> On Jul 11, 2008, at 4:54 PM, Eric wrote:
>
>>> Toward a New Macroeconomics: From Criticism and Avoidance to Doing
>>> It Right.
>>> Session I: Growth, Technical Change and Transformation.
>>> David Laibman
>>
>> Even though I have no idea what this means, that won't stop me from
>> saying this sounds dreadful.
>
> David Laibman, editor of Science & Society, once told me I couldn't
> refute efficient market theory with empirical evidence. Only another
> theory could refute a theory. That's doing it right, I guess.
Re. Eric's comment: I believe David means that the way macro has been dealt with by radical thinkers until now hasn't been very fruitful.
(1) People "criticize" it. But not in the sense of -- say -- Marx's critique of political economy, which involved appropriating the most influential intellectual traditions of the time, "rubbing them against each other" (to use David Harvey's apt metaphor), and thus forging a higher understanding of the world we grapple with in our daily lives.
And (2) people avoid it. Somehow, they decide a priori, pre-rationally, that it (macro) is false, wrong, or useless, when that is precisely what needs to be established. And the way to establish it is by developing its negation. How?
Well, this is David's punchline precisely. By "doing it right" -- that is, while anchored in a radical opposition to the status quo, by taking up its method, subject matter, issues, etc., engaging with them, rub that stuff against other existing intellectual traditions, and taking all that to its conclusion.
In my own terms, I've been making a similar argument for about 10 years now. And slowly working on it. David, coming from quite another place, has reached similar conclusions. In the last couple of years, we've been sharing and comparing notes. That's why I think my interpretation of the title of that URPE session is not completely off.
Re. Doug's comment. I'm not exactly sure what David meant. But one could argue that (1) the EMH theory as such, that is, as a theory (as understood among conventional economists), is not refutable by facts, but only by logic. The EMH is an "if X, then Y" statement. The EMH cannot be deemed responsible for X not holding, but only for Y not holding given that X holds. And that is a problem of logic (or math).
Refuting the EMH is as simple (or as difficult) as proving that from X, Y doesn't follow logically.
And (2) that all an empirical test of the EMH can do is determine the extent to which the observations in a data set are consistent with the "predictions" (implications) of the EMH. Everyone accepts that premises X are always "false" as statements of fact. That is, that actual markets are always more complex than any finite set of premises X could capture. But the point of abstracting and theorizing is that, if the markets we observe exhibit Y-like properties, then that should make us more confident that the premises X are plausible. With that you can play mental experiments relevant to your individual or collective needs or practice.
Of course, in the abstract, one could declare that a given amount of residual uncertainty is "unacceptable." But so what? It is only with an alternative theory capable of reducing the amount of residual uncertainty that the EMH will be considered properly refuted.
The latter is, of course, a much murkier issue. Such is life.