Friday, February 5, 2010

Progress in Economics

What does it mean to make progress in economics? I was thinking of how Austrians are the logical descendants of the Free Banking School, Monetarists and Keynesians of the Currency School, and Real Business Cyclists of the Banking School, and how little the arguments have changed or disagreements have been settled. There may be more acceptance of a variety of causes of recessions from low interest rates and credit expansions, to high interest rates and credit contractions, to exogeneous shocks, or perhaps not. There may be a broader diffusion of responsibility from government regulation and central banks, to banking and market misjudgments or non judgments, to changes in circumstance and new information, or perhaps not. There may be more ambiguity as to problems and solutions and their effectiveness and efficiency, or perhaps not.

It also brings to mind what is meant by cause. If there is a cause than removal of the cause should prevent the effect, while if many causes it may only shift the source. If the cause may not be removed it may not be possible to prevent the effect, but if the cause may be addressed the effect may be remedied ex poste if not ex ante. If a cause under our control is powerful enough to create an effect, it must also be powerful enough prevent or remedy one, or if not, there is nothing to be done. If one has the power, one also has the responsibility, and while it may be disclaimed, it can never be disavowed. If we are capable of doing bad, we must also be capable of doing good. Causes are often selected more for the remedies they offer rather than their actual effects. This is bad science but can be in one's self interest and difficult to resist.

Science progresses through incorporation of the useful and elimination of the unuseful, and we shouldn't expect valuable insights to disappear, but neither should we expect fringe views to disappear on their own. If there weren't some truth to them they would have never been adopted and if there weren't some utility to the promulgators they would have never been kept. Progress is possible but often painstaking.

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