Tuesday, 19 June 2007

Usefulness versus Truth – The Former Matters More

From John Kay’s latest piece – really can’t agree more with it; serves to partially represents how my philosophical world-view has changed in recent years. Also a pseudo-response to Rational Thinker’s excellent comment on my previous post.

“Why Rorty's search for what works has lessons for business
Financial Times 19 June 2007

When a student of business and economics wants to ponder the conceptual foundations of these subjects, Richard Rorty, who died on June 8, is the modern philosopher I recommend.

What mattered to him was not the search for what is true, but the search for what works. The test of a model, a way of thinking or a theory is not truth but usefulness. …

… The modern economist is driven by physics-envy. Physicists have the best claim to hold a mirror to nature: their models have proved so useful that no one would think about heat, pressure or motion in any other way. Many people claim this is because these theories are true.

…The pragmatic Rorty argued that to say the theories are true adds nothing to the observation that the models are useful. This claim, applied to hard science, is a subject of continuing disagreement. But Rorty’s perspective is surely right for complex and fluid situations whose outcome depends on human interaction. The soldier’s war stories give insight into “The Way the World Is”, but in a very different way from the models of quantum physics. No individual soldier – no general – ever sees the whole picture; no one can ever, in this sense, hold a mirror to nature. The best accounts will eventually come from the military historian or the novelist who pieces together – and manufactures – a narrative from fragments of information and experience. There can be many such accounts, some better than others, none representing a unique correspondence with the truth.

And so it is with business and finance. I have often given an account of an event in business history and been confronted by a participant who offers an account of “The Way It Was”. But all he offers is an account of the way it was for him. Even an aggregation of such accounts can provide only a partial and controversial description of the whole.

Economists often assert that economic theory says this or predicts that. But economic theory will never hold a mirror to nature. Good economic arguments are specific to their context. There are no universal economic laws, only trends and tendencies.”

The last paragraph is especially agreeable.


PS: Also, read Greg Mankiw's nice and insightful paper: The Macroeconomist as Scientist and Engineer. To Rational Thinker again - I guess you are more of a 'scientist', and me an 'engineer' :)


rational thinker said...

Hi Eleanor,

Surprising that you said that, because I am currently a "practicing engineer". lol. :) I do like the refreshing view that economics, macroeconomics is no longer just a science for us to analyze why the world is the way it is, but rather a set of tools for us to induce changes. However, being an engineer, i can safely tell you, all engineering tools and judgements are made based on fundamental sciences (physics) that have to be developed before refined engineering can be made.

Looking at the "time" factor of macroeconomics development, where Prof Mankiw has excellently summarized in his paper, macroeconomics stemmed out of the observation of the great depression as well as the financial/monetary crisises since. mostly. Hence, so far, it's always been the "scientific" look onto macroeconomics. Whether now we have the sufficient data and tools to actually engineer our economy? well, mankiw thinks we might be in future. i think so too.

democratic junkie said...

"Truth resides in every human heart, and one has to search for it there, and to be guided by truth as one sees it. But no one has a right to coerce others to act according to his own view of truth." — Mahatma Gandhi

Anonymous said...

One has to be very careful in saying usefulness matters more than truth, without the conviction to seek truth, we can fool ourselves and have our values lost in the process.
Even though scientiffic theories may not represent the whole truth, it is reproduceable, it forms the foundation to buid all the technological products today and in the future. It enables us to create tools for good and bad, without which we would still be living in the stone age.
One has to be very careful to distinguish between what is true from what one wants to believe to be true.
Yes, a lot of things can be useful but not true. One can claim to have words with God/god before one comes down the mountain. One can use this to create a group of followers, reaping power, social and economic benefit. Get people to die for such believes and create war. Is this useful? You may so so, but I have a hard time telling myself that this is right. Just look around and see the pain religion is inflicting on society. It may be useful for some, but as a civilization, we are the greatest cheaters and the most cunning.
In the end, truth still matters more. We use to joke around " there is no such thing as truth in marketing " and hope we will not come to the conclusion one day to say " there is no such thing as truth in science/engineering", the emergency escape in the plane has to work when call upon, it is more than a useful marketing tool!


rational thinker said...

hence, the reason why we see a lot of "pop" economists these days. harping about "useful" economics and nothing on the fundamentals. they might earn millions on book rights, but they certainly do nothing in furthering the knowledge of economics.

feliz said...

As Prof Mankiw says, " ..life is messy and everything , from citizens to government, is imperfect ( and people aren't always
rational too ).. " thus he reckons that "..studying economics is a tall order; and to certain degree, one has to wear so many hats - have to learn to be a mathematician, historian,statesman, philosopher .. so as to understand further the imperfections in order to explain and hopefully improve the world around them.. "

matt madd said...

Your blog is really a breath of fresh air compared to those saturated with narcissm.....keep going girl!

Anonymous said...

'The modern economist is driven by physics-envy.' LOL :P

hey there, great blog you have here! you must be the only econoblogger in Malaysia! :) I'll be reading economics at uni this september (assuming I get the grades!). Your blog will be very interesting holiday reading for me :) BTW you might want to check out Dani Rodrik's upcoming book 'One Economics, Many Recipes'..I think his ideas are pretty much along the same lines as yours..I totally agree that there isn't a one-size-fits-all formula for economic growth, that's just crazy !

Elanor said...

Hi all,

Thank you for all your comments - truly appreciate them.

:) Elanor

ps: Anon, Rodrik's latest book is already next in my reading list! Can't wait for it to be released.