One thing that has stuck in my mind form reading Stephen Jay Gould’s [amazon_link id=”0099440822″ target=”_blank” ]The Hedgehog, The Fox and the Magister’s Pox[/amazon_link] is his aside about the contrasting presentation styles of those in the sciences and those in the humanities. He claimed that scientists will never cover their powerpoint slides with slabs of texts and will never read out a lecture, whereas academics in the humanities are prone to do both. I don’t know if that’s correct in general but I’m sure he’s right to say writing a text and giving an oral presentations require different styles. So I’m feeling pretty pleased today that I’ve both finished (more or less) writing a lecture (the Joseph Rowntree Foundation Lecture at York on 27 February) and started thinking about the slides and presentation. But it’s going to make every lecture twice as much work from now on!

[amazon_image id=”0099440822″ link=”true” target=”_blank” size=”medium” ]The Hedgehog, The Fox And The Magister’s Pox: Mending and Minding the Misconceived Gap Between Science and the Humanities[/amazon_image]

I’m winding down after a day’s lecture preparation by dipping into Deirdre McCloskey’s [amazon_link id=”0472067443″ target=”_blank” ]How to Be Human (Though an Economist)[/amazon_link], always enjoyable. The book fell open at her essay Why Economics Should Not Be Taught In High School. This intrigued me, as I’m currently organising a conference (at the Bank of England on 7 February – details available here) on the teaching of economics, albeit at undergraduate level.

McCloskey writes:

“The trouble with teaching economics philosophically is that a 16- or a 19-year old does not have the experience of life to make the philosophy speak to her. It’s just words… Economically speaking, she hasn’t had a life. She has lived mainly in a socialist economy, namely her birth household, centrally planned by her parents, depending on loyalty rather than exit. She therefore has no concept of how markets organize production. … She does not have any economic history under her belt – no experience of the Reagan Recession or the Carter Inflation.”

She concludes that economics has to be taught tacitly to young people, in the background of other subjects.

The trouble is, undergraduate students don’t have so much experience or wisdom either. And by the time they’re graduate students, they’ve spend a quarter of a century not experiencing the world of markets and jobs. So I think I’d draw the opposite conclusion: teach economics at every age, but teach it over and over again. I think it’s a subject that benefits from iteration. I’m certainly still learning, and I do remember the Carter Inflation and the Reagan Recession.

[amazon_image id=”0472067443″ link=”true” target=”_blank” size=”medium” ]How to Be Human: Through an Economist[/amazon_image]

I’ve just started a book by David C Rose called [amazon_link id=”0199781745″ target=”_blank” ]The Moral Foundations of Economic Behavior.[/amazon_link] It already promises to be very interesting. Take this paradox from the Introduction:

“General prosperity requires co-operation in large groups, but we are indisputably a small-group species. We are therefore maladapted for achieving a condition of general prosperity.”

The argument is that ever-larger groups are necessary for increasing specialization, which is the source of growth and modern prosperity – as Douglass North and Vernon Smith put it, a condition for development is moving from personal exchange in small societies to impersonal exchange. But achieving the necessary trust within large groups depends on a moral framework which does not come naturally….

More will follow when I finish the book.

[amazon_image id=”0199781745″ link=”true” target=”_blank” size=”medium” ]The Moral Foundation of Economic Behavior[/amazon_image]

2012 is starting with a lot of forecasts for the year ahead, a time-honoured and yet futile tradition. If there is one thing 2011 taught us, it’s the scope for radical uncertainty to throw any prediction off course.

Besides, correct predictions can often be unwelcome. Back in 2005-2007 I was, rather reluctantly, doing some UK macro work for a client (this is not my usual type of consultancy work). I’m a big fan of charting your data, so each quarter I prepared a book of about 30 charts, which replicated the overview I used to help prepare when I worked in the Treasury in the mid-1980s, including asset prices, house price ratios, yield curves and money and credit aggregates as well as the obvious GDP, inflation, unemployment etc. As the assignment progressed, I told them that either the benign combination of rapid global growth, low inflation and booming asset markets would continue – or we should take seriously the inverted yield curve as a signal of forthcoming recession, in which case asset prices would plunge (as they do), and by the way global asset prices including housing were highly correlated. I lacked the intellectual courage to go with the anti-consensus pessimism, because after all I don’t do macro, and the client certainly didn’t like that scenario so they picked the other one.

Anyway, all this came to mind because my eldest son is tussling with econometrics in his course and I learnt that his textbook is co-authored by my thesis adviser. Stock and Watson’s [amazon_link id=”1408264331″ target=”_blank” ]Introduction to Econometrics [/amazon_link]looks a terrific text. The innovation in econometrics in the past 20 years or so has been sensational – I was just about in time for Grainger revolutionising time series work, and for the use of vector autoregressions, and had been taught a lot of that by Mark Watson anyway. Hendry and Clements are also excellent on the time series econometrics in their [amazon_link id=”140512623X” target=”_blank” ]Companion to Economic Forecasting[/amazon_link] and earlier books.  However, although my micro-econometrics teachers could not have been bettered (Zvi Griliches, Dale Jorgenson and Jerry Hausman), I finished before the Heckman and McFadden inspired innovations became widely used.

But the trouble is that a lot of the econometrics that is done is poor quality. Not only do economics journals not publish negative results (this afflicts most sciences, I think), a lot of economists plug data into statistical packages and torture it until it delivers ‘statistical significance’. On the way, they lose sight of the underlying hypothesis, the alternative against which it is being tested, the properties of the raw data, the economic meaning of the coefficients, the effect of omitted variables and simultaneity – pervasive in macro time series data – and so on. Few have even learnt to plot their data before they start, to pick out visually the outliers and breaks in series, as I was taught.

So for any economist who takes empirical work seriously, I think McCloskey and Ziliak on [amazon_link id=”0472050079″ target=”_blank” ]The Cult of Statistical Significance[/amazon_link] is a must, along with McCloskey’s [amazon_link id=”1843761742″ target=”_blank” ]Measurement and Meaning in Econometrics[/amazon_link]. I’ve not read many econometrics textbooks recently. I like  Angrist and Pischke’s [amazon_link id=”0691120358″ target=”_blank” ]Mostly Harmless Econometrics[/amazon_link], which is fabulous about formulating hypotheses and counterfactuals (there’s a website too). Anyway, I’m sure my son is in good hands with his textbook.

And the moral for 2012? Think carefully before you make a prediction, and work out what to do if you’re wrong. Or, as the old joke puts it, forecast what will happen, or when, but never both at the same time.

[amazon_image id=”1408264331″ link=”true” target=”_blank” size=”medium” ]Introduction to Econometrics[/amazon_image]

[amazon_image id=”0691120358″ link=”true” target=”_blank” size=”medium” ]Mostly Harmless Econometrics: An Empiricist’s Companion[/amazon_image]

After a couple of thrillers for holiday-light relief (a dark Swedish number called [amazon_link id=”1849161526″ target=”_blank” ]Three Seconds[/amazon_link], which was good and provided a suitable contrast to compulsory Christmas good cheer, and a Barcelona-based police procedural, [amazon_link id=”1933372141″ target=”_blank” ]Dog Day[/amazon_link], rather mannered), I turned to a posthumously-published book by Stephen Jay Gould, [amazon_link id=”0099440822″ target=”_blank” ]The Hedgehog, The Fox, and the Magister’s Pox: Mending the Gap Between the Science and the Humanities. [/amazon_link]

The subtitle spells out the aim of the book, and in a way it’s hard to see anybody disagreeing with the argument that there are different methodologies able to illuminate the world. Gould argues that important methodological differences do not simply map onto [amazon_link id=”190683704X” target=”_blank” ]C.P.Snow’s ‘two cultures'[/amazon_link] of science and humanities. Some sciences have to take an historical approach rather than an experimental one. He says:

“A large range of factual subjects, evidently part of science and duly explainable (in principle) by empirical methods operating under natural laws, treats different kinds of inordinately complex and historically contingent systems….as not deducible or predictable at all from natural laws tested and applied in laboratory experiments.” They rest instead on a specific historical sequence of events and can be explained afterwards but are unpredictable beforehand. Examples are the history of continents and landforms, the phylogeny of life. I’d include economics alongside geology and evolution as this kind of empirical subject, the key being that newly discovered evidence or a new chain of events can overturn hypotheses.

However, Gould goes on to argue that the deep-seated habit in all argument of dividing the world into dichotomies is highly misleading anyway. Not only do fuzzy boundaries crop up everywhere (see the philosophy of vagueness), there are more than two possibilities in many kinds of circumstances, including ways of understanding the world. (This was also a theme of Gillian Rose’s brilliant [amazon_link id=”0521578493″ target=”_blank” ]Mourning Becomes the Law[/amazon_link]) The continuum is actually more pervasive than the dichotomy, although it’s interesting to think about what in our mental make-up makes the division into two so attractive, and about whether we can overcome it.

Thirdly, the book also argues that the idea of a war between science and religion makes no sense. It is not true historically – he learnedly discusses the debates of the 17th to 19th centuries in which churchmen were often to be found on the ‘side’ of science. And the two occupy non-overlapping territory, he argues. The domain of religion is not factual knowledge, the domain of science is not spiritual belief.

An enjoyable read. Gould was one of the most readable of science writers, although the subject matter of this book is serious going. And a suitable thought to take from 2011 into 2012, a year when we seem likely to be presented with a lot of attempts to divide views into two opposing camps.

Happy New Year to all!

[amazon_image id=”0099440822″ link=”true” target=”_blank” size=”medium” ]The Hedgehog, The Fox And The Magister’s Pox: Mending and Minding the Misconceived Gap Between Science and the Humanities[/amazon_image]