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The McCloskey critique refers to a critique of post-1940s "official modernist" methodology in economics, inherited from logical positivism in philosophy. The critique maintains that the methodology neglects how economics can be done, is done, and should be done to advance the subject. Its recommendations include use of good rhetorical devices for "disciplined conversation." [1]
Deirdre McCloskey's 1985 book The Rhetoric of Economics argues that "The Mathematization of Economics Was a Good Idea", but that "economic modernism" took equilibrium model-building and econometrics (especially "existence-theorem" mathematics, and statistical significance) "absurdly" far. Roughly speaking McCloskey wants economics to make interesting, new, and true statements about the real world, and argues that proving the hypothetical possibility of an effect within an analytical framework is not a constructive way of doing this. Although the conventional way of connecting the economic model with the world is through econometric analysis, she cites many examples in which professors of econometrics were able to use the same data to both prove and disprove the applicability of a model's conclusions. She argues that the vast efforts expended by economists on analytical equations is essentially wasted effort.
In "Ask What the Boys in the Sandbox Will Have", McCloskey identified the economists whom she accuses of leading economics astray in the 1940s:
Her complaint against the modern profession, and against the Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel winners above, has provoked a strong defense from the economic mainstream. It has led to debates with such figures as Kenneth Arrow, who vigorously support the "Samuelson" approach, and argue that the quantity of analytical mathematical models in modern economics is a critical requirement for progress. However, McCloskey acknowledges the virtues as being born from each man's "genius", and rather blames the vices as being created not by these three Nobel economists, but by their students and their students' students, including herself.
McCloskey says that most economists when they write are "tendentious", assuming that they know already, and concentrating on a high standard of mathematical proof rather than a "scholarly" accumulation of relevant, documented facts about the real world. The advice she offers colleagues here is to spend more time in the archives, and write more heavily researched papers from specific observations in the real world (she argues that this is the norm in the natural sciences on which economics believes it is modelling itself, but that most economics practitioners actually base their methodology more closely on pure mathematics).
Since she says: "No one really believes a scientific assertion in economics based on statistical significance" the solution she proposes to establishing cause and effect in economics is "calibrated simulation". Calibrated simulation relies on measurement and numerical techniques (such as Monte Carlo methods) to test the robustness of its predictions, without requiring a closed-form solution proving that the postulated relationship will always hold (or will be reached in "equilibrium", or be impossible). As an illustration, she contrasts the Babylonian and Greek "rhetoric" used to back up the claim that the square on the long side of every right angle triangle has the same area as the sum of squares on the other two sides: While Greek geometry found a 'universal proof', the Babylonian engineers simply measured the sides of a thousand right triangular stones, and applied the heuristic that since all of these obeyed the relationship so would the rest. McCloskey believes that the Babylonian approach is more applicable to economics, and that Moore's Law and advances in modeling software will soon make it easier to use and understand than the Greek approach.
In Calibrated Simulation is Storytelling she writes that one way to describe scientific theories is how mechanically mathematical they are: at the one end lie such hypotheses as Newtonian celestial mechanics which can be reduced entirely to equations – at the other are important works such as The Origin of Species which are "entirely historical and devoid of mathematical models". McCloskey says that economics would benefit from recalibrating its output within that spectrum to the more historical, "narrative" analysis.
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Paul Anthony Samuelson was an American economist who was the first American to win the Nobel Memorial Prize in Economic Sciences. When awarding the prize in 1970, the Swedish Royal Academies stated that he "has done more than any other contemporary economist to raise the level of scientific analysis in economic theory".
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Deirdre Nansen McCloskey is an American economist and academic. Since 2023 she has been a Distinguished Scholar and holder of the Isaiah Berlin Chair in Liberal Thought at the Cato Institute in Washington, D.C. From 2000 to 2015, she taught at the University of Illinois at Chicago, where she was Distinguished Professor of Economics History, and Professor of English and Communication. During those years, she taught economic history at the University of Gothenburg, economics at the University of the Free State, and philosophy at Erasmus University Rotterdam.
Kenneth George "Ken" Binmore, is an English mathematician, economist, and game theorist, a Professor Emeritus of Economics at University College London (UCL) and a Visiting Emeritus Professor of Economics at the University of Bristol. As a founder of modern economic theory of bargaining, he made important contributions to the foundations of game theory, experimental economics, evolutionary game theory and analytical philosophy. He took up economics after holding the Chair of Mathematics at the London School of Economics. The switch has put him at the forefront of developments in game theory. His other interests include political and moral philosophy, decision theory, and statistics. He has written over 100 scholarly papers and 14 books.
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William Arnold Barnett is an American economist, whose current work is in the fields of chaos, bifurcation, and nonlinear dynamics in socioeconomic contexts, econometric modeling of consumption and production, and the study of the aggregation problem and the challenges of measurement in economics.
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Mathematical economics is the application of mathematical methods to represent theories and analyze problems in economics. Often, these applied methods are beyond simple geometry, and may include differential and integral calculus, difference and differential equations, matrix algebra, mathematical programming, or other computational methods. Proponents of this approach claim that it allows the formulation of theoretical relationships with rigor, generality, and simplicity.
Stephen T. Ziliak is an American professor of economics whose research and essays span disciplines from statistics and beer brewing to medicine and poetry. He is currently a faculty member of the Angiogenesis Foundation, conjoint professor of business and law at the University of Newcastle in Australia, and professor of economics at Roosevelt University in Chicago, IL. He previously taught for the Georgia Institute of Technology, Emory University, and Bowling Green State University. Much of his work has focused on welfare and poverty, rhetoric, public policy, and the history and philosophy of science and statistics. Most known for his works in the field of statistical significance, Ziliak gained notoriety from his 1996 article, "The Standard Error of Regressions", from a sequel study in 2004 called "Size Matters", and for his University of Michigan Press best-selling and critically acclaimed book The Cult of Statistical Significance: How the Standard Error Costs Us Jobs, Justice, and Lives (2008) all coauthored with Deirdre McCloskey.
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The World in the Model: How Economists Work and Think is a work by Mary S. Morgan published by Cambridge University Press in 2012.
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