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.

Elanor

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' :)