Re: Article in the Chronicle of Higher Education

["J. Barkley Rosser, Jr." <rosserjb@xxxxxxx>]

      I agree with Paul Davidson regarding the
use of math and rigor.  Arguing against math
and rigor, per se, just leads to heterodox
economics being marginalized and disregarded.
      I also agree that Roy Weintraub's book is
very interesting, although I have some disagreements
with him (but those will be aired in the JPKE
Symposium to which Paul referred).
      I would note that although math and rigor must
be accepted, there is a trend to having less of it
in the mainstream now to a small extent.  Even in
places like JET or J. Math Econ one now sees
long verbal introductions that attempt to explain
in words what is supposedly going on in the paper.
And, a central contradiction of Roy Weintraub's
book is that on the one hand he identifies the rise
of a Bourbakist approach to math econ as the
signal victory of the mathematical approach while
also noting its decline among mathematicians and
implicitly therefore its decline among economists
as well.  That has gone on, I believe.  There has
been a big change in the nature of the math being
used by economists of all stripes in recent years.
      However, I disagree with Paul regarding
pluralism.  That must be the appropriate response.
      I also apologize in advance to the organizers
of the ICAPE conference that I shall not be able
to attend it for personal reasons.  However, it
looks very exciting, and I regret that I shall not be
there.  I fully support its aims and goals.
Barkley Rosser
James Madison University
Editor, Journal of Economic Behavior and Organization
----- Original Message -----
From: "pdavidso" <pdavidso@xxxxxxx>
To: "Forstater, Mathew" <ForstaterM@xxxxxxxx>
Cc: <pkt@xxxxxxxxxxxxxxxx>
Sent: Saturday, January 25, 2003 1:30 PM
Subject: Re: Article in the Chronicle of Higher Education


> Henry and Gary have asked me to elaborate while Mat  has written:
>
>
> >===== Original Message From "Forstater, Mathew" <ForstaterM@xxxxxxxx>
=====
> >Paul can speak for himself, of course, but since he has done so
> >previously, I imagine he is referring to his tactic of emphasizing the
> >(related issues of) number of axioms, ergodicity versus non-ergodicity,
> >and generality (general versus special in Keynes's sense).
> >
> >My own feeling is that a multi-pronged approach is called for, meaning
> >that we need to challenge the mainstream in multiple ways. Paul's
> >approach is important, but we need to fashion a variety of internal and
> >external critiques, challenging them on their own grounds, as well as
> >challenging the grounds themselves.  We also need to fashion alternative
> >approaches, and here I think that we need to both develop specific
> >alternative paradigms (Post Keynesian, Institutionalist, Marxist,
> >Austrian, etc.) as well as to work on a variety of hybrid or eclectic
> >approaches that draw on multiple alternative traditions.  Of course,
> >every person doesn't have to do all of these--there can be some division
> >of labor.
>
>
> Here is my response to all three:
>
> &#65279;RESPONSE TO "TASKING ON RATIONAL MAN"
>
> The fact that Notre Dame Committee found no fault of current faculty who
were
> hired to build an alternative - is of no value.  In 1974 I was appointed
to be
> the area wide chair of the Economics discipline at Rutgers University with
a
> specific mandate from the Provost to product differentiate (vis-a vis
> Princeton, etc) the economics discipline in New Brunswick. At that time
there
> were five departments of economics in New Brunswick and all of them
consisted
> of mainly low-rated mainstream economists. The Provost wanted to bring
media
> attention to an alternative economics program at Rutgers.  The Provost was
> motivated by an article appearing in THE CHRONICLE OF HIGHER EDUCATION
lauding
> the University of Massachusetts for providing an alternative to the
> neoclassical mainstream of the day.  The Provost urged me to get the same
> media attention for an alternative [Post Keynesian discipline at Rutgers]
> where there were 81 professorial lines in 5 different economics department
at
> the New Brunswick Campus Area.
>
> The economics department of Livingston College (Rutgers) recruited under
my
> guidance  Alfred Eichner, Jan Kregel, Nina Shapiro, Michele Naples, and
Bruce
> Steinberg (that's right - the guy who is now the media talking head of
Merrill
> Lynch) as non-mainstream economists.   With me that made 6 out of 81
economic
> professorial positions that could be identified as non-mainstream!
> These six faculty members out published the remaining 75 others -
including
> outpublishing in mainstream journals. Yet after this, my neoclassical
> colleagues revolted and the Administration caved in ----- the rest is
history
> as they  prevented Steinberg, Naples, and Shapiro from getting tenure- and
> made life very unpleasant for Kregel, Davidson and Eichner so that
ultimately
> Kregel and Davidson left and Eichner died.
>
> So history indicates that Central Administrators back off with their
support
> when a viable alternative starts to take root - and the remaining
neoclassical
> economists protest. Attention from the main stream is desired by
> administrators- especially in periods of tight budgets when granting
> foundations and government  institutions are dominated by mainstream
panels of
> peers who think of the grants as "their" money. [See the anecdote about
NSF
> and my grant request in John King's book HISTORY OF POST KEYNESIAN
ECONOMICS.]
> Administrators now evaluate departments as to whether they are "profit
> centers" and heterodoxy just does not cut it for grant money-
> Perhaps the University of Missouri Kansas City an exception as long as
> financial support for CFEPS continues to provide funds.
>
> If heterodox economists join other social science departments than they
are
> lost to the economics discipline - and the fight over economics is over.
>
>
>
> First point: We must continue to fight for publication rights in the major
> economics journals published by the American Economic
Association -especially
> the AER, JEP, and JEI - from which we are excluded as not 'rigorous".  The
AEA
> association is willing to accept our dues each year- at least 5000 of us
> according to the CHRONICLE- and that represents a substantial funding to
> propogate neoclassical fiction. How about sending a petition to tghe AEA
> indicating a mass resgnation from its membership unless we are given
access to
> the journals?
>
>   [ I was an important force in pushing the AEA to set up the Schelling
> Committee on Journals and I presented the Schelling committee with a
proposal
> to assure that heterodox members of the AEA had representation on the
Board of
> Editors of the AEA journal and some voice in editorial decisions.
> Unfortunately, I lost that fight primarily for lack of support -- for
others
> merely railed against theory and the use of math. This latter path of
being
> against theory and math is a foolish one to take but it allowed the
Schelling
> committee to endorse such an argument without recommending any
institutional
> teeth to enforce such actions. ]
>
> This argument against theory and math allows the mainstream -- especially
> Nobel Prize winners-- to characterize all heterodox economists as
nonrigorous,
> soft-headed, bleeding heart, fuzzy thinkers who are trying to use
economics to
> foster a political program.
>
> Heterodox economists should NOT permit themselves to be categorized as
> against theory or math.  We are only against BAD theory, i.e., bad theory
is
> theory based on axioms that are not relevant to economic decision making
in an
> entrepreneurial economy.  In an entrepreneurial economy such as we live
in, as
> Keynes pointed out in 1935, production and exchange is organized
> by the use of money contracts in the face of an uncertain future. And a
money
> wage (not real wage) contract is ubiquitous in labor markets.
>
> Accordingly attacking neoclassical economics as "sycophantic to
capitalism" -
> as Steve Keen is quoted as saying in the CHRONICLE article, is exactly the
> wrong words to use in argument -- for it the make speaker smell
suspiciously
> like a destructive anarchist in sheep's (or maybe Marxian)
> clothing.   Capitalism  (i.e., an entrepreneurial economy where the money
wage
> contract is a basic instrument for organizing production), like Democracy,
may
> not be exactly the most efficient heaven on earth, but with reforms it is
> probably the best hope for all us mere mortals.
>
>   The basic attack on "rational man" should be that in an economy that is
> nonergodic, i.e.,  ontologically[ not epistemologically] uncertain,
> self-interest decision can result in BAD economic outcomes even for those
who
> decisions was made in the light of self-interest.
>   This has nothing to do with MARXIAN exploitation, unequal power, etc.
>
>   Michael Bernstein's argument that WWII "solidified" the trend towards
Adam
> Smith's laissez   faire economics - as suggested in the CHRONICLE article-
is
> not only misleading but it   historically inaccurate. [I wish Mr.
Bernstein
> had read Roy Weintraub's new book HOW   ECONOMICS BECAME A MATHEMATICAL
> SCIENCE.  This book, I believe, is a an   excellent book on the history of
> economic thought development and therefore we are going to  publish a
> symposium of reviews and rejoinder on the Weintraub book in an early
> forthcoming issue of the JPKE.]
>
>   Moreover, as someone who lived through WWII and the post war period, I
was
> appointed as   an Instructor in Physiological Chemistry at the medical
school
> of the University of Pennsylvania in 1950, I can reply to Mr. Bernstein
that
> the enormous infusion of government funds for developing application of
> mathematical models in various disciplines - dried up immediately after
the
> war and did not really beginning again until the late 1950s - after
>   Sputnik. [ All one has to do is look at Herman Miller's study of INCOME
OF
> THE AMERICAN PEOPLE to see that in 1950 academic salaries lagged way
behind
> skilled blue collar workers - and nominal academic salaries were not much
> higher in 1950 than they werein the 1930s. In 1950 a starting salary for a
> Full Professor in Physiological Chemistry at the medical school of the
> University of Pennsylvania was $4800.]
>
>  Keen is quoted [in the CHRONICLE] as putting neoclassical economics at
the
> same level of Physics before Newton.  This is a terribly wrong argument
for it
> suggests that with enough research neoclassical economics can reach at
least
> the same level of description and prediction  as Newtonian physics.  But
that
> is NOT possible since Newtonian physics dealt with ergodic processes and
the
> major economic processes in economics are NONERGODIC.  Therefore
prediction
> is impossible- and institution building to offset unforseen outcomes MUST
be
> the  object of economic policy.
>
>   THE ONE UMBRELLA FALLACY. Mat has responded by arguing that heterodoxy
needs
> to   encourage many approaches- a similar argument has been put forth by
> Harcourt and Dow "the horses for courses" argument.  I prefer to call this
> approach the fallacious idea that "the  enemy of my enemy is my friend".
>
>   The history of the Post Keynesian movement in the 1960s to 1980s (see
John
> King's book)   shows that this approach leads to failure to force the
> neoclassical mainstream to make room  for any alternative in the major
> economic journals, textbooks, etc
>
>   In the 1970s, a mixture of Sraffians, Kaleckians, Minskyians[ e.g.,
Minsky,
> Chick, etc],  English neoKeynesians and American Post Keynesians [the
latter
> are the only ones who  adopted Keynes's aggregate supply (Z) -- aggregate
> demand equilibrium approach ] joined  together under the Post Keynesian
> umbrella. [Some may be surprised by my identifying  Minsky as separate
from
> the American Post Keynesians - but see pp. 113-14 of John King's book
HISTORY
> OF POST KEYNESIAN ECONOMICS where King correctly illustrates  why
"Minsky's
> Post Keynesianism was highly individualistic" . [Why? Basically Minsky was
>   not interested in the Z-D equilibrium analysis and his impact was to
retard
> PK in the US by providing people like Solow with a different model than
the
> basic Z-D model.  Using Minsky  against other Pkers permitted Solow to
argue
> that Pkers were a confusing and confused group  of malcontents who saw
> differing problems in capitalism but had no consistent model to   provide
a
> solution.  Thus Solow could dismiss Post Keynesians as they were reaching
> their
>   pinnacle  (Notoriety?) Of professional attention as an inconsistent
group of
> idiot savants.
>
>   I could go on to argue why Deidre McClosky's"three vices" (as described
in
> THE  CHRONICLE)  are not the proper argument either.  But this will only
> lengthen this already long response.
>
>   Regarding math and economics I again urge people to read Roy Weintraub's
> book HOW ECONOMICS BECAME A MATHEMATICAL SCIENCE and the symposium on this
> book
>   which we hope to publish in the Summer 2003 issue of the JPKE.
>
>   I should note that the defenders of neoclassical economics - e.g., Solow
and
> Arrow [in the  CHRONICLE article] use a form of pluralism to defend the
> mainstream. When challenged about self- interest decisions and efficiency
they
> point to a "broadened" view of rationality -  i.e., game theory,
behavioral
> economics,etc.  Thus they can reject the Dow call for pluralism --
>   because they provide "rigorous" pluralism -- while heterodoxy rail
against
> rigor even in pluralism.  Many heterodox economists let them get away with
> that - because  it "looks" like they are moving towards the heterodox
outcomes
> even if these main stream pluralists are not adopting the heterodox theory
>
>   But we should attack vigorously this mainstream "broadening" of their
theory
> because these  other mainstream approaches - still fundamentally assume an
> underlying ergodic economic system. [See my article on probability and
> uncertainty in the 1991 issue of JOURNAL OF ECONOMIC PERSPECTIVES] To the
> extent they permit uncertainty to enter the analysis -- it is
epistemological
>   uncertainty and therefore in the LONG RUN the market system - via a
social
> Darwinistic process- will weed out the fools and the survivors will be
those
> who made decisions "as if" [to use Milton Friedman's phrase] they
possessed
> the "correct" information about the future!
>
>   So Steve Keen is wrong in saying (as quoted in THE CHRONICLE) that these
> neoclassicals  are "getting away from the traditional assumptions".  In
the
> short run they permit a certain form of limited rationality (Simon's
bounded
> rationality) while permitting some decisions to be erroneous [to say
decisions
> are erroneous MEANS one assumes that the real path of the economy is
> preprogrammed, i.e., ergodic] while in the long run , the neoclassical
truths
> still are the outcome.
>
>   When will neoclassical economics give up a fundamental assumption
(axiom)
> such as the neutrality of money and the ergodic axiom -- the latter
Samuelson
> ,in a 1968 article in the Canadian Journal of Economics, insisted is
essential
> in making economics a science?
>
> When a neoclassical pluralist develops a model where money is not neutral
in
> either the short run or the long run , then AND only then, we will know
that
>  neoclassical pluralism is moving towards a model that is applicable to an
> understanding the   operation of an entrepreneurial economy.
>
>   Steve Keen 's argument t (again quoted in the CHRONICLE) that "If what I
> demolish is a  straw man, why do they teach him?" is a cheap shot and a
bad
> argument.  After all in  principles of physics we are all taught that if
we
> drop a feather and a stone from the top of the leaning tower of Pisa they
will
> both hit the ground at the same time - even though we know  empirical fact
> that the feather will take longer to hit the ground.  But demolishing the
> straw
>   man of the feather-stone model by empirical facts is NOT sufficient to
> demolish the law of  gravity!! And Steve should know better.
>
>
>   So what is the correct argument??
>
>   We should take our lead from Keynes one of the best logicians and
"minds" of
> the 20th
>   century. [See p. 16 of Keynes's GT}
>
>
>  [ P.S. I am surprised the author of the CHRONICLE article never contacted
me]
>
>  Paul
>
> Paul Davidson
> Editor, Journal of Post Keynesian Economics
> University of Tennessee
> SMC 503
> Knoxville, Tennessee 37996-0550
> phone # (561)369-1951; fax #(561)369-1951;
> email pdavidson@xxxxxxx
> http://econ.bus.utk.edu/davidsonextra/Davidson.html
>
>