What do you mean “exploring the limits of human knowledge”?
The tagline of this blog is “exploring the limits of human knowledge,” and I realize that this means different things to different people. Most people when confronted with a tagline like that would assume that I’m claiming to be “pushing the envelope” as it were, or advancing knowledge past the limits of what we now know. However, what I actually mean by exploring the limits of human knowledge is that I’m more interested in learning what we don’t know and how our lack of knowledge affects the choices that we make, both on an individual level and collectively through public policy.
As it happens, my nom de plume is “Socrates”; this is not a coincidence. The oracle of Delphi, when asked to name the wisest person in the world, is known to have chosen Socrates, for he was the only one who knew how much he didn’t know. The level of arrogance, single-plane thinking, and unwarranted self-assuredness at all levels of society, but especially in the corridors of power, is absolutely staggering. It is that arrogance that creates the unintended consequences that are the subject of this blog. And it is that arrogance to which I refer when I say that I am exploring the limits of human knowledge.
Of course, I stand on the shoulders of those who come before me, and I am further grateful to those who do research in this area concurrently with my writing. One scholar in particular caught my eye today: Ricardo J. Caballero of MIT and NBER, who has submitted a working paper entitled “Macroeconomics after the Crisis: Time to Deal with the Pretense-of-Knowledge Syndrome.”
Read the abstract and you’ll get a sense of what I mean when speak of limits:
In this paper I argue that the current core of macroeconomics – by which I mainly mean the so-called dynamic stochastic general equilibrium approach – has become so mesmerized with its own internal logic that it has began to confuse the precision it has achieved about its own world with the precision that it has about the real one. This is dangerous for both methodological and policy reasons. On the methodology front, macroeconomic research has been in “fine-tuning” mode within the local-maximum of the dynamic stochastic general equilibrium world, when we should be in “broad-exploration” mode. We are too far from absolute truth to be so specialized and to make the kind of confident quantitative claims that often emerge from the core. On the policy front, this confused precision creates the illusion that a minor adjustment in the standard policy framework will prevent future crises, and by doing so it leaves us overly exposed to the new and unexpected.
I look forward to reading the paper in its final form.