Economics as Science

October 29, 2013

The recent Nobel Prize [1] in economics has prompted a fair bit of commentary/discussion along the lines of ‘is economics a science’? I thought I’d add to that commentary. The extremes of the commonly articulated positions are roughly:

“Of course it is – and a stronger, more manful, more mathematical science than your [puny / relativistic / fraudulent / etc.] [psychology / sociology / history / etc.]”

“Of course it isn’t – it’s a series of barely coherent apologies for the interests of the powerful, detached from any reference to or understanding of the suffering inflicted upon billions by the policies it advocates and sophistically excuses”

With of course a range of other positions too.

The former of the two positions above is articulated principally by economists; the latter principally by left critics of economics. I’m in many respects on the left [2] – but I’m also in training to become an economist. Where does that place me? [Well – not to build up suspense: I think economics is indeed a science (that’s why I think it’s worth doing economics). But the longer version follows.]

Prior question: what does it mean for something to be a science? As a first pass, I take a disciplinary research-space to be a science if:

1) The object it studies is a real phenomenon that can actually be empirically studied.[3] [4] (So astrology doesn’t count – because the relationships between celestial objects and human personality is not a real phenomenon; but astronomy does count, because celestial objects are real things.) (What’s actually real is of course itself a scientific question – but so it goes; there’s no paradox there – just the usual Neurath’s Boat principle of there being no discursive ‘outside’.)

2) There exists a set of established norms and research practices for testing claims about these objects against empirical evidence – for an endeavour to be scientific, claims must be vulnerable to rejection in the light of empirical findings.

3) There’s a discursive space, for researchers, within which those norms for testing claims against evidence can themselves be debated, contested and transformed.

Science is therefore a communal endeavour – it can’t exist outside of a community of research. Science relies on the collection of evidence; the positing of claims on the basis of and for testing by evidence; and the collective ongoing assessment of the evidence, the claims, the methodological connections between the two, and the norms governing the whole endeavour, within a community of researchers.

This definition of science does not require the following things:

– That practitioners of scientific inquiry be particularly rational. All else being equal it’s better for practitioners to be reasonable and informed than not, but the ‘rationality’ of the system resides principally in the possibilities made available by the overall institutions of the system, rather than in the virtues of individual researchers. (It is necessary, though, for a sufficiently large number of members of the community to be committed to reproducing those broad institutional practices enumerated above, that the practices are indeed reproduced.)

– That scientific claims be correct. The whole point of the scientific endeavour is that claims (including both empirical claims and the methodological claims that inform empirical claims) are open to revision.

– That members of a research community be capable of predicting the future behaviour of the phenomena studied. Some phenomena are amenable to this, in the current state of knowledge; others are not. It is not a requirement of science that predictions of future events be created, only that evidence (including evidence generated by future events) be capable of modifying our claims.

– Relatedly, that ‘general laws’ be discovered. Science can study unique specificity just as scientifically as it can study general principles; one is not more sciencey than the other.

– That there be broad consensus on most major topics within the research community. One hopes that warranted consensus can be established, but an important part of the mechanism from which it might emerge is disagreement.

None of those things just listed need apply for a community to count as a group of scientific researchers.

In these terms, is economics a science?

I think the answer is: clearly yes, economics is a science. There is a real object of study (the economy, however that’s understood). There are established principles for collecting evidence and testing claims against evidence. There are ongoing (quite sophisticated) debates about the methodological principles involved in these tasks. So I think economics is pretty unambiguously a science, and I’m happy to be a member of and participate in that research community of scientific practitioners.[5]

What about the second objection, though? The objection that economics is just serving the interests of the powerful, etc.?

Well – just because a community of research meets all the criteria for science, doesn’t mean that it isn’t full of bullshit – nor does it mean that the kinds of bullshit dominant in a field are in any way accidental. Here, as often, it’s important to distinguish between best practice and actual practice. Best practice is not something that exists independently of actual practice – it is generated in and emerges out of actual practice. But it is also something that actual practice can be judged against – and often judged severely. Like any discursive space, the discursive space of economics is variegated – it contains many voices in dispute. In participating in that discursive space, we add our own voices and evaluate those voices already in contention. The norms of evaluation – and, therefore, the conclusions – that we take away from engagement in that space may be minority views relative to the space overall.

So it’s important to distinguish between the claim that economics is a science, and the claim that economics in general has things right, or is even on the right path. It’s important to have an account of the many things wrong with economics too – which I’ll start to talk about in a future post.

[1] The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel

[2] This post articulates my politics I think reasonably well – although I’m losing patience with left positions and figures sufficiently rapidly that, while I don’t think I’m on the classic ‘Trot to neocon’ ideological trajectory here [not least because I was never a Trot, but you know what I mean], it’s hard not to see why some such view would look reasonable, from the outside.

[3] “What about mathematics?” Well, mathematical objects (whatever their status – as it happens, I have a conventionalist line on the status of mathematical objects, but nothing here relies on that) can’t be empirically studied, so mathematics isn’t a science in this sense. What gives mathematics its objective character (on my account at least) is the degree of consensus that can be (and has been) attained around mathematical norms – math is pretty much unique in this respect. This is what distinguishes mathematics from, say, theology, which also has an object of study of ambiguous status (real? fictional? social? supernatural?) but where the degree of consensus is far lower, even within specific religious communities, let alone between religions.

[4] “What about the SCIENCE OF BEING that myself and three other graduate students in this Heidegger course are developing?” Sorry – that’s not a science.

[5] Note, though, that economics is not a more manful or vigorous science than any other social science, even if it involves a lot of math.

I’ve just started reading Elinor Ostrom’s ‘Governing the Commons’ – the 1990 book summarising the research program for which she won a Nobel Prize in 2009. Ostrom’s work is interesting, empirically oriented, methodologically and theoretically eclectic, and I think provides a valuable set of resources for those trying to think about institution-building.

At the start of the book, Ostrom summarises three standard ways to understand the problem of commons governance, in the economics literature:

1) Garrett Hardin’s fable of the tragedy of the commons (written from a position of anti-population growth; Hardin is also a signatory on the notorious ‘Mainstream Science on Intelligence’ letter to the Wall Street Journal – that is to say, an advocate of scientific racism); though Ostrom (like others) draws attention to earlier figures who had described the same dynamic, such as H. Scott Gordon:

“Wealth that is free for all is valued by no one because he who is foolhardy enough to wait for its proper time of use will only find that it has been taken by another” (Gordon 1954, p. 124; quoted in Ostrom 1990, p.3)

2) The prisoner’s dilemma game. This is the famous game-theoretic scenario in which two participants have to choose one of two courses of action (cooperate or defect). The game scenario is set up such that if the other player defects, one is better off defecting; and if the other player cooperates, there is no disadvantage to defecting (though no advantage either). In this circumstance, it seems ‘irrational’ not to defect; but if both players defect, both players are worse off than if they had cooperated. In Wikipedia’s always-useful words:

“[The prisoner’s dilemma] was originally framed by Merrill Flood and Melvin Dresher working at RAND in 1950. Albert W. Tucker formalized the game with prison sentence rewards and gave it the name “prisoner’s dilemma””

(I need to read all this work.)

3) The logic of collective action. In his 1965 book of this name, Mansur Olson writes:

“unless the number of individuals is quite small, or unless there is coercion or some other special device to make individuals act in their common interest, rational, self-interested individuals will not act to achieve their common or group interests” (Olson 1965, p.2,; emphasis in the original; quoted in Ostrom 1990, p.6)

I haven’t read Olson and can’t summarise his arguments; I should look at all of that too.

Anyway – Ostrom has various criticisms of all this: notably that these various analyses of commons governance typical presuppose given, immutable rules that determine the choices available to actors in these scenarios; but in actual social life the social rules and institutional frameworks within which we must make our decisions and take our actions are themselves also determined by our collective actions. To put things crudely: if we’re faced with a ‘prisoner’s dilemma’, why can’t we do something about the prison?

I wanted to briefly mention another issue with the prisoner’s dilemma, and related models, though. In Ostrom’s words:

“those attempting to use these models as the basis for policy prescription frequently have achieved little more than a metaphorical use of the models” (Ostrom 1990 p.7)

The use of such models as metaphor, though, can have a specific ideological function beyond the occlusion of the possibility of institutional change. The basis of a prisoner’s dilemma or tragedy of the commons scenario, is a situation in which economic actors engage on more or less equal terms, and where it is indeed the case that absent cooperation no economic actor will be better off. This is what makes the ‘tragedy of the commons’ a tragedy, rather than simply the defeat of some actors by others.

In some commons scenarios, however, it may be (indeed it sometimes is) the case that some specific actor or actors, in taking the ‘defect’ strategy, will be better off in absolute terms. If a specific actor can benefit sufficiently from the extraction of resources from the commons, it may not matter if the commons is exhausted or destroyed in the process – the actor who benefits most may still be on top, relative to even the best-case ‘cooperative’ scenario. All else being equal, the greater the power differentials between the different actors (and the greater the resources to be appropriated), the more likely this scenario is. If we consider that actors can (in fact) move between different ‘commons’ extracting resources from each, and so an actor’s considerations don’t have to be restricted to the specific game we’re currently imagining, this scenario seems quite a bit more likely. (And, of course, there are plenty of examples of actual real-world resource depletion or appropriation that seem to fit this model very well.)

That is to say – this framing of the problem of commons governance can de-emphasise one central way in which such governance can fail: not lack of coordination, but simple domination. A full reckoning with the challenges of institution-building needs to take account of both of these issues (and many others).

I’m sure there’s lots of work that’s been done on this and similar scenarios – but I don’t know this work. I’d like to explore these issues – and, in general, I’d like to look at how power differentials can be given a more central place in this kind of modelling of economic phenomena.

~~

Works cited:

Gordon, H. Scott. “The economic theory of a common-property resource: the fishery.” The Journal of Political Economy 62, no. 2 (1954): 124-142.

Hardin, Garrett. “The Tragedy of the Commons∗.” Journal of Natural Resources Policy Research 1, no. 3 (2009) [1968]: 243-253.

Olson, Mancur. The logic of collective action: public goods and the theory of groups. Vol. 124. Harvard University Press, 2009.

Ostrom, Elinor. Governing the commons: The evolution of institutions for collective action. Cambridge university press, 1990.

Wikipedia contributors, “Prisoner’s dilemma,” Wikipedia, The Free Encyclopedia, http://en.wikipedia.org/w/index.php?title=Prisoner%27s_dilemma&oldid=574372985 (accessed October 2, 2013).