The Silliness of Krugman, Williamson & Rosenberg on the Scientific Standing of Economics

A lot of silliness in the last few days from Krugman, Williamson & Rosenberg on the scientific standing of economics and the role of tautological equilibrium constructs in the explanatory strategy of that science.

The simple and outstanding fact of the matter is that this issue has been resolved by Hayek — and the evident fact that Misters Krugman, Williamson & Rosenberg are for all intents and purposes unaware of Hayek’s work on the matter doesn’t count in the least as a counter argument.

Here is Hayek’s resolution of the puzzle:

Economics provides a contingent, bottom-up causal explanatory mechanism for the design-like order of the over-all coordination of economic plans — i.e. open-ended learning and changes in rival understandings and judgments by individuals in the context of changing local conditions and relative prices.

The explanatory form is similar in many ways to Darwinian biology.  And note well, any design-like order without a designer raises the question: what sort of causal mechanism produced that order if it was not the direct, designed and made product of a designing mind?

Both economics and Darwinian biology provide empirical, contingent, causal mechanisms which are contingent because we can imagine alternative — though implausible — rival mechanisms, e.g. (1) Martians put everything in place and created the order we see; (2) a massive act of pure change with no underlying causal mechanism at all; (3) God created the design-like order we see; (4) humans or nature itself are pre-programmed like ants to do exactly the things they do; (5) etc.

Hayek also explained the role of the tautological equilibrium construct.  It has several, some of these closely echoed earlier by Marshall, Mises, Knight, and other giants of economic science.

The first role is this — the equilibrium construct allows us to perceive the design-like order in the coordination of economic plans.  In other words, the equilibrium construct plays a central role in providing us with a perception of a pattern that gives rise to the problem of design-like order without a designer.

The second role is equally significant:  by screening off what a tautological logical or math construct cannot include — open-ended learning and changes in understanding and judgment — the equilibrium construct isolates the contingent causal mechanism at the heart of economic explanation, i.e. open-ended learning or discovery and changes in rival understandings and judgments in the the context of changing local conditions and relative prices.  It is learning and changes in rival understanding of the relative relational significance of things which allows Hayek’s famous understanding of market prices as signals to function.

So that is the skin and bones of the core of Hayek’s resolution of the puzzle of making sense of economics as a contingent, causal explanatory endeavor and a true gem within the kingdom of science with a status very similar to Darwinian biology, providing a remarkable window on a causal mechanism capable of producing true marvels of design-like order.

But it is one half of the coin.

The other half of the coin is perhaps equally significant.  Because Hayek — along with Popper, Menger, Wittgenstein, Kyle, Kuhn and others — blew apart the justificationalist / demostrative knowledge tradition and the various images of “science”, “math” and “knowledge” this tradition metastasized into in the 19th and 20th centuries.  Hayek’s started first with Mach and the brain — showing that that Hume / Mach empiricism, associationism, and phenomenalistic positivism more particularly — were incompatible with any imaginable classificatory mechanism of neural network connections in the brain.

Hayek came to be aware that much if not most of science did not involve making and justifying Laplacean predictions of particular events according to simple 2-variable relations or 2-variable linear equations.  And the image of an individual’s “knowledge” as existing in the form of fully articulated, fully public, deductive structures was fallacious and incompatible with what we know about the primacy of motor control in the brain and the significance for communication and cooperation of shared and acquired common patterns of going on together in the world.  Like Kuhn, Hayek came to see that we don’t make sense of science by looking at completed formal constructs in a textbook, we make sense of science by re-calling to mind the problem raising patterns that generate inquiry, and by looking at what the embodies elements of the inquirer bring to table in perceiving those patterns and in providing solutions to them.  This later aspect is particularly significant in the case of a human science like economics, where the inquirer directly embodies many of the elements essential both in seeing the problem and in grasping the character of the explanatory elements exploited.  The Kantian or Hilbertian or Tractarian demand descending from the justificational / demonstrative tradition of Euclid and Aristotle that all knowledge should have a public, fully articulated and justified formal or mathematical structure was fatally ill-founded on a false understanding of the well-spring of symbolic significant in embodied structures of mind and shared, imitation-acquired common practices or ways of going on together.

Hayek coined and Popper adopted the term “scientism” to label all of the false images of science and knowledge which social scientists, philosophers and even natural scientists sought to impose on those thinking about the nature of “science” and “knowledge” or how to produce science or knowledge in any special field.  Eventually, Hayek convinced Popper that his own “falsifiability” criterion of “science” was falsified by the example of Darwinian biology, economics, global brain science, and by other sciences involving what Hayek called “essentially complex phenomena” where only patterns could be explain via causal mechanisms involving innumerable, functionally-defined, or open-ended causal components, and no “falsifiable” particular predictions at a particular places in space and time could be made.

It’s easy to document the dramatic role of the false images of “science” and “knowledge” across the course of the development of economics over the last 150 years: from Pareto, Schumpeter, and Schumpeter’s student Samuelson’s attempt to build economics on the image of Mach account of science and knowledge, to the influence of the the Hilbert program and Bourbakist school of mathematical formalism, to the direct plagiarism and aping of 19th century energy mechanics by Walras and others, to the Peirce, Popper and Carnap inspired “testability and instrumental utility criterion” of “science” of Friedman and Lipsey, it is easy to document an unstinting 150 years of scientism in the profession of economics.

I’ll add more tomorrow. For now, see also my notes on Rosenberg’s conversation with Roberts on the nature of economic explanation.

11 comments to The Silliness of Krugman, Williamson & Rosenberg on the Scientific Standing of Economics

  • Martin

    Greg,

    “Hayek’s started first with Mach and the brain — showing that that Hume / Mach empiricism, associationism, and phenomenalistic positivism more particularly — were incompatible with any imaginable classificatory mechanism of neural network connections in the brain.”

    I have not read the sensory order, however I have read Mach’s economical nature of physical inquiry and I do not see how what you argue here – the article – is in any way in contradiction with what Mach has argued there.

  • Greg Ransom

    Read the book, then get back to me.

    Popper, Kuhn and Wittgenstein’s attack on Machian phenomenalist/empiricist positivism shares deep and supporting commonalities with Hayek’s contribution.

  • Martin

    Greg, I understand that, but I do not see such a clear-cut difference between Mach from the ‘economical nature of physical inquiry’ and what you wrote above.

  • Greg Ransom

    Martin, this isn’t stuff so simple that a few words in the comments to a blog post will do the job. The book can be had from Amazon for less then $20. Gerald Edelman and Joaquin Fuster recommend it …

  • complexphenom

    Greg,

    Do you know of any instances where Hayek ever mentions Kurt Godel’s contributions to answering Hilbert’s challenge in the negative? I know he brings up Godel’s name briefly in one of the interviews here: http://hayek.ufm.edu/index.php/Main_Page (not exactly sure which one off the top of my head), and he also mentions Godel once I believe in “Studies on Phil, Politics and Econ”. But other than these specific cases, I’m not aware of any deep discussion by Hayek of what Godel’s theorems mean for the irreducibility of all of human thought to a turing machine. I’ve always wondered what it would have been like had Hayek and Godel ever met, or at least knew of each others’ work. Any insights?

    Thanks.

  • Greg Ransom

    I believe Hayek brings up Godel in his unpublished “System Within systems” paper, which attempted to respond to Popper’s objections to Hayek’s _The Sensory Order_. The idea is that every formal system of relations is manipulated by a system with a higher level of complexity. Hayek never made his idea so clear, or mastered the Godel proof so well as to make his argument bulllet proof rather than suggestive.

  • Greg Ransom

    One thing that has always fascinated me is the relation of Wittgenstein’s work to Godel — there is a helpful book or two on the topic.

    Note well that there is a great deal of overlap between Hayek’s work and Wittgesntein’s.

    In the post-Edelman period we must consider Hayek’s Sensory Order mechanism a negative proof against the possibility of the Machian, positivist, associationist and behaviorist programs rather than an account of the actual mechanism of categorization used by the brain, which most likely makes use of selective mechanisms.

  • complexphenom

    Thanks Greg. I must look up the essay you mention. I know Rebecca Goldstein has written a somewhat of a layman’s book on Godel where she discusses Godel’s experience as a participant of the Vienna circle. Godel’s philosophical differences between the Vienna Circle and Wittgenstein are surveyed from her own point of view. Better books in my opinion are Henry Wang’s “A Logical Journey” and “Logical Dilemmas” by John Dawson. Both are bios/reflections on Godel’s thought. There’s also Godel’s own unpublished philosophical essays found here: http://www.amazon.com/Kurt-G%C3%B6del-Unpublished-Philosophical-Essays/dp/3764353104/ref=sr_1_29?s=books&ie=UTF8&qid=1317678572&sr=1-29

    that one’s on my waiting list; and most recently this book was just published: http://www.amazon.com/Kurt-G%C3%B6del-Foundations-Mathematics-Horizons/dp/0521761441/ref=sr_1_8?s=books&ie=UTF8&qid=1317678476&sr=1-8

    which I just received the other day and can’t wait to get through. There’s lots of discussion in it about how incompleteness applies to various subjects according to given experts. Wish they had included a section by a Hayek expert on the possible applicability of incompleteness to complexity issues.

    btw, I know Hayek had read Henry Margenau’s “The Nature of Physical Reality” and cites it in his “Sensory Order”. I’m halfway through Margenau’s book and it seems to me to describe a philosophy of physics (and an ontology of physical nature) entirely consistent with Hayekian brain-mind principles. I’m wondering why no one seems to be discussing Margenau nowadays? With respect to physics his constructionism seems more plausible than Mach’s extreme empiricism and some of Popper’s suggestions, and I rather like Popper. As someone with a physics background, I believe Margenau is sadly being overlooked for no good reason. His descriptions (along with Hayek’s) may go far in distinguishing the differences in epistemology between the sciences (physical & social).

  • Greg Ransom

    I’ve never checked out Margenau’s book. Guess I need to take a look.

  • complexphenom

    Here’s Gell-Mann on Margenau: http://www.webofstories.com/play/10565

  • Greg Ransom

    Gell-Mann’s “Panther” book is rather interesting on the notion of “information”, among other things.

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