Is Economics imperial among the social sciences? A philosophical approach.

Demonstratio longe optima est experiential-Sir Francis Bacon (By far, the best proof is, experience)

Economics is the de facto queen of the Social Sciences. Here is to be emphasized the term science, for economics aims to strive towards the epitome of true science, that is the methodology of classical physics. The fact that many models of economic theory have been derived from the physical sciences is no coincidence. Moreover, economists are imputed as having physics-envy, with matching mathematical rigor as a proxy for doing better science.

It is necessary to explore as to why and how this entails economics to have dominance and hegemony among the social sciences. Clearly, physics holds as much hegemony over the hard sciences as the United Nations has control over global peace. So what is it that the author uses the term of Economics imperialism in the social science domain? For that, a careful historical examination of the fields development and the nature of knowledge generated within the field needs to be looked into.

The author traces this history of imperialism into three phases. The first phase comes after the post-war (The second one) development of a new mathematical rigor within economics, with the ascent of what we now dub as neo- classical synthesis and more importantly, models of general equilibrium as developed by Arrow, Debreu and others. The powerful implications of the two fundamental welfare theorems resonated in the entire scientific community, with strong results derived from axioms under certain assumptions, tautologically de- rived with the help of mathematics. This methodology is called the hypothetico- deductive approach, and regarded philosophically as the ideal mode of generating new knowledge as the results derived from within it are certain(unlike probable results of the inductive approach).

In the strict Popperian sense, this made economics the most scientific of all social sciences. However, as any economist would know, this applies to only neo-classical economics, which ascribes to methodological individualism as its foundational framework (a framework developed by none other than Popper). Neo-classical economics also fits into Popper’s definition of science, as it adheres to the doctrine of falsification, more than of other competing schools of thought, as well as other social sciences in general.

However, by mid-1970s, it was apparent that the General Equilibrium model didn’t serve more than a textbook mathematical puzzle(Blaug,1992) and despite its mathematical elegance, it failed to hold any relevance for the real economy, given the nature of arbitrary assumptions. This divided the economics community into two fields in regard to the future of economic methodology. On one side were the predictionists, propounded by (Friedman,1953) for whom assumptions and descriptions were irrelevant in the face of precise predictions, and the descriptionists on the other, led by Samuelson, who argued for descriptive accuracy and gave the now famous ’F-twist’.

 

This gave way to the next phase of economic methodology, dubbed by the author as the New Economics phase. The methodology of economics gravitated towards inductive and adductive methods rather than the strict hypothetico deductive approach it had earlier followed, relying on ad hoc assumptions and a piecemeal approach to economic problems rather than deriving results from the older generalized theory, resulting in varied sub-fields of economic theory ranging from international trade, industrial organization to environmental economics, addressing uniquely a plethora of questions it had yet not addressed. One of the proponents of this new approach, Gary Becker defined Economics as an approach or an engine of analysis and forayed across disciplines dealing with questions relating to crime, family, marriage and discrimination through economic theory.

The author argues that the hegemony of economics before the New Economics phase could be argued for owing to the superior deductive method com- pared to the remaining social sciences but the new imperialism was based on poorer inductive and adductive methods.1Blaug calls this fall from grace of economics as a science from the pedestal of falsification to the ditch of verificationism.

However, it has repeatedly been asserted by both philosophers and economists, that economists never really practiced falsification, but only romanticized the concept of it. What they instead practiced was Nave or innocuous falsification.(Blaug,1992).The wave of the New Economics approach left an explanatory void both theoretically and empirically and was filled by institutionalism and empiricism respectively. According to the author, the rise of empiricism and institutionalism brought with them a new wave of imperialism, but with even a lesser case for economic hegemony.

The rise of quantitative data analysis and Econometric methods have taken the field by storm in the last two decades. While the development of sophisticated methods of analyzing data has increased the power of generating inferences, but that power comes with a great responsibility and ethics. Under the force of publishing bias, an algorithmic approach of econometric tools to generate papers has eroded the reputation of empirical techniques. There is a well-known adage that under sufficient torture, the data can confess anything. Even when data quality issues are taken care of, the Kletzer Effect that is multiple interpretations from the same data, sometimes reinforcing opposing viewpoints independently.

(The case against inductive methods has been referred as to the ’Black Swan’ problem where justification of all swans are white break down when a black swan is discovered.)

 

In the domain of Popper, both institutionalism and empiricism abide by the mode of verification rather than falsification. The former seeks at pattern behavior while the latter is used to expound established worldviews.

Before getting into the merits or demerits of each approach, a fundamental question needs to be accounted for, which we have taken for granted. That is the age old debate of induction versus deduction. Now it is clear that deduction approach generates truth with certainty, but how do we account for the truth of the premises? Ultimately in this backward induction, the premise has to be derived from induction. The black swan argument against induction is too restricting to do any relevant social science in that manner. It becomes a huge cost to researchers to avoid the black swan when probably there might not be a black swan at all, and that happens more often than not. The author maintains that the new economics theoretical findings are dubious as he gives the example of trade theory and its paradoxes. But he skips over that economists learn from their mistakes and now apply more realistic environments to their modeling from strategic interaction, imperfect information, and completion and so on. Economists have moved on from comparative static based single equilibrium models in linear systems to multiple equilibrium systems with stochastic processes in a dynamic environment. Both have their pros and cons, but it would be naive to base predictions on a theory that maintains the world runs within a single equilibrium point.

The author has misjudged the nature of economic imperialism as related to its methodology. Economic questions hold tremendous importance with actual material implications for entire world population, and economic policy is what rules the world in geo-politics, questions of poverty and standard of living. The basic necessities of life of food, clothing and shelter depends on what economists do in their ivory towers. This power and influence is what gives economists what he dubs as imperialism. Imperialism as defined in the dictionary means a force- ful occupation. Economics hasnt either forced nor occupied the other social sciences. Crossing disciplinary boundaries to better answer economic questions or even attempt to answer the disciplines own pertinent question should be lauded as freedom of research rather than encroachment. Nobel Laureates in Economics boast of the names of Herbert Simon, Daniel Kahnemahn, and Elinor Ostrom among many who used their discipline to answer economic questions by refuting orthodox theories throws light on the rather accommodating nature of the field.

The final point in my response would be in respect of the entire philosophy of the movement of economics in which my central argument corresponds that appraising scientific knowledge in terms of deductivism, verificationism, essen- tialism, reductionism, and other isms does more harm than good. I explain this in the following points: –

• Appraisal of economic methodology appears to share the same fate as economics does in having different schools of thought within the tradition. The Popperian criteria of falsification is just one strand of ap- praisal. Other strands include Kuhns theory of Scientific revolutions, Lakatos paradigm of scientific research programs and Feyerabands an- archistic theory of knowledge generation. Philosophical appraisal fails in this context as Poppers falsification hypotheses are themselves not subject to falsification and hence falls under the paradigm of what he calls pseudo science.

• Following a particular definition of science institutionalizes the generation of knowledge, which is then expropriated by vested interests. Freedom of knowledge generation might be anarchy, but the negative association of the word corresponds to political science and not academic research. If knowledge generation is institutionalized, we wont see accidental and unorthodox discoveries, which includes Newtons classical physics, Galileos experiments, Darwins Origin of Species and Einsteins theory of relativity.
• Its true an anarchist model of knowledge generation would be amorphous and will have a lot of noise to signal ratio where noise denotes bad quality research and signal as quality research. But that holds better than in a system where research is filtered so that there is a lot less noise but drastic cuts in signal too. And the unregulated system of research ultimately does get recognized, in a more democratic space, if it deserves recognition.

  This is not to say that economics as a discipline is clearly in the right di- rection and doesnt need any introspection. As I earlier mentioned, the prob- lems within economics plague other social sciences and even the hard sciences. Economists have started questioning their physics-envy as can be seen from vehement criticism of DSGE models by leading economists to development of disciplines such as Cultural Economics and Neuroeconomics which some decades back would have been sheer blasphemy. The imperialism within the field has di- minished, and is integrating with other social sciences as social sciences should, in a normative sense. The future of economics is moving towards Big Data and machine learning and sticking to luddite approaches of sticking with the deduc- tivist model and not adapting to the times is what makes a field truly scieantific. The quote by Paul Feyeraband should sum up as something to ponder on.

  “Teachers’ using grades and the fear of failure mould the brains of the young until they have lost every ounce of imagination they might once have possessed.” – Paul Feyeraband, Against Method,1965.

  References

  Blaug, M. (1992). The Methodology of Economics. Cambridge: Cambridge University Press.

Friedman, M. (1953).The Methodology of Positive Economics. In M. Fried- man, Essays in Positive Economics (pp. 3-43). Chicago: University of Chicago Press.