October 17, 2016

Evolutionary economics: Just another degenerated research program

Comment on Noah Smith on ‘David Sloan Wilson’s econ critique’

Blog-Reference

Economics is a bit complicated because there is (i) political economics vs. theoretical economics, and (ii), orthodox economics vs. heterodox economics (see the 2x2 map on Wikimedia*)

The situation is this: political economics (= agenda pushing) dominates theoretical economics (= science) since the founding fathers and has not produced much, if anything, of scientific value since the last 200 years.

Heterodoxy has always argued that something might be wrong with Orthodoxy. To be sure, Heterodoxy’s rejection of Orthodoxy is right. In 2016 no thinking being can defend orthodox economics any longer. The problem with traditional Heterodoxy is that it has not produced much, if anything, of scientific value either.

Economics is what Feynman famously called a cargo cult science because BOTH Orthodoxy and traditional Heterodoxy does NOT satisfy the scientific criteria of material and formal consistency.

Evolutionary economics is part of Heterodoxy since Thorstein Veblen asked: “Why is Economics Not an Evolutionary Science?” The next was Marshall with his famous call for a new methodology: “The Mecca of the economist lies in economic biology.” Evolutionary economics is institutionalized in different countries and communicates its research in the Journal of Evolutionary Economics.

David Sloan Wilson has had a great insight: “Nevertheless, I had faith that evolution could say something important about the regulatory systems that economists preside over, even if I did not yet know the details.” This insight has occurred many times before and it is only new and exiting to the average dull Econ 101 student.

Evolutionary economics has been tried and it has failed: “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.” (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 to be clear about is: economics is NOT about psychology, human behavior, sociology, politics, biology, anthropology, etcetera. Economics is about the properties and the working of the economic SYSTEM.

ALL Human-Nature approaches are bound to fail. The ultimate reason can be stated as a methodological impossibility theorem: NO way leads from the explanation of individual behavior to the explanation of how the economic system works.

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. DOI DOI10.1007/s00191-011-0235-3. URL

* Map of current economics

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COMMENT on Some guy on Oct 18

While you were asleep a very smart methodologist has found out that “... economics is not a science of behaviour”. (Hudík, 2011)

So, the point is NOT “that it’s just very hard to make a general mathematical model of human behavior” but that there is NO NEED to make such a model. To speculate about constrained optimization, bounded rationality, animal spirits, or rational expectations is just as brain dead as to speculate about how many angels can dance on a pinpoint.

While you were asleep the very definition of economics has been changed from: “Economics is the science which studies human behavior as a relationship between ends and scarce means which have alternative uses.” (Robbins, 1935, p. 16) to “Economics is the science which studies how the monetary economy works.” (2014)

Now, go and wake up your Econ 101 teacher and tell him that he is fired.

References
Hudík, M. (2011). Why Economics is Not a Science of Behaviour. Journal of Economic Methodology, 18(2): 147–162.
Kakarot-Handtke, E. (2014). Objective Principles of Economics. SSRN Working Paper Series, 2418851: 1–19. URL
Robbins, L. (1935). An Essay on the Nature and Significance of Economic Science. London, Bombay, etc.: Macmillan, 2nd edition.

Immediately following 'The bigots of common sense'