Tuesday, February 17, 2015

Why do macroeconomists think they know what it's like to be a physicist?

Noah Smith and Scott Sumner decide to presumptively step into the shoes of a physicist. First, Noah:
String theory is something you hear Brian Greene or Michio Kaku talk about, and you think "Wow, neato, the Universe is mysterious and funky!", and then you never think about it again.
And then there's Scott:
Imagine I was debating a string theorist, and I told him the theory was a bunch of worthless nonsense, as it was not refutable. He might respond that I didn't know what I was talking about. And to be honest I would have to agree with him, I don't know what I'm talking about in the realm of string theory. And having once read someone who does, who also criticizes the theory for being unfalsifiable, doesn't change that fact.

I don't think many people would be insulted if you told them that they are not qualified to debate quantum mechanics, or biochemistry. But they do get offended when you tell them they are not qualified to debate macroeconomics. Why is that?

Perhaps because people can immediately recognize that fields like physics and biochemistry are way over their heads, but macro looks deceptively simple. ...
Of course, not being physicists themselves, Noah and Scott don't realize how often non-physicists decide to inveigh on the subject of quantum mechanics, string theory or the methodology of science. Say, people like ... Scott Sumner. Noah isn't much better -- having only an undergraduate education in physics. And don't get me started on the philosophers! As soon as someone at a party or out at a bar learns that I'm a physicist, they immediately try their hand at interpreting quantum mechanics. And I assure you people do get insulted when you tell them they have no idea what they are talking about.

Sure, it can be annoying when people don't bow to my superior credentials in this arena. But you know what allows us physicists to come out of these scraps with our egos intact, instead of asking why don't people take our PhDs seriously?

Because we actually do know what we are talking about.

[Take it away, Robert Waldmann.]

Seriously, we physicists can discuss at length with some really good arguments about why we think quantum uncertainty isn't just due to some unknown underlying deterministic theory. And that's a field where there is still new research!

In contrast, Scott Sumner wrote this blog post. I am not a macroeconomist, but I can assure you as a person well-versed in complex non-linear systems that his model is laughable. Yes, Scott calls it a "toy" model. In physics, the Ising model is a toy model (even Wikipedia says so). But the Ising model doesn't just say the magnetization is what it was in a previous time period plus a "magnetizationing"  force that moves the magnetization to what it is now. That is to say Scott's "toy" model is pure phlogiston. It quite literally says that NGDP is created by outputiston. That's not a toy model -- that's a question begging model (in the original sense of the phrase).

And Scott wonders why non-experts don't take his credentials seriously!

The area where Scott is most convincing is where he's not being a macroeconomist, but rather  an economic historian. He knows a lot about the Great Depression. He has a lot of good counterexamples from history where various (in particular, Keynesian) models fail. He is not a stupid person. But when it comes to explaining data? There is precious little there there.

I am not sure I quite get why Noah is deciding to be diplomatic (as Waldmann puts it). I mean Noah wrote this:
Unlike hard scientists, macroeconomists must spend considerable effort persuading people of the likability of assumptions. The assumptions that macroeconomists "like most" are the ones around which consensus forms.
That is Noah's restatement of Karthik Athreya's (a macroeconomist himself) view of macroeconomics. Emphasis mine. Yep. Debating which assumptions are like, totally, the awesomest. Noah also wrote this:
But how much do you smooth [with an HP filter]? That's a really key question! If you smooth a lot, the "trend" becomes log-linear, meaning that any departure of GDP from a smooth exponential growth path - the kind of growth path of the population of bacteria in a fresh new petri dish - is called a "[business] cycle". But if you don't smooth very much, then almost every bend and dip in GDP is a change in the "trend", and there's almost no "cycle" at all. In other words, YOU, the macroeconomist, get to choose how big of a "cycle" you are trying to explain. The size of the "cycle" is a free parameter.

Noah seems to think that you need to have a PhD in economics to see that this is intellectual garbage. But really, anyone with any kind of technical background can see this. The thing is that macroeconomics is in such a nascent state that this kind of problem definition is still a pretty important advance. The EMH (Fama) and failures of the EMH (Shiller) simultaneously won the Nobel prize recently. Talk about problem definition! And those really are advances in the field!

Maybe that is the problem? Do macroeconomists not realize that their field of inquiry is still so young that it's still in the "non-experts can make an important contribution" phase? Keynes' General Theory came out in 1936. Samuelson's book is from 1947. I'd liken these to Galileo and Newton, and not Feynman and Weinberg. Economics didn't even exist as an idea until around the time of Adam Smith's Wealth of Nations. We've known about electromagnetism at least since 600 BCE. That's about 2500 years between discovery and final theory (QED). In between 600 BCE and 1947 (and over 100 years after Newton), Faraday made many contributions to the field -- without any formal education in physics. I see myself arguing with the Hooke's and Halley's of macroeconomics, not the Witten's and Weinberg's.

Macro isn't string theory and the pronouncements of macroeconomists shouldn't be taken with limited argument from non-experts as the pronouncements of string theorists should [1]. String theory is built on quantum mechanics along with special and general relativity. There are no fundamental laws that are a part of macro. There isn't even a fundamental framework (quantum field theory is a framework) ... the closest I've seen is DSGE. And what do Scott and Noah think of DSGE? Ha!

It's that framework that gives physicists (and string theorists) this clout. Our PhD programs teach us that framework. Hamiltonian systems, Lagrange multipliers, partition functions, Noether's theorem. These are tools physicists (and chemists and engineers) use in separating the theoretical wheat from the chaff.

Even economists use Lagrange multipliers! Why can't a person with some undergraduate education hold forth on that?

What framework does an economics PhD (uniquely) teach that gives economists the right to go unquestioned by people who don't know that framework?


[1] Even then, Scott's example where someone brings up the argument that string theory is untestable is a good argument! And non-experts can make that argument! And experts like myself can point to the string degrees of freedom accounting for the entropy of a black hole ... and not get all bent out of shape about it.


  1. Thanks for the link. I think that Noah Smith knows a lot about physics (an undergraduate education in physics implies learning a lot). having an undergraduate education in biology, I really wouldn't know.

    I stress again, as you did, the word "diplomatic". Noah Smith hasn't always been diplomatic. He was planning to be a macroeconomist then decided it was garbage. In other posts he is very frank, even rude.

    I think you are a bit kind to us macroconomists. Yes it is a new field, but it has managed to worsen over time. It is barbarous and decadent, undeveloped and schlerotic (but it pays my mortgage).

    1. Cheers, Robert. I think I had this piece by Noah Smith in mind:


      It's not that Noah gets things badly wrong or anything in his (interesting) post, it just seems like the pros and cons of string theory are given from the point of view of someone who hasn't had a class in string theory. The converse is here where a physicist doesn't quite grasp the allure of DSGE models :)

      Otherwise, I think the only reason I understand any economics at all is because Noah was once a young physicist and so writes about things in a way that makes sense to my own enforced order on the world ...

      I don't think macro is as broken as you seem to think it is, but maybe that is just me being new to the field. Even though I'm coming at it from a weird angle, there is much that seems fine on the face of it (e.g. Paul Krugman is always right).

  2. I was thinking maybe Noah does not want to spoil the gravy train of the centrally managed econ job market.


  3. I was thinking maybe Noah does not want to spoil the gravy train of the centrally managed econ job market.


  4. I too was thinking about Krugman (almost) always being right. It is a fact that there are a few economists who make accurate important predictions about what will go wrong. The predictions are implications of standard DSGE models. I think my distress was caused by your use of the words "Keynes" and "Samuelson". The problem is that the points where there is a lot of evidence that Krugman understands the economy better than policy makers are exactly the points where Krugman says exactly the same things Keynes and Samuelson said.

    Something which is new is that the arguments are contensted by extremely prominent economists (Lucas, Prescott and Fama just to stick with people who won the Sveriges Riksbank Nobel memorial prize). I think this wasn't true in the 1960s. So macroeconomists have contributed more than nothing but, I think, clearly worsened in my lifetime.

    I came here to confess to some amateur physics (and very much on the usual topics for amateurs).



    1. Likely since you wrote the second linked post on fermions, the hive mind that is wikipedia has added some great visualizations of the topology of spinors:


      Indeed you can rotate a spinor by 360 degrees and end up with a minus sign, requiring 720 degrees to return to the original wavefunction.

      One of the confusing things about half-integer spin is that its fundamental represensation SU(2), the half integer spin rotation group, is a covering group of SO(3), the whole integer spin rotation group, so you can do the rotation by 360 degrees -- thinking about it as SO(3) -- but come out with the weird phase of -1.

      The Pauli exclusion principle comes from the commutation relations, and is actually a relativistic quantum effect (the spin-statistic theorem). The rotations above are non-relativistic. Although not fully accurate, a kind of thought experiment to use is that you are 'boosting' (changing reference frame) past a spinning particle. Looking at the Earth from above the north pole it spins counter clockwise, but looking at it from above the south pole, it spins clockwise. These 'boosts' are 'rotations' the SO(3,1) group that makes up Lorentz symmetry (special relativity).

      Later on in physics one uses Grassman number-valued fields (speaking of another non-expert who made contributions to physics) to do relativistic quantum mechanics (i.e. quantum field theory). This helps to clear up the subtleties.

      The overall problem is that the Pauli exclusion principle tends to be taught as non-relativistic quantum mechanics, so it has aquired some incorrect explanations. It should be taken as an empirical fact (as you mention in your blog post) in non-relativistic quantum mechanics.

  5. I still owe you a reply to an earlier post. I haven’t got round to it yet but I haven’t forgotten.

    This post is about what it means to be an expert. An expert is not someone who says they are an expert. Some people say they are experts at forecasting by reading crystal balls. They are not experts. They are crazy.

    An expert is someone acknowledged BY OTHER PEOPLE as an expert. Physicists are acknowledged as experts by other people. Why?

    First, they have a track record of doing useful things like harnessing electricity or nuclear power.

    Second they appear to be ethical. The guys at Cern declared victory only when they had observed a Higgs Boson (or whatever).

    Third, although I’m sure that physicists disagree with each other, they don’t suggest that we try experiments on broader society to help them in their research.

    Fourth, current research is mostly irrelevant to everyday life so the rest of us don’t care if physicists are wrong in these areas. Also, we have no independent way of knowing whether, say, the Big Bang is true, as we have no way of observing it ourselves except via the experts.

    Fifth, physicists seem to like to explain their ideas in everyday language. Einstein said “if you can’t explain an idea to a six year old then you don’t understand it yourself”. The rest of us think that Einstein was smart.

    The most likely issue that the public will have with physics is that research seems to be becoming more expensive but achieving fewer results. Maybe one day the rest of us will pull the plug on funding physics research. However, physicists have built up such trust and goodwill over a few hundred years that this will probably take a long time.

    Contrast this with macro-economics. There are so many issues that it’s hard to know where to start. Think of the economist who said that economists had solved the problems of macro-economics a few years before the current crisis – and he was a Nobel prize winner! What about the guys who issued warnings about government debt over 90% of GDP without checking their own spreadsheet calculations! Anyone can make a mistake in a spreadsheet. That’s why professionals add check totals to their spreadsheets to ensure internal consistency and, when it’s important, get two people to develop the same spreadsheet and then compare results to check for errors.

    Take another example of people who are acknowledged as experts – seismologists. They know what happens during earthquakes and why earthquakes occur in some places but not others. They can measure earthquakes and provide warnings when they occur. They can give advice on the risks associated with building in earthquake zones. However, they can’t forecast earthquakes and they can’t prevent them. This comes back to ethics. They don’t pretend they can do things that they can’t do. This is essential in order to maintain public trust.

    Earthquakes are rare events. Seismologists could establish a good forecasting track record by predicting ‘no major earthquake in San Francisco tomorrow’. I think I am correct that there have been no major earthquakes in San Francisco for about 25 years, so a seismologist who made this prediction daily would have been correct thousands of times in a row. However, predicting the absence of a rare event is what the rest of us would assume anyway. Only forecasting the occurrence of the rare event is useful. Seismologists can’t do that and they tell us so.

    Compare that with economists. In practice, their forecasts often say little more than ‘tomorrow’s economy will be the same as today’s economy give or take a little’. That’s not useful as it’s what the rest of us would assume. As with seismology, forecasting the rare event would be useful but they can’t do it. Nevertheless, economists try to pretend that their mathematical models are useful in a way that seismologists do not.

    1. I would pretty much agree with your assessment.

      I think politics may be the most important driving factor. For example, obfuscation is useful if you're trying to push a policy (sort of the converse of your fifth point), and "useful" in macroeconomics is observer-dependent (per your first point).

      Additionally, "relevant to everyday life" is pretty much the decisive criterion as to whether expert opinion is trusted on an issue. Living on the west coast of the US, I've had several occasions to assure acquaintances that there is little danger in the US from radioactive material seeping into the Pacific ocean from the Fukushima plant. The response to my 'expert opinion' was generally predictive of the person's political attitude toward nuclear power. I was even accused of being pro-radiation because of my job -- especially funny because my job doesn't actually have anything to do with radiation.

  6. Great post. Just to jump in a month later, can I add that macro suffers from one huge problem that afflicts all the social sciences: the discipline are structured horizontally, not vertically, in terms of levels of social organization. The problem becomes that you get turf wars (or tribal wars) rather than learning. Economists, political scientists, and sociologists argue about political economy or organizations, coming at the same thing from different directions, but they cannot learn form each other without getting into trouble over status and legitimacy. If, on the other hand, the social sciences were organized vertically--so you get psychology (cognition), then social psych (small groups), then community studies, then organizational studies, then "macro" (institutions)--then you'd have real research on levels of organization with their own emergent properties, and one level could learn from the other while still doing its own work. I could study small groups on their own terms, and come up with empirical findings and frameworks that explain what I've found in terms of that level of organization--but I would love to know what cognitive psychologists have found out, so that I can make better sense of my level of analysis and maybe discover new directions of study. (I'm thinking of organic chemistry vis-a-vis physics. I can do orgo without knowing thing 1 about QM--but when I know QM, I have an expanded field of vision for making sense of chemical reactions, and I discover a few reaction mechanisms I might not have thought about, so I can do more experiments.)

    1. Cheers, thanks. I agree that turfs for turfs' sake aren't very constructive. It's ok to have e.g. jargon to organize thought, but jargon also builds walls.


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