January 30, 2016

The economist’s hajj from Mordor to Mecca

Comment on David Sloan Wilson on ‘Economics — still in the land of Mordor’

Blog-Reference and Blog-Reference on Feb 2

Always, when economics is in the methodological doldrums it looks around for success stories. In the 1890s Newtonian physics fell somewhat out of favor as archetype and the heterodox economist Thorstein Veblen asked “Why is Economics Not an Evolutionary Science?” The next was Marshall with his famous call for a new methodological hajj “The Mecca of the economist lies in economic biology.”

Now David Sloan Wilson tells economists “The [neoclassical] edifice is based upon a conception of human nature that is profoundly false, defying the dictates of common sense, before we even get to the more refined dictates of psychology and evolutionary theory.”

Strictly speaking this is an old hat since J. S. Mill: “The science then proceeds to investigate the laws which govern these several operations, under the supposition that man is a being who is determined, by the necessity of his nature, to prefer a greater portion of wealth to a smaller ... Not that any political economist was ever so absurd as to suppose that mankind are really thus constituted, but because this is the mode in which science must necessarily proceed.” (1874, V.38)

The first thing every layman recognizes is that there is something wrong with equilibrium economics in general and with constrained optimization in particular. Hence, there have been countless attempts to borrow from Darwinism which seems to be more conversant with Human Nature than economics. Closer inspection, though, showed quickly that all suggestive resemblances between natural and economic evolution remain on the surface.

“In a recent series of publications, ‘Generalized Darwinism’ has been proposed as a new overarching research strategy that is based on the assumption of a fundamental homology between evolution in nature and the evolution of the economy. The principles of variation, selection, and retention that have been distilled from evolutionary biology by isolating abstraction are claimed to be generally valid. It is suggested to apply these abstract principles as a unifying framework for all evolutionary theories. By a brief reconstruction of the different historical forms of Darwinism we have shown that the identification of these abstract principles with Darwinism is misleading. Moreover, on a priori grounds other principles — non-Darwinian or even anti-Darwinian ones like, e.g., orthogenesis, saltationism, or neo-Lamarckism — could claim a similar plausibility in explaining economic evolution.

The crux with such allegedly unifying abstract principles derived by isolating abstraction from findings in other domains is that they provide but an abstract hull. In order to become a useful heuristic device, they need to arrive at domain-specific explanation which, in turn, would require to add substance by hypotheses on the disciplinary ‘details’ of actual evolutionary processes, e.g. in the economy. This is, of course, what is done in the first place in a bottom-up research strategy as it has fruitfully been practiced in the development of Darwinism in evolutionary biology." (Levit et al., 2011, p. 559)

David Sloan Wilson advertises a common sense approach. This, of course, appeals to all economists who have not much more than that. As a matter of fact, Wilson’s approach is fundamentally flawed. The first thing is to be clear about the subject matter: economics is not about psychology, human behavior, sociology, politics, biology, evolution, etcetera. Economics is about the properties and the working of the economic system. All Human-Nature approaches are a detour.

Because of this, economics has to develop its own methodology and neither copy it from Newton nor from Darwin, nor from chaos theory, nor from complexity theory, nor from anywhere else.*

Where Wilson is right is that neoclassical economics is unacceptable. This, though, is known since more than 140 years.

Egmont Kakarot-Handtke


References
Levit, G. S., Hossfeld, U., and Witt, U. (2011). Can Darwinism be "Generalized" and of What Use Would This Be? Journal of Evolutionary Economics, 21(4): 545–562. DOI10.1007/s00191-011-0235-3. URL
Mill, J. S. (1874). Essays on Some Unsettled Questions of Political Economy. On the Definition of Political Economy; and on the Method of Investigation Proper To It. Library of Economics and Liberty. URL

* See ‘How to restart economics

Related 'The three pillars of English philosophy: Individualism, Darwinism, Political Economics'