trapped within the context of the society in which they exist, it's a human endevour after-all, but biologists are trapped by their context too and were able to eventually transcend that boundary because they were looking at the world in a way that would force them to reject false ideological presuppositions. Economics has started to apply mathematical tests to their own presuppositions, this can only be regarded as a more positive development in the search for truth.

The way in which the economy is abstracted is done in a way that as already mentioned, simply obscures many things, it increasingly restricts itself, suddenly economy is a neutral area of study distinct from society where values are to be implemented. As if the economy was as enduring as the laws of nature it self.

We can only understand things by abstracting them. The economy itself is an abstraction of the system of interactions between people. It is difficult if not impossible to understand the economy or society by trying to look at the whole thing at once in the same way it was impossible to discover the overall system of evolution without understanding many particular things. Science after all is inductive, we go from the specific to the general.

You can accuse an economist like amartya sen of failing to question capitalist ideology or capture the holism of society in his work on social choice and welfare but by understanding these specific things we can come to a better understanding of the economy as a whole, and thus of society as a whole. (I would point out that there is a very important amount of crossover work between sociology and economics as well so I don't see the criticism that economics ignores the implications of economy with society and values as entirely valid.)

It is not, in my mind, a bad thing in and of itself that economists seek to understand specific things.

Issues with the way it abstracts is for example the illusion of barter.
In the real world, money mediates exchange and money is a commodity whose value is based in relation to all other commodities. But not so in the bartering illusion where apparently we directly trade known objects and money is nothing else but apparently something to stream things along more easily.
But this is apparently prominent in marginalist economics
p. 151

I don't want to get too caught up in arguments about any specific modern theory in economics. My point would be that wherever there is a real world implication to a theory then it should be tested. Where it isn't testable because of limitations in our ability to test it we should be cautious in accepting it. Where it cannot be tested because it is untestable we should reject it as unknowable or at least the realm of philosophy.

I think I'd make a point here and attempt to draw a line in the argument between philosophy of the economy and economics as it's currently practiced. It would simplify the argument to draw a hard line between the part of economics that is untestable by mathematical means or by looking out at specific cases in the economy today and philosophical worries like whether or not the marginal theory or labor theory is true in a philosophical sense. That isn't to say it isn't an important question. There is a limit to what we can know with what knowledge and tools we have at hand and we will always be more restrained when using empirical methods.

Ultimately, my distaste here is the sense in which when I read your posts, it felt as if in the vein of economics as neutral scientific study

I actually wouldn't say it's neutral. Scientific study in general isn't and cannot be neutral because it is done by human beings and we exist in a particular context with particular biases. The institutions of science shape it, it has it's own institutions and institutional culture, etc. Those institutions are deliberately shaped in many ways to try and fight against those human biases but they exist. It's only through a shared commitment to the values that make science work that are drilled into anyone taking science courses that push those values and vigilance and criticism from outside and in of these institutions are necessary to make them continue to function.

My point on this is that science, academics, and economics in particular are all shaped by stuff and can never be truly neutral. We just have to hold it to a particular set of values and standards.

On that vein I would argue that people like you or sivad who criticize the discipline help the discipline in the long run. It forces them to defend themselves from stinging criticisms that they may not be upholding those values they profess and forces them to evaluate their work in that context.

But at this point we are running far deeper into the philosophy of science that I'm super comfortable with since I'm not super well read on the topic.

The bias of economics is the illegitimate abstractions which largely do not correspond to capitalism as it. AS such, no amount of time will necessarily improve the field when the issue lays in it's foundation.

By this argument biology would be a sterile endeavor because it was entirely descriptive and was founded in perfect creation. The power of the institutions of science and academia is it's ability to challenge it's own presuppositions and founding ideology. We advance, and it's messy and difficult and biased and human but this assertion that it's foundation is flawed and we can't progress is not only wrong but would seem to fly in the face of the actual historical development of science.

Perhaps one might assert that some of these criticisms no longer apply but it's not apparent to me that this is the case. It seems that such concerns remain relevant and considered relatively recently, except of course by the field itself which will continue to plod along and hopefully strike it rich within it's confined area of study.

It's not that these criticisms don't apply, they may in fact exist for forever in some form or another. I would only posit that a self reflective study using the foundations of scientific institutions so long as the values and integrity of those institutions are defended can transcend their ideological foundations. We cannot treat a particular human endeavor as not being able to grow past it's ideological roots and into a new one and then claim that the entirety of society can do so.

[Sivad]

Why Economic Models Are Always Wrong
Calibration--a standard procedure used by all modelers in all fields, including finance--had rendered a perfect model seriously flawed. Though taken aback, he continued his study, and found that having even tiny flaws in the model or the historical data made the situation far worse. "As far as I can tell, you'd have exactly the same situation with any model that has to be calibrated," says Carter.
https://www.scientificamerican.com/arti ... ays-wrong/


It’s time to junk the flawed economic models that make the world a dangerous place
Comparing the economics elite with its equivalent in theoretical physics, Romer notes the same problems: over-confidence, “an unusually monolithic community”, near-religious group loyalties, a tendency to disregard results that don’t match the theory – and too little consideration of the risks of being wrong.

This is not just a problem for economics. Romer says the parallels between bad physics and bad economics suggest there might be a “general failure mode” in any discipline that becomes over-reliant on maths. Basically, the kudos goes to people at the cutting edge of designing mathematical models, not to those whose models match reality. If Romer is right, there are big implications for the way governments and central banks make policy. Instead of abstract models, you would need something much closer to reality – and, with the rise of computer simulation technologies, that is close at hand.

[...]

It’s not a new line of attack. The Kingston University economist Steve Keen has long argued that reliance on flawed models contributed to the scale of the 2008 crash – by encouraging decision-makers to underestimate risks, economic theory has the power to make the world more dangerous. But Keen is a lifelong rebel; Romer is a doyen of the profession, and from the heart of the US academic mainstream. His attack on some of the most esteemed and influential economists of our time is a big thing.
https://www.theguardian.com/commentisfr ... rous-place


Big questions and big numbers
We cannot live without big and ambitious economic models. But neither can we entirely trust them
But how plausible were the numbers? Twelve years on, economists have shown little inclination to go back and check. One exception is Timothy Kehoe, an economist at the University of Minnesota. In a paper published last year, he argued that the models “drastically underestimated” NAFTA's impact on trade flows (if not on jobs). The modellers assumed the trade pact would allow people to buy more of the goods for which they had already shown some appetite. In fact, the agreement set off an explosion in the exports of many products Mexico had scarcely traded before. Cars, for example, amounted to less than 1% of Mexico's exports to Canada before the agreement. By 1999, however, they accounted for more than 15%. The only comfort economists can draw from their efforts, Mr Kehoe writes, is that their predictions fared better than Mr Perot's. A low bar indeed.

Dubious computations also helped to usher the Uruguay round of global trade talks to a belated conclusion in 1994. Peter Sutherland, head of the General Agreement on Tariffs and Trade, the ancestor of the World Trade Organisation (WTO), urged negotiators to close the deal lest they miss out on gains as great as $500 billion a year for the world economy. This figure came, of course, from a big model.

Even staunch free-traders, such as Arvind Panagariya, an economist now at Columbia University, thought these claims “extravagant” and “overblown”. They escaped scrutiny, he argued in 1999, because they emanated from “gigantic” models, which were opaque even to other economists. Why then did these models thrive? Supply and demand. “Given the appetite of the press and politicians for numerical estimates and the publicity they readily offer researchers, these models are here to stay,” Mr Panagariya concluded.
http://www.economist.com/node/7159491


"if you torture the data long enough it will confess"

[mikema63]

Why Economic Models Are Always Wrong

I read that article a few days ago and it is a rather incredible perversion of all the basic rules of models and statistics. Sadly I have to admit that this isn't really limited to economics, p hacking and other forms of statistical jiggery pockery are relatively common in many of the sciences including biology. It's a problem that needs to be filtered out by replication and through the normal process.

It’s time to junk the flawed economic models that make the world a dangerous place

The accusations of this piece could be applied to the sceinces in many places and times. It's something of a common joke that the only way new ideas finally become commonly accepted is when all the old guard scientists die.

I'd point out that people are people on an individual level, we have to look to the whole institution for progress not individual economists. I really like Thomas Kuhn's ideas on this point.

Big questions and big numbers

We must always work with incomplete information when making decisions. Which leads to making wrong decisions. We cannot absolve ourselves of the responsibility to act because of this.

"if you torture the data long enough it will confess"

It's not that hard to manipulate statistical analysis of data sets in just about any discipline. In fact the simple t-test is a super standard way to analyze the certainty of a particular difference between data sets (for instance when measuring how likely an increase in some protein vs the control is significant or a result of random chance) and is incredibly easy to manipulate and pretty common in many disciplines because of the incredible pressure of publish or perish.

[Truth To Power]

There were quite a few economists who foresaw the collapse despite the consensus, do you really think that was just intuition?

None of them were mainstream neoclassical economists. Not one. Modern mainstream neoclassical economics has therefore effectively been falsified. It has been proved to be an objectively false doctrine, with no more scientific credibility than known fabrications like Lysenkoism, phlogiston, epicycles, or phrenology.

[Sivad]

I read that article a few days ago and it is a rather incredible perversion of all the basic rules of models and statistics. Sadly I have to admit that this isn't really limited to economics, p hacking and other forms of statistical jiggery pockery are relatively common in many of the sciences including biology. It's a problem that needs to be filtered out by replication and through the normal process.

That article is suggesting that it can't be filtered out.

Carter had initially used arbitrary parameters in his perfect model to generate perfect data, but now, in order to assess his model in a realistic way, he threw those parameters out and used standard calibration techniques to match his perfect model to his perfect data. It was supposed to be a formality--he assumed, reasonably, that the process would simply produce the same parameters that had been used to produce the data in the first place. But it didn't. It turned out that there were many different sets of parameters that seemed to fit the historical data. And that made sense, he realized--given a mathematical expression with many terms and parameters in it, and thus many different ways to add up to the same single result, you'd expect there to be different ways to tweak the parameters so that they can produce similar sets of data over some limited time period.

The problem, of course, is that while these different versions of the model might all match the historical data, they would in general generate different predictions going forward--and sure enough, his calibrated model produced terrible predictions compared to the "reality" originally generated by the perfect model. Calibration--a standard procedure used by all modelers in all fields, including finance--had rendered a perfect model seriously flawed.Though taken aback, he continued his study, and found that having even tiny flaws in the model or the historical data made the situation far worse. "As far as I can tell, you'd have exactly the same situation with any model that has to be calibrated," says Carter.

I'd point out that people are people on an individual level, we have to look to the whole institution for progress not individual economists.

We're not just flawed as individuals, as we come together in groups individual flaws are often amplified and new flaws emerge at the collective level. Science is a human institution so it's always going to suffer from the flaws of human nature. Skepticism is always warranted wherever the human element is involved.

We must always work with incomplete information when making decisions. Which leads to making wrong decisions. We cannot absolve ourselves of the responsibility to act because of this.

That gets us into decision theory which gets really complicated(and controversial) really fast. It's not nearly as simple as "responsibility to act".