How to do Chicago Economics
Here are two discussions about how Chicago teaches economists to do economics. Both Reder and McCloskey say that when the evidence contradicts ideology, stick with the ideology.
McCloskey, Donald N. 1985. The Rhetoric of Economics (Madison: The University of Wisconsin Press).
140: “In seminars in economics it is common for the speaker to present a statistical result, apparently irrefutable by the rules of positive economics, yet to be met by choruses of “I can’t believe it” or “It doesn’t make sense.” Milton Friedman’s own Money Workshop at Chicago in the late 1960s and the early 1970s was a case in point.”
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Reder, Melvin W. 1982. “Chicago Economics: Permanence and Change.” Journal of Economic Literature, 20: 1 (March): pp. 1-38.
13: “Any apparent inconsistency of empirical findings with implications of the theory, or report of behavior not implied by the theory, is interpreted as anomalous and requiring one of the following actions: (i) re-examination of the data to reverse the anomalous finding; (ii) redefinition and/or augmentation of the variables in the model…; (iii) alteration of the theory to accommodate behavior inconsistent with the postulates of rationality… (iv) placing the finding on the research agenda as a researchability anomaly.” Chicago tends to shun iii.
13: It is customary to confront theory with evidence. By contrast, “Chicago economists tend strongly to appraise their own research and that of others by a standard that requires [inter alia] that the findings of empirical research by consistent with the implications of standard price theory.”
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Why does this not surprise me? One of the reasons I am highly critical of capitalist defenses of the market economy is because it seems to be apologetics to me. It is analogous to the kind of apologetics I see in revealed religion such as Christianity or Islam. You point out an error or a discrepancy in a sacred text like the Bible or the Koran and people who believe in “inerrancy” will reinterpret the text more “figurative” or “allegorical” or suggest that future research may uncover the answer.
When it’s pointed out that the cosmology in sacred texts does not match the cosmology that has emerged from science, they either assign ulterior motives to science, poke holes in the scientific research, or try and reinterpret the sacred text to agree with science. It’s apologetics through and through and this is what we may be seeing with the Chicago school of economics.
Good blog post, Dr. Perelman!
Matthew
Thank you. I agree with you analogy of economics and theology. The only difference is that we end up in hell if we do follow the holy books of economics.