Economics As "Science of Sociology" - [Was: Case solved, at last!

[Gunnar Tómasson <gunnar.tomasson@xxxxxxxxxxx>]

Re. the following:

 

> If you want to fight the "Washington Consensus" by
> working on improved macroeconomic theory, first you
> have to untie the hand you've tied behind your back and
> drop the requirement of a maximising foundation in order
> to qualify as "Economic Science".

 

Comment:

 

If, as Robert Solow suggests, "macroeconomics cannot be "exact", it has to work by rough analogy and empirical compromise," then "macroeconomic theory" reduces to a modern version of what classical economists called the "art" of political economy, the science counterpart to which Keynes called "an apparatus of the mind, a technique of thinking."

 

It is not readily apparent why - without its "science" counterpart - such "art" should in any manner, shape, or form be equated with "Economic Science".

 

And, if working by "rough analogy and empirical compromise" be "science," then "macroeconomic theory" is properly regarded as branch of the "Science of Sociology".

 

Gunnar

 

 

 

----- Original Message -----

From: "Bruce McFarling" <ecbm@xxxxxxxxxxxxxxxxxxx>

To: <pkt@xxxxxxxxxxxxxxxx>

Sent: Tuesday, December 11, 2001 2:21 AM

Subject: Case solved, at last! (Was Re: Monetary production ...)

> Now Gunnar says,
>
> >In fact, there is nothing mysterious about Say's Law - it
> >restates in terms of Supply in the Factor Market and Demand
> >in the Market for Final Ouput the logical implications of
> >the maximizing attributes of Homo Economicus which underlies
> >all of Economic Science.
>
> See: anachronistic introduction of the core neoclassical
> concept into classical economic theory and the General
> Theory.
>
> A moment reflection ought to suffice ... but it doesn't,
> or a lot of misdirected effort would have been avoided ...
> to establish that a model in which all the decision are
> maximising decisions is an incomplete model of economic
> decision making.  Ergo, while it may be appropriate in
> some microeconomic questions, it cannot be appropriate
> as the sole foundation for a effective macroeconomic
> model.  Business operators know that they do not know
> enough to make it universally sensible to devote all
> resources to the best possible use based on currently
> available information, so that some business decisions
> will be regular in a way that differs from maximising
> decision making.
>
> Boulding argued that where this type of decision making
> is obscured is in beginning from the income statement
> instead of the position statement ... that is, as I
> interpret it, having decided what and how much to devote
> to precautionary purposes and whether, what, and how
> much to devote to speculative purposes, the amount
> devoted to pursuit of opportunities based on known
> information might be modelled using maximising models
> (though, of course, there are arguments regarding the
> strengths and weaknesses of maximising models even
> here).  However, the decision of what portion should
> be allocated to those three different purposes cannot
> conceivably be modelled using a maximising approach,
> since two of the three sets of costs and benefits are
> by definition unknown when the decision is being made.
>
> Since proper consideration of this allocation problem
> is included in the General Theory, and is the foundation
> of an important part of the system (albeit in the area
> of money and financial assets and not in the theory of
> production in general), then the statement:
>
> >the maximizing attributes of Homo Economicus which
> >underlies all of Economic Science.
>
> finally pins down a specific premise being added to the
> reading of the General Theory (as well as explaining
> Bentham as the representative of classical economic
> theory!) which is resulting in the gross distortions
> that have resulted.  Define economic science as that
> which is based on the foundation of your particular
> borrowing from an earlier physics, and then anyone
> who explores beyond the constraints of that foundation
> is not engaged in "Economic Science"!
>
> I'm happy that that is cleared up, through disappointed
> that it is such a mundane trained incapacity at work.
> If you want to fight the "Washington Consensus" by
> working on improved macroeconomic theory, first you
> have to untie the hand you've tied behind your back and
> drop the requirement of a maximising foundation in order
> to qualify as "Economic Science".
>
> Virtually,
>
> Bruce McFarling, Shortland, NSW
> ecbm@xxxxxxxxxxxxxxxxxxx
>
>