Chapter dzǵ: Tacit Preachments are the Worst Kind ȁȂȀtending toward them at speeds specified only inad hocways. In this con-
nection, Lucas (ȀȈȇǿ) scorns models containing “free parameters.” Observ-
ing and reasoning about disequilibrium processes in a straightforward and
therefore relatively nonmathematical manner can be stigmatized as casual
and loose, so they escape due attention.
Equilibrium-always theorists presumably know as well as anyone else
that atomistic competition is and must be the exception rather than the
rule in the real world, that sellers are typically not selling as much of their
output or labor as they would like to sell at prevailing prices, that most
prices and wages are not determined impersonally but are consciously
decided upon (even though decided with an eye on supply and demand),
and that these and other circumstances cause or reveal price stickiness. But
the theorists do not know these facts officially, not in a methodologically
reputable way.
Ļey are inclined to recite the slogan that (in the paraphrase of Willes
ȀȈȇǿ, p.ȈȀ) “theories cannot be judged by the realism of their assumptions,”
a slogan reasonable enough in certain contexts and under certain inter-
pretations, yet much abused. Actually, it is necessary to distinguish at
least between simplifying assumptions that abstract from unimportant
details and assumptions on which the conclusions crucially depend. (Alan
Musgrave,ȀȈȇȀ, makes enlightening distinctions between negligibility,
domain, and heuristic assumptions.)
What assumptions are acceptable simplifications and what ones are
crucial to the conclusions depends on the question at hand. “[A]n ecolo-
gist concerned about pollution may treat the Black Sea as a closed body
of water, the Straits of Marmara being sufficiently narrow for that. But
someone considering how to ship goods from London to Odessa should
not” (MayerȀȈȈȂ, p.Ȃȇ). In investigating the long-run effects on relative
prices and quantities of a specified change in wants, resources, technol-
ogy, or taxes, it is convenient to assume that competition is pure and that
markets clear. Ļings are different inmacroeconomics, whose very subject
matter is the lapses that do sometimes occur from a high degree of coor-
dination of radically decentralized decisions and activities. When one is
investigating how and why separate but interdependent markets fall short
of working to perfection, it is fatuous to insist that they are always in equi-
librium anyway. More generally, it is fatuous to work with assumptions
that rule out the questions to be faced. (It is important, by the way, as
Karl Popper taught, to have a question or problem to work on, not a mere
topic; BartleyȀȈȈǿ, p.ȀȄȈ.)