I think Anders basically has it. His synthesis also makes more sense if we consider corporations as somewhat state-like institutions.

LOL OK Luis, I won't derail Chris' thread any more. I'll let people judge your post for themselves.

Well, RDD is there to solve causal inference about a particular outcome...by looking at how it changes around a discontinuity. My point is that if there's no reason to doubt the story being told from descriptive statistics then you can use something like RDD as a robustness check in an appendix, but any precision it offers is spurious - highly local, resting on unchallenged assumptions, and full of statistical noise. Ultimately there are far more important questions that should be filling the pages of 'top' economics journals. I'd also dispute your far-reaching statement about econometrics, as I've both taught and been taught it and the story you're telling is not familiar.

I'm sure I'm not the only one who would like a reference for that Cosma Shalizi claim!

Luis, for me one of the ways "actually existing capitalism is in need of major reforms" becomes "we need an alternative to capitalism" is that existing capitalism has seemed to go in the 'wrong' (i.e. socially reprehensible) direction since the crisis. This fits what Chris has said before about cuddly capitalism being unlikely/unsustainable because it is against the predominant power relations created by capitalism.

Your point is an important one, but I want to add to something Luis said - we need to be aware of individual policies because often politics is about individual policies. Say we had 10 mildly regressive regulatory policies counterbalanced by a hugely progressive tax system - clearly that would be vulnerable to a relatively straightforward political reversal. IMO we need to combine both perspectives to have politically viable leftist policies.

Hi guys, just wanted to clear up the confusion - I meant Randomised Control Trials. If you see the links in my original post there is a Jacobin article about how the kinds of micro policies tested using RCTs often seem to benefit local elites.

Hey! Thanks for posting on this topic, good post. But I think you are a bit unfair to me. What I said was reasonable and I stuck to topics which I know something about - even if you think I'm wrong, I'm not being ridiculous. Let me comment: 1. Nothing specific to say; you'd have to elaborate 2. The denunciation is of micro policies in general, not necessarily RCTs in themselves and certainly not just RCTs. There is evidence (linked to in the post) that the shift in the IMF/WB to many of these, ranging from those implemented through RCTs to those not, often seems to benefit local elites. 3. Tbh I thought the proposition that Russian privatisation was disastrous was uncontroversial. I'm also not sure about lumping Putin and Yeltsin together (the former was more of a reaction to the latter, no?) And as for Scheifer, he was prosecuted for insider trading and Harvard had to pay out. I don't see what they would do this if he had been clearly innocent. 4. IDK what you mean by the maths was correct. Within the parameters of the model it is not 'wrong', but there is no allowance for fat tails, which explains why it has failed to account for price collapses like 1987 and LTCM. Also, I didn't say the bailout was public - but it was necessary, and the collapse could have had terrible consequences otherwise. 5. I wasn't talking about Friedman or Hayek but the economists employed directly by Pinochet throughout the coup/government.

Does Brennan distinguish between modern liberal democracy and more local types of democracy (workplace, local govt, community)? I know you've argued before that the latter are more likely to produce better outcomes as they take advantage of Hayekian knowledge and participants have more of a personal stake in the outcomes.

I suppose the question is whether a theory(s) exist which can reconcile the observation that the market is hard to beat with the kind of regularities you identify.

I'm not trying to do a 'gotcha' here Chris, but doesn't a lot of the evidence you present here contradict your support for the EMH?

@Pinkeen Most capitalist states have been murderously oppressive, too. The U.S. was built on genocide and slavery; the UK had an enormous empire in which it killed and starved many in its colonies; I could go on but I'm sure you know it all...

Maybe economists should just stop signing group letters as if they have the authority to deliver the verdict on political decisions?

From the Maugham quote: "To ensure this, it is essential to control the costs of spending programmes" ...erm, why? This is just an empty assertion. It is the huge non-sequitur of the entire austerity program, and people don't even seem to challenge it directly that often.

When I saw that this post was about obliquity and Corbyn, I thought you were going to suggest that his unwillingness/inability to play the game and make political capital of things like personal spats had contributed to Tory apathy, which in turn created the biggest political spat of this parliament or the last. But maybe hypothesis is pushing things a bit. I doubt commenter 'deviation from the mean' would like it (:

@doc It's funny you should mention that, because replication of empirical economic research has been similarly unsuccessful: http://www.federalreserve.gov/econresdata/feds/2015/files/2015083pap.pdf I agree with gastro that we have to be cautious about extrapolating previously successful predictions. I'd also point out that 'economics' as a field contains a lot of different theories about financial markets and little ex ante reasons to prefer one theory or another. Sure, knowledge of an area combined with an eye to empirical evidence and some intelligence/intuition - all of which you no doubt have, Chris - will help you to pick out better ideas. But such an ability is not inherent to the practice of 'economics'.

I suppose the question now becomes: when can a theory be entirely abandoned or refuted? Do we constantly expand our library of theories, as Dani Rodrik seems to want? Are theories basically never refutable, which is something a paper called 'economic models as analogies' seemed to argue? I'm not saying you're arguing this but it seems to be the way economics is heading. I've never seen a single theory completely abandoned, while research pushes the basic framework in all sorts of (sometimes contradictory) directions. Personally I find that this is clumsy and creates model selection problems, and am not sure how it is advancing our understanding of the world. Anyway, I don't disagree with most of your post and I think we may be talking about slightly different things. So I'll stop rambling now.

Luis, Maths is useful when things can be quantified. The problem is that econ is full of mathematisations of things which cannot be quantified, such as effort, utility and countless random parameters that have no obvious interpretation (please don't force me to find an example). I've never been against modelling - just against modelling the wrong things. "That involves writing down clearly articulated models, seeing how well they are supported by data, trying to think of ways to test them. This is what economists do." This is what economists like to think they do. What I've been learning is that in practice, it's more like 'economists write down clearly articulated but unnecessarily complicated models, impose arbitrary assumptions on them to reach a conclusion they could have come to in a sentence, then look for broad, stylised patterns in the data that are loosely consistent with their conclusions.' I'm not saying all econ is like this - that's a worst case scenario. But in general econ is nowhere near rigorous empirical testing of models and I don't know if it ever can be. Obviously, Murray's paper is not the same as his blog post. He doesn't just use thought experiment examples; he refers to a lot of evidence on return-maximising firms to support his case. He also comes to a number of non-standard conclusions with his framework. Off the top of my head these include that perfect competition is not necessarily the most efficient and that firms will not produce unless there are decreasing returns to scale to start. I don't see how renting capital is the same as having it in the denominator in the maximisation decision, either. It's another annoying habit of economists to respond to any new idea by insisting it's in their model if you interpret this way or that way. It's like a particular sub-category of Romer's 'mathiness'. sam, I've not actually said anything about equilibrium or economic history, but I'll bite. No equilibrium critique has ever concluded "...and therefore, there should be large surpluses and shortages in a capitalist economy". You are not referring to 'equilibrium' as a modelling tool but to an implication of standard demand-supply. Advocating non-equilibrium tools does not mean that you think every conclusion of every equilibrium model is wrong. Although supermarkets do throw away a lot of food and firms tend to keep spare inventories precisely due to dynamic considerations that are absent from this model. History is simply not a staple part of most economists' training. Individual economists are aware of history; there are fields devoted to studying it; but in general research, education and policymaking is a lot more concerned with modelling than with learning from history. I think this is a sad state of affairs.

Chris, I don't believe that assuming people are not rational, as defined by economics, is tantamount to assuming they are stupid. Investors are dealing with a remarkably complicated situation and, being human, have no choice but to use heuristics and cognitive shortcuts. I also think my mum would say that the market is hard to beat and she would have no idea how to invest! But of course there are those who consistently beat the market, which contradicts the EMH. One thing I forgot to mention is the fact that we have multiple theories leading to the same prediction in economics. So EMH implies the market is unpredictable but so does the theory of fractal markets, albeit for different reasons. How does Dani Rodrik choose between these two in any sort of rigorous way? Luis, because the use of maths does not just require the maths itself to be precise; it requires you to be precise about what you are mathematising. You can write any mathematical model, attach economicsy-sounding labels to the variables and claim it says something about the world, but ultimately if you have no clearly defined links between the theory and the maths then it's not clear why and when the maths is relevant. Economics doesn't use maths in this way; it uses it in a more vague, intuitive way and tries to defend every model as potentially valid, depending on the judgement of the economist. But there are two crucial questions missing: (a) What does this model add over the basic insight it is supposed to represent (behavioural econ is a repeat offender here); (b) How do I know when to use this model over some other model? Without well defined domains and boundary conditions, it's difficult to answer (b), particularly if two models yield similar predictions. It's almost as if economics is celebrating having an n=k problem, where n is real world situations and k is models. If you want evidence economists are resistant to non-standard ideas then how about Cameron Murray's theory of return seeking firms: http://www.fresheconomicthinking.com/2015/08/the-confused-economic-orthodoxy.html To me, these seems pretty well substantiated empirically, novel and interesting. But some of the referee's responses are pretty pathetic if you ask me.

While I agree with your point that attacks on economics should in general not be ideologically motivated, I disagree with your choice of theory to defend economics (the EMH) and even more strongly with this new 'economics is about choosing models' fad. Firstly, economics has a habit of using extremely unrealistic models to make wrong predictions, then describing the disconnect between the unrealistic model and the world as a 'puzzle'. Then, after some time and with a lot of mathematical tinkering, the 'puzzle' may be solved in any number of ways. The problem is that these 'puzzles' are only 'puzzles' if you believe the ridiculously unrealistic models in the first place. In the case of the EMH, one of the puzzles might be 'excess volatility'. The type of papers you link to have discovered that investors tend to herd, follow rules of thumb, act on wrong/imperfect information etc. Well, surprise surprise! My mum could have told you that. So how has economic theory advanced our knowledge here? To be sure, there's benefit to testing and sometimes formalising our intuitions. But when formalising theory takes centre stage, even when the theory contradicts the knowledge we have and does not have evidence to support it, it pushes our understanding backwards rather than forwards. Going on to shoehorn things we already knew into this theoretical framework only gets us back to where we were before - unless the theory can make another clear, sound, nontrivial prediction. Similar examples are the equity premium, life cycle hypothesis, allais 'paradox' etc. Secondly, and in partial reply to Luis' first comment, heterodox economists do not claim to have the one true theory at all. What we would prefer is that (a) our theories get a hearing alongside neoclassical ones and (b) there are clear conditions for using theories, including some conditions for when we simply do not have a good enough theory! Economists are ultimately in a state of dissarray about their use of models and as a result they are producing mutually conflicting assertions: - The claim that maths adds rigour and precision to theory; - The claim that they should choose between these theories based on vague, arbitrary and unstated hunches; - The dismissal of heterodox theories outright. Do I really have to detail why any 2 of these 3 are contradictory?

"Autonomy is not something that can be given to you in any meaningful sense, you have to achieve it." But it can be taken away from you by coercion by e.g. your employer. That's one of Chris' points.

If I remember correctly, did Keynes not make the prediction with the proviso that there wouldn't be another war?

Not sure how clear the intelligence was about Iraq - in many cases it contradicted Bush/Blair's narrative, but they went ahead anyway...

I would go one step further and suggest that nuclear catastrophe is not something to which we can attach a probability. And it could be that trident increases some risks by making *us* more aggressive.