My Supposed Hubris

I do macroeconometrics, if pushed to define one of my research areas. This is a classic area for criticism by those towards the right of the political spectrum, not least Arnold Kling. Kling has an essay entitled Science of Hubris, in which he carries out his usual attack on what he calls scientism, i.e. any attempt to put really precise numbers on things that we can't be precise about. In Kling's mind, we just can't be precise about any kind of economic aggregate, notably GDP, or investment, because there's just too much going into them, and these aggregates are made up of very different things too.

So essentially, he dismisses the entire field of applied macroeconomics because statistical agencies aren't able to add things up particularly well, and because, well, economists shouldn't be thinking in such broad terms; they should only be thinking at the microeconomic level. Those who practice is, apparently, are the very epitome of hubris; that is, to have "excessive pride or self confidence" as my Mac's Dashboard dictionary tells me.

Of course, anyone who puts their head up above the parapet is liable to accusations of hypocrisy, but folk like Kling at EconLog, and Boudreaux at Cafe Hayek are remarkable examples of precisely this. Kling and Boudreax (and others on their respective blogs) have remarkable confidence in one thing, and one thing only: The price mechanism in a fully free market. They are scornful and incredibly bitingly sarcastic (esp. Boudreaux) of those who dare to suggest anything otherwise, who dare to imagine that government intervention could possibly be a useful thing. To be that requires a heck of a lot of hubris, from what I can see.

And it's not limited to that; Russ Roberts and David Henderson at EconLog had a number of posts about Ideological Turing Tests, and how those on each side of a debate characterise the other, declaring (of course), that those on the right, those nearer to the libertarian school of thinking, were much better than those anywhere else on the spectrum at accurately describing the position of their opponents. Then just today, a post about confidence, where the application is not to Austrians with their remarkable over-confidence in the price mechanism in many inappropriate contexts but, yes, you guessed it, Keynesians (or at least, their crude caricature of them). Utterly stunning the amount of times I think about pot calling kettle when I read Hayekian/Austrians on their blogs.

But back to macroeconometric models. What I struggle to understand is this. If an econometric model is built that happens to include all the relevant explanatory variables for an aggregate variable (e.g. inflation) such that the residuals are white noise, then to all intents and purposes, that aggregate variable has been explained. A humble presentation of such a model would not make bold predictions about the future (forecasting is entirely different to macroeconometrics), but would instead make suggestions at what had been learnt from this exercise. But Kling and those in his camp would disregard it entirely.

Kling et al suggest that one of the most dangerous things about Keynes and his teaching was that he let loose governments and convinced the common man that there was intellectual rigour behind their own whims and desires. Equivalently though, via their scepticism of absolutely everything other than what they previously believed in, Kling et al promote an unhelpful atmosphere of scepticism through which genuine academic progress is hindered - all because of their ideology rather than any desire to be scientific in their pursuit of knowledge.

What is the point of Libertarian Economists?

What useful function to they perform? Economics is a practical discipline, studying the allocation of resources by (semi) rational agents in the context of conflicting interests. On of the agents that will always exist is the government - it's fair to say few examples of anarchy have succeeding, for whatever reason (man's desire for power and to control, probably mostly).

The mere existence of that government will mean that there will be an incentive for some to lobby it to further their interests - creating laws, tariffs, imposing taxes, whatever it may be.

So, what is more useful: Libertarians, who spend their entire time talking about how corrupt, inefficient and a pure waste of space government is, or other economists who attempt to study the nature of the beast for what is it, and try to devise the best possible solution given that government will always exist and hence incentives to manipulate government will always be there?

Libertarians, who essentially just sit on the side bleating on about how terrible things are, or other economists who actually try and understand the nature of these interactions in order that they may, in the future, reduce the problems of crony capitalism? In response to what I think the latter group of economists do, libertarians would provide some pithy quote from Hayek about how because of information constraints, it is silly of us to think we can design things better. How lame is that? This essentially lumps libertarians in with folk like Creationists who try to get in the way of learning more about the world around us.

I think you know where I stand. I think this is the aspect of libertarians that irritates me most of all - their lack of a constructive alternative that could constitute a stable equilibrium.

I should really stop....

...however, I do keep reading blogs by libertarians. Here's one, where Arnold Kling describes another economist as using the "stupidest argument for stimulus". Apparently, that argument is that teachers are being laid off, and it's stupid because schools could instead be reducing salaries for teachers instead, if they valued these teachers so highly.

Now, of course Kling is averse to just about any argument in favour of fiscal stimulus because he is averse to just about any argument for government intervention it would seem (because the market always performs better - despite unending amounts of economic theory and empirical evidence to the contrary).

However, I think most of all it's just inconsistent of him. He says it's stupid because in economics there's always another way. Yet I suspect that when faced with the assertion "the deficit needs cutting", he wouldn't describe statements like "we must cut spending if we're going to cut the deficit" as stupid, even though perfectly equally, we could raise taxes to cut the deficit.

Maybe I'm just stupid, but I don't see what the difference is, and why Kling is also not advocating the stupidest of arguments, just because there is another perfectly reasonable way to do the same thing.