tag:blogger.com,1999:blog-6837159629100463303.post2462222645316778797..comments2023-06-18T01:25:08.748-07:00Comments on Information Transfer Economics: Corporate taxes and unscientific economistsJason Smithhttp://www.blogger.com/profile/12680061127040420047noreply@blogger.comBlogger8125tag:blogger.com,1999:blog-6837159629100463303.post-77485302863997728922017-10-30T11:07:07.098-07:002017-10-30T11:07:07.098-07:00You write:
"First and foremost the lack of ...You write: <br /><br />"First and foremost the lack of empirical success does not appear to have an effect, so why would positive results have an effect?"<br /><br />Well maybe the bar has been very low for empirical success for so long that nobody knows (or can imagine) anything different. An actually empirical success might raise the bar a bit. Of course everyone used to a low bar would hate that, but I can see that being a game changer. It might drag them kicking and screaming into a new empirical era. If it happens, it should be fun to watch! =)<br /><br />Re: male-dominated. But men love to humiliate each other, so if there's a way to beat the old school establishment over the head with an empirical hammer, it's hard to believe a red-blooded male wouldn't LOVE to be the one wielding the hammer. Once there's blood in the water, it'll be a feeding frenzy. <br /><br />Lol ... I think I set a new record for cliched metaphors in these last two comments.Tom Brownhttps://www.blogger.com/profile/17654184190478330946noreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-84087564621494219212017-10-30T10:54:24.453-07:002017-10-30T10:54:24.453-07:00Thanks Jason. I'll look up Susan Athey.Thanks Jason. I'll look up Susan Athey.Tom Brownhttps://www.blogger.com/profile/17654184190478330946noreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-28277817374619564722017-10-30T10:40:05.476-07:002017-10-30T10:40:05.476-07:00For some reason, I don't see an "undeniab...For some reason, I don't see an "undeniably successful" framework of models or new paradigm doing it for a couple of reasons. First and foremost the lack of empirical success does not appear to have an effect, so why would positive results have an effect?<br /><br />Second, economics does seem to have a significant amount of philosophy built around the idea that you don't have to look at empirical data and there are a large number of people out there (including proponents of heterodox economics) who are perfectly willing to go along with this because their own theories probably wouldn't stand up to the scrutiny. I mean the von Mises crowd forswears even mathematics.<br /><br />Third, the field is male-dominated and therefore given to "male answer syndrome" (aka gender-dependent overconfidence bias) which generally gets in the way of any sort of progress. Impediments would range from economists looking at that "undeniably successful" framework and claiming to know what it's all about without knowing what it is, to continued reasoning using "stories" that fit the economist's preconceived notions.<br /><br />I imagine efforts like Susan Athey's to bring machine learning into econ might help (in particular, it puts data at the forefront -- and additionally, economists seem more amenable to colonization by new hip machine learning than physics which they seem to have some sort of complex about envying), but generally I am pessimistic about any sort of progress in a short period of time if for no other reason than progress rarely happens in a short period of time.Jason Smithhttps://www.blogger.com/profile/12680061127040420047noreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-67329404843598760422017-10-30T10:05:50.743-07:002017-10-30T10:05:50.743-07:00Here's a candidate scenario: a bunch of bored ...Here's a candidate scenario: a bunch of bored physicists discover a discipline (economics) that uses math and data, but seems to be somehow lacking in the scientific approach they're used to, so they decide to colonize it. =)Tom Brownhttps://www.blogger.com/profile/17654184190478330946noreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-66942169024304743032017-10-30T09:58:42.785-07:002017-10-30T09:58:42.785-07:00In my second paragraph I realize I'm asking yo...In my second paragraph I realize I'm asking you to speculate.Tom Brownhttps://www.blogger.com/profile/17654184190478330946noreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-51890627243371158062017-10-30T09:56:15.934-07:002017-10-30T09:56:15.934-07:00Interesting read Jason. I'm surprised John com...Interesting read Jason. I'm surprised John commented. I'm even surprised he read your post. And I'll more surprised again if he responds to your response.<br /><br />What do you see as a plausible path for academic economics to make the changes you'd like to see? What would be the "game changer" or the "tipping point" in the field, or will it just be a gradual process (assuming it happens at all)? For example, will it be an undeniably successful model (or framework and associated models) which serve as a new gold standard against which other work is compared?Tom Brownhttps://www.blogger.com/profile/17654184190478330946noreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-83526356495004300202017-10-29T10:39:52.166-07:002017-10-29T10:39:52.166-07:00I did read them. The idea that this represents a &...I did read them. The idea that this represents a "POSSIBLE" result is actually the problem. On exactly what basis is this a "POSSIBLE" result? The model itself hasn't been compared to data (which you've rationalized by it being too simple). Does it derive from a more complex model that has been compared to data? It's not presented that way. I'm 97% sure it does not because it's basically the Solow growth model and additionally there appear to be no models that get the data correct to a greater accuracy than my model result presented above.<br /><br />So I ask again: On exactly what basis is this a "POSSIBLE" result?<br /><br />The source of all possibility of describing reality (and therefore a fortiori policy) is empirical data. Without empirical data under its belt or in its genealogy, a model is just a math problem. It has zero validity. Zero. There is literally no other scientific field that would say it does. Economics is an aberration in this regard.<br /><br />You can't have toy models without first getting the empirical data right to some degree. Maybe it's 10%. Maybe it's 1%. Just some degree. This can't just be achieved by overfitting existing data either (unless it is then used to e.g. forecast).<br /><br />Given the accuracy of macroeconomic models, there should be no toy models in economics. No one should ever say they wouldn't "take such a simple model to data" in macro because there is no basis to formulate that simple model *except* on the explicit premise of comparing it to data. It's not like it's a simplification of some wildly successful macro model. (Which one is that?) As an aside, I have no idea where economists' concept of 'protecting' simple models from data comes from. It's not like the model is going to get hurt. If it's such a good model but looks ridiculous compared to data you should still show the comparison to data and argue why it's ok. Is it because economists already know their models will look ridiculous compared to data and just decided as a field not to talk about it? 'Obviously we're talking bollocks, but there's no need to actually come out and say it.' Is it just being patronizing of the public? 'If some layperson saw this, they'd think we have no idea what we're talking about, but it'd take years to explain it, so better just not show how the sausage gets made.' I don't get it.<br /><br />You can make toy models in physics. That's because relativity and quantum mechanics have been compared to data, therefore any model constructed using e.g. the quantum field theory framework automatically has the benefit of being consistent with empirical successes of relativity and quantum mechanics and therefore is well down the road of possible results.<br /><br />But there's no wildly accurate macro theory framework that lets us do this with corporate tax rate cuts (or really any policy choice). So whether or not any model, simple or complex, represents a "POSSIBLE" result is *entirely* dependent on data.<br /><br />Sure, the field's defense is that all** economists do things this way. They all** make up math problems and just assume they represent "POSSIBLE" results. And that is (unfortunately) very true. But it's cargo cult science. Just because all** economists do it doesn't make it scientifically valid. If all economists decided a p-value of 0.2 was just fine, would you go along with it too?<br /><br />**Let me put in the exception for econometric models like VARs, which are based mostly on data.<br /><br />So let me answer my question: there is no basis for this to be a "POSSIBLE" result. Claiming that it is "POSSIBLE" is unscientific. And as I said in my post, the fact that your result is basically model independent (plug in α = 0 and try to rationalize the result like any decent undergrad would on a homework problem) makes the lack of "leaning over backwards" (in Feynman's words) to reject it even more egregiously unscientific.Jason Smithhttps://www.blogger.com/profile/12680061127040420047noreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-32225277377468074402017-10-28T19:51:19.439-07:002017-10-28T19:51:19.439-07:00If you read my and Greg's post, you will see t...If you read my and Greg's post, you will see the question we address is whether it is POSSIBLE for a corporate tax cut to raise wages by more than it costs the government in revenue. Neither of us would take such a simple model to data. The point is not to estimate the wage changes of the Trump proposal, whatever it is. The point, clearly stated, is to establish a possibility result. For that you use the simplest possible model, as unrealistic as it is. Of course a real model needs depreciation, interest deduction, personal taxes, adjustment costs, and on and on. Reading before criticizing could save a lot of headaches, in particular most of Brad Delong's comments on everything. John H. Cochranehttps://www.blogger.com/profile/04842601651429471525noreply@blogger.com