2014-04-02

The economics delusion

The unexpected question (and the implied answer) were a bit surprising, I know. Every once in a while, a writer needs to wake up his or her reader. Good morning (or afternoon or evening or whatever, depending on when you are). We need to dig a little deeper.

The English philosopher R.G. Collingwood once defined "science" in a rather simple and straightforward way. He said that science is "a body of systematic or orderly thinking about a determinate subject-matter" (p4). Thinking systematically, in turn, is "answering questions intelligently disposed in order. The answer to any question presupposes whatever the question presupposes. And because all science begins with a question (for a question is logically prior to its own answer) all science begins with a presupposition" (p63).

I like this definition for two reasons. First, it certainly allows us to look at economics as a science (and the definition is equally applicable to the natural sciences as well). Second, it emphasizes (and reinforces) the point I have been making and that Sheldrake presented so forcefully, namely that all sound thinking starts with assumptions (and it would do us well to be aware of what these are).

When seen as systematic thinking, we can see what economics is up to. They should be able to develop theories, even if they can experiment with them, that can be used to explain what's going on around us. Those of us who were forced into economics classes in the course of our schooling and those who take an interest in more than sports have come to know some of the general principles that economics proposes: supply-and-demand (high demand, high prices, for example); too much money in circulation equals inflation; and more, but our experience also shows us that these principles (which economists like to pass off as "laws", which they aren't) don't always work. Anyone who thinks that gasoline prices, for example, are driven by supply-and-demand, is out of touch with reality. I've seen prices vary by as much as 10 euro cents per liter between 9:00 am and 2:00 pm. What we all drive to work but don't have to go home? No, it's the little things that give it away.

It turns out that economics, then, spends most of its time developing (mathematical) models that describe what is going on around us. My question is, just how helpful is that? I'm not convinced they are very helpful at all. All that economic commonsense that most of us were exposed to just doesn't seem to reflect what is really going on. Oh sure, the economists would like us to believe that the world has become so much more complicated that it's hard keeping up with reality. Truth be told, though, their models are just that models. Reality ... well, that's whole other story ... as any of us living there can tell you.

It's here that we see the weakness of Collingwood's definition, that is true, but it's the best one we have right now. There is systematic thinking about a subject matter going on. The problem is, however, that the thinking about the subject matter has little, if anything, to really do with the experience of the subject matter. In other words, it would seem that economics may have simply said adieu to reality. If that's the case, who cares if it is a science or not?

So it is to that, and its consequences, that we will turn to next time.

References
Collingwood, R.G. (1998/1940) An Essay in Metaphysics, Revised edition, with an Introduction and additional material edited by Rex Martin, Clarendon Press, London.

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