September 10, 2015

The happy end of the social science delusion

Comment on Lars Syll on ‘Are all models wrong?’


For more than two thousand years now, physicists have seen falling leaves but until this day we have no scientific theory of this phenomenon. Instead, we have the theory of gravity, motion, ballistics, etc.

The first thing to notice is that physicists are not concerned with reality as such but with certain aspects of reality. In other words, reality is narrowed down to those general aspects that can be dealt with effectively by applying tools that are already available or are developed specifically for the task at hand.

What a scientist instinctively avoids are questions that cannot be answered in principle like: Is God male or female? Exactly this type of question is what occupies non-scientists most of their time.

Science is often accused of being narrow or over-simplistic. However, those who have tried to tackle the fullness of reality head-on have never produced more than colorful descriptions, interesting gossip, subjective interpretations, data-decorated hunches, or extensively interpolated individual histories. In the meantime, narrowly focused science has moved in an unbroken sequence of logical steps from the elementary Law of the Lever to the unobservable deep reality of quantum particles and quarks.

Reality is not something given and simply to be looked upon — this is the delusion of naive empiricism — but is continuously redefined in the course of scientific research itself.

While it is obvious that economics has much to do with human behavior it is a methodological mistake to primarily focus on this aspect of economic reality, just as it a mistake to focus on individual flying leaves in order to find out something general about falling bodies. No way leads from the observation of a myriad of falling leaves to the Universal Law of Falling Bodies. Likewise, no way leads from the observation of individual behavior to the systemic economic laws.

The so-called social sciences have always been a misguided endeavor. The reason is simple. “By having a vague theory it is possible to get either result. ... It is usually said when this is pointed out, ‘When you are dealing with psychological matters things can't be defined so precisely’. Yes, but then you cannot claim to know anything about it.” (Feynman, 1992, p. 159)

Certain knowledge about human behavior is hard to come by, to say the least, and to circumvent this fundamental difficulty by postulating constrained optimization is of breathtaking naivety — or worse.

It has not been such a good idea to build economics on a green cheese assumption about human behavior. Therefore, “... if we wish to place economic science upon a solid basis, we must make it completely independent of psychological assumptions and philosophical hypotheses.” (Slutzky, quoted in Mirowski, 1995, p. 362) see also (Hudík, 2011)

This is exactly the opposite of what may be called Hume’s methodological delusion: “And as the science of man is the only solid foundation for the other sciences, so the only solid foundation we can give to this science itself must be laid on experience and observation.” (Hume, 2012, Introduction)

The results of Hume’s program are, as to be expected: “...there has been no progress in developing laws of human behavior for the last twenty-five hundred years.” (Hausman, 1992, p. 320)

The science of man, or what we call social sciences, has no solid foundation. As a matter of principle, there is no such thing as a social science. Therefore, the first methodological task is to take economics out of what Feynman aptly called cargo cult science.

The new definition of economics is objective-structural-systemic and entirely free of any behavioral connotations: economics is the science that studies how the monetary economy works. Thus, the popular yet forever pointless second-guessing of human motives and behavior can be left to psychology, sociology, political sciences, philosophy, mythology, literature or science fiction.

Economics is a failed science and the ultimate cause is given with this definition: “It is a touchstone of accepted economics that all explanations must run in terms of the actions and reactions of individuals.“ (Arrow, 1994, p. 1)

Accepted economics is scientifically unacceptable.

Egmont Kakarot-Handtke

Arrow, K. J. (1994). Methodological Individualism and Social Knowledge. American Economic Review, Papers and Proceedings, 84(2): 1–9. URL
Feynman, R. P. (1992). The Character of Physical Law. London: Penguin.
Hausman, D. M. (1992). The Inexact and Separate Science of Economics. Cambridge: Cambridge University Press.
Hudík, M. (2011). Why Economics is Not a Science of Behaviour. Journal of Economic Methodology, 18(2): 147–162.
Hume, D. (2012). A Treatise of Human Nature. Project Gutenberg EBook. URL
Mirowski, P. (1995). More Heat than Light. Cambridge: Cambridge University Press.

Related 'From PsySoc to SysHum' and 'The Science-of-Man fallacy' and 'PsySoc — the scourge of economics' and 'The art of start' and 'A farewell to PsySoc economics' and 'Redefining economics' and 'Economics vs. Sociology' and 'Questions and answers about economics'.

ICYMI (Henry, September 13)

True to form, economists got also the criterion of simplicity into the wrong throat: “Others, the inexperienced students, make guesses that are very complicated, and it sort of looks as if it is all right, but I know it is not true because the truth always turns out to be simpler than you thought.” (Feynman, 1922)

Economists explain their failure regularly with the complexity of the subject matter. This argument does not hold water.

“But in fact, there are good reasons, not only for the belief that social science is less complicated than physics, but also for the belief that concrete social situations are in general less complicated than concrete physical situations.” (Popper, 1960)

‘All models are false’ is a correct observation as far as standard economics is concerned, but the usual explanation is misleading.

“I think we have to admit that most successful scientific theories are lucky over-simplifications. (Popper, 1994)

The keyword is lucky.

Related 'Two steps towards truth'.