Abstraction, Language and Modelling in Economics

by Philip Pilkington

Fixing the Economists Article of the Week

Alciphron is the title of the book by the philosopher George Berkeley that was most popular in his own time and is probably his least popular in ours. The reason for this is because the book deals with atheism and religion and many would suppose that this has little bearing on questions unrelated.

Most of the book is rather enjoyable on its own terms. It is written in dialogue form in a prose style that is easily among the best that you will encounter among Anglo-Saxon philosophers. The Alciphron of the title is the representative of what at the time was called ‘free-thinking’ but what Berkeley renames ‘minute philosophy’ — basically, skeptical atheism, hyper-rationalism, distrust of authority in general and what would later develop into Jacobinism through the political ideas of the likes of Rousseau.

What makes the bulk of the dialogue so entertaining is the vacuity of Alciphron who is apt to use empty phrases and tautologies in place of religious ideas. In his desperation to tear himself away from the morality of the day Alciphron tries to articulate his own moral principles. But given that these are cast in a framework of skepticism he finds it increasingly difficult when pressed on it to give them grounding. Any time this point is driven home Alciphron tends to hide behind empty words like Virtue and Honour which he reflects upon in a sort of poetic and mysterious way — the typical posture of what would later become the sentimentalism of the Romantics.

All of this is interesting in its own way, but personally I have never been much taken by moral philosophy. It is in the Seventh Dialogue, however, that Berkeley sketches out some very interesting ideas on human language — something that he recognised as being an absolutely central philosophical question.

He begins with a discussion of how words stand in place of ideas like chips stand in for money-values in a card game — this is the standard conception of the day and, to a large extent, remains so today. He then goes on to show that once we have agreed upon a definition of a word it need not call to mind that definition immediately for us to communicate the idea lying behind it. Just in the same way as once we agree upon a money-value for a chip in a card game we need not call to mind the actual coins that stand behind it every time we use it. He then writes,

From hence it seems to follow that words may not be insignificant, although they should not, every time they are used, excite the ideas they signify in our minds, it being sufficient, that we have it in our power to substitute things or ideas for their signs when there is occasion. It seems also to follow, that there may be another use of words, besides that of marking and suggesting distinct ideas, to wit, the influencing our conduct and actions; which may be done either by forming rules for us to act by, or by raising certain passions, dispositions, and emotions in our minds. A discourse, therefore, that directs how to act or excites to the doing or forbearance of an action may, it seems, be useful and significant, although the words whereof it is composed should not bring each a distinct idea into our minds. (p222)

Berkeley starts from a rather nuanced conception of language. Words not only stand for ideas, they also exert influence on our behaviors and form rules by which we act. Words can also be used rhetorically to exert emotional affects.

What’s more words need not, Berkeley maintains, stand for distinct ideas. He gives the example of consciousness or the ‘I’. In truth I have no conception, no distinct idea of myself as an ‘I’ and yet the word is required to explain all sorts of things. Another example is that of the word ‘number’ as a general abstract idea — i.e. not signifying a particular number (1, 2, 3, 4, etc.).

Do but try now whether you can frame an idea of number in abstract, exclusive of all signs, words, and things numbered. I profess for my own part I cannot. (p223)

These words are abstractions. They are not representative of clear ideas but they are functional and necessary nevertheless.

Berkeley then goes on to show how numbers, for example, allow us greater ease in performing certain operations dues to their clearness of notation.

But here lies the difference: the one, who understands the notation of numbers, by means thereof is able to express briefly and distinctly all the variety and degrees of number, and to perform with ease and despatch several arithmetical operations, by the help of general rules. Of all which operations as the use in human life is very evident, so it is no less evident, that the performing them depends on the aptness of the notation… Hence the old notation by letters was more useful than words written at length: and the modern notation by figures, expressing the progression or analogy of the names by their simple places, is much preferable to that for ease and expedition, as the invention of algebraical symbols is to this, for extensive and general use. (pp304-305)

This is one of the main reasons why we use abstract language. It is not the only reason, of course, but it is a very important one. This leads people to the use of analogy and metaphor — even to the anaological or metaphorical use of models and diagrams.

We substitute things imaginable, for things intelligible, sensible things for imaginable, smaller things for those that are too great to be comprehended easily, and greater things for such as are too small to be discerned distinctly, present things for absent, permanent for perishing, and visible for invisible. Hence the use of models and diagrams. (pp232-233)

But it is all too easy, if we get too bogged down within these abstractions and forget how they are connected with the practical realities that we are actually dealing with, to begin talking nonsense and trying to solve pseudo-problems with no real meaning.

Be the science or subject what it will, whensoever men quit particulars for generalities, things concrete for abstractions, when they forsake practical views, and the useful purposes of knowledge, for barren speculation, considering means and instruments as ultimate ends, and labouring to obtain precise ideas, which they suppose indiscriminately annexed to all terms, they will be sure to embarrass themselves with difficulties and disputes. (p308)

This is where economics has erred since at least the turn of the 19th century. The early marginalists occupied two groups. One were the Walrasians who, following Leon Walras, were perfectly content to confine themselves to barren speculation of unrealistic nonsense provided it was done in a nice, formal mathematical manner. The other group were the Marshallians who tried to bring such abstract speculation down to earth. Consider the following quote from Alfred Marshall from a letter he wrote in 1906,

[I had] a growing feeling in the later years of my work at the subject that a good mathematical theorem dealing with economic hypotheses was very unlikely to be good economics: and I went more and more on the rules — (1) Use mathematics as a shorthand language, rather than an engine of inquiry. (2) Keep to them till you have done. (3) Translate into English. (4) Then illustrate by examples that are important in real life. (5) Burn the mathematics. (6) If you can’t succeed in (4), burn (3). This last I did often.

Clearly Marshall was becoming ever more concerned about the use of formal modelling in economics. He could see that it was apt to get out of hand. Marshall’s followers in this sense were, of course, Keynes and the early Post-Keynesians. But they lost the battle. By the 1950s Walrasianism was in the ascent. Even Neo-Keynesians like Solow and Samuelson displayed a penchant for abstractionism that was apt to get carried away with itself and only produce irrelevant dross.

Today the situation has become entirely absurd and nonsensical. Economists that should be trying to articulate a new way forward are, like Don Quixote battling his windmills, spending most of their time and effort trying to refute DSGE models and insisting that New Classical economics is irrelevant. This rather mundane and largely useless behavior is what is currently passing for the avante-garde of economic discourse.

This is not so much the fault of these economists as it is that they have been educated in a discipline in which, to a very large extent, this is the only discourse going. Frankly, I wouldn’t want them coming up with any ‘positive’ approaches because it is all too likely that they would end up resembling the Walrasian muck, with its groundless abstractions and useless rubbish.

Economics can only change when its object of inquiry has changed. But this cannot happen with the present practitioners because those who currently make up the bulk of the discipline are more comfortable with engineering and physics than they are with history. They are not people who can articulate themselves in a manner suited to the material that they are dealing with. And those that are suited to the material are generally driven away from economics courses because of the ridiculous formal demands placed on them by insulated and irrelevant lecturers who teach nothing but second-rate mathematics.

In this regard it is difficult to see how the discipline can change its spots. My reckoning is that the change will have to come from outside of academia. It seems to me that academic economics is only producing students whose modus operandi is in picking holes in the status quo, unable to articulate an alternative. That, to me, indicates a profession rotting from the inside out. Those who really care about how economics should be done will likely look elsewhere to learn their trade. They will be able to ironically navigate the economics classroom meanwhile learning how to really do economics elsewhere.

Addendum — Modelling as an ‘I’: I mentioned above that probably the most primitive of our abstract general ideas is that of the ‘I’. While I have no clear idea of myself as an ‘I’, I nevertheless maintain that it exists based on the fact that I have consciousness. This ‘I’ then comes to encompass my will, my experience, my opinions and so forth.

Now, it is quite obvious to anyone working in economics that economists are very testy about their models. Often one feels that when you attack a model the builder of a model will react as if you are attacking his or her person. I think that this is actually explainable if we come to understand that for many economists their model becomes a sort of stand-in or representation of their knowledge of the economy. Thus, a model becomes a sort of representation of the economist as an economist. To attack the model then becomes to attack the adequacy of the economist.

I think that this simple observation explains a lot about the weirdness you often encounter in economists when you discuss their models — or the models of their leaders that they adhere to. Because this model represents them as an economist — the ‘I-economist’, as it were — they often feel that in attacking their model you are attacking their person. This, I think, explains a great deal of anxiety you encounter among economists when you raise the issue that models might be largely useless.

Responses such as the typical “But what is YOUR alternative model” and so forth should be read in this way — i.e. as an attempt to avoid the truth-content of the statement that models might be useless and channel the discussion into a battle between models, between ‘I’s. In this way the economist seeks to neutralise the statement that might undermine them as an ‘I-economist’ and instead tries to re-frame the debate in such a way that the ‘I-economist’ is maintained and the conversation becomes simply a fight between such ‘I-economists’.

This also goes a long way to explaining why, as some feminist economists have noted, modelling tends to be a male practice. Males in contemporary society have a far greater need to assert themselves as static ‘Is’ than females. An attack on models can easily be taken as an attack on one’s masculinity while, more radical still, an attack on modelling in general can be taken as an attack on contemporary representations of masculinity. While I am not generally inclined to explain intellectual constructions in such a manner I believe that this is indeed of relevance here.