Re: Why Heterodox are subject to be losers.

["Gunnar Tomasson" <gunnar.tomasson@xxxxxxxxxxx>]

Paul:

The following goes to the heart of our differences on the concept of
"theory":

> >There is nothing wrong with that so long as Economic Theorists follow the
> >logical implication of such "theory" and abstain from any and all
> >predictions about the future course of economic events.
>
> MY RESPONSE:
> Again Gunnar you conflate science and theory with prediction. SCience and
> theory implies the ability to specify the conditions which EXPLAIN why we
> observe what we observe.
>
> EXPLANATION IS THE ESSENCE of theory and science- and if you are lucky
enough
> to be dealing with an ergodic process then you can explain and predict

Briefly, "explanation" is NO part of empirical science/theory - the
reduction of observed phenomena to mathematical form does NOT "explain"
whatever physical factors may have given rise to the phenomena in the first
place.

The fact that many scientists speak of "theories" in their field AS IF they
"explained" - rather than "described" - given phenomena reflects imprecision
of language rather than the facts of the matter; a point which appears with
crystal clarity in the essential incompatibility of the "explanations" of
orbital motion provided by the equations of Newtonian Mechanics, on the one
hand, and of Einsteinian Mechanics, on the other hand.

By the same token, the reduction of observed economic phenomena to
econometric form "describes" but does NOT "explain" them - whence it follows
that it is inadmissible on epistemological grounds to ascribe "explanatory"
power (with x, y, or z degree of uncertainty) to variables used in
econometric projections.

Re. the following:

> Obviously if you are analyzing nonergodic processes -- you can not use
PAST
> quantitative date to make statistically reliable predictions about the
future.

Comment:

Agree, as indicated in my last point above.

Gunnar


----- Original Message -----
From: "pdavidso" <pdavidso@xxxxxxx>
To: "Gunnar Tomasson" <gunnar.tomasson@xxxxxxxxxxx>
Cc: <pkt@xxxxxxxxxxxxxxxx>
Sent: Thursday, March 06, 2003 4:58 PM
Subject: RE: Why Heterodox are subject to be losers.


> >===== Original Message From Gunnar Tomasson <gunnar.tomasson@xxxxxxxxxxx>
> >Comment:
> >
> >Not so - your concept of "theory" - and that of Evolutionary Theorists -
is
> >NOT that of physical science.
> >
> >There is nothing wrong with that so long as Economic Theorists follow the
> >logical implication of such "theory" and abstain from any and all
> >predictions about the future course of economic events.
>
> MY RESPONSE:
> Again Gunnar you conflate science and theory with prediction. SCience and
> theory implies the ability to specify the conditions which EXPLAIN why we
> observe what we observe.
>
> EXPLANATION IS THE ESSENCE of theory and science- and if you are lucky
enough
> to be dealing with an ergodic process then you can explain and predict
>
> Obviously if you are analyzing nonergodic processes -- you can not use
PAST
> quantitative date to make statistically reliable predictions about the
future.
>
>  [SVEN; ARE YOU READING THIS -- AND THE IMPLICATIONS FOR YOUR ALL OUT
DEMAND
> FOR QUANTITATIVE ANALYSIS?]
>
> But you can make predictions regarding qualitative behavior if you
correctly
> specify reactions to nonergodic uncertainty -- e.g., a rush to liquidity
when
> people think the future is less certain than they thought previously.
>
>  of course, the question arises:
> >
> >What is Economic Theory good for?
> >
> >Re. the following:
> >
> >> If you just appeal to "common sense" and not to an axiomatic logical
> >general
> >> theory -- then anything goes and we are back to a Tower of Babel.
> >
> >Comment:
> >
> >Here, the Samuelson/Tomasson concept of "theory" is one up on your own -
for
> >"an axiomatic logical general theory" relating to real-world economic
> >phenomena cannot possibly exist UNLESS such phenomena are ergodic.
> >
> >Or, to put it differently, any such "axiomatic logical general theory"
would
> >be "operationally meaningless
>
>
>
> MY RESPONSE:
>
> Again Gunnar you are long -- we can understand the desire for liquidity
for
> precautionary purposes in a general theory that does not require the
ergodic
> axiom.  It is not operationally meaningless-- all that it means is you
cannot
> predict the date -- with statistical reliability -- when the current bear
> (desire for liquidity) market will end -- or the next bull market will
begin.
> All you can say, is the bear market will end when people stop feeling the
need
> for liquidity and begin to believe that financial markets like the NYSE
and
> NASDAQ can provide sufficient capital gains  to offset transactions costs.
> See my book POST KEYNESIAN MACROECONOMIC THEORY CHAPTERS ON LIQUIDITY --
or
> my FINANCIAL MARKETS, MONEY AND THE REAL WORLD Chapters on the same topic.
>
> 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
>
>