PKT message, Re: A rhetorical complaint and two questions

Re. the following:

> For reasons I'll again repeat, I don't think the premise of this - that
> "Keynes was providing a methodology/theoretical framework for economics
> that would be similar to that provided by Einstein for physics" - is
> correct.

>
> Keynes explicitly claims that economics can't be a science like
> physics. One fundamental ontological reason it can't is that the
> subject matter of economics is characterized by "organic unity," by
> "internal relations."
>
> "The atomic hypothesis which has worked so splendidly in physics breaks
> down
> in psychics. We are faced at every turn with the problems of organic
> unity,
> of discreteness, of discontinuity - the whole is not equal to the sum of
> the
> parts, comparisons of quantity fail us, small changes produce large
> effects,
> the assumptions of a uniform and homogeneous continuum are not
> satisfied."
> (X, p. 262)

Comment:

The point at issue relates to the construction of Keynes' statements in Ch. 1 of the General Theory, namely, that "the object of [his chosen] title is to contrast the character of [his] arguments and conclusions with those of the classical theory of the subject, upon which I was brought up and which dominates the economic thought, both practical and theoretical, of the governing classes of this generation, as it has for a hundred years past. I shall argue that the postulates of the classical theory are applicable to a special case only and not to the general case, the situation which it assumes being a limiting point of the possible positions of equilibrium."

This reads like a paraphrase of a statement which Einstein might have made: "I shall argue that Newton's postulates are applicable to a special case only and not to the general case - that it holds for low-velocity situations and, as such, represents a limiting case of a my more general theory."

Gunnar

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

From: "Ted Winslow" <egwinslow@xxxxxxxxxx>

To: <pkt@xxxxxxxxxxxxxxxx>

Sent: Friday, January 03, 2003 9:06 AM

Subject: Re: A rethorical complaint and two questions

>
> Clifford Poirot wrote:
>
> > Some would argue that Keynes' method is significant in and
> > of itself, not because Keynes wrote it, but because Keynes wrote what is
> > correct. As Paul has argued, Keynes was providing a
> > methodology/theoretical
> > framework for economics that would be similar to that provided by
> > Einstein
> > for physics. Thus a departure from Keynes' "General Theory" framework is
> > seen as a departure from the intent and meaning of the Keynesian
> > Revolution.
> >
> > I take a different approach. I see Keynes as providing some important
> > insights but needing to be supplemented by others-Veblen, Schumpeter and
> > many others. To me, the acid test of a theory is its ability to
> > explain. I
> > don't think we can have a "General Theory" of the sort that Paul is
> > after
> > and I have offered some epistemological and ontological reasons why I
> > think
> > the "fundamentalist" approach to economic theory is wrong.
>
> For reasons I'll again repeat, I don't think the premise of this - that
> "Keynes was providing a methodology/theoretical framework for economics
> that would be similar to that provided by Einstein for physics" - is
> correct.
>
> Keynes explicitly claims that economics can't be a science like
> physics. One fundamental ontological reason it can't is that the
> subject matter of economics is characterized by "organic unity," by
> "internal relations."
>
> "The atomic hypothesis which has worked so splendidly in physics breaks
> down
> in psychics. We are faced at every turn with the problems of organic
> unity,
> of discreteness, of discontinuity - the whole is not equal to the sum of
> the
> parts, comparisons of quantity fail us, small changes produce large
> effects,
> the assumptions of a uniform and homogeneous continuum are not
> satisfied."
> (X, p. 262)
>
> In this Keynes was following, among others, Marshall. In Marshall the
> ontological idea of "internal relations" is implicit is his assumption
> of the "pliability of human nature." Marshall explicitly identified the
> "subject-matter" of economics with "human nature" so that the
> "pliability of human nature" meant that economics, unlike physics, was a
> science whose "subject-matter ... passes through different stages of
> development." This in turn meant that the "laws which apply to one stage
> will seldom apply without modification to others; the laws of the
> science must have a development corresponding to that of the things of
> which they treat."
>
> "For the sake of simplicity of argument, Ricardo and his followers often
> spoke as though they regarded man as a constant quantity, and they never
> gave themselves enough trouble to study his variations. The people whom
> they knew most intimately were city men; and they sometimes expressed
> themselves so carelessly as almost to imply that other Englishmen were
> very much like those whom they knew in the city. ... As the [19th]
> century wore on ... people were getting clearer ideas as to the nature
> of organic growth. They were learning that if the subject-matter of a
> science passes through different stages of development, the laws which
> apply to one stage will seldom apply without modification to others; the
> laws of the science must have a development corresponding to that of the
> things of which they treat. The influence of this new notion gradually
> spread to the sciences which relate to man; and showed itself in the
> works of Goethe, Hegel, Comte and others. ... Economics has shared in
> the general movement; and is getting to pay every year a greater
> attention to the pliability of human nature, and to the way in which the
> character of man affects and is affected by the prevalent methods of the
> production, distribution and consumption of wealth." (Marshall,
> Principles, Variorum ed., Vol. 1, pp. 762-764)
>
> This repeats the claim made at the beginning of the Principles that "the
> influence of circumstances in fashioning character is generally
> recognized as the dominant fact in social science." (Vol. 1, p. 48)
> (This "fact" is, of course, rather far from being "generally recognized"
> in contemporary economics.) Marshall, like Marx, points to "the
> prevalent methods of the production, distribution and consumption of
> wealth" as the most important of these circumstances (see also Vol.1,
> pp. 1-2).
>
> In his biographical essay on Marshall, Keynes points out (see
> particularly X, pp. 185-7 and 196-7) that Marshall was aware of this
> ontologically based difference "between the objects and methods of the
> mathematical sciences and those of the social sciences" (p. 197). It
> was the source, he claims, of "the profundity of his [Marshall's]
> insight into the true character of his subject in its highest and most
> useful developments." (X, p. 188)
>
> "Marshall ... arrived very early at the point of view that the bare
> bones of economic theory are not worth much in themselves and do not
> carry one far in the direction of useful, practical conclusions. The
> whole point lies in applying them to the interpretation of current
> economic life. This requires a profound knowledge of the actual facts
> of industry and trade. But these and the relation of individual men to
> them are constantly and rapidly changing. Some extracts from his
> Inaugural Lecture at Cambridge will indicate his position:
>
> "The change that has been made in the point of view of Economics by the
> present generation is due to the discovery that man himself is in a
> great measure a creature of circumstances and changes with them. The
> chief fault in English economists at the beginning of the century was
> not that they ignored history and statistics, but that they regarded man
> as so to speak a constant quantity, and gave themselves little trouble
> to study his variations. They therefore attributed to the forces of
> supply and demand a much more mechanical and regular action than they
> actually have. Their most vital fault was that they did not see how
> liable to change are the habits and institutions of industry. But the
> Socialists were men who had felt intensely, and who knew something about
> the hidden springs of human action of which the economists took no
> account. Buried among their wild rhapsodies there were shrewd
> observations and pregnant suggestions from which philosophers and
> economists had much to learn. Among the bad results of the narrowness
> of the work of English economists early in the century, perhaps the most
> unfortunate was the opportunity which it gave to sciolists to quote and
> misapply economic dogmas. Ricardo and his chief followers did not make
> clear to others, it was not even quite clear to themselves, that what
> they were building up was not universal truth, but machinery of
> universal application in the discovery of a certain class of truths.
> 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." (Collected Writings, vol. X, p. 196)
>
> Keynes's claim that:
>
> "The Theory of Economics does not furnish a body of settled conclusions
> immediately applicable to 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."
>
> is simply repeating this conclusion of Marshall's.
>
> This fundamental methodological point is also the focus of Keynes's
> correspondence with Harrod about "Tinbergen's method."
>
> For the reasons given by Whitehead (which I've also frequently
> reproduced), internal relations limit the applicability of axiomatic
> reasoning in general and mathematical reasoning in particular. The
> comparison of classical economists to Euclidean geometers in the General
> Theory (p. 16) is most likely a reference to Whitehead. Whitehead used
> the development of non-Euclidean geometry to illustrate the limitations
> placed on axiomatic reasoning by the ontological fact of internal
> relations. Keynes had attended (indeed was the only student attending)
> Whitehead's 1904 lectures on non-Euclidean geometry.
>
> The "general theory" is a general theory of a "monetary economy," of
> "capitalism." It isn't a "general theory" of economics. Capitalism, as
> Keynes conceives it, is a particular kind of economy, one whose
> "essential characteristic" is "the dependence upon an intense appeal to
> the money-making and money-loving instincts of individuals as the main
> motive force of the economic machine." (IX, p. 293)
>
> As Keynes's own treatment of them reveals, however, this allows for a
> great deal of variation in the form taken by the General Theory's "three
> fundamental psychological factors": "the psychological propensity to
> consume, the psychological attitude to liquidity and the psychological
> expectation of future yield from capital-assets." (VII, p. 247) Putting
> flesh on the General Theory's "bare bones" therefore requires attention
> to the specific form taken by these factors in specific historical and
> cultural contexts.
>
> Keynes's theory can't be properly evaluated until it's properly
> understood. The psychology underpinning it explains why
> misinterpretation of the theory is so common and so tenacious. In one
> sense then, such misinterpretation confirms the theory. It also points
> to a significant aspect of what Keynes once called the "Tolstoy problem."
>
> Ted
>