Re: Statistical Method And Economics [Was: Re: Piorot on Madrick

[Ted Winslow <egwinslow@xxxxxxxxxx>]

Gunnar Tomasson quoted Jaynes:

> Here is Jaynes on related issues: 
>  
> In any approach, the reasoning format one can use is determined by the
> techniques used to make these connections between the mathematics and
> the real world.  In principle, orthodox theory recognizes such a
> connection only when it consists of empirically observable
> frequencies.  But one can work in statistics for a long time without
> ever encountering a real problem in which the data actually consist of
> frequencies.  Therefore, to maintain this viewpoint, if frequencies are
> not already inherent in the nature of the problem and the data, they
> must be implanted by artificial means. 

This involves implicit ontological claims.

Whitehead, whose "frequency theory" of probability Keynes, in A Treatise
on Probability (pp. 109-20), questioned but did fell able to
definitively reject, claims that "frequencies" - "truth frequencies" -
characterize all reality i.e. they are an irreducible feature of the
"real potentiality" constituted by the "standpoint" of every "actual
occasion."  They provide the basis for his own frequency theory.  In his
subsequent writing on the matter, Whitehead attempted to answer the
questions Keynes had raised in the Treatise.

The idea of "real potentiality" is underpinned by the idea of "internal
relations" i.e. it provides a theory of probability worked out on the
hypothesis of "organic unity" as opposed to the "atomic hypothesis"
tentatively adopted by Keynes in A Treatise on Probability.

Keynes subsequently abandoned the atomic hypothesis for the hypothesis
of organic unity.  He also abandoned the other foundational idea of the
Treatise - the idea of logical probability relations.  Yet he continued
to believe there was an objective basis for judgments of probability and
for statistical induction.  Whitehead's frequency theory provides such a
basis.

As I've pointed out many times (most recently in elaborating the
original statement of it by Marshall -  "While attributing high and
transcendent universality to the central scheme of economic reasoning, I
do not assign any universality to economic dogmas.  It is not a body of
concrete truth, but an engine for the discovery of concrete truth."
(Marshall, as quoted by Keynes in X, p. 196)), the following is a
statement of a methodological implication of the ontological idea of
"organic unity."

"The Theory of Economics does not furnish a body of settled conclusions
immediately applicable to a policy.  It is a method rather than a
doctrine, an apparatus of the mind, a technique of thinking, which helps
its possessor to draw correct conclusions."

Ted