Still on the wrong track

Comment on Karla Hoff/Joe Stiglitz on ‘Striving for Balance in Economics: Towards a Theory of the Social Determination of Behavior’

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Economists, like most human beings, are intensely interested in watching other human beings, interpreting their actions, and second-guessing their motives. After all, between the individual human being and Nature or the universe or reality stands society, which is to say, all the stories society tells about Nature or the universe or reality or history or the hereafter. But from the history of the sciences, we know that virtually all of societal storytelling is logical and factual rubbish. The greater part of humanity, though, never transcends parochial social rubbish. Plato famously described the epistemological condition with the cave metaphor and Buddha with the metaphor of the blind men and the elephant.

Accordingly, the representative economist is as deeply convinced as any flat-earther that economics is essentially about the behavior of human beings. And this is why standard economics has been built upon the behavioral axiom of utility maximization (Weintraub, 1985, p. 147).

And this is the fundamental methodological blunder because there is no behavioral assumption whatever that can play the role of an axiom. Why? Let us go back to Aristotle’s first principle of science “When the premises are certain, true, and primary, and the conclusion formally follows from them, this is demonstration, and produces scientific knowledge of a thing.” (Posterior Analytics)

Now, there is no proposition about human behavior that is ‘certain, true, and primary’ because human actions are original. This has been known to the scientists in all ages “The bifurcation of motion into two fundamentally different types, one for natural motions of non-living objects and another for acts of human volition ... is obviously related to the issue of free will, and demonstrates the strong tendency of scientists in all ages to exempt human behavior from the natural laws of physics, and to regard motions resulting from human actions as original, in the sense that they need not be attributed to other motions.” (Brown, 2011, p. 211)

Scientists in all ages knew that there is, as a matter of principle, no such thing as a behavioral law or anything close to it. Economists, of course, are incompetent scientists and therefore never had much compunction to postulate/accept constrained optimization as their foundational premise. The other methodological lunacy has been to take equilibrium into the set of axioms (Weintraub, 1985, p. 147).

The representative economist has not got the point until this very day. As Krugman put it on his blog “most of what I and many others do is sorta-kinda neoclassical because it takes the maximization-and-equilibrium world as a starting point ...”. More than 100 years after Jevons/Walras/Menger and the total failure of the neoclassical program this is simply self-debunking idiotism.

All the more so as economics, to begin with, is not a science of behavior (Hudík, 2011). Economics is not a so-called social science like psychology/sociology and not a natural science like physics but a systems science.

The representative economist never got the crucial methodological point and this is why economics is a failed science. Orthodoxy is built upon the false premises of methodological individualism. It is pretty obvious that behavior is socially conditioned. Thus far Hoff/Stiglitz’s point of analytical departure moves closer to what psychology/sociology has found out long ago.

To leave methodological individualism behind makes perhaps better sociology or political science but not better economics. The reason is obvious: no way leads from the understanding of individual or social behavior to the understanding of the behavior of the economic system. Filibustering about fellow human beings or society does not help to find out what profit is, how unemployment can be cured, and what the systemic future of the market economy is.

Feynman already identified the social sciences as cargo cult sciences and because of this Hoff/Stiglitz’s approach is a vain attempt to reanimate the dead scientific corpus called standard economics.

Egmont Kakarot-Handtke


References
Brown, K. (2011). Reflections on Relativity. Raleigh: Lulu.com.
Hudík, M. (2011). Why Economics is Not a Science of Behaviour. Journal of Economic Methodology, 18(2): 147–162.
Weintraub, E. R. (1985). Joan Robinson’s Critique of Equilibrium: An Appraisal. American Economic Review, Papers and Proceedings, 75(2): 146–149. URL

Immediately preceding Economics is NOT a science of behavior.

Related 'The existence of economic laws and the nonexistence of behavioral laws' and 'The creative destruction of Wren-Lewis'