The F-twist – realism, economic policy analysis and climate change – part 1
Tom Foster
Introduction
This article identifies that mainstream (orthodox) economics is not treated as a science and its adoption of the FTwist and inherent lack of realism has opened the profession to influence by vested interests. In turn leading to the analysis of economic policy, including that of climate change, in favour of these interests. The article opens by comparing economics to the author’s experience in a Science, Technology, Engineering & Mathematics (STEM) profession.
First encounter
In the 2000’s and 2010’s I was (informally) active in the climate debate discussing its associated politics and (economic) climate policies. During this period I developed a framework to help me understand from where those promoting climate denialism were sourcing their denialism; please refer to Figure 1.
|
Source of Denialism |
Description |
|
Vested-Interest |
Most common source for denialism. Vested interest, in particular those benefitting financially from the fossil fuel industry. |
|
Political Ideology |
Primarily found amongst those who identified as being on the political right and/or conservative in their politics. Much of the debate was framed as a move to ‘green’ energy solutions which these people tended to assoc- iate with the left of politics and therefore their ideolog- ical opponents. |
|
Religious |
A religious element could be found amongst deniers, these would have the view the earth and its resources are infinite and made for man’s use as “God would always provide”. People who held such religious views would also display a level of scepticism or denialism about science in general. These views contrast with the alternative religious philosophy of being stewards to God’s creations, perhaps best exemplified by the current Pope. |
Fig 1: Framework (anecdotal) used by the author to understand the motivations of client denialists.
I found that by using this framing the source of denialism in denialists could be more easily identified, with some prominent deniers associating with one or more sources. For example I associate with all three sources of denialism the socially conservative Tony Abbott, Australia’s prime minister from 2013 and 2015 (Readfearn, 2023).
At this time I was not involved nor familiar with macroeconomics, however by 2020 this had changed owing to my introduction to Modern Monetary Theory (MMT). At the beginning of the first Covid lockdown that year I found myself listening to the MMT-informed podcast Macro ‘n Cheese and my first introduction to Professor Steve Keen. During this episode (Kennedy, 2020) Keen spoke about the impact economists had had on our planet’s ecology played a hand in the evolution and and climate, with specific mention to the the roles of economists Milton Friedman and William Nordhaus in this, and how they had ignored the “importance of realizing that the economy exists inside the ecology. Without the ecology, there is not only no economy, there’s no humans either. And this has been completely ignored by mainstream economics.”
I was stunned; for someone who had followed the politics of the climate policy debate for so long it had never occurred to me that economists may have played a hand in the evolution and promotion of climate denialism. I immediately updated my framework of denialism; please refer to Figure 2.
|
Source of Denialism |
Description |
|
Vested-Interest |
Most common source for denialism. Vested interest, in particular those benefitting financially from the fossil fuel industry. |
|
Political Ideology |
Primarily found amongst those who identified as being on the political right and/or conservative in their politics. Much of the debate was framed as a move to ‘green’ energy solutions which these people tended to associate with the left of politics and therefore their ideological opponents. |
|
Religious |
A religious element could be found amongst deniers, these would have the view the earth and its resources are infinite and made for man’s use as “God would always provide”. People who held such religious views would also display a level of scepticism or denialism about science in general. These views contrast with the alternative religious philosophy of being stewards to God’s creations, perhaps best exemplified by the current Pope. |
|
Neoclassical Economists |
Dominant macroeconomic thought of today. Model the economy based on the unrealistic assumptions of the planet’s resources being infinite and money finite, whereas, in reality, it is the other way around. Predictions of their models benefit powerful interest groups in society. Provide intellectual succour to climate denialist position, recognised by Nobel Prize in economics |
Fig 2: Framework (anecdotal) used by the author to understand the motivations of client denialists, updated to include the influence of neoclassical economics.
The economics profession plays an important and significant role in our society, not least of which is advising political leaders on policy and educating the public on economic dynamics. Economics ignoring the ecology seemed to me insanity and completely disconnected from reality.
Without humans there is no economy and this revelation put into question the authority of the economics profession as a science. Like the wizard behind the curtain in the famous 1939 movie The Wizard of Oz (Marks, 2018) — refer to Figure 3 – I felt that economics had now been revealed to me as something akin to a pseudo-science rather than a real science.
Why had ‘pseudo’ occurred in economics?
Milton Friedman’s 1953 essay The Methodology of Positive Economics sheds light into this phenomenon with his view “in general, the more significant the theory, the more unrealistic the assumptions” (Friedman, 1953, p14), thus declaring unrealistic assumptions “are not a vice but not a virtue” (Musgrave, 1981, p377). To give a name to Friedman’s view, the well-known economist Paul Samuelson later coined the term “Friedman’s twist” or the “F-twist” (Bryan, 2011).
In his critique of Friedman’s view, Alan Musgrave in his 1981 essay Unreal assumptions in economic theory: The F-twist untwisted successfully (Musgrave, 1981) objectively debunks Friedman’s dictum by showing the “F-twist stems from his (Friedman’s) failure to distinguish three different types of assumption” (Musgrave, 1981, p378) that Musgrave defines as negligibility assumptions, domain assumptions, and heuristic assumptions.
Reading Musgrave’s essay I was reminded of my own undergraduate education in professional engineering with the ‘classic’ example of ‘how not to do things’ shown to first year engineering students (we were told) worldwide, the famous 1940 collapse of the Tacoma Narrows Bridge in Washington State (Harish, 2022). Here an engineering error was crudely exposed only days after the bridge was opened, by a cross wind that created ever growing torsional (sinusoidal) oscillating waves on the bridge leading to its eventual collapse. The event was filmed (British Pathé, 1940) and lives on in prosperity and generations of training of engineering students including electrical engineering students like me.
For me, what’s just as interesting as the Bridge’s collapse is the response of the engineering community to discover the cause and to ensure the error would be avoided in future engineering projects.
In the aftermath of the Bridge’s collapse an investigation was conducted to “explicitly understand the reason for failure. The experiments brought about a new theory: wind-induced oscillations” (Harish, 2022). Furthermore “The problem that caused the collapse of the Tacoma Narrows Bridge was not a new problem, but one which had been unspecified” (Harish, 2022). However the ”factors causing collapse were not originally considered and only became part of the later forensics” (Harish, 2022).
‘Factors unspecified’ are a type of unrealistic assumption and, as this famous engineering failure demonstrates, a factor (or axiom) that can lead to a problem when left unspecified in a model can have significant negative implications to it’s predictions when the model is applied in the real-world environment.
The investigation led to improvements in engineering design, modelling, and testing (based upon realistic assumptions) to “prevent failures like the Tacoma Narrows Bridge collapse and build better and stronger bridges and buildings” and “the new bridge was redesigned (based on lessons learned) and rebuilt in 1950” (Harish, 2022).
Tom Foster holds a Bachelor of Engineering (Electrical) Honours degree from the University of NSW, a Post Graduate Diploma in Management from MGSM and is currently studying for the Master of Economics of Sustainability degree at Torrens University. Part 2 of this article will appear in the next issue of ERA Review.
References
Readfearn, G. (2023, February 7) Former Australian PM Tony Abbott joins board of UK climate sceptic thinktank. The Guardian Australia
Kennedy, A (Producer). (2020, April 18). Steve Grumbine and Steve Keen discussing Supply Chains and Pandemics with Steve Keen (Episode 64) [Audio podcast episode].
Macro n Cheese. Viewed 3 April 2023 https://realprogressives.org/podcast_episode/episode64-supply-chains-and-pandemics-with-steve-keen/
Marks, P D. (2018, July 27) The Man Behind The Curtain. Criminal Minds blog.
https://7criminalminds.blogspot.com/2018/07/the-man-behind-curtain.html
Friedman, M. (1953). The Methodology of Positive Economics, Essays in positive economics. The University of Chicago. Press. http://pombo.free.fr/friedman1953-.pdf
Musgrave, A. (1981). ‘Unreal assumptions’ in economic theory: The F-twist untwisted. Kyklos, 34(3), 377–387.
https://doi.org/10.1111/j.1467-6435.1981.tb01195.x
Bryan, K. (2011). “THE F-TWIST AND THE METHODOLOGY OF PAUL SAMUELSON,” S. WONG (1973). A FINE THEOREM.
Harish, A. (2022, November 7). Why the Tacoma Narrows Bridge Collapsed: An Engineering Analysis. SimScale blog.
https://www.simscale.com/blog/tacoma-narrows-bridge-collapse/
British Pathé (1940). Tacoma Bridge Collapse: The Wobbliest Bridge in the World?. [Video]
YouTube https://youtu.be/XggxeuFDaDU
Montana State University (n.d.). 3A60.10 Tacoma Narrows Bridge Collapse https://physics.montana.edu/demonstrations/video/3_oscillationsandwaves/demos/tacomanarrowsbridgecollapse.html
