The “Standard Model,” Part II: Natural Law, Economics, Measurement, and Capital

At Tjalling Koopmans’ invitation, Rasch became involved with the Cowles Commission, working at the University of Chicago in the 1947 academic year, and giving presentations in the same seminar series as Milton Friedman, Kenneth Arrow, and Jimmie Savage (Linacre, 1998; Cowles Foundation, 1947, 1952; Rasch, 1953). Savage would later be instrumental in bringing Rasch back to Chicago in 1960.

Rasch was prompted to approach Savage about giving a course at Chicago after receiving a particularly strong response to some of his ideas from his old mentor, Frisch, when Frisch had come to Copenhagen to receive an honorary doctorate in 1959. Frisch shared the first Nobel Prize in economics with Tinbergen, was a co-founder, with Irving Fisher, of the Econometric Society,  invented words such as “econometrics” and “macro-economics,” and was the editor of Econometrica for many years. As recounted by Rasch (1977, pp. 63-66; also see Andrich, 1997; Wright, 1980, 1998), Frisch was struck by the disappearance of the person parameter from the comparisons of item calibrations in the series of equations he presented. In response to Frisch’s reaction, Rasch formalized his mathematical ideas in a Separability Theorem.

Why were the separable parameters  significant to Frisch? Because they addressed the problem that was at the center of Frisch’s network of concepts: autonomy, better known today as structural invariance (Aldrich, 1989, p. 15; Boumans, 2005, pp. 51 ff.; Haavelmo, 1948). Autonomy concerns the capacity of data to represent a pattern of relationships that holds up across the local particulars. It is, in effect, Frisch’s own particular way of extending the Standard Model. Irving Fisher (1930) had similarly stated what he termed a Separation Theorem, which, in the manner of previous work by Walras, Jevons, and others, was also presented in terms of a multiplicative relation between three variables. Frisch (1930) complemented Irving Fisher’s focus on an instrumental approach with a mathematical, axiomatic approach (Boumans, 2005) offering necessary and sufficient conditions for tests of Irving Fisher’s theorem.

When Rasch left Frisch, he went directly to London to work with Ronald Fisher, where he remained for a year. In the following decades, Rasch became known as the foremost advocate of Ronald Fisher’s ideas in Denmark. In particular, he stressed the value of statistical sufficiency, calling it the “high mark” of Fisher’s work (Fisher, 1922). Rasch’s student, Erling Andersen, later showed that when raw scores are both necessary and sufficient statistics for autonomous, separable parameters, the model employed is Rasch’s (Andersen, 1977; Fischer, 1981; van der Linden, 1992).

Whether or not Rasch’s conditions exactly reproduce Frisch’s, and whether or not his Separability Theorem is identical with Irving Fisher’s Separation Theorem, it would seem that time with Frisch exerted a significant degree of influence on Rasch, likely focusing his attention on statistical sufficiency, the autonomy implied by separable parameters, and the multiplicative relations of variable triples.

These developments, and those documented in previous of my blogs, suggest the existence of powerful and untapped potentials hidden within psychometrics and econometrics. The story told thus far remains incomplete. However compelling the logic and personal histories may be, central questions remain unanswered. To provide a more well-rounded assessment of the situation, we must take up several unresolved philosophical issues (Fisher, 2003a, 2003b, 2004).

It is my contention that, for better measurement to become more mainstream, a certain kind of cultural shift is going to have to happen. This shift has already been underway for decades, and has precedents that go back centuries. Its features are becoming more apparent as long term economic sustainability is understood to involve significant investments in humanly, socially and environmentally responsible practices.  For such practices to be more than just superficial expressions of intentions that might be less interested in the greater good than selfish gain, they have to emerge organically from cultural roots that are already alive and thriving.

It is not difficult to see how such an organic emergence might happen, though describing it appropriately requires an ability to keep the relationship of the local individual to the global universal always in mind. And even if and when that description might be provided, having it in hand in no way shows how it could be brought about. All we can do is to persist in preparing ourselves for the opportunities that arise, reading, thinking, discussing, and practicing. Then, and only then, might we start to plant the seeds, nurture them, and see them grow.

References

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Andersen, E. B. (1977). Sufficient statistics and latent trait models. Psychometrika, 42(1), 69-81.

Andrich, D. (1997). Georg Rasch in his own words [excerpt from a 1979 interview]. Rasch Measurement Transactions, 11(1), 542-3. [http://www.rasch.org/rmt/rmt111.htm#Georg].

Boumans, M. (2001). Fisher’s instrumental approach to index numbers. In M. S. Morgan & J. Klein (Eds.), The age of economic measurement (pp. 313-44). Durham, North Carolina: Duke University Press.

Bjerkholt, O. (2001). Tracing Haavelmo’s steps from Confluence Analysis to the Probability Approach (Tech. Rep. No. 25). Oslo, Norway: Department of Economics, University of Oslo, in cooperation with The Frisch Centre for Economic Research.

Boumans, M. (1993). Paul Ehrenfest and Jan Tinbergen: A case of limited physics transfer. In N. De Marchi (Ed.), Non-natural social science: Reflecting on the enterprise of “More Heat than Light” (pp. 131-156). Durham, NC: Duke University Press.

Boumans, M. (2005). How economists model the world into numbers. New York: Routledge.

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Cowles Foundation for Research in Economics. (1947). Report for period 1947, Cowles Commission for Research in Economics. Retrieved 7 July 2009, from Yale University Dept. of Economics: http://cowles.econ.yale.edu/P/reports/1947.htm.

Cowles Foundation for Research in Economics. (1952). Biographies of Staff, Fellows, and Guests, 1932-1952. Retrieved 7 July 2009 from Yale University Dept. of Economics: http://cowles.econ.yale.edu/P/reports/1932-52d.htm#Biographies.

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Fisher, W. P., Jr. (2003a, December). Mathematics, measurement, metaphor, metaphysics: Part I. Implications for method in postmodern science. Theory & Psychology, 13(6), 753-90.

Fisher, W. P., Jr. (2003b, December). Mathematics, measurement, metaphor, metaphysics: Part II. Accounting for Galileo’s “fateful omission.” Theory & Psychology, 13(6), 791-828.

Fisher, W. P., Jr. (2004, October). Meaning and method in the social sciences. Human Studies: A Journal for Philosophy and the Social Sciences, 27(4), 429-54.

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Frisch, R. (1930). Necessary and sufficient conditions regarding the form of an index number which shall meet certain of Fisher’s tests. Journal of the American Statistical Association, 25, 397-406.

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Rasch, G. (1953, March 17-19). On simultaneous factor analysis in several populations. From the Uppsala Symposium on Psychological Factor Analysis. Nordisk Psykologi’s Monograph Series, 3, 65-71, 76-79, 82-88, 90.

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