Cheltenham, UK and Northampton, MA: Edward Elgar,. 2001. x + 203 pp. $80 (hardcover), ISBN: 1-84064-694-2. Reviewed for EH.NET by Lall B. Ramrattan, ...
The Lost Art of Economics: Essays on Economics and the Economics Profession Author(s): Reviewer(s):
Colander, David Ramrattan, Lall B.
Published by EH.NET (February 2003) David Colander, The Lost Art of Economics: Essays on Economics and the Economics Profession. Cheltenham, UK and Northampton, MA: Edward Elgar, 2001. x + 203 pp. $80 (hardcover), ISBN: 1-84064-694-2. Reviewed for EH.NET by Lall B. Ramrattan, Department of Economics, University of California – Davis. Although the author of this book expresses an artistic partiality for economics, his message is to call a spade a spade, namely “not to present scientific economic arguments for more than what they are” (p. 11). The methodology of the book is presented in almost syllogistic form on page 10, built on a functional foundation, and mapped onto the domain of “how economists actually go about their work, and where they get their directions from.” Art is defined as “using one’s intuition to gain insight, and imagination in expressing the insights one has gained through the best means possible. Purposeful people are naturally artists” (p. 10). As economizing behavior is purposeful, science will have a limiting role. Within the author’s framework, science is limited to the role of gaining and storing insights. Standard science stores insights in efficient mathematical form, and conveys insights to others. It fails in some areas that do not LEND
themselves easily to empirical
verifications; particularly, in the areas of complex systems such as economics and the social sciences. As a first examination of the author’s theses, we may note, from an ontological point of view, that economists are not all artistically inclined. Economists are inclined to take a position anywhere between belief and science. The Austrian school, for instance, are “Human Action” or “praxeologically” inclined, a methodology Friedman set about to attack with his brand of positive economics. A second problem from a common sense or pragmatic position is that knowledge may be a limiting case of belief: what we believe in we can come to know. However, superiority over our ancestors in science and culture does not guarantee us being more artistic. A third problem is that from a research or epistemological point of view, science may create art. For example, a recent
CBS 60 minutes report showed that the invention of the MIRROR
is largely
responsible for the enhancement of art. A fourth problem from a mystical point of view is that art might be an experience good for THE ECONOMIST , with no guarantee that the intuition necessary for better economic policies will develop. Because the author’s position is not clear from the definition he offers of art, we shall try to further understand it from a more logical viewpoint. A distinguishing feature of Colander’s methodological position is his implicit insistence that normative and positive are contrary rather than contradictory terms. According to P. F. Strawson, when one can add an inconsistent statement (art) to two statements that are inconsistent with each other (normative and positive), then the statements are contrary (Strawson, 1952, 16). Colander’s system is analogous to the analysis of day and night but not without twilight, and appears to be the way its framer, J.N. Keynes, laid out its initial architecture for Political ECONOMY . He is clear about the position of art as “establishing a buffer between positive economics and normative judgments” (p. 60). Colander argues for keeping the three-part system of Keynes, but for adjusting it towards a more realistic BALANCE
favoring art. Metaphorically speaking, if
the three party system can be laid out on the three corners of the Jacob Marschak preference triangle as modified by Machina (1987), then the way modern economists have unfolded their methodological preferences has resulted in the collapse of the side that represents art. However, it is not clear whether such a situation represents a degeneration of the Keynesian methodology, which the author seeks to make more progressive. One must not forget that the father of positivism, Auguste Comte, thought of progress in a positive sense as a movement from childhood to manhood, from religion through metaphysics to science, and that Friedman might just be following that hunch. In terms of the metaphor, the three vertices can degenerate, and the suppression of the third vertex, representing art, can attempt to make the Keynesian PROGRAM progressive. Another approach to understanding Colander’s methodology is to contrast it with others. The author makes important contrasts with the methodology of Thomas Mayer (pp. 51-53). We are told that Mayer emphasizes, “empirical science economics,” while the author emphasizes “applied policy economics.” Mayer laments “the notion of an intellectual hierarchy with formal theory on top”
(Mayer, p. ix), while the author “sees such abstract work as necessary to REFINE
theoretical insights” (p. 52). Mayer’s approach is akin to “fingertip
economics,” embedded in a “single semi-formal methodology” in which the art and positive economics are intertwined, whereas Colander’s methodology drives a wedge, creating a separating plane between art and positive economics. But like practitioners of the same paradigm, the two views are dominated with more agreements over disagreement. It is tempting to contrast the text with the paradigmatic and research PROGRAM methodologies of Kuhn and Lakatos, respectively. Briefly, art as used by the author in the tripartite system has often been taken as equivalent to the words “practical,” “precepts,” or “instrumental” (Machlup, pp. 489, 506). If those words can be used interchangeably, then it would be incorrect to state that the use of instrumentalism is absent in modern policy economics. Policy models, such as advocated by Tinbergen and others will embody the tripartite distinction with significant weight given to each. This point can be further elucidated with a few ninth-grade algebraic terminologies. Consider these two system equations: TARGET
= d I + eE +f S (1) Trend = a I + bE + c S (2)
where I, E, and S are instruments to achieve a TARGET
return, and some trend.
Given appropriate values for the parameters, we can state that national trends should be arrested by about x-percent to attain over the long-term a target y-percent growth. From the art point of view, the two equations with three instruments (I, E, and S) are overdetermined. For joint policy effects, we can take one variable as given. But that still would not help. Assuming we take the effects of S as fixed, then another problem surfaces, viz., db – ea = 0, since the coefficients for I and E in the two policy equations are collinear, using the coefficients from our model. Similar problems arise if I or E, instead of S, is fixed. Therefore, no simultaneous policy effects in line with the two equations are allowed. The use of the term “instrumental” instead of “art” may not warrant the severe charges the author has leveled against Friedman. Friedman would legislate rules to act as instruments in the case of regulating the money SUPPLY , an area in which he is more influential than scientific. In other cases, he would use trivial instrumental examples such as the dumping of money in a community by a helicopter (Friedman, 1969, p. 4). Colander should take into ACCOUNT
that
Friedman was standing on the shoulder of giants such as David Hume. In a recent
good text on methodology, Kevin HOOVER
reminded us of such a foundation set by
the many Humean statements such as “Were all the gold in ENGLAND annihilated at once,” or if “every man in GREAT BRITAIN should have five pounds slipt into his pocket in one night,” or suppose that “four-fifths of all the money in GREAT BRITAIN to be annihilated in one night”(Hume, 1974, pp. 296-311 cited in Hoover 2001, p. 5). In the hard sciences, such experiments were maintained and popularized in science by Albert Einstein himself under the name Gedankenexperiment. We should also state that Friedman is very abstract and scientific as can be his work on the permanent INCOME
hypothesis.
Therefore, it is difficult to appreciate Colander’s point of view that “Friedman’s methodology involves … a lack of INTEREST
in doing abstract
theory” (p. 34). The five axioms Colander offers are in a budding state. They are not parallel to the axioms of Savage or Von Neumann. In the author’s own words, they are “methodological rules” not intended to be “binding constraints.” It is up to the methodologists whether to nip these rules in the bud, or nurture them for a while. J.M. Keynes gave us a tri-part system that is still alive and well today. Colander’s restatement of them is likely to contribute to their progressive lives. This book is a must reading for serious students of economic thought. References: Hume, David, Essays: Moral, Political, and Literary, edited by Eugene F. Miller (Indianapolis: Liberty Classics, 1954, edited 1985). Friedman, Milton, The Optimum Quantity of Money and Other Essays (Chicago: Aldine Publishing Company, 1969). HOOVER , Kevin D., Causality in Macroeconomics (New York: Cambridge University Press, 2001) Machina, Mark, J., “Choice under Uncertainty: Problems Solved and Unsolved,” Journal of Economic Perspectives, Vol. 1, No. 1, Summer 1987, 121-154. Machlup, Fritz, Methodology of Economics and Other Social Sciences (New York: Academic Press, 1978) Mayer, Thomas, Truth versus Precision in Economics (Northampton, MA: Edward Elgar, 1993) Strawson, P. F., Introduction to Logical Theory (London: Methuen, & Co., 1952). Lall Ramrattan is the co-author of “The European Monetary Union vs. U.S.A., Cooperation and Competition: An Examination of Welfare Benefits,” (with Michael
Szenberg and Cathyann Tully) in J. Jay Choi and Jeff Wrase, editors, European Monetary Union and CAPITAL MARKETS , Volume 2 of the International FINANCE Review (Holland: Elsevier: JAI Press, 2001). He has published in many fields of economics in a variety of journals. He is a lecturer at the Department of Economics at UC-Davis.
