25 sats \ 3 replies \ @Undisciplined OP 7 Feb \ parent \ on: Is Studying Economic Data "Doing Economics"? econ
Good question, there are two things I notice:
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As obvious as it may be, you are proposing a theory of the connection between a specific employer and downstream effects, so it isn't just the data identifying the driving forces. That's often referred to as the "theory laden" problem in science. Without theory of some kind you'd just be grasping at random straws.
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A major part of economic analysis involves understanding both what was observed and what wasn't (the counterfactual). This is the "compared to what?" piece. In your example, the employer is going out of business for a reason, so you'd need to know what the alternative was to them going out of business in order to make draw meaningful conclusions.
Thank you. So the Mises approach is you need a theory to help you understand the data?
I get that from a philosophical pov, but the problem is the natural human tendency to goal seek. Many of us see this all the time at work. The 'guys at the coal face' can tell what is going wrong based on observation and heuristics. But someone in authority will ignore this practical experience, based on the data; in other words, the data has been mis-interpreted in line with a theory, which blinds the manager/analyst/consultant to reality on the ground.
Seems to me we should analyse the data first, then reach a conclusion.
My example of a big employer closing is deliberate to illustrate the point. When UK/US manufacturing started to collapse in the 70's and 80's, many pundits claimed this was a positive economic development, and there would not be long lasting issues. They were very wrong, imv, though I understand the opposite arguments. But the data evidencing the fact such areas were plunging head first into catastrophe was ignored, because of economic theories.
Btw, I agree with a lot of the Austrian School articles!
But on this point, I feel data should be analysed free of bias, and that includes political & economic theory.
It should be data first, theory second to explain the data...?
Good debate on this post btw!
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There's a lot to unpack there. The feedback cycle between theory and practice is very interesting.
I would expect the Austrians to give more weight to the on-the-ground experience of people who do the work than the empirical schools of economics. That's an ironic reality, but the empiricists will dismiss what they're told with "the plural of anecdote is not data". In other words, workers' observations are not gathered in an experimentally rigorous way, which leads empiricists to simply dismiss them.
An Austrian would more likely appreciate that work processes evolve over time to reflect economic reality and changes observed by workers first-hand are evidence that economic reality may have changed.
One of the core tenets of the Austrian School is epistemological humility, which means being humble about what you claim to know. They recognize that economics is too complex to be modelled precisely, so they aren't going to make the kinds of overreaching claims that neoclassical or Keynesian economists make.
I feel data should be analysed free of bias
The technical meaning of "bias" is "a tendency to make errors in a particular direction". It isn't about coming into an investigation with prior beliefs. If your beliefs are true, then you won't be biased. If you come in with no prior beliefs, you won't have any idea what questions to ask.
To me the Austrians are by far the least biased school of economics, because they make the fewest simplifying assumptions in their theory. All those economists you were talking about being dismissive of how local economies would be affected by manufacturing loss were overconfident in the assumptions in their models. Those assumptions are the source of their biases, but they would tell you that those assumptions were backed by data.
Good debate on this post btw!
I agree! It's a lot of fun for me.