Economics and Ontology. II, the wrong track of Economics

Publicado el 24/04/2006

I will now present Tony Lawson`s opinions about the te current state of mainstream Economics.

This kind of Economics is understood to be any economic discourse which uses mathematical models. Once this is provisionally accepted, we are confronted with the following three propositions. (i) Mathematics are not necessary for a science. (ii) Mathematics are only useful in a world which could never be akin to the social world. (iii) Therefore Economics is in the wrong track.

In the sequel to this post I will try to explain how Lawson thinks a really scientific Economics could be developped from trscendental ontology. But from the time being I will just deal with the aforementioned three propositions, explaining them and then submitting some remarks.

The example of biology should suffice to accept that mathematics are not a prerequisite of scince. We really accept biology is making substantial progress in the understanding of the deep structure of living matter and yet mathematics are not substantial to these developments.

Mathematics however are quite useful in a world where things stay as they are structurally even if the observatios related to the phenomena appearing in this world are seen to be evolving. That is, mathematics are useful only to understand the workings of a closed system.

Now, since human society is a completely different system continouslly changing in structure, mathematics cannot help much and sticking to them as a tool is just a recognition of the necessity of belonging but hardly an instrument for the discovery of truth.

The three ideas are clear enough and deserve some remarks.

Consider first the following list of Nobel Laureates. Hayek, Buchanan, Coase, Kahneman, Tversky and Vernon Smith. They are mainstream and they have not used mathematics in any significant way. Of course it could be the case that in many decades we might come to realize that they did not gain any particular relevant insight into the deep nature of economic reality. It could be, but it would be quite different than stating as of today that their insights are right, if they are, just by chance, which is what Lawson is saying, I think.

The sharp distinction between events and regularities on one hand and deep structure on the other hand is somewhat contrived. For one thing we could say that models-mathematical or not- give us a glimpse into the nature or the deep structure of reality. For another thing distinguising between puzzles and problems -as I have done in the past-could also be a way of differentiating between the desire to understand the puzzling nature of things and problems whih are nothing but a sudoku which wi llbe solved sooner or later.

And to end this second post I think that Tony Lawson has to take care, if we are going to accept his critic, of the extrange nature of Lucas 72 or of Azariadis 81, both in JET.

As for te Lucas piece it is a piece of mainstream Economics if ever there was one. It consists of a matematical model which shows simultaneouslly that the deep structue of an economic system shows no sign of a trade-off between the rate of inflation and the rate of unemployment and that nontheless well defined problems of information can explain the apparent downward sloping fit of the observations recorded for these two variables.

As for Azariadis his pionnering work on selffulfilling prophesies shows mathematically that an economic system completelly deterministic could look like beyond the sadow of a doubt as a sochastic one just because the people come to belive tahat that was the case.

I thingkthat these two examples of regular mainstream Economics cast a doubt on the sharp distinction made by by Lawson between events and regularities on the one hand and deep stucture on the other. They seam to me as a stone on the shoe of any realist, empirical or trascendental. In the latter case because, unless you thing you have discovered the unique right ontology you cannot be sure that events and regukariies cannot come from some other ontology.

In summary, even if you are a realist you cannot avoid epistemic problems. Not even if you are a trascendetal ontologicalist.