by Summary:
As I came to develop a deeper understanding of economics, I became increasingly convinced that Kaldor’s approach was the only way to prevent economics ossifying into pure formalism. “Stylised facts” was his methodological weapon, and I can do no better than quote from his essay “Capital Accumulation and Economic Growth” (1961), with its strongly implied attack on the neoclassical approach to model construction: “We all agree that the basic requirement of any model is that it should be capable of explaining the characteristic features of the economic process as we find them in reality. It is no good starting off a model with the kind of abstraction which initially excludes the influence of forces which are mainly responsible for the behaviour of the economic variables under
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Mike Norman considers the following as important: nicholas kaldor, Post Keynesianism, stylized facts
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As I came to develop a deeper understanding of economics, I became increasingly convinced that Kaldor’s approach was the only way to prevent economics ossifying into pure formalism. “Stylised facts” was his methodological weapon, and I can do no better than quote from his essay “Capital Accumulation and Economic Growth” (1961), with its strongly implied attack on the neoclassical approach to model construction: “We all agree that the basic requirement of any model is that it should be capable of explaining the characteristic features of the economic process as we find them in reality. It is no good starting off a model with the kind of abstraction which initially excludes the influence of forces which are mainly responsible for the behaviour of the economic variables under
Topics:
Mike Norman considers the following as important: nicholas kaldor, Post Keynesianism, stylized facts
This could be interesting, too:
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As I came to develop a deeper understanding of economics, I became increasingly convinced that Kaldor’s approach was the only way to prevent economics ossifying into pure formalism. “Stylised facts” was his methodological weapon, and I can do no better than quote from his essay “Capital Accumulation and Economic Growth” (1961), with its strongly implied attack on the neoclassical approach to model construction:
“We all agree that the basic requirement of any model is that it should be capable of explaining the characteristic features of the economic process as we find them in reality. It is no good starting off a model with the kind of abstraction which initially excludes the influence of forces which are mainly responsible for the behaviour of the economic variables under investigation; and on finding that the theory leads to results contrary to what we observe in reality, attributing this contrary movement to the compensating (or more than compensating) influence of residual factors that have been assumed away in the model.
Skidelsky goes on to explain Kaldor's use of stylized facts as being derived from a combination of historical data and intuition in reasoning to the best explanation. This is called "abduction" although Skidelsky doesn't use the term.Any theory must necessarily be based on abstractions; but the type of abstraction chosen cannot be decided in a vacuum. ... Hence the theorist, in choosing a particular theoretical approach, ought to start off with a summary of the facts which he regards as relevant to his problem. Since facts, as recorded by statisticians, are always subject to numerous snags and qualifications, and for that reason are incapable of being accurately summarised, the theorist, in my view, should be free to start with a ‘stylized’ view of the facts – i.e. concentrate on broad tendencies, ignoring individual detail, and proceed on the ‘as if’ method, i.e. construct a hypothesis that could account for these ‘stylized’ facts, without necessarily committing himself on the historical accuracy, or sufficiency, of the facts or tendencies thus summarized” (177–178).In my opinion, the stylised facts approach stands up pretty well to the criticisms that have been made against it.
This post is a should-read for those interested in Keynesian and Post Keynesian economics. There are many more good points Skidelsky brings out.
Robert Skidelsky's blog
Stylised Facts
Robert Skidelsky | Emeritus Professor of Political Economy at the University of Warwick
Acta Oeconomica, Vol. 67 (S), pp. 31–35 (2017)