Oddities in the Rhetoric of Economics: Paul Romer Confronts the "Adversarial Method" in the Presentation of Economic Theory
I guess I first ran into this mode of doing economic "theory" back in 1984, when Ed Prescott came through Cambridge, MA presenting a paper and did an absolutely awful job at explaining his model. Unless you had worked through his math carefully--or had talked to somebody at all--you left Prescott's seminar thinking his results were much more general than they were, and with next to no insight as to which of his assumptions were crucial and which were simply ornamental to produce the results he wanted to get.
At the time I thought that Prescott might simply not be good at communicating. It never crossed my mind that this game of hide-the-ball might be a deliberate strategy, let alone that some economists thought that all economists played--or should play--this game of trying to draw a large wedge between the narrow conclusions readers should actually draw from the model presented and the sweeping conclusions authors hoped to fool readers into drawing from the model...
But Romer is not the only one who is now very annoyed at this mode of "argument". Cf.: Pfleiderer on "chameleons"
Must-Read: : Freshwater Feedback Part 1: “Everybody Does It”: "The freshwater sympathizers agreed... that [Robert] Lucas and [Benjamin] Moll strategically refrained from verbal disclosures about some of the properties of the underlying mathematical formalism...
...Where we disagreed was whether this was a sign of behavior by the authors that is wrong. In effect, their response was caveat emptor; this is what all economists do.... We agreed about what about what Lucas and Moll did but we disagreed about what other economists do.... Freshwater economists believe that we are already in the noncooperative adversarial equilibrium, so it is wrong to express disapproval of economists who are simply engaging in the type of behavior that is rational in that equilibrium.... When the freshwater types say ‘everybody is following the adversarial method,’ what they may honestly be saying is that ‘everybody I know is following the adversarial method and they all believe that everyone else is doing this too.’... To me, the facts seem to be that freshwater economists are following a coordinated strategy based on the adversarial method yet that many other economists are still committed to the scientific method...
The complaint I have against Romer's piece here is that he has no links to and no examples of real economists justifying Lucas and Moll by saying: "a) everybody does X; that is how the adversarial method works" and "b) by selectively expressing disapproval of this behavior by the freshwater economists that you name, you, Paul, are doing something wrong because you are helping 'those guys'". Needless to say, this is not a complaint about Paul Romer: this is a complaint about people who are rejecting his arguments and who he us feels a need to respond to you have not bothered to leave a paper or an electron trail.
Rumors complaint about the game of hide-the-ball in Lucas and Moll seems, to me, correct:
As always, it helps to be specific.... The distribution of productivity in the Lucas-Moll model... assumption 1 states that at time 0, the support for this distribution is... [x,∞)... [which] means that everything that people will ever know is already known by some person at time 0. Lucas and Moll present a “bounded” model in which the support for the distribution of productivity at time zero is [x,B)... claim that this bounded model leads to essentially the same conclusions... ([note:] I disagree...). Lucas and Moll do not give the reader any verbal warning that... the support... jumps discontinuously back to [x,∞) at all dates t>0, so it is a bounded model in only the most tenuous sense....
I suggested that this omission... was a sign of something wrong.... The response I got was that... the support for the distribution is bounded only at date 0... could be inferred from a careful examination of the math.... They did not, technically, make a false statement when they use the word “bounded” to describe the model’s behavior... [and] should not be expected to say in words anything that would weaken their argument.... Lucas and Moll strategically refrained from verbal disclosures about some of the properties of the underlying mathematical formalism... caveat emptor: this is what all economists do...
But that is not what all economists do.
For example, the big flaw in Robert Barro's (2005) theory of why the wedge between average U.S. stock and safe bond returns is so high is that moments in which stocks have high current ratios of price to permanent earnings--like 1999--are moments in which the expected chance of persistent future depression are high, and moments in which stocks have low current ratios of price to permanent earnings--like 2009--are moments in which the expected chance of persistent future depression are low. But Barro does not play hide-the-ball but is explicit and up front about this implication of his theory:
If [the chance of future depression] p increases, the expected marginal utility of future consumption rises because marginal utility is particularly high after a 50% disaster. This change motivates people to hold more of the risk-free asset, partly because they want to shift from the risky to the risk-free asset and partly because they want to save more. Thus, in equilibrium, the risk-free rate falls. The risky rate also declines, but the spread between the risky and risk-free rate increases...
It really had not occurred to me until I read this latest by Romer that this hide-the-ball rhetorical method was seen as a legitimate strategy by anybody!
