[PEN-L:11360] NC economics

[James Devine <jdevine@xxxxxxxxxxxxxxx>]

Wojtek Sokolowski writes: >...A good example is the use of factor analysis...<

It's interesting that factor analysis is not popular among economists.
Maybe it's because it's very empiricist, usually not forcing any theory on
the data. Economists _start_ with their theory (usually Walrasianism,
though asymmetric info and game theory are big) and usually take as true,
with the real world as a flawed imitation of the theory. This discourages
empiricism and factor analysis.

However, much of macro-econometrics is empiricist, as with ARIMA (if I
understand it correctly).

>My own view is that neo-classical economics, as well as other disciplines
based on external-control-rat-choice model of behaviour (cf. behaviourism),
uses a fundamentally different paradigm of scientific truth than other
social, and not only, sciences. For most sciences, the main object of
inquiry is to discover how things are related to one another (cf. "causes"
and their "effects"), but NC does not give a shit about that. The primary
object of the NC, and rat-choice models in general, is not to find out how
people make decisions, but to provide an easy to manipulate tool to make
decisions by those endowed with decision making authority....<

You forget the Chicago school, which wants to force the world to fit into
the Walrasian model (as in Chile) and _after that_ have no authority
figures at all. Milton Friedman, e.g., wants the US Federal Reserve -- the
most important authority in his book -- to do nothing but follow very
simple rules, I guess because he sees the US as already fitting the Model.
The libertarian pretensions of the Chicago school are pretty silly, but
they do exist. My students (and many other adolescents) take these ideas
seriously.

>That explains the popularity of NC economics among the corporate and
government types, as well as its lack of interest in empirical research.<

Is NC economics _really_ popular among corporate types, beyond providing an
ideological justification? My impression is that the corporate types read
the management literature (Peter Drucker et al) rather than NC economics.
(Look at the "economics" section of
most book stores; it's usually mixed in with "how to make $1 million
starting with no money down" books.)

I also get the impression that the government types are more interested in
the less pure versions of NC economics that are more empirical in focus.

Further, NC economics shows a lot of "interest in empirical research." Why
else does econometrics exist?

Maybe we need a NC economist to come in and defend the honor of his or her
school. Otherwise, it's unclear what is being criticized. Maybe Phil
Mirowski's definition of this economics helps.

This school
1. employs mathematical modeling rather than institutional analysis or
historical evidence as its main tool for understanding the world (formalism);

2. claims to be "scientific" in a positivist or Cartesian way, in imitation
of idealized natural science (positivism);

3. utilizes constrained maximization, equilibrium, and comparative statics
as its main analytical pillars (equilibrium economics);

4. emphasizes individual utility-maximization (consistent goal-seeking) as
the determinant of human behavior (utilitarianism);

5. always seeks out microfoundations, i.e., solely individual explanations
of aggregate phenomena (reductionism, methodological individualism); and
finally,

6. leaves many of the most important variables, such as tastes and
technology, as exogenously determined by nature or other forces outside of
the economist's concern (naturalism).

To Mirowski's list, I would add a final tenet, hopefully as a friendly
amendment. To neoclassicals,

7. institutional forms in the economy are either to be explained as
exogenous impositions, from, say, the political sphere, or as explainable
in terms of individual preferences and technology, along with such natural
phenomena as incomplete information and transactions costs
(anti-institutionalism).

Some NCs fit this definition better than others. It's a model, an abstraction.


in pen-l solidarity,

Jim Devine   jdevine@xxxxxxxxxxxxxxx
jim_devine@xxxxxxxxxxxxxx
Econ. Dept., Loyola Marymount Univ.
7900 Loyola Blvd., Los Angeles, CA 90045-8410 USA
310/338-2948 (daytime, during workweek); FAX: 310/338-1950
"It takes a busload of faith to get by." -- Lou Reed.