Saturday, November 27, 2010

Continued Balderdash From Liebowitz And Margolis

Joan Robinson, drawing on John Maynard Keynes, famously distinguished between models set in historical and logical time. Geoffrey Hodgson, now an institutionalist economist, has written extensively about evolutionary models in economics. Given my interest in such economists, I also find of interest how to formalize the notion that "history matters". I think mathematical models of nonergodic processes is one way of formally setting a model in historical time.

Brian Arthur and Paul David, two economists, have developed a parallel idea, that of path dependence. This post is about false statements Stan Liebowitz and Stephen Margolis like to make about this work. Liebowitz and Margolis quote Paul David:
"The foregoing account of what the term 'path dependence' means may now be compared with the rather different ways in which it has come to be explicitly and implicitly defined in some parts of the economics literature. For the moment we may put aside all of the many instances in which the phrases 'history matters' and 'path dependence' are simply interchanged, so that some loose and general connotations are suggested without actually defining either term. Unfortunately much of the non-technical literature seems bent upon avoiding explicit definitions, resorting either to analogies, or to the description of a syndrome - the set of phenomena with whose occurrences the writers associate path dependence. [Rather than telling you what path dependence is, they tell you some of the symptomology - things that may, or must happen when the condition is present. It is rather like saying that the common cold is sneezing, watering eyes and a runny nose.]" -- Paul David
Liebowitz and Margolis somehow think you will be persuaded to believe the following:
"So here we see David disqualifying, at least from others, any efforts to connect path dependence to observable phenomena. David would have path dependence discussed only in the context of the most severe abstraction, an immaculate concept immune from criticism: it is a dynamic stochastic process that is non-ergodic." -- Stan Liebowitz and Stephen Margolis
Notice Paul David never says that path dependence, under a rigorous definition, never will be manifested in observable empirical phenomena. Elsewhere Paul David notes that Markov processes can be non-ergodic, that is, path dependent. And he notes that economists have connect Markov processes, not all of which need be path-dependent, to observable penomena:
"Homogeneous Markov chains are familiar constructs in economic models of the evolving distribution of workers among employment states, firms among size categories, family lineages among wealth-classes or socio-economic (occupational) strata, and the rankings of whole economies among in the international distribution of per capita income levels." -- Paul David
Why are certain economists so willing to tell untruths?

References
  • W. Brian Arthur (1989) "Competing Technologies and Lock-In by Historical Small Events", Economic Journal, V. 99, N. 1: pp. 116-131.
  • W. Brian Arthur (2009) The Nature of Technology: What It Is and How It Evolves, The Free Press. [I haven’t read this]
  • Paul A. David (1985) "Clio and the Economics of QWERTY", American Economic Review. V. 75, N. 2 (May): pp. 332-337.
  • Paul A. David (2000) "Path Dependence, It's Critics and the Quest for 'Historical Economics'"
  • Paul A. David (2007) "Path Dependence - A Foundational Concept for Historical Social Science", Cliometrica, V. 1, N. 2: pp. 91-114 (working copy)
  • Stan J. Liebowitz and Stephen E. Margolis (2010) "How the Lock-In Movement Went off the Tracks"

7 comments:

media said...

3 points:
---ergodicity i do think is real basic (and not only to econ---the question for me is what other 'atomic elements' do you need to get everything---for the reocrd, i'm categorically against category theory, but it may be a bias); only one economist i have read really follows up on it and he was ignored and i think dropped it---beyond Arthurn who seemed to introduce the word into economic vocabulary; chomksy has discussed how amazing it is babies can learn many words early, and then just stop

---there are actually alot of ways ergodic are used (like equilibrium, chaos, complexity, entropy...). arthur uses one (and one i disfavor actually though for his applications its cool).

---marglin i guess i should like since he's 'rad', but he's at HU ('suck') and seems antimathemtical (racist or biased---i forget if math is phenotypical (learned)or genotypical (innate)). i'll google the other dude to see if their cult is the issue.
marglin wrote about bosses (what do they do)---good question. give phds? i forget the answer.
however your reply says something about markov processes which marglin doesn't mention, even if his quote is wack. (eg path dependence=markov is your implicit assumption).

the entire issue to me is definitional; after all its applied math and math is a tautology.

Robert Vienneau said...

I think both Brian Arthur and Paul David talk about non-ergodicity. Other economists do too. Paul Davidson, who is a different person than Paul David, may have introduced economists to the importance of the concept. I think of his 1982 article, "Rational Expectations: A Fallacious Foundation for Studying Critical Decision-Making Processes".

Margolis and Marglin are different people. I don't see how Stephen Marglin is relevant for this post. Stephen Marglin has done some very good mathematical economic modeling. Given the purges, the endorsement of lying to the undergraduates, and the criminal behavior; I don't think think much of Harvard economics as a whole either. But they still manage to have a couple of economists I respect. Marglin is one.

I do not assume path dependence=markov. Some models of path dependence are certain Markov processes. Not all Markov processes are path-dependent or non-ergodic. But some are.

media said...

just passed by here again (possibly an empirical proof of ergodicity, or maybe just locked in a loop?).

i was thinking of marglin---i liked his 'what do bosses do'---not margolis of NC who you were commenting on. i thought that was who margolis was. my mention of math econ was because i have noticed people like marglin and foley have both written non-math critics of classical econ, and i see that as like kicking a dead horse. theres more importasnt stuff.

i looked at the margolis liebowitz paper. the most surprising thing there beyond their apparent endrosement of efficiency (ie no such thing as lock in, because we will ergodically explore every production/consumption bundle and choose the best deal (modulo SMD)) was that Durlauf (who wrote an early paper on nonergodicity in econ) they quote as agreeing with them. i wonder the context of that quote----i just glanced at the paper. does durlauf reject nonergodicity?

i tend to dought one can really decide what standard is better. lock in seems somewhat intuitive---eg the self-interest maximizier obviously outperforms the new socialist man.

but there are or may be some examples of apparent ergodicity in econophysics.

i think the real issue is how one defines ergodicity and applies it. you basically have to claim you know everything (all possible states) and then show either one checks them out, or fails to do so.

one possibility is from keynes---in the long run we're all dead (heat death of the universe) so there is no lock in, and margolis is right. (freeman dyson and frank tipler would dissent; i could also give some counterexamples.) perhaps have to just wait and see.

Clint Ballinger said...

I had a little bit on this here http://philpapers.org/rec/BALCCI Am working on something more - (btw, it is not technical)

Dana Albert said...

I confess that I know very little about economics, but I do know something about the very poor reasoning skillls exemplified by Margolis and Liebowitz in their attack on the Dvorak typewriter keyboard layout, which they mounted in an attempt to deny the notion of lock-in. I am shocked that anybody would agree with the anti-Dvorak article they published. If you are interested in my passionate rebuttal to it, click here:

http://www.albertnet.us/2009/06/defendants-i-type-lot.html

Cheers,
Dana Albert

Chip S. said...

One thing that is conspicuously missing from either this post or these comments is any demonstration that L&M's facts are wrong.

What is present here in abundance is a refusal to let facts get in the way of personal beliefs.

The logic of "path dependence" also tells us that radios and TVs were never produced because of the lack of radio and TV stations. Also, no cars using internal-combustion engines were ever produced because there were no gasoline stations.

Great theory.

Robert Vienneau said...

The logic of path dependence does not tell us that. The subject of the post was misrepresentation of the theory, not distortion of the literature on the empirically measured effects of types of keyboards.

Anyways, if one actually cared about empirical examples, one would read Douglas J. Puffert. I have read his article, "Path Dependence, Network Form, and Technological Change".