29 Jan 2014

## Regression Pitfalls: Why Growth Rate versus Level Could Be Crucial

Daniel Kuehn and I have been reading a lot of the major papers in the minimum wage debate. (I had asked Daniel if he would be willing to work through these papers with me, since this is his area and [given our different political perspectives] I wanted to make sure I was being fair to the guys arguing the case for raising the minimum wage.) Some of Daniel’s very helpful posts are here, here, here, and here.

I am going to be writing more on the broader debate in other outlets, but for the present post I want to spell out a crucial point that Meer and West raise in their 2013 working paper. Specifically, if the minimum wage doesn’t cause a sharp reduction in the level of employment, but instead permanently reduces the growth of employment, then a regression looking for a level effect might seriously understate the minimum wage’s influence.

In this post, let’s not worry about the context of the minimum wage, but instead focus just on the narrow econometric point, because at first glance it’s counterintuitive. So, consider the following two scenarios (taken from Appendix A in Meer & West):

The idea is that some “treatment” is applied to State A first, then after some time has passed the same treatment is applied to State B. (Here “state” means an actual territorial unit, i.e. one of the 50 states of the Union.) The time durations are chosen so that the pre-treatment period is exactly the same length as the post-treatment.

As the charts clearly illustrate, in case (b) the treatment causes a one-shot (but permanent) reduction in the level of the variable of interest, while in case (c) the treatment causes a permanent reduction in the growth of the variable of interest.

Now, if we run a “differences in differences” (DiD) regression and choose the level of the y-variable as our dependent variable, then in case (b) it will attribute a negative coefficient to the treatment variable, while in case (c) the regression output will report no effect of the treatment. In contrast, if we run a DiD regression and analyze the growth of the y-variable, then in case (b) it will show no effect of the treatment, while in case (c) it will correctly assign a negative coefficient to the treatment variable.

Thus, if you accept these claims for the sake of argument, you can see the relevance to the minimum wage debate: If raising the minimum wage primarily affects the growth of employment, then the typical regressions in the literature (which look at the impact on the level of employment) could be vastly understating the actual effect.

To repeat, at first this seems counterintuitive. After all, we can quite clearly see that the treatment in case (c) has made the level of employment lower than it otherwise would have been; why wouldn’t a regression looking at level effects pick this up?

One way to see it is to read the discussion in Meer and West’s appendix. It has to do with the fact that the DiD estimator uses an “indicator variable” that is the same for both states except in the middle time interval. This makes the common “time trend” variable soak up the actual work that the treatment is doing. (Obviously I’m putting this into my own words.)

I think the way to make this “click” intuitively is to look at a different graph, this one from Meer and West’s Appendix B:

Now in the chart above, the “control state” (for which there is no treatment) chugs along at the same rate of growth the whole time. (That’s why the logarithm of its level of employment is a straight line.)

In contrast, employment in the treated state was originally growing at the same rate (though it had a higher level, initially), but then after the treatment it suffered a permanent reduction in the rate of growth. (Be sure you are focusing on the solid line, not the dotted one.)

Now, the dotted line shows the trend of employment in the treated state, over the entire period. Before the treatment, the treated state grows “above trend,” while after treatment, it grows “below trend.” (Note that if we were to plot the control state’s time trend, it would overlap perfectly with the actual employment level; for any interval in this graph, the control state employment would be growing “exactly even with trend.”)

So Meer and West are here illustrating a huge potential pitfall in including “state time trends” as a control factor in these types of analyses. In the above example, a regression on the level of employment, with a state time trend included as a variable, would show no effect of treatment. Daniel made this “click” for me by pointing out that if you shift the dotted line in the diagram down just a tad, so that it lines up perfectly with the solid line, then it’s “obvious” that the treatment had no effect on the level of employment in the state: The dotted line and solid line end up at the same level, at the last time period.

UPDATE: In the comments, Daniel elaborates on what happens in the regression that corresponds to shifting the dotted line in that way: “the intercept is accounted for by the fixed effects (geographic fixed effects effectively give every geographic area their own intercept). So if you clean out all the differences in the intercept, you see what controlling for the trend does.” Also, to be clear, Daniel is not agreeing that the “revisionist” studies are wrong; he is just clarifying what Meer and West are claiming, and how their cute pictures relate to the econometric specifications in the minimum wage literature.

Now to be sure, these hypothetical examples don’t prove that the empirical studies finding little impact of the minimum wage are necessarily spurious. However, they do highlight the serious pitfalls in such undertakings, and in particular we can see how including geographical “trend” controls might end up obscuring the quite real impact of the policy.

#### 70 Responses to “Regression Pitfalls: Why Growth Rate versus Level Could Be Crucial”

1. Daniel Kuehn says:

“Daniel made this “click” for me by pointing out that if you shift the dotted line in the diagram down just a tad, so that it lines up perfectly with the solid line, then it’s “obvious” that the treatment had no effect on the level of employment in the state: The dotted line and solid line end up at the same level, at the last time period.”

And so everyone’s clear on why I said this – the intercept is accounted for by the fixed effects (geographic fixed effects effectively give every geographic area their own intercept). So if you clean out all the differences in the intercept, you see what controlling for the trend does.

Dube has a very good reaction to this criticism, though. And he also re-analyzes his county pair study on the growth rates (Meer and West don’t do county pairing), and shows that when you do a DID with county pairs, it still has no effect on the growth rate.

• Daniel Kuehn says:

Which should make sense… I’m not sure what the story is where the minimum wage would have no level effect but a big growth effect. It certainly wouldn’t be the “textbook” story.

• Beard Face says:

Out of curiosity, what exactly is the theory proposed by minimum wage proponents? How do they expect increases in the minimum wage not to have disemployment effects?

• Kevin Donoghue says:

I’m sure there’s more than one theory, but monopsony is the one I most often hear mentioned:

http://press.princeton.edu/titles/7522.html

• RPLong says:

Isn’t the test for monopsony a completely different empirical question than the test for minimum wage effects?

Look at it this way: If I want to find out whether or not it’s raining, I could either measure the amount of water falling from the sky (test for rain), or I could measure the amount of water on the ground (test for wetness). I agree that evidence of water on the ground is evidence for rain – but it is also evidence that the sprinklers are on, or that someone is washing their car, or that I spilled my drink, or etc. etc.

Sure, I could try to “control for sprinklers” and “control for drinks,” but isn’t that a little stupid when I could just as easily measure how much water is falling from the sky???

If someone wants to make a case for labor market monospony, let them do it. But that’s not a minimum wage test. At best, a minimum wage test is one piece of evidence in favor of monopsony – but it is neither a necessary nor sufficient one.

• Harold says:

“in the dynamic monopsony model, employers… face real costs associated with hiring new workers. These costs flow from inevitable frictions in the labor market. Workers incur costs (time, effort, financial expenditures) to find job openings; and, workers must limit their job searches to openings that fit their geographic, transportation, and scheduling constraints. To overcome these frictions, employers must either pay above the going wage (to draw extra attention to the particular vacancy) or wait (with implied costs in lost output) until they are able to fill the vacancy with a worker willing to accept that particular opening at the going rate…

In the monopsony model, employers are unlikely to pay higher wages in order to fill vacancies because they would then have to raise the pay of their existing workers to match the pay offered to their last hire. As a result, in monopsonistic settings, employers habitually operate with unfilled vacancies, rather than raising the wage for their entire workforce. In this context, raising the minimum wage can actually increase employment by raising the wages of the existing workforce to the “competitive” level (no existing jobs are lost because these workers were being paid below their “marginal product”) and filling existing vacancies (which increases overall employment).
http://www.cepr.net/documents/publications/min-wage-2013-02.pdf

There are other ways for the employer to pass on the cost : reduced wages of higher earners, increased prices, reduced turnover and increased efficiency as more managerial effort is put into increasing productivity.

The following UK study looked to see where the costs went.
http://164.36.50.178/lowpay/research/pdf/NMW_profits_and_prices.pdf

From their conclusions: “We show that profitability was significantly reduced by the minimum wage. Importantly, we also show that low wage firms were not forced out of business by the higher wage costs resulting from the minimum wage. On possible explanation (that requires more research attention in future) is that firms were making profits from paying low wages prior to the minimum wage introduction and that one
consequence of the introduction of the minimum wage to the UK labour market was to moderate these excess profits by channelling them back to the wages of low paid workers. “

I think to paraphrase this conclusion – it is possible the employers were exploiting the workers!

2. Bala says:

Forgive me if this makes me sound like a pest, but one thing is this post sure bugs me.

I wanted to make sure I was being fair to the guys arguing the case for raising the minimum wage.

I would say being fair to them is to point out how wrong they are in choosing the empirical method to make their case. If empirical data does not establish or refute economic laws, then how does one ever make a case for raising the minimum wage through analysis (however sophisticated) of empirical data?

• Bala says:

*in this post…..

• Daniel Kuehn says:

I think it’s important to separate the empirical issue from the policy issue, although you sound like you’ve got issue with empirics on their own.

• Bala says:

Just a straight question. Isn’t the entire discussion about whether empirical data refutes the theory that minimum wage laws cause unemployment? If so, I wonder how you meaningfully separate the empirical issue from the policy issue.

It’s a different matter that I have issues with anyone attempting to use empirical methods to identify or attempt to validate/refute economic laws. I wonder why that tomfoolery is taken seriously, especially by an Austrian.

• Daniel Kuehn says:

No what I mean is that “does the minimum wage reduce employment” and “should we have a minimum wage” are two very different questions.

• Bala says:

If this is what you mean, you have completely missed what I am saying. My point was simply that the proper way of being fair to those who use empirical methods to find out whether minimum wage laws cause unemployment is to tell them that they are wrong. I was in effect wondering why Bob is giving people who do this even a shred of credibility by engaging them in a discussion on their terms instead of calling them out on their complete ignorance of economics and its proper method.

I mean, if a guy uses empirical methods to settle this question, it is better to advise him to go back and get an education in economics rather than argue over whether the empirical research proves what the researcher seeks to prove using it. That’s fair!!

• Richie says:

I think it’s important to separate the empirical issue from the policy issue,…

How? Is not the whole point of minimum wage research (empirical issue) to determine whether setting a minimum wage is “good” policy? Would minimum wage studies be done if no minimum wage policies were being considered?

• Daniel Kuehn says:

No, it’s not to determine if it’s good policy.

The point of the research is to determine if the minimum wage reduces employment.

Private citizens determine whether policy is “good” or not. There is no econometric test to determine that.

• skylien says:

So nobody uses such studies to actually argue that minimum wage policies are ‘good’?

BTW: I always thought that the main idea of science in general was to find out what are ‘good’ ways to achieve certain goals…

• Daniel Kuehn says:

Of course people use studies to argue that the minimum wage is “good”. That’s important information when people make those decisions.

I think to a large extent (though not completely) we are interested in science for that reason. I think the goal of any given scientific inquiry is to find an answer to a positive (not a normative) question.

• Daniel Kuehn says:

They are making these claims in response to my point that we have to separate the empirical question from the policy question. That’s the context of their point and my response.

You don’t do research on the minimum wage to determine if the minimum wage is “good”. There’s no way to assess that scientifically. You do research on the minimum wage to find it’s employment effects. That information is of course likely to be important in any given person’s assesment of whether it’s good.

• skylien says:

If people determine that it was good if poor people earn more, and if econometricians deliver them studies that say through minimum wages you can reach that goal without any drawbacks, then of course the implication is that a minimum wage is a good way to reach that goal. And of course are econometricians interested in doing these studies mainly because the public wants to know that.

• skylien says:

• skylien says:

Well then I guess you are in agreement. Of course science doesn’t determine what is good and what is bad. Science should just give accurate answers what does what. But science is dependent on the public to know what issues to investigate.

So you are just paraphrasing Mises, that economics (as all science) should be value-free

😉

• Daniel Kuehn says:

Well, I’m paraphrasing John Neville Keynes. But I hear that Mises guy was a good knock-off of Keynes too 🙂

• Richie says:

Private citizens determine whether policy is “good” or not. There is no econometric test to determine that.

• Daniel Kuehn says:

To make an informed decision

• Richie says:

To make an informed decision

About what? Whether it would be “good” policy? I thought private citizens determined that?

• Bala says:

The point of the research is to determine if the minimum wage reduces employment.

But then you know even before you start this research that it cannot achieve its goal. The reason for this is simple.

Economic theory states that minimum wages would result in an excess of supply of labour over demand for labour, i.e., unemployment in comparison with what it would be in the absence of minimum wage laws that put a price floor above what would have been the (unknown and unknowable outside the market process) equilibrium wage. To even make an effective statement on the effect of minimum wage on unemployment, the research needs to dig out what the situation would have been in the same circumstances, i.e., ceteris paribus, in the absence of minimum wages alone. In other words, you need data from the counterfactual world.

No amount of data from other regions that did not come under minimum wage laws would suffice because that is not a proper case of ceteris paribus. Since the data can never be from the counterfactual world because human behaviour unlike the behaviour of non-living things is not repeatable but volitional, the research can never hope to attain its goal, i.e., test whether minimum wage laws cause unemployment.

That’s why I said “being fair” to people who keep taking cover behind empirical research is telling them “Please take a step back and learn economics.”

The point about separating empirical research from the policy is just a lot of handwaving.

• Harold says:

“”If empirical data does not establish or refute economic laws,”
If evidence contradicts our theory, we should ignore the evidence and keep the theory?

• Daniel Kuehn says:

Not to mention the fact that he’s pretending there is only one theory here.

• Bala says:

Did you read? I said “does not”.

• Bala says:

I am not the one pretending. That job’s being done by those who claim that their modelling is theorising.

• Harold says:

Do you mean “does not” in this case or in the sense of “does not ever”? You say “being fair to them is to point out how wrong they are in choosing the empirical method to make their case” I inferred that you believed the empirical method could never “establish or refute” economic laws. If you meant that there wasn’t enough empirical evidence in this case, it hardly makes the empirical approach the wrong one.

It depends on whether you want economics to be a branch of logic or something you can actually use. Like in geometry, you cannot refute or confirm Pythagoras’ theorem by measuring real triangles, because the theorem uses idealised triangles. But if you want to work out the square on the hypotenuse of a real triangle, you have to get out there and measure it.

• Bala says:

Yes. I meant never. That’s because laws derived through sound deductive reasoning from axioms are never refuted by empirical evidence related to the laws themselves. You’ve got to strike at the root – the premises.

The proper method of economic theorising is indeed logic. That does not make it any less explanatory of the real world. My point remains simply that the empirical method is the wrong way to establish or attempt to validate economic laws. So Daniel’s entire approach has nothing to do with economics. For all his claims, Daniel is only dabbling in economic history, not in economics.

• Harold says:

So we are back with the question – if evidence contradicts our theory we should ignore the evidence and keep our theory?

The answer is a bit complicated.

“laws derived through sound deductive reasoning from axioms are never refuted by empirical evidence related to the laws themselves”

Triangles again. Pythgoras’ theorem is a “law derived through sound deductive reasoning from axioms” Measuring objects will not refute or confirm this. What measuring will do is confirm or refute that we are dealing with a right angle triangle. If we empirically determine that the square on the longest side does not equal the sum of the squares on the other two sides, we can conclude that we are not dealing with right angle triangle, and Pythagoras will not help us.

Economic laws correctly derived from axioms will remain unchanged by evidence. Whether those laws apply to the actual economy can only be determined by evidence. If there is a contradiction then we must look to either our deductive reasoning or to our axioms.

You are entitled to stick to your laws, and to claim that in a world where your axioms applied such and such a thing would happen. If the evidence shows that these axioms do not apply, I don’t see why anyone should care one way or another if you are right or wrong about your law.

• Bala says:

So we are back with the question – if evidence contradicts our theory we should ignore the evidence and keep our theory?

No. We are not. You are. That’s probably because you are failing to understand what I am saying.

Whether those laws apply to the actual economy can only be determined by evidence.

Wrong. They explain the real world economy. They are what enable you to even comprehend what’s happening out there. Evidence has no role to play out there.

You are entitled to stick to your laws

And you too are free to use the laws to comprehend the world and them pretend that the data “contradicts” these laws.

If the evidence shows that these axioms do not apply

Oh! Do show me which bit of evidence shows that the axiom “Man acts” does not apply to the real world economy.

I don’t see why anyone should care one way or another if you are right or wrong about your law.

I hope you now see it. I hope you also see how wrong you are.

• Bala says:

And to make matters worse, the laws compare the real to the counterfactual about which you have no data. You are not even in a position to come up with a reliable model that will tell you what the data would have been in the counterfactual world (the way it works in the natural sciences). So, your celebrated “evidence” is actually quite meaningless because it can only be about that which is (or was), not that which would have been.

• Harold says:

“Wrong. They explain the real world economy.” How can you possibly know this without evidence? I do not understand what you are saying because it appears to make no sense.

I am not saying in a particular case “this evidence contradicts your axiom so you must be wrong.” I am trying to understand your approach.

Economic theory is not based only on the axiom “man acts”. You cannot arrive at supply and demand curves from this axiom. You need to have some assumption about how he acts.

Can we agree that the economic laws you describe are similar in nature to Pythagoras’ Theorem? I agree that evidence is not applicable to this.

Where we seem to diverge is when you say this theory applies to the real world economy. You state that it does, but how do you know this? How do you know it is not some other theory that applies to the real world economy?

• Bala says:

How can you possibly know this without evidence?

Scientism, anyone? So deductive reasoning from sound axioms does not help you know anything about the real world, does it?

I do not understand what you are saying because it appears to make no sense.

If it makes no sense, it could also be because you are not applying your mind on the task of trying to make sense. I think that is the case here.

I am trying to understand your approach.

If this is true, you have a book or two to read, not hope to learn economics in a couple of blog comments.

Economic theory is not based only on the axiom “man acts”.

It is.

You cannot arrive at supply and demand curves from this axiom.

You can and proper economists do. Action leads you to preference which leads you to value scales which lead you to individual demand and supply schedules which lead you to market demand and supply schedules and voila! What do you have out there??

You need to have some assumption about how he acts.

Wrong. You don’t need this. What you seem to need is to learn real economics, not voodoo.

Can we agree that the economic laws you describe are similar in nature to Pythagoras’ Theorem?

Oh yes!

I agree that evidence is not applicable to this.

Good to see you agree on this. But I do understand it is not easy to shake of years or decades of scientistic indoctrination. It requires a lot of effort.

Where we seem to diverge is when you say this theory applies to the real world economy. You state that it does, but how do you know this?

Because it explains the consequences of the most fundamental (from a human perspective) real world phenomenon – human action. Every economic proposition is true and explains the real world as long as “Man acts” describes real world man.

How do you know it is not some other theory that applies to the real world economy?

I eliminated the others based on methodology. Empirical methods are methodological nonsense because human action is volitional and non-repeatable. So what does that leave you with?

• Harold says:

“So deductive reasoning from sound axioms does not help you know anything about the real world, does it?”
You say “help you know”. I do not deny that they can be an aid to understanding. A useful tool. Just as pure empiricism will not get you to understanding, neither will pure reflection.

Your approach to economics assumes that the model you construct from a single axiom “man acts” is certain to fully and unambiguously describe the complexities of human interaction. Compare with pharmacology, for example, where a trial is considered essential to evaluate the effect of a new drug.

I saw this on Liberty HQ forums:
“It’s well understood in the Austrian school that we have to use our judgement as to when economic laws apply in reality. We have to interpret other people’s behaviors, and praxeological laws are our tools to do so.”

This seems a reasonable approach – we construct theories based on observation and reflection, then we use judgement about how applicable these are to the real world. Judgement is based on evidence.

You seem to be disagreeing with this person (gotlucky), and contend that the laws always apply.

Another way that may help me understand where you are coming from. Say I propose that man acts. In the absence of full information the action will be arbitrary. Since man never has full information, most actions are arbitrary and thus without purpose. I then go on to construct a theory of economics based on this. Why would this not be just as good as yours?

• Bala says:

Your approach to economics assumes ….

Stop right there. It assumes nothing. It explains real world economic phenomena such as prices, wages and interest. That, to me, is as much as economics seeks to explain.

neither will pure reflection.

First, I doubt there can be anything such as pure reflection. All reflection is reflection on a concept of something. That concept must come from reality as all concepts must. Second, it is irrelevant to the Austrian approach that starts from the axiom “Man acts”.

Compare with pharmacology,….

Natural science vs Social science alert….

…..contend that the laws always apply

The issue is never the “applicability” of the laws because they are always applicable. It is only the usefulness in comprehending and explaining that is in question.

Say I propose that man acts

You don’t propose it. It is axiomatic. If you fail to recognise it, the error will be all yours.

In the absence of full information the action will be arbitrary.

Irrelevant for the theorising.

Since man never has full information, most actions are arbitrary and thus without purpose.

Wrong right in the end because action is by definition purposeful behaviour and the very concept “action without purpose” is an oxymoron.

Why would this not be just as good as yours?

It would be utter nonsense because it would take an oxymoron as the base of theorising. The output can only be more contradictions.

• Harold says:

A word from Mises:
“Every theorem of praxeology is deduced by logical reasoning from the category of action. It partakes of the apodictic certainty provided by logical reasoning that starts from an a priori category. Into the chain of praxeological reasoning the praxeologist introduces certain assumptions concerning the conditions of the environment in which an action takes place. Then he tries to find out how these special conditions affect the result to which his reasoning must lead. The question whether or not the real conditions of the external world correspond to these assumptions is to be answered by experience. But if the answer is in the affirmative, all the conclusions drawn by logically correct praxeological reasoning strictly describe what is going on in reality”
http://mises.org/books/ufofes/ch2~6.aspx

Note particularly “The question whether or not the real conditions of the external world correspond to these assumptions is to be answered by experience. ”

To me that says that praxeology can be used to make predictions about the real world, and then you can test these empirically.

You may say that the empirical part is merely testing the environment, not the economics. I counter that to define economics as only that part is to render it insufficient to describe the real world.

More Mises: “The assumptions of Euclid were once considered as self-evidently true. Present-day epistemology looks upon them as freely chosen postulates, the starting point of a hypothetical chain of reasoning…The starting point of praxeology is a self-evident truth,”
How do we know that this self evident truth is not as fragile as the assumptions of Euclid?

• Major_Freedom says:

Harold:

Because any attempt to refute the axiom of action would presuppose action, since a refutation is itself an action.

Action is not just presupposed by one or two or a dozen particular attempts to refute it. It is presupposed in all attempts to refute it. That makes it absolute.

Apodictic truths of reality should have this characteristic, by the way. If an actor can perform a refutation of X, then X of course cannot be apodictic. But if an actor cannot refute X, for all possible attempts, then X is indeed apodictic.

Not even an attempt at a purely idealistic refutation can succeed. For even if we imagine every human actor ceasing to exist, to lay claim of a world without action, still carries with it a thought of the subject, namely, the thought of a world without thinking.

We can’t think of a world with no thinking, because to think of a world without thinking, is itself a thought. Our minds are so constituted that we must necessarily presuppose a thinker is present for every possible conception of every possible world.

But what is thinking? Thinking is an action. And we know action is apodictic. Since thinking is an action, then what that means is that what is true for thinking as such, as also an apodictic truth.

Any alleged gap between the purely idealistic world of thought, and the rest of reality, is bridged with action.

The truths of action serve as an epistemology, because they can constrain purely idealistic thoughts down to only those thoughts that are apodictic, by way of filtering out only those thoughts ultimately grounded on action.

We may err, and we may make mistakes in reasoning and deduction, but provided the self-reflective, i.e. non-empirical, deductions are correct, which can only be established via self-reflection, then those statements say something absolutely true about reality.

• Ken B says:

Harold, save yourself time. Buy a post and argue with it.

• Major_Freedom says:

Didn’t know your brain is on sale Ken B.

• Bala says:

Oh, come on, MF! You’re surely joking.

On a more serious note, a comment like this is priceless coming from a person who couldn’t untangle demand from quantity demanded.

• Keshav Srinivasan says:

“Because any attempt to refute the axiom of action would presuppose action, since a refutation is itself an action.” Major_Freedom, what if there was someone who believed that human thoughts and behavior was completely explainable in terms of the behavior of the constituent particles that make up the human body? How would the fact that they’re arguing for their position imply that they’re engaging in action in the Misesian sense, i.e. a phenomenon inexplicable in terms of the behavior of their constituent particles?

• Major_Freedom says:

Keshav:

Major_Freedom, what if there was someone who believed that human thoughts and behavior was completely explainable in terms of the behavior of the constituent particles that make up the human body? How would the fact that they’re arguing for their position imply that they’re engaging in action in the Misesian sense

What is an argument, and how does it differ from other phenomena? Suppose the wind and rain etched “2+2=4” in a rock. Suppose the materialist wrote down “2+2=4” on a piece of paper.

If the materialist argued that their behavior with pen and paper is not categorically different from the wind and rain etching 2+2=4 in the rock, in the sense that their behavior is not purpose driven, but causally driven like the wind and rain, then my position is that there is no reason to take what they say as anything more than a purposeless motion.

For if I saw “2+2=5” etched in the rock instead, or just wavey dents and whatnot, then I would know that the materialist’s argument cannot mean what the they seem to want people to think they mean.

• Keshav Srinivasan says:

“If the materialist argued that their behavior with pen and paper is not categorically different from the wind and rain etching 2+2=4 in the rock, in the sense that their behavior is not purpose driven, but causally driven like the wind and rain, then my position is that there is no reason to take what they say as anything more than a purposeless motion.” Yes, a reductionistic materialist would say that his behavior is fundamentally causal, and that all purposes that he has are completely explainable in terms of the causal behavior of his constituent particles. So what? That’s not an argument for ignoring what he writes, is it? Just because etchings by rain and winds and writing by a system of particles making up a human being are in the same broad conceptual category doesn’t mean we should treat them exactly the same, does it? Isn’t it still possible that the etchings of one system of particles more reliably produces true statements than the etchings of another system of particles?

• Bala says:

Harold,

You are twisting Mises beyond recognition. Let me show you your error with an example.

The propositions of economics such as the laws of supply and demand have already been identified from the action axiom. To this framework, we now add the special condition from our experience of the environment – the existence of a minimum wage law. We now go on to identify its effect based on the already developed laws of supply and demand. They tell us that sustained unemployment must exist.

Let us say that we now look at the real world and find that in this particular case, unemployment has not become worse than it was before. This tells us that the laws of supply and demand do not explain this situation all by themselves and that more economic propositions and observations of special conditions observed in relation to the terms of those propositions will have to be brought in and a deeper explanation will have to be sought.

This is not looking to empirical data to validate laws but looking to reality to figure out which combination of economic propositions and particular special conditions completely and their effects within the framework of the economic propositions explains what we observe in the real world.

Like the guy who was giving you wonderful advice about talking to posts, you too seem to have no clue about economics (You should see the way he got demand and quantity of demand tangled up. It was hilarious). Why don’t you pick up a book (HA and MESPM) and learn it rather than expect someone to provide you that education over a few blog comments?

• Bala says:

Sorry Harold. Got a couple of words wrongly positioned in 1 paragraph….

*This is not looking to empirical data to validate laws but looking to reality to figure out which combination of economic propositions and particular special conditions and their effects within the framework of the economic propositions completely explains what we observe in the real world.

• Major_Freedom says:

Keshav:

“That’s not an argument for ignoring what he writes, is it?”

Who said we had to ignore it? All I said is that there is no reason to understand it as anything other than a rock having “2+2=5” etched on it.

“Isn’t it still possible that the etchings of one system of particles more reliably produces true statements than the etchings of another system of particles?”

Truth? Materialism reduced prevents any coherent meaning for truth and falsehood.

If you saw “2+2=5” etched in a rock, the materialist can’t say that it is “wrong”,

You may not understand it yet, but when you argue something is true, or something is false, you are distinguishing yourself from materialist phenomena.

• Keshav Srinivasan says:

“Who said we had to ignore it? All I said is that there is no reason to understand it as anything other than a rock having “2+2=5″ etched on it.” Well, don’t you think that you should pay more attention at least to the etchings of some systems of particles as opposed to other systems of particles? If out of pure coincidence some molecules assembled themselves into a robot, wouldn’t you pay more attention to what the robot says as opposed to some etchings of rain and wind?

“Truth? Materialism reduced prevents any coherent meaning for truth and falsehood.
If you saw “2+2=5″ etched in a rock, the materialist can’t say that it is “wrong”,” Why can’t you be a materialist when it comes to physical phenomena and yet believe that there’s something called objective truth out there? That’s what a lot of mathematical Platonists of the atheist variety believe. They think certain complex systems of particles can reliably produce mathematical truths because they’re operating on the basis of physical laws which are founded on mathematics.

But forget truth for a moment? What about coherence and meaning. If you’re a system of particles, wouldn’t it be worthwhile to communicate with other systems of particles that are similar to you?

“You may not understand it yet, but when you argue something is true, or something is false, you are distinguishing yourself from materialist phenomena.” Well, I can understand if you said that when you argue for the truth of something, you implicitly acknowledge that that there is something called objective truth distinct from material phenomena. But I don’t see why you’re acknowledging that you are distinct from material phenomena.

• Major_Freedom says:

Keshav:

“Well, don’t you think that you should pay more attention at least to the etchings of some systems of particles as opposed to other systems of particles?”

Should? You mean I should do that instead of something else? If my behavior is past caused, then there is no reason for me to alter my behavior from what it otherwise would have been without my purposeful intention. Indeed, altering via intention presupposes I have a choice. So no dice.

You are talking to me like I have a choice and that I can choose among competing purposes. But if we assume reduced materialism, what I do is inevitable, and no one etching “should” be paid more attention than any other. Should makes no sense in materialism.

“If out of pure coincidence some molecules assembled themselves into a robot, wouldn’t you pay more attention to what the robot says as opposed to some etchings of rain and wind?”

I think you’re misunderstanding me here. I am not saying materialist thinking is leading me to ignore some things and pay more attention to other things. My argument has more to do with what is true versus what is not true about reality.

If you want to argue that I have a reason to pay attention to some etchings over other etchings, by way of having them ranked in terms of how each benefits my life, procreation and all the rest, then that would imply truth means what is beneficial to my life, and false means what is not beneficial to my life. But then that would contradict the materialist thesis that purports to say what is true about reality apart from whether or not it happens to benefit any given entity’s existence.

“Why can’t you be a materialist when it comes to physical phenomena and yet believe that there’s something called objective truth out there?”

Objective truth “out there” as distinguished from materialism…”in here”? You again just distinguished yourself from materialist phenomena.

That’s my main argument. We cannot help but think like we are not causally determined. It makes sense in another respect, namely, via dialectics. If we are going to be able to sense materialism, we can’t be materialist ourselves. Just like we can’t sense a smooth surface unless we think of a rough one, so too can we not sense materialist phenomena unless we are distinguished from it.

“But forget truth for a moment? What about coherence and meaning. If you’re a system of particles, wouldn’t it be worthwhile to communicate with other systems of particles that are similar to you?”

You mean choose communicate with like phenomena more, and choose to communicate with unlike phenomena less?

If my behavior is predestined, then it makes no sense to ask me to do this instead of that.

“You may not understand it yet, but when you argue something is true, or something is false, you are distinguishing yourself from materialist phenomena.”

“Well, I can understand if you said that when you argue for the truth of something, you implicitly acknowledge that that there is something called objective truth distinct from material phenomena. But I don’t see why you’re acknowledging that you are distinct from material phenomena.”

Materialism does not hold objective truth to be distinct from materialist phenomena. It holds teleological phenomena as distinct (and untrue).

I was just responding to your statements, by showing you what is implied in them. If you’re going to advance the materialist position, then you can’t be asking me to think what you want or would like me to think.

• Harold says:

1) Action axiom. Man refuting “man is capable of action act” is a contradiction – a bit like I think therefore I am cannot occur without thought, and hence a thinker. However, what is contradicted is than man “can” act, not that he does always. Maybe the only action he is capable of is attempting and failing to refute the axiom. Mammals act. That is self evidently true in the terms of “capable of action”. I am a mammal, like I am a man. Dog hungry, dog eats. So dogs act. Action purposely directed to achieve its ends. It is also self evidently true that dogs may be capable of *reaction*. They may be able perform certain actions unconsciously as an instinctive response to stimuli. It is self evidently true that man may be capable of the same. Since we have no way of knowing which actions are purposeful and which not or to what degree, we are left with a theory that includes only the purposeful aspects of our actions. It is logically possible that there are very few solely purposeful actions, so a theory that describes very little of actual interactions.

Empiricism. Bala says “This tells us that the laws of supply and demand do not explain this situation all by themselves” That is, we have empirically determined that the laws of economics that we might have considered sufficient to explain the interaction are not in fact sufficient. We must continue to look further for an explanation. We may say that this does not refute the economic law of supply and demand, but who cares? We must still look for an explanation.

Bringing the two strands together, can the explanation be that some aspect of the actions are not purposeful, so fall outside of the laws of economics derived form the action axiom?

3. Ken B says:

Keshav
You seem like a nice guy so I hesitate to inflict this on you. But you did ask. http://mises.org/daily/2097

• Keshav Srinivasan says:

Ken B, you’re right, I didn’t find it convincing at all. It only states the point I’m disputing, it doesn’t present an argument for it:
“Even though an individual might try to deny the axiom, his real behavior attests to its existence. Action is the deliberate employment of means for attaining ends. In this case, the actor’s end is the denial of the action axiom. His attempted means is the statement, “Humans do not act.”” Whether the individual’s denial is really action depends on what “deliberate employment of means” is, and I’m pretty sure that what is meant by “deliberate” is “directed by a mind whose behavior is not explainable in terms of the behavior of particles”, so the question remains, why does the denial of the action axiom imply that the person is behaving in a way that inexplicable if you only look at the behavior of his constituent particles.

• Major_Freedom says:

• Ken B says:

It’s part and parcel of the same error many Idealists and Austrians make: thinking mind is a fundamental constituent of the universe, not something you get only with brains or other information processing physical systems. Which is why we see so many evolution deniers.

(As you know I consider you to have not grasped the full consequences of evolution. But youre not a denier.)

• Keshav Srinivasan says:

Well, I don’t accept the full consequences of evolution if you mean the notion that all aspects of Man are due to evolution. But I just consider evolution to be a theory concerning the development of the human body. As I told you in a previous thread, the soul is a supernatural entity which is eternal but which has effects on the behavior of the body.

• Ken B says:

Yes, we agree on what it is we disagree on.
🙂

• Major_Freedom says:

Yay more ignorance. Ken B you never disappoint.

No, praxeology does NOT require any assumption that “mind” is a “fundamental constituent of the universe”.

ACTION can be understood as either idealistic OR materialistic, or both. It makes no difference how you approach activity, in terms of what it actually is.

• Ken B says:

“You may not understand it yet, but when you argue something is true, or something is false, you are distinguishing yourself from materialist phenomena.”

• Keshav Srinivasan says:

I think Major_Freedom believes that consciousness is an emergent phenomenon arising from certain systems of particles, but it is not explainable in terms of the behavior of the individual particles and their individual interactions. Personally, that seems to me to be a contradiction in terms.

• Ken B says:

Being therefore a constituent part of reality. He needs that for his reply to you, otherwise he must admit meat machines can think about truth.

• Major_Freedom says:

How?

I can’t know water by only knowing the nature of isolated hydrogen and oxygen.

Emergent phenomena is not only emergent in terms of behavior, but emergent in terms of knowledge as well.

• Keshav Srinivasan says:

Major_Freedom, you can understand a water molecule if you understand the nature of each constituent particles and the nature of the interaction between each pair of neighboring particles. Is it your position that you understand the behavior of the human brain if you can understand the nature of each constituent particle, and the nature of each interaction between a pair of adjacent particles? That’s what physics says.

• Major_Freedom says:

“He needs that for his reply to you, otherwise he must admit meat machines can think about truth.”

Yes, I will readily, and wholeheartedly, agree that we could theoretically build a machine/robot that acts along Misesian lines.

But this construction would not be what materialists believe it would be. The robot could not be coherently regarded past causally determined.

For this particular robot would have to be an “accident” in the sense that less than the entirety of its make-up is capable of being attributed to the conscious activity of its creator. It could be built, but its behavior over time would be a priori unpredictable, because it would of course be a learning robot.

As time passes, and it learns in ways not pre-known by the creator, its actions could no longer be regarded as constrained to constants of causality. For presumably it would learn from any such constancy, and thus no longer think of itself as fully explainable by that constancy, which of course will affect its behavior in ways apart from that constancy.

Using materialist language:

Learning occurs when atoms come together in ways that did not exist before, and come together in ways that could not be known by those same atoms prior.

You can think in a general sense that everything is past causally determined, but not coherently as such, because every time we try to find the next theory-testing-outcome formula with an unknown outcome at the outset, the very process of engaging in that activity affects our knowledge and actions in unpredictable ways.

This apodictic absence of predictability is just another way of saying teleological behavior.

• Major_Freedom says:

“Major_Freedom, you can understand a water molecule if you understand the nature of each constituent particles and the nature of the interaction between each pair of neighboring particles.”

But interactions means water, which means you’re already assuming the emergent thing in question exists.

My argument is that we can’t know water by knowing hydrogen and oxygen IN ISOLATION.

Emergent behavior deals with phenomena that arises by an INTRODUCTION of interactions that did not exist prior.

“Is it your position that you understand the behavior of the human brain if you can understand the nature of each constituent particle, and the nature of each interaction between a pair of adjacent particles?”

The “interactions” is presupposing the brain itself.

My argument here is, again, that we cannot know the nature of a human brain by knowing the nature of an isolated proton.

“That’s what physics says.”

I know. But physicists are, in the course of their approach, presupposing that they themselves are NOT subject to constancies in relations, for they are of course thinking that they are going to learn something new that they did not know before the experiments. And to the extent that their knowledge affects their actions, their actions would not be subject to constancy either.

In other words, physicists are distinguishing themselves as actors from the non-acting subject matter they are studying. It’s a rather interesting necessity.

• Ken B says:

Woo woo.

• Ken B says:

Aside from your plausible theory Consider this theory. All human thought is actually controlled by Thor from his command post in a tea pot in the asteroid belt. He dictates you deny the axiom. Thor is not human. How is your denial a result of human action in the Mises sense, much le ss your action as required.

• Major_Freedom says:

Praxeology does not deal with the psychological MOTIVATIONS for why a person says or does anything.

It only deals with the logical categories of what people do when they do it.

• Major_Freedom says:

“Keshav, please read this and find a flaw in it that I can later use against the Austrians, because at this point I can’t. I’m running low on ammo, comrad.”