Matt Nolan

Economics sucks, it is just the study of ‘common sense’

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This is a view I hear all the time, a view that (in my view and given how it is often framed) completely misses the point of economics, social science, and even common sense!

Common sense is an important thing to keep in mind, and the concept undeniably has a place when thinking about the application of economic ideas, or the reference point from where the social sciences should put effort into building understanding.

Common sense refers to judgements, knowledge, and beliefs that are shared between people. The context I’m using here is a touch weaker – but similar to the more common definition:

“Common sense is a basic ability to perceive, understand, and judge things which is shared by (“common to”) nearly all people, and can be reasonably expected of nearly all people without any need for debate”

The main difference is that this is descriptive of the way common sense is treated, not an indication of the way we should treat it 😉

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Infometrics

Careful making us an aggregate happiness machine

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Last week Matt Nolan discussed the idea that being too target focused can be dangerous (Infometrics link here):

Instead of targeting an arbitrary set of outputs that treat New Zealand like a machine, policy should be based on the inherent trade-offs that exist for the policy question we are asking.  Focused research on the costs and benefits of educational achievement, health outcomes, benefit policy etc – these are the ways we can incrementally improve policy, and build a better society together.

These outputs may suggest to us there is an issue that deserves investigations– but they should not be seen as an end to themselves.

Policy justified on the basis of the target of an arbitrary GDP or happiness index doesn’t do this, and instead threatens to tie our outcomes closer and closer to someone else’s view of what is right, what is just, what is happiness, and what wellbeing.  Instead the aim of government policy should be to ensure people in society have the ability to reach, and access to, choices that allow them to gain wellbeing.

A factor that often gets missed when discussing policy options in public is that the real “target” is not observable.  If we are not careful about the way “observable” things translate into the underlying issues we really care about, we will make a lot of false policy conclusions.

One of the reasons economists use a counterfactual that involves no government involvement is because of the idea of “revealed preferences” – that individuals will make choices that reveal the value they place on things.  Individuals know (at least to a greater degree) what they value, while the rest of us cannot hop into the minds of others and figure out what they value.

A clear view of trade-offs, and the use of markets to help ensure people reveal preferences, gets us a long way. Given that we can then go about considering the views of co-ordination that Matt also touched on last week.

 

Matt Nolan

Quote of the day: Pinker on changes in social sciences

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Via Noah Smith.  We have the following post on the Pinker vs Wieseltier debate on science and humanities (if you have a chance I would suggest reading the debates themselves as well).

The era in which an essayist can get away with ex cathedra pronouncements on factual questions in social science is coming to an end.

Very good, and Pinker’s co-operative version of science with the humanities seems appropriate to me (where instead we are merely asking about how to deal with certain propositions and using the best tools available).  I think Pinker won this debate, I am unsure why Wieseltier felt it necessary to take such an extreme position though – I think he initially believed Pinker was trying to force through a view based on the superiority of scientific authority (one that Pinker rules out in his initial article!), when he was really just suggesting the use of the scientific method (namely introducing a degree of the positivist view of theory creation) given the improvements in data availability and usability we have had.

As XKCD says:

But even within Pinker’s reasonable claims there is one area where I would be a touch careful Read more

Matt Nolan

Quote of the day: Hausman on tarot card reading … or ethics and economics

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Today’s quote of the day stems from me starting to reread “Economic Analysis, Moral Philosophy, and Public Policy“.  Last time I went through this book it annoyed me, as it didn’t seem to be attacking a “fair” version of an economist – rather a caricature.

However, I have noticed this time, in the first chapter, Hausman admits that is what they are doing – and it is to make the basic ethic principles they want to discuss “clear” to other economists.  In other words this isn’t a book about criticising economists per se – more a basic description of some important moral principles to keep in mind when translating from theory to practice in economics and policy making, and decision making more generally.  I can deal with this, and should be able to read the book far less defensively.

On that note he says:
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jamesz

Economics vs physics

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An interesting post by the Economic Logician that bears on our recent discussion:

Physicists believe that social sciences can only be described as true sciences if on can figure out some laws that always apply, without exceptions, and if there some invariant constants that would be good, too. Social scientists do not believe this is the right approach, foremost as one has to deal with individuals and societies that make choices.

James Wayne realizes that Physics lacks one ingredient that is essential in social sciences: choice.

Matt Nolan

Economics and science – careful with the prediction call

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I see that Rosenberg has created a bit of an uproar in the economics community with his claims around economics (although the articles focus is macroeconomics) not being a science.

Unlike other economists I think this is a good thing in terms of forcing economists to defend against the claim – however, like other economists I don’t quite agree with his sole focus on predictive success and the way he frames elements of economists’ arguments.  To me the suggestion that economists are instrumentalists (the Friedman essay) misses the point on what economists actually do – fitting the Friedman essay into a consistent lens of understanding for what economics is and what economists do is a hard, but fun, thing to attempt do with friends over beer 🙂

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