June 12, 2015

Economics is NOT a science of behavior (II)

Comment on Bruce Edmonds on ‘The Context-Dependency of Human (Economic) Behaviour’

Blog-Reference

You say: “Let me start this post by making clear what everybody knows: people behave differently in different kinds of situation, but we can effectively recognise these kinds of situation and use them to understand, and even predict, how to behave and what people will do in these situations.” (See intro)

Yes, everybody knows this already from Popper.

“Thus the situational analysis will comprise some physical things and some of their properties and states, some social institutions and some of their properties, some aims, and some elements of knowledge.” (Popper, 1994, p. 168)

Because you invented a new name for an old chestnut you erroneously think that context-dependency has been overlooked thus far. Just the contrary is true.

“... it is the central point of situational analysis that we need, in order to ‘animate’ it, no more than the assumption that the various persons or agents involved act adequately, or appropriately -- that is to say, in accordance with the situation. ... Thus there is only one animating law involved ... It is known in the literature under the name of ‘rationality principle’, ... ” (Popper, 1994, p. 169)

From your examples it is clear that you have not yet realized that economics is not a science of behavior (Hudík, 2011). What you are talking about belongs entirely to the realm of sociology, psychology, anthropology, history, etcetera. Hence, what you and most economists are practicing is a dilettantish variant of Psycho-Sociology.

In marked contrast, theoretical economics deals exclusively with the systemic behavior of the actual monetary economy. Theoretical economics is objective. There are systemic laws but no behavioral laws. Systemic laws, for instance the Profit Law (2015)*, have the same methodological status as physical laws. The Profit Law holds always and everywhere. The economist's task is to find these systemic laws and this implies to leave all speculations about human behavior to the yellow press.

Does the world expect from economists to find out how people behave? No, this is the proper job of psychology, sociology, anthropology etcetera. Does the world expect from economists to figure out what profit is? Yes, of course, no philosopher, physicist, biologist, or sociologist will ever try to figure this out.

Have economists done their proper job? No. Do you know what profit is? No. Does context-dependency help to find out what profit is? No.

Let me sum up this post by making clear what everybody knows: Is someone who does not understand what profit is a good economist?

Egmont Kakarot-Handtke


References
Hudík, M. (2011). Why Economics is Not a Science of Behaviour. Journal of Economic Methodology, 18(2): 147–162.
Kakarot-Handtke, E. (2015). Essentials of Constructive Heterodoxy: Profit. SSRN Working Paper Series, 2575110: 1–18. URL
Popper, K. R. (1994). The Myth of the Framework. In Defence of Science and Rationality., chapter Models, Instruments, and Truth, pages 154–184. London, New York, NY: Routledge.

* See here