Cargo Cult Science Macroeconomics

Science could almost be defined to be that human activity where mistakes are being intentionally made but in a systematic way. The aim of this activity is then to establish causality. Causality is what allows us to forecast what will happen next if we know all relevant variables. Causality, in other words, is a bit like implication in first-order predicate logic except way different: while in mathematical logic we establish truth by way of a calculus of truth tables this is not the case in those sciences which are cursed to deal with the real world. In math the world is nicely defined by our axioms. Once we lay those down, in principle, all theorems are predetermined. The only thing that may vary is that some of these theorems may manifest themselves earlier than others.

In physics there is no cleanly defined, axiom-based universe so the game is quite different. We have to deal with not knowing all that is relevant and we may have to deal with the fact that we may not perceive all that there is and so we are forced to model as we go. In that sense “the earth is flat” is as good a theory as any for those who cannot see a sailboat sink into the horizon and whose ability to travel and perceive is limited to within epsilon of the earth’s tangent space under their feet. A theory which helps us understand what we perceive is a good enough theory until we have an experiment that challenges it. So we learn by doing and we approximate. In that respect we try wrong things and proceed by elimination and when we do this carefully we call it science.

Things get a bit more complex with economics. Economics is that human endeavor which mimics physics “except that its particles have feelings”. ((Imagine how much harder physics would be if electrons had feelings! – Richard Feynman)) This complicates matters enormously which become even worse because all the economics known to man is written by people stubbornly denying the fact that what they are really doing is mimicking physics in a naive way. (( http://web.mit.edu/alo/www/Papers/physics8.pdf)) The worst brand of economics in that respect is macroeconomics. The basic way in which its practitioners have earned their Nobel prizes is to look at time series of aggregate variables, figure out a coincidence of occurrence in some countries, in some time frame and write a model that fits that data, using it to “predict the economy”, succeeding so long as it is of no use and failing right when it matters. If that reminds us of what Richard Feynman calls “cargo cult science” it is because it really is very much like cargo cult science. “In the South Seas there is a Cargo Cult of people. During the war they saw airplanes land with lots of good materials, and they want the same thing to happen now. So they’ve arranged to make things like runways, to put fires along along the sides of the runways, to make a wooden hut for a man to sit in, with two wooden pieces on his head like headphones and bars of bamboo sticking out like antennas -he’s the controller-  and they wait for the airplanes to land. So I call these things Cargo Cult Science, because they follows all the apparent precepts and forms of scientific investigation, but they’re missing something essential, because the planes don’t land.” ((Richard P. Feynman. “Cargo Cult Science: The 1974 Caltech Commencement Address”)) There are many ways in which science can fail, some are less painful than others and some influence less people than others. Lets look at two examples, one more innocent than the other.

Hennig Brand was a German Chemist who in the sixteen hundreds was convinced that “gold could somehow be distilled from urine ((Bill Bryson “A short History of Nearly Everything”)). The similarity in color seems to have been a factor in his conclusion”. H. Brand collected urine by the buckets and put it through just about everything he could think of. He never produced gold of course but at some point around 1675 he did notice something remarkable. The paste he turned the urine into began to glow and when exposed to air it would sometimes burst into flames. What he discovered was phosphorus! Industry could of course make good use of phosphorus, as we now know, but its production was cumbersome to say the least. Soldiers were called to provide the raw material as it was not until the 1750s when a Swedish Chemist named Karl Scheele was able to produce phosphorus in bulk without the need for urine thus relieving generation of soldiers from the task (pun intended).

Portuguese neurologist Antonio E. Moniz ((http://www.wired.com/thisdayintech/2010/11/1112first-lobotomy/  )) ((http://www.britannica.com/EBchecked/topic/345502/lobotomy)) performed the first lobotomy in 1935 in a Lisbon hospital. American neurosurgeons W. Freeman and J. Watts had performed the first frontal lobotomy in the United States soon after that which was basically a procedure by which one drove an icepick through the eye cavities and rotated it around its axis when it reached the brain thus destroying brain tissue. What lobotomy claimed to do is to cure mental disease. Moniz won the Nobel prize  for his “science” in 1949 but soon after that lobotomy was abandoned evaluated as that which it was: a barbaric practice. Before it landed in the trashcan of science lobotomy mutilated thousands of people.

These are two examples of scientific mistakes which are totally different. Producing smelly phosphorus instead of gold by unnecessarily imposing urine collection on soldiers is a misdemeanor in comparison to the brutal crime of lobotomy. When a lawsuit was brought against the seismologists who failed to properly warn the population of L’Aquila ((http://www.nature.com/news/2011/110914/full/477264a.html)) in 2009 I was left with mixed feelings as to whether or not a seismologist can ever be liable for not predicting an earthquake or not. The premise of the lawsuit of course was not that seismologists fail to predict but that they calmed L’Aquila’s population in the midst of continuing tremors failing to properly weigh in the fragility of ancient structures widespread in the city. One naughty thought did occur to me though:

What would Social Science be like if it were to be liable for its recommendations? What if a folk could sue practitioners of macroeconomics for malpractice? What if a segment of society could sue a micro-economist whose model falsely claimed to identify causality? What would economics look like then?

I was recently pointed to an article on voxeu.org on “expansionary fiscal austerity”. ((Revisiting the evidence on expansionary fiscal austerity: Alesina’s hour?)) The phrase more or less claims a causal relationship between fiscal austerity and economic growth. The claimed causality is supposed to go from austerity to growth as in “in order to cause economic growth you need to impose fiscal austerity”. If your intuition is that this is quite possibly the silliest thing you’ve heard then you are not alone. You are also not far off the mark. The voxeu.org article shows that Alesina’s conclusions are so nuanced that their translation (by fiscal hawks) into the fact that we need “large, credible and decisive” cuts to cause growth is wishful thinking at best and nonsense coming out of theological premonitions in all likelihood.

Economics occasionally claims too much, it is too naive to be true and lends itself to abuse by those who first decide what the right policy is and then identify the literature which is easier to “re-purpose” to fit their needs. This is not as illegitimate as it may sound at first. If you are for some reason convinced (say because of your cultural background or you economic status) that austerity is a virtuous practice then you are going to have a hard time abandoning the idea. If you moreover need to convince others of the validity of your views then you may seek some sort of “scientific legitimacy” and depending on circumstances you may re-purpose or even abuse some “research” for that. On the other hand one could write several publishable papers on the merits of sending women back to the misery of housekeeping (unemployment would go down?) but no amount of science would convince a modern society to do so. The bottom line is that political questions and issues of culture are not solved by optimization techniques but by political decisions. So when Olivier Blanchard finds logic and fairness in the brutality its IMF is subjecting Greece to he has only one thing going for him: he is not liable for malpractice in a court of law. Democracies however have a way of filing a malpractice case against wrong policies. It is called voting. The upcoming Greek elections is one of the last chances for Europe to stop political decision making from being wrapped in Cargo Cult Science and expressed in the street lingo of retail banking and recast the debate on the future of the continent in political terms.

 

 

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