March 3, 2015

Complexity, scientific incompetence, and the art of asking the right questions

Comment on Peter Radford on ‘Economic Ignorance?’


Peter Radford arrived a the following insight: “Economies are devilishly complicated things. They are full of obstreperous and notoriously difficult subject matter. Notably people. And people, as we all know, do the darnedest things. They, for instance, change their minds and sometimes even contradict themselves — with a straight face too. This makes plotting and explaining their activity very hard.” (see intro)

Since Newton's and Adam Smith's days, when economists ask themselves why they have failed in both relative and absolute terms, one invariably hears the same complexity-uncertainty-hard-stuff refrain.

“There is a property common to almost all the moral sciences, and by which they are distinguished from many of the physical; this is, that it is seldom in our power to make experiments in them. ... We therefore study nature under circumstances of great disadvantage in these sciences; being confined to the limited number of experiments which take place (if we may so speak) of their own accord, without any preparation or management of ours; in circumstances, moreover, of great complexity, and never perfectly known to us; and with the far greater part of the processes concealed from our observation.” (J. S. Mill, 1874, V.51)

Or: “Years ago I heard Mr. Cobden say at a League Meeting that ‘Political Economy was the highest study of the human mind, for that the physical sciences required by no means so hard an effort.’” (Bagehot, 1885, PE. 13)

Or: “The motives and conditions are so numerous and complicated, that the resulting actions have the appearance of caprice, and are beyond the analytic powers of science.” (Jevons, 1911, p. 15)

Or: “Knight accuses the positivists of overlooking the complexity and uncertainty of testing in all sciences and argues at length that positivist views of science are particularly inappropriate to economics, which, like all sciences of human action, must concern itself with reasons, motives, values and errors, not just causes and regularities.” (Hausman, 1989, p. 118)

Or: “Economics is a strange sort of discipline. ... too many things are always happening at once. The inferences that can be made from history are always uncertain, always disputable, . . . You can’t even count on a long and undisturbed run of history, because the ‘laws’ of behavior change and evolve. Excuses, excuses. But the point is not to provide excuses.” (Solow, 1998, pp. x-xi)

We know from the history of science that Ptolemy's theory of planetary motion was very complex — in the end, he dealt with more than 20 epicycles — and that the complexity vanished completely by changing the vantage point. Could it be that complexity is not in the subject matter but in the observer's mind? Could it be that economists observe and argue, like Ptolemy, from the wrong vantage point?

“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, 1992, p. 171)

Could complexity simply be an indicator of dilettantism or confusion?

Imagine for a moment an aircraft flying from, say, New York to Paris. Now we can ask why. One way to answer the question is to speculate about the motives and reasons of the passengers, the pilot, the crew, the flight controllers, and the greedy managers and stockholders of the airline. The other way to look at flight is to think about the laws of aerodynamics, thermodynamics, and so forth.

We could know in advance that there is no such thing as ‘laws’ of human behavior that could explain flying, not to speak of a particular flight. Real scientists have always been well aware of this.

“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)

Hume and Adam Smith, though, missed this crucial methodological point and subscribed to the primacy of what was called the Science of Man.

“It is evident, that all the sciences have a relation, greater or less, to human nature: and that however wide any of them may seem to run from it, they still return back by one passage or another. Even. Mathematics, Natural Philosophy, and Natural Religion, are in some measure dependent on the science of MAN; since the lie under the cognizance of men, and are judged of by their powers and faculties.” (Hume, 2012, Introduction), original upper-case

By anchoring economics firmly in the social sciences Hume and Smith set the discipline on the wrong track and programmed failure: “...there has been no progress in developing laws of human behavior for the last twenty-five hundred years.” (Hausman, 1992, p. 320), see also (Rosenberg, 1980, pp. 2-3)

Ergo: economics is not a science of behavior (Hudík, 2011); economists have to change their vantage point; economics has to be redefined. Note well that all this has nothing to do with the manifest misapplication of mathematics in standard economics.

Old definition, subjective-behavioral: “Economics is the science which studies human behavior as a relationship between ends and scarce means which have alternative uses.”
New definition, objective-structural: “Economics is the science which studies how the monetary economy works.”

In non-technical terms, this is what a Paradigm Shift, a.k.a. new economic thinking is all about.

Egmont Kakarot-Handtke

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Brown, K. (2011). Reflections on Relativity. Raleigh:
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Hausman, D. M. (1989). Economic Methodology in a Nutshell. Journal of Economic Perspectives, 3(2): 115–127. URL
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Hudík, M. (2011). Why Economics is Not a Science of Behaviour. Journal of Economic Methodology, 18(2): 147–162.
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