Philosophy of Economics Rules: introduction to the symposium

ABSTRACT

Economists have long been criticized for their use of highly idealized models. In Economics rules: Why economics works, when it fails, and how to tell the difference [Oxford: Oxford University Press, 2015] Dani Rodrik responds to this criticism by offering an account of models that emphasizes the diversity of models in economics. Rodrik’s account presents a rare opportunity for economists and philosophers of economics to engage in a mutually beneficial exchange that could improve our understanding of the power and limits of economics, and the rights and wrongs of the dismal science. The symposium on Rodrik’s Economics Rules is the first attempt to seize this opportunity.     

Modeling model selection in model pluralism

ABSTRACT

In his recent book, Rodrik [(2015). Economics rules. Why economics works, when it fails, and how to tell the difference. Oxford University Press] proposes an account of model pluralism according to which multiple models of the same target are acceptable as long as one model is more useful for one purpose and another is more useful for another purpose. How, then, is the right model for the purpose selected? Rodrik roughly outlines a selection procedure, which we formalize to enhance understanding of his account of model pluralism and to advance the critical discussion.     

Rights and wrongs of economic modelling: refining Rodrik

ABSTRACT

This is a critical discussion and proposed refinement of the inspiring account of the successes and failures of economic modelling sketched in Dani Rodrik’s Economics Rules. The refinements make use of a systematic framework of the structure of scientific modelling. The issues include distinguishing the discipline of economics from the behaviour and attitudes of economists as targets of normative assessment; nature and sources of success and failure in modelling; the key role of model commentary; model transparency; purposes and audiences of modelling; the nature of critical assumptions; negligibility, applicability, and tractability in modelling; the possibility of generally applicable models; and economics fundamentalism. The proposed refinements submit sharper formulations for some of Rodrik’s ideas and supplement others, but they also reveal tensions and relieve some – not yet all – of these.     

The economics of online dating: A course in economic modeling

The author discusses the development of a unique course, The Economics of Online Dating. The course is an upper-level undergraduate course that combines intensive discussion, peer review, and economic theory to teach modeling skills to undergraduates. The course uses the framework of “online dating,” interpreted broadly, as a point of entry, via Paul Oyer's popular economics book Everything I Ever Needed to Know about Economics I Learned from Online Dating. The author then explores an approach to teaching students how to not just solve models, but to create economic models from abstract ideas. This approach to teaching modeling is supported by Albert Bandura's work on self-efficacy as a bedrock pedagogical principle.     

Reply to Frederic Lee's Comment on “The Citation Impact of Feminist Economics”

Abstract

This essay is a response to “A Comment on the Citation Impact of Feminist Economics,” by Frederic Lee, which appears in this issue ofFeminist Economics.

Frederic Lee's comment is a valuable addition to our understanding of the intellectual interactions between feminist economics and other schools of heterodox thought, and demonstrates how much can be learned by studying citation patterns.     

Prediction versus accommodation in economics

ABSTRACT

Should we insist on prediction, i.e. on correctly forecasting the future? Or can we rest content with accommodation, i.e. empirical success only with respect to the past? I apply general considerations about this issue to the case of economics. In particular, I examine various ways in which mere accommodation can be sufficient, in order to see whether those ways apply to economics. Two conclusions result. First, an entanglement thesis: the need for prediction is entangled with the methodological role of orthodox economic theory. Second, a conditional predictivism: if we are not committed to orthodox economic theory, then (often) we should demand prediction rather than accommodation – against most current practice.     

Model selection in macroeconomics: DSGE and ad hocness

ABSTRACT

We investigate the applicability of Rodrik’s accounts of model selection and horizontal progress to macroeconomic DSGE modelling in both academic and policy-oriented modelling contexts. We argue that the key step of identifying critical assumptions is complicated by the interconnectedness of the common structural core of DSGE models and by the ad hoc modifications introduced to model various rigidities and other market imperfections. We then outline alternative ways in which macroeconomic modelling could become more horizontally progressive.     

Economics of soft innovation: a review article

This article identifies and articulates the foundations of the theoretical approach of the new book ‘Soft innovation: Economics, product aesthetics and the creative industries’ by Professor Paul Stoneman. This book is likely to open a new research area within the economics of innovation. The source of economic growth and prosperity is technological change and the economics of innovation to date has mainly focused on technological approaches to innovation. However, the development of the technological base of product and process can explain only a part of economic growth as soft innovation represents a relevant additional source of economic development that has received little attention so far. The source of a unified economic approach for soft innovation relies on Lancaster's theory of consumer behaviour coupled with the variety approach, innovation in services and the economics of knowledge. It appears as though industry structures favouring the successive emergence of new variants are characterised by soft innovations.     

Tests of Fairness Models Based on Equity Considerations in a Three-Person Ultimatum Game

Two recent models incorporating fairness considerations into the economics literature based on agents' concerns about the distribution of payoffs between themselves and others (Fehr-Schmidt, 1999,Quarterly Journal of Economics. 114 (3), 769–816; Bolton-Ockenfels, 2000,American Economic Review. 90, 166–193) are investigated using a new three-person ultimatum game: One person allocates a sum of money to two others, one of which is randomly chosen to accept or reject the offer. Rejection gives both the responder and the proposer zero income and a positive consolation prize for the non-responder. The data show essentially no reductions in rejection rates, holding offers constant, with and without consolation prizes, contrary to both models' predictions.     

Emergence versus neoclassical reductions in economics

ABSTRACT

Many epistemic anomalies of the neoclassical research programme originate from its ontologically reductionist meta-axioms, which predicate how economic macro-systems are constituted from their micro-entities and how the latter behave – namely atomistic aggregativity, normative equilibration and global instrumental rationality. This paper explores the metaphysical foundations of the premise of emergence and argues that it can be a remedy to the ills of neoclassical reductions, and a foundational epistemic principle in a progressive systemic research programme in economics, which would bridge existing streams of ‘heterodox’ economic theory.     

The old versus the new institutionalism

Marianne Ferber, a 75 year old professor emerita at the University of Illinois, Urbana-Champaign, has been a central figure in developing both the literature and the institutions of feminist economics. She was one of the first and most effective scholars to challenge Gary Becker's analysis of the economics of the family. Her textbook, The Economics of Women, Men and Work , co-authored with Francine Blau and Anne Winkler, is the standard for courses on women in the economy. Her 400 page annotated bibliography, Women and Work, Paid and Unpaid , published in 1987, is the definitive source on economic research on women's work published up to that point. Her anthology, Beyond Economic Man: feminist theory and economics , co-edited with Julie Nelson, is the first to pull together the exciting new work being done by people who have an explicitly feminist perspective on economics. She was a member of the Committee on the Status of Women in the Economics Profession in the 1970s, a founding member of the International Association for Feminist Economics (IAFFE) and for 1995 and 1996 served as IAFFE's president. This interview was conducted in January 1998.     

The participant observer in the formation of economic thought Summa Oeconomiae Perlmanensis

This essay addresses issues related to the History of Economic Thought, Comparative Economic Analysis, and Institutional Economics alluded to in Mark Perlman's “The Character of Economic Thought, Economic Characters, and Economic Institutions”. Specifically, some differences between the strands of American Institutionalism and Schumpeterian economics are brought into focus. Against the background of a review, the ideas of a major participant in the historical analysis of economic thought are discussed. The conclusion is that an evolutionary approach to economics would benefit from any attempt to substitute systematic-discursive theorizing for the received genre of an abstract-deductive approach.     

Mainstream economics, heterodoxy and academic exclusion: a review essay

Does the mainstream of economic thinking and analysis tend systematically to exclude ideas and approaches that could enrich the field, and, as a consequence, have important questions and issues been shunted aside for nonobjective reasons? Two recent volumes by heterodox economists that address these questions are Geoffrey Hodgson's How Economics Forgot History: The Problem of Historical Specificity in Social Science, and Steve Keen's Debunking Economics: The Naked Emperor of the Social Sciences. I evaluate their claims of academic exclusion and assess the current state of (selective) pluralism within mainstream economics.     

Evolutionary economics and the counterfactual threat: on the nature and role of counterfactual history as an empirical tool in economics

Counterfactual conditional statements are ubiquitous in any scientific endeavour. This paper contains an analysis of the nature of counterfactual conditionals and the conditions under which they are considered assertable by scientists. The paper then applies this analysis to the use of counterfactuals in evolutionary economics, arguing that because evolutionary economics is inherently concerned with historical processes it cannot avoid the use of counterfactual history as one of its tools of empirical analysis. We discuss the strengths and pitfalls of counterfactual history. We argue that because evolutionary economics starts from the foundation that randomness may be inherent in any economic system, the very aspects of evolutionary economics that make counterfactual history a desirable empirical tool also make that tool difficult to employ. RID="*" ID="*" We thank the participants of the International Seminar on Evolutionary Economics as a Research Programme in Stockholm, May 1997, for many helpful comments. We also thank Lorri Baier for many helpful substantive and textual comments. Correspondence to: R. Cowan     

Is UK economics teaching changing? Evaluating the new subject benchmark statement

This paper evaluates the recent reform to the curricular governance framework for UK Economics teaching: the revised Subject Benchmark Statement document for Economics (SBSE). The crisis of confidence in economics which was amplified by the global financial crisis presented an opportunity for fundamental change in economics teaching. The paper asks whether the new SBSE represents change. We ask whether the new SBSE is pluralist with regard to economic theory and method; how it treats the economy and its wider socio-political dimension; what are its educational goals and approach; and overall, how much change has it brought? The paper concludes that the new SBSE does not constitute change: it still exhibits limited pluralism, ignores ethics, power and politics and ignores key educational goals.     

How modern economics learned French: Jacques Drèze and the foundation of CORE

The Center of Operations Research and Econometrics (CORE), founded in 1966, was one of the channels through which economic modelling practices were imported from the USA to Europe. Officially modelled after the Cowles Foundation for Economics Research, it reflected Jacques Drèze's broad experiences in the USA during the 1950s when modelling techniques were not yet anchored in disciplines. CORE gained an international reputation, however, through the rather exclusive community of Neo-Walrasian economists represented by Werner Hildenbrand, Jean Gabszewicz, and Gérard Debreu. After this community modified the disciplinary divisions at CORE, the influence of CORE on continental economics occurred mainly through disequilibrium economics, which still represents a “French accent” in modern macroeconomics. At the same time, operations research and econometrics prospered at CORE while receiving scant attention from economists. This essay tells the story of how CORE changed continental economics through the unique career path of its founder, Jacques Drèze.     

Integration of and Deliveries among the World Zionist Organization,Israel, and Diaspora Countries: System Articulation with the Social Fabric Matrix

Abstract:

The religious economics (not economics of religion) concern here is the relationship between the World Zionist Organization (WZO) and Israel, which is known as a geopolitical power in its region and which is also known as an economic success story. Joseph Schumpeter and Karl Polanyi explained how the political economy of medieval Europe was influenced and guided by Christian morality. This paper extends the analysis of religious economics by using the social fabric matrix of original institutional economics to define and structure the integration of the WZO, Israel, and the Diaspora countries. This allows us to observe how to conduct such work and to learn how Israel is guided and influenced by the WZO. It also helps to explain Israel’s “risk of tearing itself apart” as noted in a recent article in the New York Times.     

The Normative Problem of Merit Goods in Perspective

Abstract

In his Theory of Public Finance (1959), Musgrave invented the concept of merit wants to describe public wants that are satisfied by goods provided by the government in violation of the principle of consumer sovereignty. Starting from Musgrave’s mature discussion (1987), I construct two categories to classify the explanations of merit goods. The first strand of thought attempts to justify merit goods within the New welfare economics, by modifying its assumptions to accommodate irrationality, uncertainty, lack of information, and psychic externalities. The second category encompasses more radical departures from consumer sovereignty, drawn from philosophical critiques of economics. In the third part of the paper, I argue that the two strands might be represented by a non-individualistic social welfare function. I also show how this solution echoes Musgrave’s early views on public expenditures before he coined the concept of merit wants. From an historical perspective, the survival of the concept highlights the persistence of a social point of view in welfare economics.     

What are the top five journals in economics? A new meta-ranking

We construct a meta-ranking of 277 economics journals based on 22 different rankings. The ranking incorporates bibliometric indicators from four different databases (Web of Science, Scopus, Google Scholar, and RePEc). We account for the different scaling of the bibliometric indicators by standardizing each ranking score. We run a principal component analysis to assign weights to each ranking. In our meta-ranking, the top five journals are given by: Quarterly Journal of Economics, Journal of Financial Economics, Journal of Economic Literature (JEL), Journal of Finance, and Econometrica. Additionally, leaving out the JEL as a survey journal and the finance journals in our top 10 list we confirm the perceived top five journals in the economics profession.     

Tracing the Origins of Personalist Economics to Aristotle and Aquinas

Personalist Economics has identified a central problem in Neoclassical Economics that originates in its representation of the economic agent as homo economicus and its grounding in individualism. Both flaws are directly addressed by Personalist Economics that has a different perspective on human nature as set forth in Personalism. Our remarks are presented in three sections. In the first section we address why individualism is an unsatisfactory philosophical foundation for modern economic theory. In the second section we trace the origins of Personalist Economics to Aristotle and Aquinas. While others, such as Heinrich Pesch and Joseph Schumpeter, played important roles in the evolution of Personalist Economics, here our efforts are restricted to the contributions of Aristotle and Aquinas. In the third section we explore how, in terms of 18 tenets, Personalist Economics and a Personalist economy differ from Mainstream Economics and the individualistic market economy.