The Scientific Limits of Understanding Complex Social Phenomena

Yves here. The post below, which discusses the limits of how “scientific” a social science can be, will strike a lot of readers as stating the obvious. But I’m posting this to remind readers that the economics profession’s scientific pretensions have led economists to have vastly more policy influence and be better paid than other social scientists. I have no doubt court soothsayers had similarly prominent roles.

In a bit of synchronicity, Andrew Gellman posted Friday on the same issue, citing an article by Douglas Campbell (sadly, there seems to be no link to it, and I Googled some of the text from it and could not find the underlying paper). Key bits from Campbell:

A new study finding that more than half of psychology studies failed to replicate is a very positive step forward for social science. Could a similar study be undertaken in economics, and what would it find? Most empirical economics research is non-experimental, and thus I suspect that most studies would replicate in the sense that if one used the same data and ran the exact same regressions, the results are unlikely to change. However, if one were also to test the robustness of results to additional (or fewer) control variables, differing estimation approaches, or try out-of-sample testing on new data, I suspect less than half would survive….While I knew the conventional wisdom that it’s a bad idea to write “comment papers” in economics, eventually I became curious what would happen if I tried to take down a “seminal” paper published in a top journal.

One paper I had been assigned to read in several graduate courses, on “The Diffusion of Development,” published in the QJE, a leading economics journal published at Harvard, argued that there is a causal link between a society’s average skull size “genetic distance to the US” and its GDP per capita. The authors were careful to point out that their results didn’t necessarily indicate a direct impact of genetic traits on economic development, but that genetic distance could be a proxy for a whole host of other cultural traits which could impact the transmission of technology. However, in my view this point was undercut by the authors’ assertion that the apparent impact of genetic distance on GDP per capita survives the inclusion of an ostensibly exhaustive list of geographic and cultural controls. This suggests that genetic distance may not merely proxy differences in cultural traits, but has a direct impact on GDP. Thus black Africa may be poor because of its genetic endowment, and white Europe rich for the same reason.

Except, …, wait a second here before we go leaping to conclusions….

How exhaustive were those geographic and cultural controls? A coauthor, Ju Hyun Pyun and I noticed that the authors did not even control for latitude or for a dummy for sub-Saharan Africa in their cross-country income regressions, even as they argued that their results were robust to controls for geographic regions. When we included these controls (standard in this literature) in the first regression we ran, the correlation between genetic distance to the US and development disappeared. We also found that genetic distance to the US failed to predict income levels even when we just included two dummy variables, one for Europe and one for sub-Saharan Africa, with no other controls. Thus, the original findings were equivalent to the observation that white Europe is rich and black Africa is poor, with no more explanatory power than that. While we felt our results were perfectly straightforward, it took us seven submissions and four years to publish our results in a minor journal. Meanwhile, results similar to those we had critiqued continued to be published in leading journals, including one of the same journals where our paper was rejected. We often had to contend with the original authors as referees – once as the sole referee. (Pro tip: if writing a paper like this, recommend to the editor that they not choose the hostile original authors as referees.) One editor sided with a creative referee who objected to our paper on the grounds that “There is no reason to interpret the sub-Saharan dummy as a ‘geographic variable’”. The same referee also zinged us for not including the exact same sample as the original paper, even though the data and original sample were not publicly (or privately) available. This was hardly the type of hassle-to-reward ratio which would lead me to write a similar such paper, at least before tenure. Instead, had we decided to write an “extension” paper, using the genetic distance data to predict some other variable, publication would have been facilitated, since the original authors would have been likely referees and would have been happy to see our results published. The incentive structure here could be improved.

The comments on the Gelman post are also instructive.

The post below focuses more on the bigger “political economy,” as in social engineering questions, that economists, with their pretenses of objectivity, try to pretend is not one of the core aims of their discipline. Yet by deciding what outcomes are to be sought, economists have already put a very big finger on the scales even before the policy design issues are on the table.

Economics became important due to the Depression and the Cold War. Political leaders saw how the destructions of wealth and livelihoods led to calls for radical solutions, and the perceived radicalism of Roosevelt was tame compared to what could have resulted. The rapid industrialization of Russia impressed upon the West what a command and control economy could do, and that it had the potential to outproduce liberal democracies.

Economists were happy, indeed eager, to offer solutions to the problems of how to create more stability (as in hold internal Communists at bay) and growth (to compete with the USSR from a manufacturing standpoint). But as the Communist threat has faded, economists have become less concerned with promoting wage growth via sharing the benefits of productivity gains with workers. More and more are explicitly or tacitly of the view that giving businesses more free rein will lead to higher growth level, which will trickle down to workers. The record of the past 35 years has shown more frequent and intense crises, underinvestment by businesses (perversely mislabeled as a “savings glut), falling growth rates, rising inequality, and falling social indicators. Yet the orthodox prescriptions that have produced such lousy result remain popular via having created a cadre of the top rich and their well-paid technocratic advisors who very much want them to continue.

By Alexander Krauss, a postdoctoral research fellow at the London School of Economics. Originally published at the Institute for New Economic Thinking website

Since Aristotle the question about the potential relationship between economic inequality and democratic changes has been studied and debated – but scientifically our ability as researchers to assess and understand how such complex social phenomena may be related is much more limited than recognised.

The existing literature is laden with contradictory hypotheses and findings that suggest this potential relationship can be positive or negative, stronger or weaker, differentiated or non-existent and can vary across and within countries and time periods. However, fundamental methodological and empirical limitations of analysis do not allow us to make such claims robustly, to some extent because the process of democratisation and changes in levels of equality are highly nuanced, idiosyncratic and heterogeneous and thus difficult to capture econometrically. Some of the most prominent authors in this literature claim that high levels of inequality decrease the likelihood of democratisation, and they also talk about “causal effects” and “the impact of democracy” on outcomes. Such conclusions presuppose a number of very demanding assumptions and requisite premises that cannot be rigorously met.

In fact, thousands of academic papers analyse the potential relationship between political variables like democracy and economic variables like inequality by gathering their data, selecting their methods and then going forward with their analysis, interpreting their findings and potentially informing policy, with many other steps along the way that involve making important implicit methodological assumptions. My recent paper1 instead goes backwards to analyse whether the data and methods that are applied by the leading authors in this literature are able to produce the robust results that they claim. It emphasises that how we as researchers generate our correlational (or ‘causal’) claims cannot be viewed independently from how we make everyday, typically unreflective decisions, such as what we decide to analyse, how we construct our variables, how we collect and use our data, which methods we choose to apply, how we interpret our statistical results, and so forth.

Better understanding the methodological and empirical limits of analysing the potential relationship between phenomena like inequality and political regimes is important for both research and policy because leading economists and other social scientists misguidedly claim to establish causal relationships but at times still inform public policy and thus can bring about adverse social outcomes.

Contrary to the existing literature, the paper argues that ‘causal mechanisms,’ or even a robust correlation, that may potentially link the distribution of economic wealth and different political regimes cannot be identified due to a number of critical scientific constraints. Some of the main methodological and empirical limitations that are outlined include aggregate macro-level analysis using a single empirical observation per country or per year; creating a uniform and meaningfully comparable measure of democracy; a multitude of non-measurable factors that may simultaneously influence the independent and dependent variables; different time lags in the potential effects of the influencing variables; important assumptions behind correlational claims derived from statistical analysis; and trying to make meaningful comparisons across and within countries over different time periods despite very different degrees and types of democracy and inequality as well as country-specific policies and tax structures.

It is important to stress that dynamic social phenomena like democracy do not have an “intrinsic nature” nor do they abide by “social laws,” and so the data and methods used to measure democracy do not allow us to say anything about causality. Using new data sources, analysing different time periods, or employing new data analysis techniques cannot resolve this question or provide robust, general conclusions about this potential relationship across countries. Because researchers are restricted to exploring rough correlations over specific time periods and geographic contexts with imperfect data, they need to be more critical and transparent in explicitly outlining the limitations of the data and methods they apply, and about the precision and interpretation of their results. The hope of this paper is to possibly be a useful warning for researchers against overly ambitious research aims and the overselling of their estimated results.


1. Krauss, Alexander. 2015. The scientific limits of understanding the (potential) relationship between complex social phenomena: the case of democracy and inequality. Journal of Economic Methodology

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  1. Unlearning

    “A new study finding that more than half of psychology studies failed to replicate is a very positive step forward for social science. Could a similar study be undertaken in economics, and what would it find? Most empirical economics research is non-experimental, and thus I suspect that most studies would replicate in the sense that if one used the same data and ran the exact same regressions, the results are unlikely to change. ”

    On the contrary, see this recent paper which tries to replicate 67 papers from top economics journals, and finds that even with the same data and code, they often can’t!

    1. Paper Mac

      “Because we are able to replicate less than half of the papers in our sample even with help from the authors, we assert that economics research is usually not replicable.”

      This is pretty astonishing. I can’t imagine how awkward it must have been to sit down with a researcher and ask them for help arriving at their paper’s conclusions using their provided data and code and watch them fail to do so.

    2. Gabriel

      Elephant-in-the-room in that paper, if I recall correctly, is that authors only attempt to correlate non-replication against “type of journal,” rather than, say, “citation index of most-cited co-author.”

  2. Gabriel

    Campbell piece viewable here. From the guy’s website, scroll down until you hit the title The Diffusion of Development: Along Genetic or Geographic Lines?.

    PS. Comments in Gelman post indeed instructive. A good deal of what in Argentina’s known as “bleeding through the wound” by some people defending defending the measures in question. One commenter seems on the edge of arguing that we should bring back phrenology. *Not* in it’s bad, nasty 19th century racial sense, of course!….–just as an entirely innocent proxy of “culture,” or something (at a certain university I was in, the fig-leaf would’ve been “institutions”).

  3. Boatwright

    It is often said that the social “sciences” suffer from physics envy. That is they would have us believe that complex, multi-variable social and economic arrangements can be reduced to simple linear, cause and effect relationships such as those described by Campbell in the above critique. The fundamental flaw in this approach is epistomological. Natural scientists, including physicists, have found that when appropriate non-linear mathematics are used to model complex phenomena results are at best fuzzy and often found to be unknowable.

    There is a large body of research in this area called Chaos Theory. “Chaos: When the present determines the future, but the approximate present does not approximately determine the future.” — Edward Lorenz

    Social science, especially economics, would do well to study up. A fuzzy premise, such as put forward by Campbell can never lead to the exact causal conclusion he finds. Such papers are nothing more than an exercise in the logical manipulation of words. Logic is a useful tool for scientists, but shouldn’t be confused with replicable evidence.

    1. gallam

      It always makes me smile to read that social sciences suffer from physics envy. Have a quick look at dark energy and dark matter and then when you are tired of that, try explaining the quantum eraser delayed choice experiment. If I could only explain 5% of the variability of certain economic and financial data I would not have a job, a house, a car or a hedge fund.

      Then again, maybe economics and other social sciences suffer from geology envy – you know, that discipline that has no record of successfully forecasting any earthquake or volcanic eruption ever. Really, I have no idea why they bother, other than the fact that they find a bit of oil from time to time.

      As I have said on these pages many, many times before, the economics literature is a vast and unknowable toolbox (or maybe toy box). In it you will find some things that are incredibly useful and will change your life with the correct application. You might also find some rusty old hammers, which are really no more interesting than those incredibly dull old fossils that the Chinese used to dig up and call dragons. Speaking personally however, I quite like dragons, and I also quite like taking the time and the effort to understand how and why those rusty old hammers were made.

    2. Synoia

      Thank you for the Chaos Theory reference. Chaos theory does appear to given behaviour – see NC’s fear and geed index.

    3. knowbuddhau

      Aw yeah, one of my favorite subjects: the non-rational, quasi-religious nature of what passes for social science. (Pretty sure I’ve said this here before, but a site search didn’t find it. And I’m keeping the original format from my scan of the article because I don’t have all day to reformat line breaks. Apologies.)

      Exercises in the logical manipulation of words, devoid of relevance or meaning outside acdemia, are also nice and safe. They’ll get you published and advance your all-important career, but advance understanding? Hardly. Their resemblance to “how many angels can dance on the head of a pin” is telling, IMNSHO.

      As with psychology, so with economics?

      Objective Psychology: A Case of Epistemological Sleight-of-Hand
      Kinget, G M. Journal of Phenomenological Psychology 11.1 (Spring 1980): 83.

      Turning Methodology into Ideology

      Psychology, however, like biblical creation, was brought about by fiat….

      This epistemological neglect and resulting methodological er-
      ror were responsible for the early psychologists’ natural-science
      choice of an approach to their subject matter and for the
      physicalistic-quantitative techniques which they imposed upon,
      rather than fitted to, the phenomena….

      However, this choice of approach and of techniques
      amounts to introducing an ideology under the cloak of
      –the mechanistic, Newtonian ideology which
      dominated 19th­-century thinking. The central assumption of this
      crypto-ideological methodology is the belief that psychological
      phenomena can be studied in the same way as physico-chemical
      phenomena, for it implies that, while phenomena differ in their
      manifestations, they are nevertheless identical in their nature, or
      sufficiently similar, to justify equating them.

      Leveling Instead of Differentiating

      Substituting Independence for Autonomy

      Psychology’s attempt at independence thus amounts to break-
      ing away from one field, philosophy, only to subject itself blindly
      to the methodological and epistemological dictates of another,
      physics, with equally sterile effects upon the refugee-discipline.
      Almost a quarter-century after Robert Oppenheimer’s warning at
      the 1956 APA convention that the worst thing psychology might do
      would be “to model itself after a physics which is not there
      anymore, which has been outdated” (p. 134), almost all of
      psychology continues to fashion itself basically upon variations of
      this moribund model.

      Equating the Unique Case for the Single Case

      Closely related to the preceding is objective psychology’s firm-
      ly established practice of equating the unique case of human ex-
      perience with the single case of physical research (Thines, 1977, p.
      47). Wanting to conduct research after the model of the natural
      scientist, psychologists want naturally to proceed by way of induc-
      tion. They typically collect instances of the “same” phenomenon,
      i.e., of phenomena loosely designated by the same label: ….
      In so doing psychology overlooks or actual-
      ly chooses to ignore
      that, in the human sector, “single” cases are
      not instances of the same phenomenon. “You can’t step twice in
      the same river,” as we know since Heraclitus…..
      Nevertheless, the experimenter chooses to restrict himself
      to this limited, perhaps irrelevant surface-sameness in order to
      proceed in a methodologically pure and “safe” fashion; safe, that
      is, from a socio-historical but not from a scientific-cognitive point
      of view. He does this, again, because he is committed to his ex-
      perimental design and its hidden philosophy rather than to the
      identity of the phenomena he aims to research.

      Semantic Shift of the Term “Fact” from Physics to Consciousness
      Substituting Ontogeny for Culture
      “Humans do this, humans do that,” when what they really mean is, “people like us.” Case in point: AGW.

  4. washunate

    For my two cents, the problem is not that political economy cannot be scientific.

    Rather, the fundamental characteristic of established academic economics is that it is not interested in truth. There are lots of scientific observations to make. But the thing is, most of them directly indict our present system.

    1. knowbuddhau

      I so hear that. When my original thesis, on the psychophysiology of empathic altruism, turned out to require more biofeedback computing power than then existed at Western Washington University (we were still using a CLI for SPSS, the first computer labs were still being set up), I tried to turn it into a phenomenological study of white supremacy in the state at that time, not in the abstract. Who knew an almost entirely white department wouldn’t welcome that? I kept hearing, “Is this thesis in the right department?” I was even accused of not reading books I had traveled to Seattle to buy. When the Hispanic graduate dean approved an extension, my own, very white, advisor said no. Gawd, I was so naive.

      Preaching to the choir is where the money’s at.

    2. HarrySnapperOrgans

      In the field I work in (physics) there are quite enough who seem more invested in their agenda than the facts. But (generally) they don’t get much air time, falling victim to the facts of observation. If the facts in Social Science are difficult to establish it could just be that the same caliber of person survives longer.

      1. washunate

        I don’t think it has to do with the difficulty of the facts. Rather, I’d say it is because the basics of the hard sciences support the power structure so there is less tension between truth and authoritarianism. The government wants the bombs to work right. They want the prison walls to stand. They want the computer hacking to be effective. They want the spy satellites to stay in orbit. Our nation’s major universities receive significant funding from the national security state (and fossil fuels and agribusiness and…) and they expect a return, from both the social sciences and the hard sciences.

        The key in the hard sciences is directing where the research goes. For example, we put a lot of resources into developing the atomic bomb, but we put very little into understanding the dangers of radioactive waste. That risk can be externalized onto the public. To this day people are still suffering from health problems caused by the Manhattan project, and the government spends a considerable effort denying any responsibility. For example, nuclear waste is one of the background issues in the lead up to Ferguson. How many physicists and biologists and medical doctors have spent significant time working with the community at West Lake Landfill and Coldwater Creek?

        When the government doesn’t want an issue to get air time, they are incredibly successful at preventing academics in the hard sciences from discussing it, whether we are talking Deepwater Horizon or NSLs or the NSA or Stuxnet or a whole host of things kept more secret than that.

  5. Keith

    If any school of economics was any good it would have supplanted all the others due to its consistent accurate forecasts.

    Many schools exist because they are right sometimes; nearly right sometimes and wrong the rest of the time.

    Economics is still in the dark ages.

    What school of economics do you believe in?

    It’s a matter of faith not science.

    1. Jim

      The School of Hard Knocks has been shown to get consistently accurate, albeit decidedly depressing, results.

    2. Synoia

      If any school of economics was any good it would have supplanted all the others due to its consistent accurate forecasts.

      Oh my, Chrystal Balls.

      Hypothesis: There is no mechanism for predicting the future; thus Economics = Dogma.

      and a well known test for the accuracy of Dogma is a Heliocentric Solar System vs a Terracentric Solar system, aka: Galileo and the Catholic Church.

  6. Andrew Foland

    Physicists (and humans in general) are extremely lucky that the physics of our universe can be understood with relatively few explanatory variables. A human who gets through five or six years of graduate school in physics can expect to understand, at some level of detail, nearly every known natural phenomenon. Even in “Chaos Theory”, one learns a lot of very valuable information about a complex system despite detailed prediction becoming impossible.

    There’s a long history in physics of using a simple model that is known to be wrong, then adding, layer by layer, the complications to bring it in towards reality. This is essentially perturbation theory. It is a valuable tool, but it does not always work. Physicists are very aware of the circumstances (strong and/or highly nonlinear couplings) in which it does not work. Again, we’ve been very lucky that most of the time, natural phenomena are not in those circumstances.

    There is no reason to expect every discipline to be so lucky in its problems yielding to the simplest tools. Some phenomena are simply too dependent on too many different things in too many complicated ways to be usefully captured as a low-dimensional approximation of a few variables versus another. The right response to that situation is to do the hard (and useful) work of building the complex model, building the complexity in from the start.

    When you find you’re dealing with such a complex system, the wrong response is to build simple model after simple model and being continuously surprised that they generally fail.

    1. theinhibitor


      I fail to see such a major difference in economics and physics. Both try to map/illustrate/analyze/compute a system. Both fail to do so at a high level of reality. Both are great tools in illustrating very simplified systems. You say that ‘physicists are extremely lucky… the universe can be understood with…few explanatory variables”. I’d say that’s a physicist trying to act like an economist.

      Think for a minute that gravity, the force which all humans first come to know, cannot be easily explained. In fact, gravity has had something like 15 alternative theories for how and why it exists, and all fail to explain it in its entirety.

      The only difference I see is that physics often deals with static variables that are controlled by the physicist (in their thought experiments or otherwise), while economics doesn’t have this liberty. It deals with chaotic/biological variables that are inherent. However, this is a MINOR difference. Econ is like a weather prediction problem in physics: so many chaotic variables that the outcome shifts depending on the instance.

      So in the end, physics tries to realize everything natural. Econ just tries to realize a man-made system.

      1. Yves Smith Post author

        Lordie. You honestly BELIEVE this?

        First, your waving away chaos as a minor issue is laughable. I hate to be this mean-spirited, but you asked for it. Modeling chaotic phenomena is extremely difficult mathematically. It’s not trivially different, as you bizarrely and inaccurately state. Economist have therefore rejected all modeling based on chaos theory.

        Second, economists have explicitly (we discuss this in length in ECONNED, as has Paul Davidson) forced an equilibrium assumption on economics to make the modeling tractable mathematically. That means they assume all economies are treated as if they have a natural propensity to achieve equilibrium, and at full employment, no less! And this Pnaglossian gloss was a pet project of Paul Samuelson and the “Keynesians” who followed him, explicitly to make economics seem more scientific. Note that Keynes himself rejected this idea, took issue with the American Keynesians who bastardized his thinking, and John Hicks, the British mathematician who worked up the models that set forth this distortion of Keynes, later repudiated his own work!

        Economics similarly rejects simpler modeling than chaos theory that allow for the modeling of what are called positive feedback loops in engineering but actually have negative consequences, when processes keep amplifying and spin out of control, like systems engineering.

        You desperately need to get out of fantasy land and read Steve Keen’s Debunking Economics. Oh, and Keen was also one of a very short list of economists to foresee the financial crisis. If the physics-fantasy version of economics you try to defend were operative, there would never be an financial crises.

        1. Synoia

          Economist have therefore rejected all modeling based on chaos theory.

          Acceptance of this = Unemployment for Economists?

          what are called positive feedback loops

          Things are not so cut and dried.

          Engineers know that feedback loops designed to provide negative feedback under a specific set of conditions, can become positive feedback loops under other conditions.

          In addition a second assumption is that a feedback loop is linear, which is again true only under a specific set of conditions.

          For example: Disciplining an Employee, and the the Employee Goes Postal.

          Chose theory is based on positive feedback and non-linearity. A perfect example of this is human communication (as typified by the network known as “Fox News”).

        2. Synoia

          If the physics-fantasy version of economics you try to defend assume were operative, there would never be an financial crises

          True and:

          Assume – Ass of u and me.

    2. washunate

      You seem to be implicitly suggesting that our present distribution of resources goes against the wishes of policy makers, as if concentration of wealth and power is a surprise and a failure rather than the desired outcome.

      Why have you come to that conclusion? Or is that not what you meant? It seems obvious to me that our public policy choices have been made on purpose, so I’m very curious to hear countervailing explanations.

  7. larry

    Boatwright, mainstream neoclassical economics suffers from physics envy but sociology and anthropology no longer do, though they once did. Most heterodox economists have no physics envy, as they realize that social science, of which economics is one, is a different enterprise from that of the natural sciences. Samuelson, in particular, thought that mathematization of the discipline would protect it from political destruction, especially his own work. He had seen what had happened to the macroeconomics textbook by Lorie Tarshis. Simply because Tarshis spent a few chapters accurately describing Keynes’ General Theory, pressure was brought on universities to remove the book from their reading lists on the absurd grounds that Keynes was a Communist and, as a consequence, this material would taint young minds. Partly at least, in order to protect his work form political interference, Samuelson took some of Keynes’ ideas and intermingled them with neoclassical ones, implicitly admitting this by referring to his position as neoclassical synthesis Keynesianism.

  8. Uahsenaa

    Another elephant in the room–there seem to be many–is the extremely biased nature of the entire system of peer review, even in the hard sciences. If there’s a sociological phenomenon that no one, at least no academic, wants to get to the bottom of, it’s how the referee process discourages negative results as well as results that are in any way non-normative. The process claims to be a form of blind review, but I can tell you, as someone who has had to review papers on occasion, that most academic fields are small enough and so closely knit that you can easily recognize someone’s work from either the subject matter under discussion or the writing style. Quite often it’s as simple as you heard the conference paper version of what you see before you.

    Then there’s the problem of what to do with completely divergent responses. What, for instance, are you supposed to do to revise a paper when one reviewer says that this work is important and needs to be said in precisely this way, while the other says you have no idea what you’re talking about. Editing your work to satisfy the one might easily incite the opprobrium of the other. Of course, it’s the job of the editor to mediate these sorts of things, but quite often s/he doesn’t know you or your work from a whole in the wall and is entirely dependent on the reviewers to make sense of it.

    Assigning the author of the paper you’re critiquing as one of the reviewers, in this instance, seems to be by design rather than an unfortunate accident.

    1. fresno dan

      Real science and real noteworthy discovers are very, very hard to come up with. Yet ever more PhD are produced, and their pay is pretty much predicated upon them writing ever more papers.
      From Ioannidis’s paper on medical research to Feynman’s talk on how researchers don’t adequately construct rat mazes to give valid results, science, alas, has become equivalent to commercial advertising – all bullsh*t all the time designed merely to make money.

  9. Steve H.

    The self-evaluation the social sciences are going through reminds me of the Annales School studying history. Understanding the conditions that lead to what is considered a successful model is challenging, and testing the model against previous data is a good place to start. Hat-tip to Ioannidis for his benchmark paper in 2005, and to Econned for laying out practical implications for finance.

  10. TG

    Predicting the local weather ten days from now is hard – but predicting that the winter in the northern hemisphere will on average be colder than the summer is easy. What would one say about a meteorologist who predicted the opposite, then explained away their error because weather is too complicated for humans to understand? You would say that this was an economist.

    It is true that in a non-rigged market nobody can predict the day-by-day fluctuations in stock prices. But some things are easy.

    In Mexico the elites deliberately ignited a population explosion in order to flood the market for labor and keep wages down. They taxed poor workers and used the proceeds to subsidize speculative finance. They allowed large monopolies to form and jacked up prices, while using trade agreements to force the average Mexican into zero-sum competition against even poorer countries in asia (‘competition for thee but not for me’). The results of these policies aimed at making the rich even richer at the expense of everyone else could have been easily predicted by John Stuart Mill.

    The problem is that an economic theory with non-trivial predictive power will step on powerful toes. Hence the incredible pressure on professional economists to produce theories that are wrong, or that study such obscure technical factors that nobody cares, or to throw their hands up and say that economics is just too hard.

    Remember, the rich don’t want valid economics not just so that they can have freedom of action to screw the rest of us over, but also to avoid responsibility for their actions. If we assume that rising inequality is some mysterious thing beyond human control, or an inevitable consequence of capitalism, then such debates are bloodless abstract philosophy. But if we say that rising inequality is due to specific actions that the rich took with malice aforethought, well, that makes any debate about inequality much more focused. And that just won’t do.

    1. Crazy Horse

      Spot on, TG

      Economics is a variety of propaganda, serving the Malignant Overlords of the ruling class and hiding behind a phony scientific smoke screen of mathematical constructs.

    2. Synoia

      but predicting that the winter in the northern hemisphere will on average be colder than the summer is easy

      Yes, and scientific: Lambert’s cosign law.

  11. fresno dan

    “The record of the past 35 years has shown more frequent and intense crises, underinvestment by businesses (perversely mislabeled as a “savings glut), falling growth rates, rising inequality, and falling social indicators. Yet the orthodox prescriptions that have produced such lousy result remain popular via having created a cadre of the top rich and their well-paid technocratic advisors who very much want them to continue.”

    With apologies to Sinclair Lewis:
    It is easy to get a man to understand something (WRONGLY), when his salary depends on his understanding benefiting the 0.1%’

  12. fledermaus

    “argued that there is a causal link between a society’s average skull size “genetic distance to the US” and its GDP per capita.”

    They really wrote an economics paper that was essentially arguing in favor of Phrenology?

  13. Optimader

    Social behaviour is emotionally driven for the most part Nassim Taleb has done a good job kicking that can down the road. Its valuable to keep putting it out there as a pshback
    Social science is not really science, nor is economics.
    Economics,once you sink in the mud beyond basic principles diverges from predicability/reproducability quickly –otherwise economists would be at the top of the economic heap

  14. Chuck Roast

    It recently came to my attention that my old university had been offering, in addition to the traditional BA in Economics, two BS in Economics degrees. This disturbing information led to an agreeable exchange of letters with the current Economics Department chairman wherein he sympathized with my concern, but wrote that this is simply the way of the world these days and he could do little about it.
    My suggestion that the department reconnect with the Humanities by offering majors in Political Economy or Economic Anthropology was a non-starter.
    My annual donation has now been diverted from a university economics scholarship fund to my old high school scholarship fund.

  15. susan the other

    Just think of all the fun we could have with research. We could research the failure of language, or the different types of boredom, or (funny line in an old movie) the history of nostalgia. When I read that Stiglitz was going to do a comprehensive study on the causes of inequality I laughed. Like writing a dissertation on shit happens. It’s all politix to me. Economix is politix. There is no intersection of inequality and politix. They are the same thing. We are basically immoral creatures – busy securing our own positions – not so malicious as disinterested. But still remiss.

  16. Steven

    I just finished an introductory course in molecular biology that confirmed one of the fundamental insights of the Nobel Prize-winning chemist Frederick Soddy:

    THOUGH it was not understood a century ago, and though as yet the applications of the knowledge to the economics of life are not generally realised, life in its physical aspect is fundamentally a struggle for energy, in which discovery after discovery brings life into new relations with the original source.

    WEALTH, VIRTUAL WEALTH AND DEBT, 2nd edition, P. 49

    Soddy develops this insight further crediting John Ruskin with the observation that

    “a logical definition of wealth is absolutely needed for the basis of economics if it is to be a science.” adding “The doctrine of energy, and the laws of thermodynamics do allow of this.” p. 102

    Soddy develops his definition of wealth further in chapter VII ,- THE TWO CATEGORIES OF WEALTH: THE NATURE AND DEFINITION OF ABSOLUTE WEALTH. In addition to ‘free (i.e. useful) energy’ Soddy lists scientific discovery as another source of wealth.

    I really don’t see how anyone with a basic grasp of history can argue with Soddy’s ideas. The wealth produced by the Industrial Revolution did NOT come from capital / money. (Michael Hudson’s work makes this abundantly clear. The English ruling class profited from the Industrial Revolution almost in spite of itself. The focus of their bankers was on making money from trade – NOT industrial development, much of which was self-financed by its inventors.) It was the product of advances in human knowledge coupled with the application of inanimate energy sources to the production of the means of subsistence.

    In the way of “What is to be Done”, it seems pretty clear that anyone interested in saving ‘capitalism’ / the nation / the human race should focus their attention on what needs to be done to create real needed wealth as efficiently – from a perspective of energy and resource use – as possible. The country or civilization that doesn’t do this is doomed. It is really hard to have patience with a profession (or practitioners such as the author) obsessed with methodology and advanced mathematics as opposed to a good hard look and reality and history.

  17. kevinearick

    City Gravitrons

    City people, the middle class disconnected from nature, are employed to consume natural resources faster than nature can replenish them, to create artificial scarcity inflation, with monetary policy hiding the difference, until it can’t; it’s a counterweight on a fulcrum, maintained by real estate control. Planting pot instead of tomatoes, shipped across the ocean, is a really stupid thing to do, but that’s empire. The counterweight convention, however, has application in space travel, building temporary bridges.

    The empire model distributed humanity across the planet, but cannot bring humanity into equilibrium. Being able to live off the land is far more effective, but the empire owns the land, by majority vote, taxation and police power, to protect and serve empire order, with fiscal policy. The empire requires demographic acceleration to maintain its actuarial financial ponzi, which can only fail, so History repeats, with a new dress called government.

    The simple fact of the matter is that those parents capable of raising productive children must be paid to do so, and is paid, by nature, in the form of distilled DNA. The moment talking heads start talking about equal rights/outcome for single people, pretending to be married or not, colored or not, the financial system can only short into discharge. Family Law, with no due process, simply swaps the two in and out, to confirm common law feudalism in both directions.

    Every nation/state on this planet is built upon feudalism, regardless of government mythology, and they all employ Family Law as the transmission mechanism, some more smoothly than others. The empire has simply run out of space, and is herding populations in circles, until they die, distill, or produce additional resources for empire consumption, which is the ‘civilized’ form of war. The fantasy of a new world order, public healthcare breeding and public education programming, will kill you if you let it.

    Whether Tesla was a zealot, before his time, or set the foundation depends upon perspective. He wired up Chicago, the technology was replicated efficiently from the top down, and has traveled backwards toward Edison ever since. The US Government is no more effective than Russian Government, because the only difference is the language dressing feudalism, social event horizon durations.

    The middle class chooses the temporal stability circumscribed by government certified specialties. Labor can and does specialize, but is capable of traversing the system, changing the focus, at will. Capital controls an always dying empire on one side of the fulcrum, with money and media, until modernization is required.

    On the other side of legacy’s mirror, over top the fulcrum focus, in multiple dimensions, is where the work gets done. Legacy and the middle class only see the dc circuit. The other mirror connects both ends, to transmit ac.

    Net, you have an ac multiplexer with dc event horizons serving as the gravitron, setting up the frequency motor generator.

    As the middle class chases arbitrary legacy capital rules in aspiration, down one side of the fulcrum back in time, you get a circuit with output but no input, and a self-obsessed, bipolar population led by a sociopath with a self-obsessed brain saying what participants would like to say but cannot due to the rules of political correctness, confirming feudalist control of property, ending in system implosion.

    Learn to work for your liberty with productive imagination, or pay someone else to do it for you, at the cost of falling living standards, growing income inequality, and war, over artificially scarce resources. Don’t get me wrong; if the countryside didn’t breed its own share of stupid assumptions, the empire of cities in the gravitron wouldn’t exist. But somebody has to balance the system, and you aren’t going to get there with majority vote, which is easily programmed to vote for legacy institutions, divide and conquer.

    There is nothing rare about the marriage of control and money, temporary assumptions, but that is what the majority seeks, to make permanent, by choice. Who is rotated in and out as the face of resulting monopolies is irrelevant. As anyone can plainly see, separation of power under the US Constitution is and always has been an illusion, arbitrarily certifying itself.

    Males wanting the privileges of females without the responsibility, and females wanting the privileges of males without the responsibility, transsexuals taking turns being affirmed as President, is not the path to the future. And a war on children, to make them economic slaves to the stupidity of History isn’t going to change the fact. Funny, Grace recognized the communists for what they were right out of the womb and reacted accordingly, and they are still trying and failing to find something medically wrong with her, up to a cool $1/2 million in make-work now.

    Insurance is for the faint of heart, for which no subsidy is enough.

  18. craazyman

    what I find shocking about this post isn’t the central thesis but this:

    “In fact, thousands of academic papers analyse the potential relationship between political variables like democracy and economic variables like inequality . . . ”

    If we conservatively assume 9 papers are submitted for every 1 published, that could mean tens of thousands of people are writing these kinds of papers. Is that totally weird or what? Tens of thousands. Are these people completely crazy to be doing this sort of thing? They must be. That’s shocking. You’d think naively perhaps that if they can do a multiple regression they’d have enough sense to do it in the right place. I guess not. It’s like coming home and taking a crap in your trash can. hahahahahahah. Even a cat knows better. Tens of thousands. Wow. I stll remember as a kid I once peed in the trash can — after realiizing the symmetry between pee and trash — but still I felt something wasn’t quite right. I was learning. I think I only did it once. These people keep doing it over and over.

  19. Jessica

    Not only are complex social phenomena difficult to understand scientifically, they are also difficult to grasp with common sense. They are not something we evolved to grasp. We did evolve to grasp individual and small group relationships, we did not evolve to grasp complex social phenomena involving millions even billions of fellow east African plains apes. In the same way, we can understand the trajectory of a flying ball or Frisbee well enough to run to where it will land and catch it, but the huge distances of astronomy we did not understand until the rise of science and even now, understand only intellectually.
    We are capable of learning to understand things we did not evolve to easily understand, but these require individual intellectual effort backed up by a huge cultural project of learning and understanding. And that cultural project must aim for truth above all. That may be the case for astronomy nowadays, but it is not true for the social sciences, just as it was not true for astronomy in the days of Galileo.
    What the Church tried to do then to astronomy, powerful interests largely succeed in doing in the social sciences now.

  20. gordon

    Yves Smith thinks economists have: “…vastly more policy influence and [are] better paid than other social scientists”. This article supports that idea:

    But what about politicians? When we look in that direction, the economists suddenly vanish (well, radically decrease) in favour of lawyers:

    Where does that leave us? With governments in receipt of plenty of economic advice they’re not qualified to understand. My guess is that the politicians (lawyers) treat policy advisors (economists) like expert witnesses. Anybody who has read The Rainmaker or seen the film (where Matt Damon gave such a good performance) knows how lawyers treat expert witnesses.

  21. Sluggeaux

    Academia is truly the original self-licking ice cream cone. There can be no such thing as social science. I have thumbtacked a quote by an artist, Werner Herzog, above my own desk: “I believe that the common character of the universe is not harmony, but hostility, chaos, and murder.”

    Academic economics appears (from my extreme remove) to be a discipline employed (literally) by the oligarchy to provide them with a political theory to justify their innate greed and to inform their debate on how to keep the masses at bay. The quaint concept of “Equality” was a fear-based reaction on the part of the American oligarchy to the Bolshevik Revolution and to the murderous Nazi and Showa regimes of the mid-20th Century. Today, they have no fear of the masses, who lack a cohesive ideology and who have been effectively herded into self-destruction through mindless entertainments, substance-abuse, and senseless spasms of gun violence.

    I love susan the other‘s reference to Joseph Stieglitz above. Earlier this year I went to a lecture and book-signing by the Laureate. He really is a decent fellow, but I had to take him to task during the book-signing about his assertion that the solution to “inequality” is greater academic opportunity for the masses. I pointed out to him that his “Stanford PhD’s For All” nostrum is just silly — it’s mathematically impossible for everyone to be above-average! What we need is more and better-paying blue-collar jobs, not more PhD’s scooping self-licking ice cream cones…

    1. MaroonBulldog

      Sluggeaux’s comments remind me to the story of the admissions officer at Harvard Business School, who is said to have urged the faculty to get more of the incoming cohort of students (number already fixed and determined) into the top half of their class.

  22. Watt4Bob

    We hold these truths to be self-evident…

    All injustice is directly related to the economic injustice foundational in the systems that form the American economy, if not the economies of the whole North-Atlantic Grey-People conflagration.

    It is the behavior of the folks I’m calling ‘Grey-People’ that perpetuates un-just conditions, and un-just conditions beg explanations, and both the people we call Social Scientists, and Economists, are the folks appointed to explain to us why this un-natural situation exists.

    Of course it takes a bit of intellectual acrobatics to explain why a people who insist they’re Christian nation, can think it’s OK to enslave your fellow man, or to rationalize child-labor for profit, so that’s why we have Social Scientists, and Economists.

    It requires something like metaphysics to explain the massive injustice we’re drowning in.

  23. equote

    “Research supports a specific theory depending on the amount of funds dedicated to it.”
    Fund source would be an interesting variable to analyze analysis…Yes, No?

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