Scholars do not always change their minds – the Keynesian case

I noted in an earlier post Menno Rol’s characterisation of the epistemology of Charles Sanders Pierce. There has now been a very insightful reply from Altug Yalcintas who takes this much further along.

Menno Rol wrote: ‘The heart of the epistemology of Pierce can be formulated as the claim that sticking to old beliefs is a man’s normal inclination and that this is in fact rational.’

I agree. However, Menno Rol also wrote: ‘In order to learn, we update old beliefs with a certain unwillingnessin the face of counterevidence, facts that we stumble upon daily. The updating process runs via hypothesis making: inference to the best explanation. What counts as the best explanation depends not only on the newly encountered facts, but just as much – or even more – on our old beliefs. Again, this is rational.’

I disagree with Menno Rol here because scholars, who run into counter-evidence or refuting reasoning, do not always change their minds or update their beliefs. I think the reason is that ‘epistemic costs’ in scholarly life are significantly high.

Epistemic costs, to my understanding, refer to the costs involved in operating the various scholarly arrangements such as collecting data, drafting papers, arguing with other scholars, and replicating the results of old models. Epistemic costs are sometimes so high that, for example, errors that scholars made in the past such as plagiarism and deterioration of data are not always remediable today. As a consequence, scholars sometimes keep reproducing erroneous models. There are at least two reasons for this: (1) there is almost no reward in the academy in going back to the models and explanations of older generations and (2) it is sometimes impossible to replicate what older generations wrote. This suggests that the scholarly world is a world of positive epistemic costs in which negative externalities are not always and perfectly self-corrective. Perfect solutions do not come about so easily because scholarly mechanisms, such as refereeing and reviewing as well as the ethics of scholarly behaviour and certain codes of act, including the issue of liability, that help increase the productivity of scientific processes, cannot fully correct or cure the harmful consequences of individual scholarship. The problem of epistemic cost is that we do NOT ‘update old beliefs’ in the face of counter-evidence and errors frequently remain uncorrected.

Reminding the SHOE-List Ramzi Mabsout’s original question: would anybody suggest any cases in which old habits of thought prevent scholars from changing their minds despite the fact that there is sufficient evidence to abandon a refuted paradigm?

In its own way this is a longer version of economic theory advances funeral by funeral. As he argues, “there is almost no reward in the academy in going back to the models and explanations of older generations”, part of the reason that the history of economic thought remains so far outside the mainstream. And given how difficult it is to even get people to look at evidence from the past, he is surely right where he wrote, “we do NOT ‘update old beliefs’ in the face of counter-evidence”. He finally returns to the original question, “would anybody suggest any cases in which old habits of thought prevent scholars from changing their minds despite the fact that there is sufficient evidence to abandon a refuted paradigm”.

The example of Keynesian macroeconomics, and especially the notion of aggregate demand, ought to be ripe for refutation but this has not been even remotely the case. The straightforward fact is that government policy now not only ignores macroeconomic theory but acts precisely in the opposite direction. From The Australian we have this summary of the communiqué issued by the G20 just this week:

In a carefully worded final statement, G20 leaders said at the weekend they were committed to ensuring ‘sustainable public finances’ and stood by their prior commitments to halve their budget deficits by this calendar year and stabilise their debt levels.

And we are not talking about economies that have begun to find their way back but economies at the bottom of the cycle and in many ways still trending down. These are economies in deep recession with high unemployment, the very conditions for which Keynesian theory was supposedly designed. But they have tried the Keynesian solution and it not only has not worked but has unambiguously caused economic conditions to deteriorate. Yet there are no major articles within the profession arguing on the need to abandon Keynesian theory. This is a conundrum to myself and you really do have to ask why that is.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.