Causality in Macroeconomics examines causality while taking macroeconomics seriously. A pragmatic and realistic philosophy is joined to a macroeconomic foundation that refines Herbert Simon's well-known work on causal order to make a case for a structural approach to causality. The structural approach is used to understand modern rational expectations models, regime switching models, Granger causality, vector autoregressions, the Lucas critique, and concept exogeneity. Techniques of causal inference based on patterns of stability and instability in the face of identified regime changes (...) are developed and illustrated in two empirical case studies. (shrink)

Elliot Sober ([2001]) forcefully restates his well-known counterexample to Reichenbach's principle of the common cause: bread prices in Britain and sea levels in Venice both rise over time and are, therefore, correlated; yet they are ex hypothesi not causally connected, which violates the principle of the common cause. The counterexample employs nonstationary data—i.e., data with time-dependent population moments. Common measures of statistical association do not generally reflect probabilistic dependence among nonstationary data. I demonstrate the inadequacy of the counterexample and of (...) some previous responses to it, as well as illustrating more appropriate measures of probabilistic dependence in the nonstationary case. A challenge to the principle of the common causeSober's argument and the attempts to rescue the principleProbabilistic dependenceNonstationary time seriesProbabilistic dependence in nonstationary time seriesDo Venetian sea levels and British bread prices violate the principle of the common cause? (shrink)

Macroeconomists overwhelmingly believe that macroeconomics requires microfoundations, typically understood as a strong eliminativist reductionism. Microfoundations aims to recover intentionality. In the face of technical and data constraints macroeconomists typically employ a representative-agent model, in which a single agent solves the microeconomic optimization problem for the whole economy, and take it to be microfoundationally adequate. The characteristic argument for the representative-agent model holds that the possibility of the sequential elaboration of the model to cover any number of individual agents justifies treating (...) the policy conclusions of the single-agent model as practically relevant. This eschatological justification is examined and rejected. (shrink)

The Methodology of Empirical Macroeconomics stakes out a pragmatic middle-ground between traditional, prescriptive economic methodology and recent descriptive methodology. The former is sometimes seen as arrogantly telling economists how to do their work and the latter as irrelevant to their practice. The lectures are built around a case study of a concrete example of macroeconomic analysis. They demonstrate that economic methodology and the philosophy of science offer insights that help to resolve the genuine concerns of macroeconomists. Some examples of questions (...) addressed include: What is the relationship between theoretical models and empirical observations? What is the relevance of macroeconomics to policy? Should macroeconomics be viewed as a special case of microeconomics? What is the place of long-standing philosophical issues in macroeconomics, such as the scope and nature of economic laws, the role of idealizations, methodological individualism, and the problem of causality? (shrink)

Argues that ontological reduction of macroeconomics to microeconomics is untenable. Existence of macroeconomic aggregates; Microfoundations of macroeconomics; Examinations of the general price level; Limits of the scientific development of microeconomics.

Discontented people might talk of corruption in the Commons, closeness in the Commons and the necessity of reforming the Commons, said Mr. Spenlow solemnly, in conclusion; but when the price of wheat per bushel had been the highest, the Commons had been the busiest; and a man might lay his hand upon his heart, and say this to the whole world, – ‘Touch the Commons, and down comes the country!’.

Recent debates over the nature of causation, casual inference, and the uses of causal models in counterfactual analysis, involving inter alia Nancy Cartwright (Hunting Causes and Using Them), James Woodward (Making Things Happen), and Judea Pearl (Causation), hinge on how causality is represented in models. Economists’ indigenous approach to causal representation goes back to the work of Herbert Simon with the Cowles Commission in the early 1950s. The paper explicates a scheme for the representation of causal structure, inspired by Simon, (...) and shows how this representation sheds light on some important debates in the philosophy of causation. This structural account is compared to Woodward’s manipulability account. It is used to evaluate the recent debates – particularly, with respect to the nature of causal structure, the identity of causes, causal independence, and modularity. Special attention is given to modeling issues that arise in empirical economics. (shrink)

Economics prefers complete explanations: general over partial equilibrium, microfoundational over aggregate. Similarly, probabilistic accounts of causation frequently prefer greater detail to less as in typical resolutions of Simpson’s paradox. Strategies of causal refinement equally aim to distinguish direct from indirect causes. Yet, there are countervailing practices in economics. Representative-agent models aim to capture economic motivation but not to reduce the level of aggregation. Small structural vector-autoregression and dynamic stochastic general-equilibrium models are practically preferred to larger ones. The distinction between exogenous (...) and endogenous variables suggests partitioning the world into distinct subsystems. The tension in these practices is addressed within a structural account of causation inspired by the work of Herbert Simon’s, which defines cause with reference to complete systems adapted to deal with incomplete systems and piecemeal evidence. The focus is on understanding the constraints that a structural account of causation places on the freedom to model complex or lower-order systems as simpler or higher-order systems and on to what degree piecemeal evidence can be incorporated into a structural account. (shrink)

In the eyes of its practitioners, economics is both a deductive science and an empirical science. The starting point of its deductions might be thought of as first principles. But what is the status of such principles? The tension between foundationalism, the idea that there are necessary and secure first principles for economic inquiry, and fallibilism, the idea that no belief can be certified as true beyond the possibility of doubt, is explored. Empirical disciplines require some sort of falsifiability. Yet, (...) empirical inquiries also require a starting place—if not a necessarily true one, at least an indubitable one, that is, one that is not actually doubted. Indubitability appears to have necessary consequences, undercutting fallibilism, while fallibilism threatens confidence in the de facto first principles that begin inquiry. This tension is examined in three well-known attempts to define economics and its method: John Stuart Mill’s economics as the science of wealth, Lionel Robbins’s economics as constrained optimization; and George Stigler and Becker’s attempt to reformulate neoclassical economics to square empiricism with Robbins’ deductivism. (shrink)

The difficulty of conducting relevant experiments has long been regarded as the central challenge to learning about the economy from data. The standard solution, going back to Haavelmo's famous “The Probability Approach in Econometrics” (1944), involved two elements: first, it placed substantial weight on a priori theory as a source of structural information, reducing econometric estimates to measurements of causally articulated systems; second, it emphasized the need for an appropriate statistical model of the data. These elements are usually seen as (...) tightly linked. I argue that they are, to a large extent, separable. Careful attention to the role of an empirically justified statistical model in underwriting probability explains puzzles not only in economics, but more generally with respect to recent criticisms of Reichenbach's principle of the common cause, which lies behind graph-theoretic causal search algorithms. And it provides an antidote to the pessimistic understanding of the possibilities for passive observation of causal structure in econometrics and related areas of Nancy Cartwright and others. (shrink)

Modern empirical macroeconomic models, known as structural autoregressions (SVARs) are dynamic models that typically claim to represent a causal order among contemporaneously valued variables and to merely represent non-structural (reduced-form) co-occurence between lagged variables and contemporaneous variables. The strategy is held to meet the minimal requirements for identifying the residual errors in particular equations in the model with independent, though otherwise not directly observable, exogenous causes (“shocks”) that ultimately account for change in the model. In nonstationary models, such shocks accumulate (...) so that variables have discernible trends. Econometricians have conceived of variables that trend in sympathy with each other (so-called “cointegrated variables”) as sharing one or more of these unobserved trends as a common cause. It is possible for estimates of the values of both the otherwise unobservable individual shocks and the otherwise unobservable common trends to be backed-out of cointegrated systems of equations. The issue addressed in this paper is whether and in what circumstances these values can be regarded as observations of real entities rather than merely artifacts of the representation of variables in the model. The issue is related, on the one hand, to practical methodological problems in the use of SVARs for policy analysis—e.g., does it make sense to estimate of shocks or trends in one model and then use them as measures of variables in a conceptually distinct model? The issue is also related to debates in the philosophical analysis of causation—particularly, whether we are entitled, as assumed by the developers of Bayes-net approaches, to rely on the causal Markov condition (a generalization of Reichenbach’s common-cause condition) or whether cointegration generates a practical example of Nancy Cartwright’s “byproducts” objection to the causal Markov condition. (shrink)

Although the relevance and importance of his work has been recognized only belatedly, Charles Sanders Peirce was, throughout his life, a careful student and significant contributor to the development of logic, scientific theory, and philosophy generally. Occasionally, complete appreciation of Peirce's efforts has been hampered because his work is often unique and, at times, highly idiosyncratic. Yet, we hope to show in this paper that for one aspect of his work in logic Peirce did not abandon the ordinary without purpose. (...) Only relatively recently have philosophers of science become interested in the logic of discovery - that is, in the logic of the selection of hypotheses to be tested rather than simply in the ways of testing hypotheses which have already been selected. (shrink)

This paper addresses the role of specification tests in the selection of a statistically admissible model used to evaluate economic hypotheses. The issue is formulated in the context of recent philosophical accounts on the nature of models and related to some results in the literature on specification search. In contrast to enumerative induction and a priori theory, powerful search methodologies are often adequate substitutes for experimental methods. They underwrite and support, rather than distort, statistical hypothesis tests. Their success is grounded (...) in a systematic effort to mold appropriate models to, and test them against, constraints of the data. (shrink)

(2013). Beyond mechanical markets – asset price swings, risk and the role of the state. Journal of Economic Methodology: Vol. 20, Methodology, Systemic Risk, and the Economics Profession, pp. 69-75. doi: 10.1080/1350178X.2013.774856.

Through most of the history of economics, the most influential commentators on methodology were also eminent practitioners of economics. And even not so long ago, it was so. Milton Friedman, Paul Samuelson, Trygve Haavelmo, and Tjalling Koopmans were awarded Nobel prizes for their substantive contributions to economics, and were each important contributors to methodological thought. But the fashion has changed. Specialization has increased. Not only has methodology become its own field, but many practitioners have come to agree with Frank Hahn's (...) (1992) view that methodology is a distraction to the practitioner, best left to the professional methodologists and philosophers, and of little practical import even when delivered from their pens. John Sutton's lectures, Marshall's Tendencies: What Economists Can Know, is a welcome return to the older fashion, for Sutton is an eminent practitioner of game theory and industrial organization. One of the main themes of these rich and nuanced lectures is the relationship of economic theory to econometric evidence. Sutton's reflections on econometrics appear to arise from the darker recesses of his practitioner's soul. While he affects a sunny disposition and ends on a hopeful note, his analysis articulates the lurking fear that econometrics is a hopeless project and that economics has little to learn from the interaction of theory and econometrics. Sutton's book is like a play in which virtue triumphs, but the villain gets all the good lines. (shrink)

Critics argued that the 2007–09 financial crisis was failure of macroeconomics, locating its source in the dynamic, stochastic general-equilibrium model and calling for fundamental re-orientation of the field. Critics exaggerated the role of DSGE models in actual policymaking, and DSGE modelers addressed some criticisms within the DSGE framework. But DSGE modelers oversold their success and even claimed that their approach is the sine qua non of competent macroeconomics. The DSGE modelers and their critics renew an old debate over the relative (...) priority of a priori theory and empirical data, classically exemplified in the Measurement without Theory Debate of the 1940s between the Cowles Commission and the National Bureau of Economic Research. The earlier debate is reviewed for its implications for the recent controversy. In adopting the Cowles-Commission position, some DSGE modelers would essentially straight-jacket macroeconomics and undermine economic science and the pursuit of knowledge in an open-minded, yet critical framework. (shrink)

The dominant view among macroeconomists is that macroeconomics reduces to microeconomics, both in the sense that all macroeconomic phenomena arise out of microeconomic phenomena and in the sense that macroeconomic theory—to the extent that it is correct—can be derived from microeconomic theory. More than that, the dominant view believes that macroeconomics should in practice use the reduced microeconomic theory: this is the program of microfoundations for macroeconomics to which the vast majority of macroeconomists adhere. The "microfoundational" models that they actually (...) employ are, however, characterized by another feature: they are highly idealized, even when they are applied as direct characterizations of actual data, which itself consists of macroeconomic aggregates. This paper explores the interrelationship between reductionism and idealization in the microfoundational program and the role of idealization in empirical modeling. (shrink)

This paper develops a problem for conciliationism that is structurally similar to the self-undermining problem but which is immune to most of the solutions offered against it. A popular objection to conciliationism is that it undermines itself. Given the current disagreement among philosophers about conciliationism, conciliationism seems to require rejecting conciliationism. Adam Elga (2010) has influentially argued that this shows that conciliationism is an incoherent method. By recommending its own rejection, conciliationism recommends multiple, incompatible responses to the same body of (...) experience. Many have offered solutions to this problem, including Elga himself. However, there is another undermining problem. When a peer disagrees about their own peerhood, conciliationism can require the rejection of the peer’s peerhood. The result is that conciliationism recommends two incompatible responses to the same body of experience in a way that parallels the original self-undermining problem. But since many, if not all, of the proposed solutions to the original undermining problem depend on distinctive characteristics of conciliationism undermining itself, they cannot apply to a peer undermining themself. I illustrate this by dividing the solutions that have been offered against the self-undermining problem into two categories: self-exempting solutions and non-exempting solutions. I then show how the proposed solutions under each type do not extend to the peer-undermining problem. If that is right, then conciliationism is faced with a more difficult undermining problem than has been so far acknowledged. (shrink)

An important and engaging book on a key argument in contemporary debates about free will and moral responsibility.

In lieu of an abstract, here is a brief excerpt of the content:A Response to Louise Pascale, “Dispelling the Myth of the Non-Singer: Embracing Two Aesthetics for Singing”Maya HooverLouise Pascale encourages a redefinition of the word "singer" and suggests ways to make it apply to a broader spectrum of people. The problem with the current definition, she believes, is that it is outdated and needs to be changed in order to better embrace the ideals of current society. In order to (...) fully understand the problem and incorporate her suggestions, it is helpful to look at the issue as a symptom of a larger philosophical problem and to examine her proposed aesthetics from a non-philosophical perspective. [End Page 202]A Philosophical Approach to an Ethnographic StudyPascale specifies the current definition of singer as one understood in terms of values set by a white, middle class, American society. She argues that this definition is a direct result of the actions of the church in the 1600s, which has influenced and effected how North Americans (specifically people from the United States) perceive and experience singing. She refers to the manner in which this definition is significantly rooted in history and has only strengthened with time as a "taproot" in music education.Pascale's main argument revolves around the fact that we in the United States have adopted and ascribe to the Western European value system of singing. She notes that in the quest to extract the highest form of singing, we tend to sort out the very best and tell everyone else not to bother. This elitist attitude is a serious problem and she is quite right to point it out. Although there is nothing wrong with classical studies revolving around a canon, we are often taught that anything else is not worthy of study or practice. As a result, we have a very narrow perception of singing due to the guidelines set by the "taproot philosophy," which greatly limits musical expression on many levels.The issue of Western European elitism in the United States is a big one that many scholars and educators like to avoid for fear of offending tradition. In Onika's case, she becomes completely redefined as a non-singer by these elitist constraints. Pascale hints at this concept at other points in her essay, but Onika's story stands out as a blatant example of subjugation.Pascale's story about her own trials in trying to learn about African dance and drumming reinforces the idea of Western elitism. She refers to Christopher Small's idea about the Western value of timing and rhythm, which is linked to "a more logical relationship between pitch and harmony."2 It is important to note that while Pascale was frustrated with her Western background, she was still encouraged by her Ghanaian instructor. She may have felt incompetent, but she was by no means subjugated, as Onika had become.Pascale relates both experiences to the link between culture, society, and the construction of belief systems. However, there is a deeper connection here that deals specifically with American society and its attitude toward those with a different belief system. Looking at other cultures shows how societies can encourage the exploration of their music by giving participants permission to be imperfect and accepting the interest in their culture with grace. This poses a question that is much larger than Pascale's original one, but one that is intricately linked to it: Why do we, as members of American society, continue to perpetuate the subjugation of anyone from outside of our established network of beliefs? [End Page 203] The problem of singers versus non-singers seems only to be a symptom of a much larger illness that is well deserving of a much deeper exploration.The Second Aesthetic from a Scientific Vantage PointPascale explores how the phenomenon of the "non-singer" translates into the music classroom. She argues that there must be a way to maintain the classical tradition while simultaneously allowing everyone to participate, trained or not. There must also be a way to allow every classroom teacher to feel comfortable singing with her/his students, and likewise to allow every student to feel comfortable enough to participate.She suggests incorporating... (shrink)

Although several important methodologies implicitly assume the truth of epistemic conservatism, the view that holding a belief confers some measure of justification on the belief, recent criticisms have led some to conclude that epistemic conservatism is an implausible view. That conclusion is mistaken. In this article, I propose a new formulation of epistemic conservatism that is not susceptible to the criticisms leveled at earlier formulations of epistemic conservatism. In addition to withstanding these criticisms, this formulation of epistemic conservatism has several (...) benefits. First, this formulation has the benefits of earlier formulations of epistemic conservatism, that is to say it makes sense of our intuitions about justification in regard to both memory beliefs and beliefs for which we have forgotten our evidence. Second, it provides a good way of responding to the skeptic’s challenge concerning the possibility of possessing knowledge of the external world posed by the Alternative Hypotheses argument. Third, it provides responses to both forms of a new skeptical problem plaguing basic knowledge structure theories, the Problem of Easy Knowledge formulated by Stewart Cohen. I argue that given the many benefits of this formulation of epistemic conservatism and the fact that it is not vulnerable to the criticisms that undermine earlier formulations of epistemic conservatism, this formulation of epistemic conservatism is a plausible view to maintain. (shrink)

Alfred Mele's deflationary account of self-deception has frequently been criticised for being unable to explain the “tension” inherent in self-deception. These critics maintain that rival theories can better account for this tension, such as theories which suppose self-deceivers to have contradictory beliefs. However, there are two ways in which the tension idea has been understood. In this article, it is argued that on one such understanding, Mele's deflationism can account for this tension better than its rivals, but only if we (...) reconceptualize the self-deceiver's attitude in terms of unwarranted degrees of conviction rather than unwarranted belief. This new way of viewing the self-deceiver's attitude will be informed by observations on experimental work done on the biasing influence of desire on belief, which suggests that self-deceivers don’t manage to fully convince themselves of what they want to be true. On another way in which this tension has been understood, this account would not manage so well, since on this understanding the self-deceiver is best interpreted as knowing, but wishing to avoid, the truth. However, it is argued that we are under no obligation to account for this since it is a characteristic of a different phenomenon than self-deception, namely, escapism. (shrink)

Matthew McGrath has recently challenged all theories that allow for immediate perceptual justification. This challenge comes by way of arguing for what he calls the “Looks View” of visual justification, which entails that our visual beliefs that are allegedly immediately justified are in fact mediately justified based on our independent beliefs about the looks of things. This paper shows that McGrath’s arguments are unsound or, at the very least, that they do not cause genuine concern for the species of dogmatism (...) called “Phenomenal Explanationism”, recently introduced and defended by Kevin McCain and Luca Moretti. (shrink)

On at least one of its uses, ‘higher-order evidence’ refers to evidence about what opinions are rationalized by your evidence. This chapter surveys the foundational epistemological questions raised by such evidence, the methods that have proven useful for answering them, and the potential consequences and applications of such answers.

It is a commonplace that liberalism and religious belief conflict. Liberalism, its proponents and critics maintain, requires the privatization of religious belief, since liberals often argue that citizens of faith must repress their fundamental commitments when participating in public life. Critics of liberalism complain that privatization is objectionable because it requires citizens of faith to violate their integrity. The liberal political tradition has always sought to carve out social space for individuals to live by their own lights. If liberalism requires (...) citizens to violate their integrity, liberals have cause for concern. I seek to rebut this integrity objection to liberalism. I focus on the dominant form of philosophical liberalism: public reason liberalism. I argue that the integrity objection undermines the mainstream conception of public reason liberalism, but not public reason liberalism itself. The paper opens by outlining the structure of public reason liberalism and the integrity objection (§§2 and 3). It then analyses two versions of the objection and argues that the second version is successful against the mainstream conception of public reason (§4). I argue in response that public reason liberalism need not endorse principles of restraint—the civic restrictions on religious expression typically associated with it. I then sketch a conception of public reason liberalism that eschews principles of restraint (§5). This alternative promises to reconcile public reason liberals and their faith-friendly critics by putting the integrity objection to rest. (shrink)

Through a series of empirical studies involving native speakers of English, German, and Chinese, this paper reveals that the predicate “true” is inherently ambiguous in the empirical domain. Truth statements such as “It is true that Tom is at the party” seem to be ambivalent between two readings. On the first reading, the statement means “Reality is such that Tom is at the party.” On the second reading, the statement means “According to what X believes, Tom is at the party.” (...) While there appear to exist some cross-cultural differences in the interpretation of the statements, the overall findings robustly indicate that “true” has multiple meanings in the realm of empirical matters. (shrink)

This volume explores evidentialism, a major theory of epistemic justification. It contains more than 20 papers that examine its nuances, its challenges, as well as its future directions. Written by leading and up-and-coming epistemologists, the papers cover a wide array of topics related to evidentialism. The contributors present both sides of the theory: some are advocates of evidentialism, while others are critics. This provides readers with a comprehensive, and cutting-edge, understanding of this epistemic theory. Overall, the book is organized into (...) six parts: The Nature of Evidence, Understanding Evidentialism, Problems for Evidentialism, Evidentialism and Social Epistemology, New Directions for Evidentialism, and Explanationist Evidentialism. Readers will find insightful discussion on such issues as the ontology of evidence, phenomenal dogmatism, how experiences yield evidence, the new evil demon problem, probability, norms of credibility, intellectual virtues, wisdom, epistemic justification, and more. This title provides authoritative coverage of evidentialism, from the latest developments to the most recent philosophical criticisms. It will appeal to researchers and graduate students searching for more information on this prominent epistemological theory. (shrink)