Less Wrong is a community blog devoted to refining the art of human rationality. Please visit our About page for more information.

pragmatist comments on Why is Mencius Moldbug so popular on Less Wrong? [Answer: He's not.] - Less Wrong Discussion

9 Post author: arborealhominid 16 November 2012 06:37PM

You are viewing a comment permalink. View the original post to see all comments and the full post content.

Comments (259)

You are viewing a single comment's thread. Show more comments above.

Comment author: Kal 20 November 2012 12:24:21PM 2 points [-]

When it comes to monetary theory, there are no controlled experiments possible. So, one has to use deduction. Moldbug's article above on 'Crash Course in Sound Economics' is a masterpiece on the topic and thus an excellent starting point. When I introduce the topic of questioning the quality of mainstream economics to friends, I put it this way: "All the various mainstream economic theories cannot be simultaneously right. So, given the number of mutually exclusive theories and the fact that controlled experiments are not possible, one has to deduce from first principles. So, let's do that."

When one deduces from first principles, one just so happens to end up with Austrian (Misesian) Economics. The deduction is not complicated. For LessWrong members, it will be easy, I think.

Misesian Economics does make predictions (i.e., pays rent) but the predictions are about whether a certain economic policy is good or bad for the economy and whether the policy is sustainable. It does not claim to precisely predict either magnitude or timing of economic disruptions caused by bad policies, because the disruptions are dependent on economic actors reacting to both new economic information & to other peoples' reactions to the same information. Given the economic policies we are currently being subjected to, the rent, that a study of Misesian ideas will pay down the road, will likely be substantial.

For those who prefer books, I suggest reading both 'Paper Money Collapse' and 'Currency Wars', in that order. If anyone here is also studying economics (given the economic developments in the last 5 years, I imagine some might be), I would enjoy a discussion.


P.S. With all due respect to Prof Krugman, he is not only wrong about Misesian Economics, he does not even properly understand what he is criticizing. His advice about how to end the current economic malaise is incorrect and thus harmful (though well-intentioned). Those who follow the financial news would have noticed a Prof Sumner being hailed as having "saved the US economy" because his idea of NGDP-targeting has in effect been adopted by the Federal Reserve. Prof Sumner does not seem to understand Misesian Economics either and his advice is also incorrect and thus harmful (and again, I am sure, well-intentioned).

Here is a quick test one can do: Read what Prof Sumner says about Prof Krugman's theories and vice versa. So, who does one follow: The Nobel Laureate or the man the Federal Reserve seems to be following? Perhaps neither? We certainly cannot follow both, if we have any interest in even superficial coherence. And, given the importance of the topic (the wealth of billions), I think we should aim for the highest level of coherence that is humanly possible.

Comment author: pragmatist 21 November 2012 09:20:47PM *  12 points [-]

The leap from "controlled experiments are not possible" to "one has to deduce from first principles" is huge and unsupported. The results of controlled experiments do not exhaust the available empirical evidence by a long shot. We have a lot of data about the effects of monetary policy from around the world. True, inferring causality from this data is not nearly as straightforward as inferring causality from a randomized controlled trial, but it's still a lot more reliable than deduction from first principles, I would think.

Think about how your argument sounds when applied to cosmological theories about the very early universe. We have a number of different theories that cannot be simultaneously right, and we cannot conduct controlled experiments. Would you endorse deduction from first principles in this instance as well?

Comment author: JoshuaZ 21 November 2012 09:23:25PM 5 points [-]

The leap from "controlled experiments are not possible" to "one has to deduce from first principles" is huge and unsupported.

Yes, whenever people try to make this sort of argument I have to wonder how they think we should do astronomy.

Comment author: Kal 23 November 2012 03:39:26PM 1 point [-]

Please see my reply above to pragmatist.

To add a bit, the rigor in monetary economics today is so far behind physics, it is not fair to compare the two subjects. It is an insult to Physics.

Comment author: Kal 26 November 2012 01:59:26PM *  0 points [-]

...it's still a lot more reliable than deduction from first principles...

I know it's been a while since this comment, but I wanted to comment that sound deduction (ie, logical reasoning) on top of correct premises trumps other forms of evidence, even well-controlled, large-sample experiments. Or put another way, the former renders the latter superfluous. We should not simply take anyone's word for the deduction of course - we have to double-check the premises and understand the deduction step by excruciating step. But once one is satisfied that the premises are correct and the deduction is bullet-proof, one can sleep soundly :)

Nothing trumps sound reasoning. The scientific method itself is a result of reasoning, a point well made by Moldbug here: http://unqualified-reservations.blogspot.sg/2010/06/three-homeworks-for-professor-hanson.html


As an analogy, I find fascinating the MWI vs Collapse debate at LW - Eliezer has concluded MWI wins as an outcome of pure reasoning. No empirical evidence required. It will be (is?) wonderful if (when?) we factorize large numbers quickly and that is evidence of MWI, but as above, it would be (is?) superfluous. If the reasoning offered by Eliezer is coherent (I don't know enough to judge), case closed. Please correct me if I have misunderstood. Thanks

Edit: MWI paragraph added.

Comment author: Kal 23 November 2012 03:36:26PM 0 points [-]

Inferring causality from a time-series of various economic variables is incoherent. There first needs to be a deductive understanding of what the causal relationships are between economic variables. That is what is meant by "first principles" here - perhaps the disagreement is semantic.

Data about effects of economic policy tells us nothing if one has not already pre-supposed causal relationships between certain variables (ie, which variable is affecting which). If one had not done so, how does one know which variables to link with which other one? The causality which is being claimed to be derived is actually assumed or it is a result of the data-mining effect.

More importantly though, I suggest (for what it is worth) that you ignore my comments which are replies to others' comments and try the original article. It repays inspection.


I have no expertise in cosmology. So I have no opinion on that which is worth stating. The only comment I have is that Physics has causal relationships clearly defined and known. The different theories thus could make different testable predictions about what we should expect to see in the here and now.

In economics, the different schools (more accurate to call them ideologies) do not agree on basic causal relationships between variables. In more than one case, one of the main tenets (of a popular ideology) is plain, flat-out incorrect, and sometimes definitionally misunderstood. I know it may be hard to believe that monetary economics is that shaky a subject, but it is. The last hundred years have been a regression when it comes to monetary economics. Thus, the first principles analysis: What is an economy?

Comment author: pragmatist 23 November 2012 05:37:13PM *  3 points [-]

I will read the Moldbug article, although I have to say I'm not optimistic, given my past experience with his writing. But I do want to disagree on this:

Inferring causality from a time-series of various economic variables is incoherent... Data about effects of economic policy tells us nothing if one has not already pre-supposed causal relationships between certain variables (ie, which variable is affecting which). If one had not done so, how does one know which variables to link with which other one?

I think you are either underestimating the tools at our disposal for causal discovery, or you have an evidential standard for causality that is way too high. Are you familiar with Judea Pearl's work on inferring causation from probabilities? Check out this sweet post by Eliezer if you're not.

ETA: I'm only a few paragraphs into the Moldbug piece and my hackles are already rising. He has already declared that a conscious being must be rational "by definition" and that other peoples' desires are unknowable, also "by definition". I don't think either of these claims are true (assuming the words have their usual meanings), let alone true by definition. This doesn't bode well, but I'll keep reading.

Comment author: Kal 24 November 2012 05:12:35AM 2 points [-]

Thanks. I have read that post by Eliezer before. The issue with monetary economics is the number of variables. Money is one half of every single transaction, in a sophisticated economy. A sound economist's standards for evidence are not any higher than anyone else's, or should not be. It is just that the array of variables is huge and gathering enough data for inferring causality, in the way the post shows, is a pipe dream. Solution: deduction from first principles.

Economists assume certain causal relationships and just screen off everything else. This is so wrong, it is tragic. And its results will be tragic too. The last 5 years were a warm-up act.


Re definitions, the meaning of rational there is that the person acts based on his internal map of the world (this is how Mises used the word way back when and it is part of parlance in Misesian economics). It does not mean what LW thinks it means.

Re unknowable desires, it is a way of saying that economically relevant desires are revealed by economic actions. Demand means being willing and able to pay.

Semantic issue in both cases :)

Comment author: Alicorn 24 November 2012 05:48:55AM -1 points [-]

Money is one half of every single transaction, in a sophisticated economy.

Economies that have multiple currencies are unsophisticated...?

Comment author: Kal 24 November 2012 06:14:11AM 2 points [-]

I mean that in a monetary economy, one always buys goods and services with money. One side of the transaction is money, whatever it is. Sophisticated here means an economy that has progressed beyond barter and developed a medium of exchange and a store of value, ie, Money.

Important to note separately that multiple currencies are results of legal tender laws. In the absence of such interference, the market would choose one commodity as Money (refer the linked article) and it would not be paper with ink on it. Yes, what could happen is that the chosen commodity is then represented by pieces of paper, but they are simply a more convenient token for the commodity, which is kept in store. And there could be multiple different papers with different names, but they all refer to the stored commodity and are thus economically equivalent and with fixed ratios among them. This economically sound system used to exist - close enough - in the 19th century.

Even now, the various currencies are not different in any meaningful economic sense. Non-US countries use the USD as the reserve for their own currencies. Some also use the Euro, Yen etc. But analyze the Euro and one sees tender laws and gold standing behind it. What stands behind the USD? Laws and legitimacy of the govt enforcing those laws. There is gold, which would be called upon if peple reject the currency as it is. We need to separate the surface phenomena from the economic relationships underlying them.

Comment author: JoshuaZ 23 November 2012 04:18:07PM *  1 point [-]

Inferring causality from a time-series of various economic variables is incoherent. There first needs to be a deductive understanding of what the causal relationships are between economic variables. That is what is meant by "first principles" here - perhaps the disagreement is semantic.

If I replace "economic variables" with "astronomy" what part of this sentence changes in implication? Why is this incoherent for some fields? The level of rigor cannot be the only difference: Physics and astronomy have become more rigorous over time, not by discussing first principles, even when moving from Aristotle to Medieval physics to Newtonian physics, but rather by adopting principles based on the empirical data. The same goes for the switch from Ptolemaic systems to Copernicus and then Kepler. It is the empirical data that matters, the apparent time-series of planetary and stellar motion.

Thus, the first principles analysis: What is an economy?

Does arguing over this definition pay any rent?

Comment author: Eugine_Nier 23 November 2012 05:46:03PM 2 points [-]

If I replace "economic variables" with "astronomy" what part of this sentence changes in implication?

One can do controlled experiments in physics here on Earth and apply the results to astronomy.

Comment author: JoshuaZ 23 November 2012 05:57:59PM 1 point [-]

So that's true, but until the late 1700s (essentially post Newton) no one had any capacity to do so (because no ideas anyone had connected the two at all in a useful way). Would this sort of claim then been valid in 1650?

Comment author: Kal 24 November 2012 04:55:00AM 1 point [-]

Re the Q about rent-paying: Yes. You should rightly be skeptical now, but please read the Economics sub-section at Moldbuggery with an open mind. Or if you prefer, start with Rothbard's 'Man Economy and State'.

The reason I linked to Moldbug's articles in this thread (indeed, this thread being only reason I signed up instead of lurking) is cos I have seen it said in LW that Misesian economics is incoherent, anti-empirical etc. With respect, people who say that are making a mistake. But what is germane is not the mistake, but the financial effect it can have.

Economics - of all subjects - pays rent. Maybe not in the short term, but eventually and especially when the central banks of the major economies are doing effectively insane things.

Comment author: JoshuaZ 24 November 2012 02:18:45PM 0 points [-]

This doesn't answer the question. Note that no one is arguing that economics doesn't pay rent. The question was whether arguing over '"what is an economy" pays rent or not.

Comment author: Kal 26 November 2012 01:16:16PM 0 points [-]

I misunderstood the Q. In my opinion, yes. There is no other way to get a sound (ie, based on sheer deductive coherence) grasp of the subject. So, attack the issue for yourself:

The first one has a very minor error btw - prob a typo. Good exercise to find it. A friend of mine just pointed it out to me.

Comment author: JoshuaZ 26 November 2012 04:17:10PM 0 points [-]

So, can you explain how arguing over the definition of a word can ever pay rent?

Comment author: Eugine_Nier 26 November 2012 11:31:53PM *  2 points [-]

Well, in a sense every definition carries an implicit assertion that the described object corresponds to a cluster in thing space. See also 37 ways that words can be wrong.

Comment author: Kal 26 November 2012 02:23:20PM -2 points [-]

Re Physics, please correct me as required but in the way I use the phrase "first principles" here, Physics does not have any first principles. Physics is observation, hypothesis, experimentation and repeat. After a certain hypothesis has sufficient amount of experimental proof behind it, it becomes a theory and thus the foundation for further work. And occasionally, we find that there is a variable missing in the theory as the experiments did not test the situations that that variable speaks to. Then we test to tease out the nuances of that aspect of reality. And so on.

Economics has first principles, in the sense I use the phrase. Thus the Q: What is an economy? It leads to those first principles and then deduction covers the rest. But one can of course get the first principles wrong and the deduction is then useless.

Comment author: Eugine_Nier 26 November 2012 11:28:12PM 2 points [-]

Re Physics, please correct me as required but in the way I use the phrase "first principles" here, Physics does not have any first principles.

Yes it does. They're just so implicit in our intuition about how the world works that we don't notice them. For example, consider all the implicit assumptions necessary for statements like "these two sticks have the same length" to be meaningful.

Comment author: JoshuaZ 26 November 2012 04:12:43PM 0 points [-]

So, why does physics have no such first principles but economics does?