Friday, September 12, 2014

(Other things being elsewhere...) "It’s a ceteris paribus thing,"

Paul Krugman:
"It’s a ceteris paribus thing, just like supply and demand."
Hans Albert, "Model Platonism: Neoclassical economic thought in critical light."  Journal of Institutional Economics (2012):
"T. W. Hutchison... called attention to the significance of ceteris paribus clauses as a form of alibi..."
I'm eagerly awaiting the delivery from interlibrary loans of Hutchison's The Significance and Basic Postulates of Economic Theory (1938). I'm neither a philosopher of science nor an economic methodologist. It's just that I like to have a good idea of "the literature" before I barge in with my two cents worth.

But I am thinking that recognizing ceteris paribus as an "alibi" is very important. Let me explain: "alibi" means elsewhere but it doesn't necessarily specify where else. It could be anywhere else. To prove an alibi, one must present a convincing narrative that offers specifics. The catch-all ceteris paribus clause invoked by economists comes closer to the lame excuse sense of alibi. Alibi assumptions immunize hypotheses against critique and falsification by empirical evidence.

While awaiting Hutchison's book, an observation in a 1935 "Note on Tautologies and the Nature of Economic Theory" caught my attention. Hutchison didn't reject tautologies. They have a role to play in logic and "pure" theory. What Hutchison objected to was "certain claims for deductive theory which... appear excessive." Specifically, Hutchison cited "a failure to distinguish between implication and inference" as giving rise to such excessive claims:
"This distinction may be summed up by saying that implications take the form 'if p, then q', and inferences the form 'since p, therefore q'. The one shows formal connections, the other states conclusions about the real world. An inevitable implication is a tautology, and can, by its nature, no more prognosticate anything than can the multiplication table. An inference, on the other hand, requires some data to be known in order to establish a 'since'."
The IS-LM "ceteris paribus thing" is an "if p, then q" thing -- a tautology -- not a "since p, therefore q" thing. One cannot draw conclusions about the real world from it.


Calgacus said...

Psst - can get chapters 8-13 here.

Sandwichman said...

Thanx. The book has arrived from Interlibrary.