Yesterday, I began teaching for the fifth year, the Global Macroeconomics and exchange rates course at the Singpaore Management University to graduate students of the Wealth Management programme, 2018-19. The first session is to set the stage for the course, for learning economics, the right approach to learning economic theories. Emanuel Derman says that they are models and models, to him, are approximations. A theory is an ‘explanation of everything’. Economic theories cannot be that. He calls them models.
In the process of preparing for the class, I read the first chapter of the book, ‘A brief history of economics: artful approaches to dismal science’ which I had downloaded some years ago. Ray Canterbery writes well.
Sample these lines:
As important as pure analytics, mathematics, and statistics are, if we know only the tools of the trade, we will be unable to know the place of economics within the broader community of ideas, much less be able to explain it to the uninitiated. We will be unable to engage in the rhetoric of the intellect….
…A broader approach invites readers to range across the neighboring fields of history, philosophy, mathematics, politics, natural science, and literature….
… Historical perspective puts the lie to any claim that economics always is a progressive science—operating, like nuclear physics, outside time and in pursuit of eternal verities.
….We cannot recognize truly new ideas unless we are familiar with the ideas that economists have already explored. And we cannot understand the ideas of the great economists unless we understand the times of their lives.
…..Institutions include formal systems, such as constitutions, laws, taxation, insurance, and market regulations, as well as informal norms of behavior, such as habits, morals, ethics, ideologies, and belief systems.
The highlighted portion is what Deirdre McCloskey would call ‘Bourgeois Virtues’ – courage, temperance, prudence, justice, faith/love. She says the word, ‘Bourgeois’ strictly referred to the ‘Middle Class’ before. She is using that word to refer to the ‘Middle Class’.
By the way, the interview of her by Arjun Jayadev here is very good read. There is also a link to the transcript of the interview, if you do not like to watch the videos. But, the good thing about the videos is that they are broken into small slices on specific topics. You can pick and choose. Thoughtful, in all.
See this paragraph:
The focus on a deeply felt and embedded analysis is typical of McCloskey for whom economics is better understood as social history rather than meteorological prediction. As a critique of the faux scientific economics that pretends otherwise, she went over her long-standing criticisms of the narrowness of economic methods (as she put it, the discipline as the breadth of ‘M to N’ rather than A to Z) and its delusions. …
…. To McCloskey, a criticism of the ways in which economics is currently practiced is not to deny the importance of formalization and abstraction but rather to know its place and to never stray from the serious business of understanding the world.
She makes an observation in the course of the interiew, that is rather significant:
The American Statistical Association, incidentally in the spring of 2016 issued an official report denying that tests of statistical significance are a sensible guide to the importance of a variable. [Link]
Read what she says about philosophy:
In economics, this surprises outsiders, the word philosophy is a swear word. People say, ‘That’s rather philosophical’ as though that was an exceptionally stupid thing to
Back to Ray Canterbury:
For all its concern with form, the new rhetoric about rhetoric nonetheless relies on argumentation within context. Without the villainous mercantilists, Adam Smith’s free trade arguments would have been as dull as the proverbial Scottish coastal town to which the tide, having gone out, refused to return. If David Ricardo had been championing industrialization during the Middle Ages, the more pious Malthus would have won their debate. Besides, there always was more than rhetoric. The great economists gave us entire systems for observing economic behavior.
Canterbury’s introduction ends with these lines, aptly:
Wall Street Capitalism had culminated in a Casino Capitalism characterized by making money with money through speculation.
Quite. It is also the apt note on which to end this blog post.