Markets, Unemployment and Economic Policy

Philip Arestis, Gabriel Palma, Malcolm Sawyer, Philip Arestis, Gabriel Palma, Malcolm Sawyer

• Publisher: Routledge
• Year: 2005
• ISBN:
  9781134784240
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

In this volume more than 40 leading economists pay tribute to, and critically evaluate, Geoff Harcourt's work. Contributors include Tony Atkinson, Tony Lawson, Edward Nell and Ian Steedman.

1

HORSES FOR COURSES

Tony Lawson

INTRODUCTION

All economists adopt a methodological stance of some kind. These stances are manifest not only in implicit research criteria but also in the advice they offer each other and many of the questions they ask. Familiar examples of the sort of questions and advice that I have in mind include: ‘What’s your model?’; ‘Have you tested it?’; ‘Don’t think about it, just do it’; ‘Avoid discussions about the use of mathematics’; ‘Be rigorous’; ‘Does it have microfoundations?’; ‘Does it have a (unique) solution (equilibrium)?’; ‘Does it support interventionist (laissez-faire) policy conclusions?’ And while various expressions of this sort are regularly employed by Geoff Harcourt, there is one recommendation that I have heard (or noticed?) him use rather more often than any other. It takes the form of the slogan ‘horses for courses’. Its usage in the scientific-methodological context is not unique to Geoff; but, perhaps because I have had the opportunity to interact with him so frequently, I associate it with Geoff before anyone else. In fact, although many who hear this slogan usually give it an immediate nod of approval (which is an interesting phenomenon in itself) I cannot think of any other person who so regularly employs it.¹

But if the slogan, as a methodological criterion or stipulation, does have a good deal of immediate intuitive appeal, it also requires some unpacking. As far as I am aware there is nowhere this has already been done. My objective here, then, is to suggest a specific interpretation. Once this has been achieved it is obviously of interest to check whether such an apparently general or abstract slogan carries methodological bite. I conclude that it does by examining its implications with regard to an issue which Geoff has himself recently addressed and which is currently as significant as any facing the discipline: the usefulness to economics of mathematical methods.

HORSES FOR COURSES

How then are we to interpret ‘horses for courses’ in the context of scientific practice? Of course there are many possible translations, and Geoff sometimes interprets the slogan in different ways. The exercise which follows must be seen as rather exploratory. My aim is to provide a translation which at least preserves those aspects which seem both essential to it and likely explanations of its apparent immediate intuitive appeal. This appears to be the minimal requirement of any translation that can be sustained.

In the light of these considerations there are several aspects of the slogan that warrant attention. The first is that it is a stipulation. After all, the statement is not of the form “any old horse will do”, i.e., whatever the course. It follows that whatever the precise form in which it translates into the scientific context, it does so as a directive or criterion of some sort. This is obviously desirable if repeating the slogan is to make any difference to anything.

A second and fundamental feature is that there is some matching going on, and it is a matching of some form of agency or action to its conditions of action. The directive is basically that for a given course, a horse ought to be selected according to its suitability in the light of existing conditions (length of course, firmness of terrain, existence, number and/or height of fences, etc.); or for a given horse, the owner or ‘racer’ ought to select a course such that the perceived conditions give the horse a comparative advantage. In short, horse is matched to course, or vice versa.

The most obvious way for this feature to be carried over into the scientific context is as the requirement that scientific investigatory practice and the feature of reality to be investigated be in some sense tailored to one another. This clearly necessitates obtaining insights into the nature of the objects of enquiry, as well as an awareness of the metaphysical presuppositions of given methods and procedures. In short, this feature of the stipulation necessitates an attention to ontology, and presupposes a realist orientation.² It represents an explicit negation of the epistemic fallacy, i.e. of the erroneous belief that ontology can be reduced to epistemology, that questions about being can be rephrased as questions about knowledge (of being). It distinguishes method from its object.

This second aspect of the ‘horses for courses’ slogan is, I think, its most essential one. Certainly it is the most essential feature of the interpretation that I am suggesting here. But there is also a (slightly distinct) third feature that warrants emphasis, one which perhaps contributes most to its immediate appeal. This feature is signalled by the apparent ability of the slogan to express much through little – by way of three words, to be precise. This latter result is achieved because the analogy drawn implicitly relates to a (familiar) whole situation: the race course and all that surrounds it. Most obviously, an essential aspect of horse-racing is the goal of winning, which typically means choosing (or riding or owning) the horse which in any given race comes first.³ In other words, the slogan in question appears to convey, as an additional essential aspect of it, something about the objective or purpose of the event, as well as a method or strategy. And in the scientific context, especially if a realist orientation is implied, this presumably translates to the goal of illuminating (revealing, explaining, understanding) some feature of reality. Object and method of enquiry are ‘matched’ to one another under the intent of illuminating the former.⁴

Thus, I suspect that Geoff is rather lax and gets it not quite right when sometimes (albeit only sometimes) he suggests that the slogan translates into something like “how you do it depends upon what the purpose is” (e.g. Harcourt 1996: 6). This interpretation (which is barely a stipulation anyway) matches procedures of action to purposes rather than to conditions of action, and thereby neglects that an additional and apparently essential feature of the slogan, and a likely major explanation of its intuitive appeal, is precisely that the purpose is already implicated: to ‘pick’ the horse which comes first.⁵

In short, I suggest that the most compelling translation of ‘horses for courses’ in the scientific context pertains to the (usual) situation where the accepted goal is to illuminate (reveal/explain/understand) some feature of reality, and takes the form of the directive that where given methods, techniques or procedures are to be employed, the objects chosen for analysis be of such a nature that the methods appear capable of illuminating them; or where definite aspects of reality are to be illuminated, the methods and procedures followed be fashioned to insights available concerning the nature of such material.

THE USE OF MATHEMATICS IN ECONOMICS

Can this methodological horses for courses (henceforth MHC) directive actually make any difference to anything? This is an important question, because there is obviously no isomorphic relation between a theory of ontology and any set of methods or procedures. Although the noted epistemic fallacy is avoided, the stipulation remains at a high level of generality.⁶ Despite this, it is easy enough to provide an initial indication that MHC can bear important implications by considering one of Geoff’s own papers. Although many economists express definite, often strongly held, views on the use of mathematics in economics, Geoff is one of the few to have written an entire paper on the topic (Harcourt, 1995 [1993]). In this paper Geoff, amongst other things, surveys a range of prominent assessments on the usefulness of mathematical formalism to economics. The problem, though, is how to choose between them. Towards the end of his paper Geoff acknowledges that he has presented an array of different views, but without making any definite selection. He writes: ‘So where does this leave us? Clearly, to take a weighted average of such divergent views would be a cop out.’ Geoff, though, does not really take the issue further,⁷ other than acknowledging that ‘mathematics can be a good servant but, even more, a bad master’ (1995: 19). My aim here is to reinforce Geoff’s latter intuition by explicitly bringing to bear the version of ‘horses for courses’ argued for above. Certainly this strategy supports implications that are reasonably clear-cut.

CRITERIA OF METHOD SELECTION

Amongst the ‘divergent views’ explicitly examined and quoted by Geoff,⁸ both the assessments of the usefulness of mathematical formalism for economics and the criteria (or implicit stipulations) employed in making these assessments are discernable in statements taken from Marshall, Keynes, Samuelson, Boulding, Debreu, Koopmans, Mirrlees, Chichilinsky, Hahn and Stone. In consequence, it is possible to divide this group into those who do, and those who do not, accept MHC as interpreted here in making such assessments. In fact only three of those listed explicitly and unambiguously emphasize a need to match method to the nature of the object of study in order to illuminate the latter – namely Marshall, Keynes and Boulding. The others draw on criteria or objectives which are either too generally stated to be interpreted here (such as ‘scientific advancement’), or rely upon specific criteria and objectives that are noticeably different.

Thus Samuelson makes an unelaborated reference to ‘advancing the science’ and also invokes the avoidance of ‘depraved’ types of ‘mental gymnastics’;⁹ Debreu emphasizes procedures which permit sounder judgements of relevance, the ability to give ‘ready answers’ to new questions through reinterpreting ‘primitive concepts’, deeper understandings of problems formulated, rigour, the intellectual need of economists for rigour, simplicity and generality, the facilitation of efficient communication and thinking;¹⁰ Koopmans emphasizes the efficiency of establishing logical links between premises and conclusions, explicitness of assumptions, a reasoning process that is not intruded upon by ‘associations clinging to words’;¹¹ Mirrlees mentions ‘explicitness of assumptions, attention to detail, and rigour’ (Mirrlees, 1978: 15–17, quoted in Harcourt, 1995: 15); Chichilinsky singles out clarity, a strong foundation, and ‘desired [mathematical] advance in areas which are of great importance for intellectuals and for those whose lives depend on it’¹² (1990: 16); Hahn emphasizes understanding, honesty, modesty, excitement, beauty, the avoidance of being ‘enslaved by slogans and shibboleths of practical men and women’ (Hahn, 1985: 28, quoted in Harcourt, 1995: 15), a need to establish precise definitions of problems and necessary conditions for definite results; while Stone draws attention to the nature of current practices in a number of social sciences, efficiency in analysing and comparing theories of complex systems, the reduction of generality in models, a need to gain insight into subjects where concepts are vague and information is imprecise, and an interest in understanding reasoning processes behind effective (as opposed to ineffective) decisions.¹³

In all these cases (whatever the accuracy of the claims put forward¹⁴) the suitability or relevance of methods and procedures to the specific nature of the material that is to be investigated is never explicitly invoked in formulating a criterion. The ‘matching’ of one with the other is not an issue. Only for Marshall, Keynes and Boulding is this an explicit consideration.

MAKING A SELECTION

But so what? What do we learn from subdividing the contributions referred to by Geoff in this manner? The answer is simply that a systematically different conclusion is reached concerning the relevance of mathematical formalism to economics according to whether or not MHC as interpreted here is invoked. Specifically, while those who fail to question explicitly whether formalistic methods are capable of illuminating social material, infer that the application of mathematical formalism to all areas of economics can only be beneficial, those who employ the criterion draw more or less the opposite conclusion.

Thus, while the former group express only positive views on the use of mathematical methods in economics, Boulding finds, for example, that ‘mathematicians themselves set up standards of generality and elegance in their expositions which are a bar to understanding’ (Boulding 1948, 1971: 236, quoted in Harcourt 1995: 12); Marshall concludes that ‘the application of exact mathematical methods to [the few facts which can be expressed in numbers] is nearly always a waste of time, while in the majority of cases it is positively misleading; … the world would be further on its way if it had never been done at all’ (Pigou 1925: 422, quoted in Harcourt 1995: 6); and Keynes writes of ‘symbolic pseudo-mathematical methods of formalising a system of economic analysis’ concluding that ‘too large a proportion of recent “mathematical” economics are mere concoctions which allow the author to lose sight of the complexities and inter-dependencies of the real world in a maze of pretentious and unhelpful symbols’ (Keynes 1936, 1973: 297, 298, quoted in Harcourt 1995: 9).

In short, if we decide to choose between the ‘divergent views’ brought to our attention by Geoff using his own ‘horses for courses’ stipulation as a criterion, then the conclusion seems clear. Ceteris paribus, support should be given to those who conclude in favour of severely restricting the use of mathematical formalisms of the sort that are regularly found in economics. It is this, is it not, that Geoff is really telling us?

METHODOLOGICAL ‘HORSES FOR COURSES’ MORE DIRECTLY APPLIED

Even so, it must be admitted that no direct argument for or against mathematical economics has actually been made here. Any conclusion against the use of specific mathematical methods is conditional upon the soundness of MHC as well as the legitimacy of the arguments made by Keynes, Marshall and Boulding in support of their noted conclusions. Of course, I suspect that few would really want to reject the (realist) MHC criterion explicitly, even if many regularly overlook it. Moreover, the observation that ‘assessments of leading economists on the validity of extending the use of certain formalisms in economics turn upon whether or not the MHC criterion is invoked’ is a partial regularity that prima facie suggests that something systematic is going on. A (conjoint) hypothesis which can straightforwardly account for it, certainly, is that (i) the statements selected by Geoff adequately capture the assessments of the various authors; and (ii) these authors have reasoned correctly, so that while the mathematical formalisms in question have numerous attractive aspects, they are not particularly appropriate to the understanding of social reality.

All the same, a direct argument still needs to be made;¹⁵ the case for limiting the use of formalism in economics so far rests merely on the authority of the cited critics. Let me, then, examine more closely at least one of the arguments of one of the ‘antagonists’. I focus on Keynes, with whose writings I am more familiar. As Geoff is a major figure in the post-Keynesian tradition, this seems the appropriate example to consider anyway. The question I want to pursue is whether Keynes’ reasoning for resisting the encroachment of formalism of the sort found in economics stands up to inspection. For reasons of space I restrict my...