Occams Razor
Kevin Quinn wrote: "....The suggestion is that economic methodology cannot
but be historical." Whether this assessment is likely to appeal to people
depends in part on what is meant by the two terms 'economic methodology' and
'historical'.
1. Let us suppose that economics consists of three distinct parts such as
(1) economic history which describes economic events that have occurred, (2)
economic science which explains observed economic events within a framework
of causality and (3) economic art (or policy) which endeavors to bring about
changes in the economy by adopting certain practices. My sense is that
understanding the history and especially the policy parts of economics
cannot be done well without a good historical grounding, with a grasp of the
norms and practices of the people who were/are involved in the historical
events or in the formation of economic policies. But the science part may be
deliberately ahistorical, as it strives to reach universal causal principles
that are true regardless of time and place. This is because science must go
beyond history and explain historical history as well as future history.
I will give an example. The statement 'the buyer pays the seller' is a
theoretical statement so far as it reveals a universal feature of the
economic event of exchange. No matter what the time or place is we cannot
have an exchange in which the buyer fails to pay the seller. Hence such a
statement is ripe to be part of economic science. In contrast, the modes and
means of payment have evolved greatly, and one cannot do justice to the
evolutionary story of payment without providing historical insights. Nor can
one possibly design a policy involving payments that does not take account
of the current norms and practices of the population for whom the policy is
to be designed.
2. If methodology is to be exclusively considered for science alone (though
history and policy must also have their own distinct methods), we are unable
to shake off the timeless principles of epistemology. Menger's long battle
with the historicists must come to mind in this regard. A new battle must be
waged, it seems, against the neo-historicists (who call themselves
econometricians) because they have failed to generate valid predictions no
matter how exhaustive their data basis for inductive inference is. I will
phrase the problem in honor of Pat Gunning who loves to ask: who sets the
standards?
We are able to communicate abstract ideas because our heads happen to
inherit something common to all of us in the biological make up. We have a
very common brain. The brain does not let us do certain things and also
compels us to do certain things with regard to thinking. Let us consider
Occam's Razor in this regard to see why this so-called norm is timeless, as
a prologue for the larger issue of principles of science.
Suppose that one is thinking about the problem of going from point of origin
A to point of destination B. One looks at the map and sees that there are
two alternatives. The first is a roughly straight and direct path from A to
B, while the second is a circuitous road that goes trough many complex turns
and twists and stretches. The brains habit is that it will tend to suppress
the memory or knowledge of the circuitous or more complex path. When one
wants to make a plan to go from A to B, the brain first presents the
straight path, and may even suppress the consciousness of the other path. A
simpler theory is preferred by the brain, and we can do nothing against it.
It is not a historically determined practice of our tutored brain: it is the
behavior of the untutored brain which tutors us. This virtue of simplicity
is not acquired by training in norms of our peers: it is inherited in our
brains.
The tortured and hence tutored explanations, such as those advanced by
historicists, tend to be discarded by our brains despite tremendous peer
pressure to uphold the tattered legacy. May be our brains are lazy and do
not like to work harder at making sense of things with complex theories if
simpler ones are available. The large and growing chorus of opinion against
the mainstream is a reflection of this very primordial character of us: the
mainstream wants us to make too many assumptions and to indulge in too many
twists and stretches. It imposes to burdensome a set of beliefs, or asks us
to believe too much. It is too complex and labyrinthine such as Ptolemaic
astronomy was too complex compared to the Copernican.
Resorting to the timeless and homeless (placeless) principles of science
appeal not just to nutcases, but to the ordinary students. Therefore I am
pretty confident that no matter how strongly the high priests of
neoclassical economics may oppose it, unified economics will be adopted in
place of the old quilts of self-contradiction patched by micro, macro, trade
and monetary theory. In unified economics, the theories of micro and macro
and trade and money are all the one and the same thing, and there is no room
for self-contradiction such as between micro and macro about what is
determined by equality of demand and supply (is it price, or is it income)
or whether trade is gainful or not (whether profit in equilibrium is zero).
In short, I am saying that the norms of science have some historical roots,
but those roots tend to be uprooted unless they are timeless. The historical
roots of science are not sustainable roots, but the logical roots are
sustained. This is essentially because the job of science is to explain
history. Science must transcend history.
This is how I interpret the Kuhnian perspective on the evolution of science.
Historically shaped paradigms impose an unnecessary burden on the intellect
to believe in complex and tortured explanations. The reason the old paradigm
is unable to provide satisfactory explanations of growing list of
unexplained phenomena it is supposed to explain is that it violates Occams
Razor by keeping a burdensome list of unnecessary assumption or exceptions,
twists and stretches that ought to be discarded. A simpler explanation gets
rid of unnecessary assumptions and yet covers a larger class of phenomena.
This is possible because the better explanation is closer to the essence of
the phenomena, and the essence is universal and hence covers a wider class.
The essence is by definition something that is both necessary and sufficient
to give rise to the phenomenon. The old paradigms fault is that it keeps
unnecessary elements to explain something, and this unnecessary element is
the problem: to keep it, one must make extravagant assumptions, exceptions,
twists and stretches. But if one adheres to essentialism, one obeys the
brains dictum (Occams Razor) of discarding unnecessary elements.
Occams Razor may be the tool that brain applies to cut out the Creatively
Redundant Arbitrary Postulates (CRAP) that define the neoclassical paradigm
of economic science. An appeal to history will not save it. One may refer to
history to see why Fisher and Friedman and Lucas went in and out of fashion,
and why Keynes could not remain the Key to economic science.
Mohammad Gani
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