----------------- HES POSTING ----------------- I just want to echo Lawrence Moss's excellent post. "Endogeneity" and "exogeneity" are rhetorical conceits -- they are concepts created to help understand the real world. And the concepts ARE useful. It is a step beyond making simple correlations, like noting that fat people don't make as much money as slim people. When I say it that way, it sounds as if the "direction of causation" -- another formal term -- is going from being fat to not making money. But ... people with low income tend to eat food products that are higher in sodium and fat, and tend not to get enough physical exercise (paradoxically, as in bygone centuries it used to be the other way around). So now where is the direction of causation? If you have a statistic that links obesity to low incomes, are you finding that people who are obese have trouble getting higher paying jobs, or are you finding that people with low incomes tend to become obese? That's when you go to the next step and try to set up a "model" of the situation -- to specify a line of causation. But it becomes a human choice to decide what is "endogenous" to the model and what is "exogenous". And when making that decision -- if you are not careful -- you have DECIDED the line of causation already. If I set the model up so that obesity is an EXOGENOUS variable and income is the ENDOGENOUS variable, then if I am not very careful in how I set the model up (with other variables that contribute to income variation) I have committed the same tautology that I would have just using a simple correlation. I will have CREATED the "proof" of causation simply by assuming from the beginning what is THERE in the first place, and what is then the PRODUCT -- I have DECIDED what is the cause and what is the effect. The whole concept of exogenous and endogenous variables, everything that is trying to be done in this sort of effort, is associated with Marshall because he was really the first (I think) to incorporate INTO a best-selling textbook, and INTO a highly-regarded teaching program, the "new" mathematics of physics -- using calculus (and algebra) in a particular way. (Not really new in terms of years, but "new" in the sense of its use in the history of economic ideas). If you are going to explain economic behavior in the real world using two-dimensional graphs drawn onto a blackboard or printed in a textbook -- two of the four major methods of dissiminating new information in the university system (the others being verbal lectures and laboratory experiments) -- then the concept of exogeneity and endogeneity become more than a "rhetorical conceit" -- an idea that helps explain things -- it also becomes a "heuristic device" -- a teaching tool. I say that because although economic research has gotten way beyond two dimensions, students are still introduced into economists via two- dimensional diagrams and two-dimensional thinking: via the heuristic device of algebra, and then calculus. (The use of "vectors" has had its own results -- some of which I find most unfortunate, enabling the researcher to "pretend" that clumsy variables don't exist because it all folds into the matrix, so reality can look a lot cleaner than we OUGHT to know it really is when we are using such complex models -- hope that made sense!). Both algebra and calculus require a left and a right side of the equation. And this is where you get the need for ONE type of variable (on the right side of the equation) and a DIFFERENT type of a variable (on the left side of the equation). Mathematicians tend to go ballistic when they see the basic two- dimensional price and quantity equations that economists draw on blackboards to teach freshmen -- because we have our X's and Y's reversed, you know. But that's a story for a different time. At any rate, it seems to me that there is just not enough self-awareness of the degree to which this narrow conceptualization of causation -- while useful -- easily creates the same types of tautologies that we laugh about when sociologists are using "simple correlation." How do you know when you are playing with tautology? I think it's when the results start to diverge GREATLY from the evidence coming in from different TYPES Of research. Any model that comes out with the result that "there was no discrimination against women in the nineteenth century Anglo-American job market" is deliciously counter-intuitive to many economics -- and ridiculously out-to-lunch to everybody else who does research in this area. Rather by definition, if the people doing the hiring are quite up-front about the discrimination, then how on earth can a simple model prove that they're wrong? ??? I'm waiting for the person to derive a model that says slavery never happened ... So where am I headed with this? Well, it seems to me that today economic THEORY no longer requires such a strict separation of exogeneity and endogeneity -- which is a good thing, because in the real world you get feedbacks and iterative processes and codetermination and all sorts of complications that make it impossible to designate something completely exogenous or endogenous, ever. Our use of math to conceptualize reality has gone past algebra and calculus and nineteenth century physics. BUT -- to a large degree, the economist's use of modeling HASN't, and the economist's teaching methods haven't either. And this is where Marshall comes in again. (I am leaning HEAVILY here on the British historians of economic thought who have written about this, BTW -- I didn't come up with this all by myself!) -- it is not that Marshall instituted the practice, or popularized the notion, of models that have one exogenous and one or many endogenous variables -- what he popularized was the concept of "catallectics" (the spelling is certainly wrong here) -- not that this was a POSSIBLE way to analyze economic problems, but that it was the ONLY way -- that we had to stick with models that could use observable variables (like price and quantity) so we could "prove" or "disprove" this or that theory about economics. Everybody learned their Popper pretty well, so we all know we are supposed to set the model up to "disprove" whatever it is we want to disprove to prove whatever we want to prove. Then Samuelson (I believe) pretty much nailed down the whole requirement that only observable phenomena counted (in his first textbook) -- and combining all that with statistics and you get econometrics, which is where you will find the currently used definitions of exogenous and endogenous -- again, rhetorical conceits designed to "fit" a problem into something that can be "modeled" using econometrics, and then we can comfortably say we have an "answer." The problem with all this (I believe) is that our conceptualization of economics is mathematically too advanced to fit the requirements of equations with a left and a right side. For the past 40 years (my timing could be off, but this is what it looks like to me) there's been an increasing divergence WITHIN economics between what economists SAY they are doing with models and what they are actually doing, what they SAY they are doing with mathematics and what they are actually doing, what they SAY they are doing with theory and how theory and reality intersects. And it seems to me that THIS is a problem for historians of economic thought. So ... going beyond the initial valid query, (and if you have made it to the bottom of this overlong message, for which I apologize) -- what does the history of economic thought have to say about the statement I just made? When Marshall wrote, there was a unity among the level of mathematics he used, the type of models he created, the sorts of problems he addressed, and the state of the scholarly literature at the time. (Catallectics was definitely an improvement over economic theories based on "national character" or genetic variations in "race" . . . ) But that's just not so today. And the intellectual dilemma that has created has been a problem within economics as a profession -- I am suggesting -- since about the end of the 1950s, when economists began writing seriously about microeconomic topics that could not be solved with reference only to "prices" and "quantities" -- but have continued to use tools created to serve a type of economics BASED on the esssential significance of only those two types of variables. Mary Schweitzer ------------ FOOTER TO HES POSTING ------------ For information, send the message "info HES" to [log in to unmask]