Home > Uncategorized > Mea Culpa: Storytelling Part Two

Mea Culpa: Storytelling Part Two

from Peter Radford

I have been accused of a few things. I appear to have upset some people. For this I apologize.

I need to explain in order that we can all move on.

Let me begin my stating my belief that economics, in all its multiple instantiations, is a vital discipline. It seeks to get at the heart of one of our most important activities, and it seeks to discover what can be called truths about those activities. It then propagates what it learns and passes its wisdom along to those outside and who might then act upon that wisdom in order to organize human life more properly. However they define ‘properly’.

So I begin with a profound belief in the importance of economics.

I also recognize that it is not possible to have just one idea or set of ideas as an explanation of human economic activity. People are diverse. Their interactions and relationships multiply the diversity. The continuation of technical progress and the application of ingenuity to previously intractable problems further amplify this diversity. The end result being that the economy looms large as a vast and almost incomprehensibly complex subject.  This dictates that there will almost always be many competing and plausible explanations of human economic activity all claiming to be ‘scientific’.

From which I conclude economics is more story telling than science. Informed story telling certainly. Story telling backed by heaps of very clever analytical insight as well.

Then there’s the performative aspect of economics.

Whereas I give a wide berth to many of these competing theories and tend to choose the story that best fits my personal view, I get much more heated over the role that economics plays in society at large.

After all it is supposed to be a center of excellence: a place where those who want to solve problems can go to learn how to act. Economists are not shy about this role. They are everywhere in public and private places passing along the lessons of their own particular brand of economics. And, of course, they teach students which is of even greater import because those students then become workers, managers, and leaders of society reliant upon what they have been taught.

This performative role, whether through shaping policy or shaping minds, places an ethical burden on economics. The stories it tells ought to have the benefits promised within them, and ought to be plausible rather than fantasy.

I don’t for a moment imagine that economists are unable to comprehend the ideological message their stories carry. Of course they are. What I suspect, though, is that many prefer to hide behind the ‘scientific’ image they like to project and to argue that outcomes they don’t like are somehow ‘natural’ and thus cannot be avoided.

I think this preference is what lurks behind the effort to dehumanize economics. Looking back through history economists have gone to great lengths to avoid the words that indicate that it is s subject about human behavior. People become ‘units’ or ‘agents’. So too do business firms which massively elides the difference between a person and a firm. Psychology is simplified and bent to make analysis more tractable. Political outcomes are simply set aside as outside the domain for study. Strategic interaction is reduced to games of varying degrees of complication. And markets become ‘impersonal’ even though they truly exist only when populated by persons.

Sometimes when I look at this effort to gloss the topic with such a rigorous veneer of  objectivity I wonder whether economists comprehend the radical bifurcation they impose on themselves: the world they study and the world they live in seem, to me, to be so distinct that they scarcely intersect, if at all.

One of the outcomes of all this is that I sometimes read or hear economists making startling statements that I think they cannot possibly believe. Or, rather, if they do believe what they say then they are presumably employing figures of speech to illustrate or expand upon a point.

This is especially true of the great benefits of markets.

I do not doubt that those benefits exist. I am too rooted in the modern capitalistic narrative not to see, or think I see, those benefits. There is clearly, in my mind, some benefit to allowing people to trade, invent, explore, and own property in order to make a profit. As a society I think those benefits are around us: Our prosperity is manifest. Our health is better than our ancestors. We struggle less to survive. We have more leisure time. And we are less afflicted by nature. These are all outcomes, to my mind, of the hard won freedoms our ancestors clawed away from the traditions and social arrangements of olden times.

But those freedoms were not won by the market. Indeed the existence of the modern market is an outcome of the fight for freedom it is not the cause of the freedom. To argue, as I have seen some argue, that it is the market to which we owe our debt of gratitude is wrongheaded. This is because it is too narrow an attribution. The fight for freedom extended across many domains: Political, social, religious, and intellectual wars had to be fought before the particular freedom we now know as the modern market emerged to work its prosperous magic. Sometimes those were actual wars in which people died.

Now I understand that to someone rooted in economics it is easy to conflate the wider struggle for freedom with that of the struggle for commercial freedom. After all we all tend to see greatness within whatever we have worked hard at our entire lives. And we want to claim priority in any discussion over where the gold medals should be awarded. But we need to recognize that when we indulge in this rooting for our own subject we are simultaneously indulging in story telling and that others might look a little askance at our claims.

It is natural, I suppose, for those who hold ardently to the marketplace story to use it to explain as much as they can. They are heavily invested in it. But let’s not get carried away. And when someone calls us to account and suggests that such radical claims are questionable at best and misleading at worst we ought not get too upset.

After all there are other plausible stories within economics let alone scattered throughout other domains of study. And, as well, all the great benefits I mentioned above have brought along with them some formidable problems that seem to need solution: How do we distribute our bountiful prosperity? How do we balance democratic values of equal citizenship with capitalistic values of returns measured against risks and variable talent? How do we balance growth with sustainability? How do we temper commercial activity within a broader social setting? How do we balance the individual and the community? And how do we accommodate both the human urge to compete with the human urge to cooperate? There are plenty more.

These are not just questions for economics. They are much too broad to be answered successfully within one intellectual tradition, but they are a challenge for economics.

They are also a challenge that lies beyond the scope of the marketplace. At least I think so.

So let’s be more modest about the triumphs of the market. Let’s acknowledge that the big questions are those that are best answered in a broader sphere. Perhaps within political economy. Perhaps within the social sciences. Whatever, I don’t care.

And if you get upset when I attack what I perceive to be a narrow point of view, you now know why I am attacking it. I may misunderstand. But I am being straightforward and bear no malice.

Economics is wonderful. It isn’t everything. There are other ways to tell the same story.



Piketty’s Capital in the Twenty-First Century

paperback edited by Edward Fullbrook and Jamie Morgan

This collection of 17 essays by some of the world’s most prominent economists explores Piketty’s book at depth and from various vantage points.

“Indispensable reading for everyone who is interested in one of the most important challenges of our time.” – John King

  1. Neville
    August 31, 2015 at 5:23 am

    I think this is the most sensible argument I have read in a long time. Agree totally.

  2. Ken Zimmerman
    August 31, 2015 at 6:20 am

    In the words of Keynes, “The difficulty lies, not in the new ideas, but in escaping from the old ones, which ramify, for those brought up as most of us have been, into every corner of our minds.” Keynes was an intelligent person, not just an intelligent economist. But even he did not fully consider what economics as a profession and economies as actors really are. Economies and economic actions were invented over a very long period of time. Mostly the inventions did not use terms like economics and economies. Later a profession was invented to study and supposedly catalog (and some say explain) these actions. The profession took the name economics. Now the profession has reversed the process. Now the professional “students” of economic actions they did not invent are inventing the actions and instructing the non-professional to follow them “to the letter,” or else face ruin and damnation. That’s a hell of a lot of power to be wielded by a group of 15,000 to 20,000. And their performance in listening to or helping non-economists is poor. I suggest we dump the whole profession and recycle its members into more useful endeavors.

  3. Franklin Chiemeka Agukwe
    August 31, 2015 at 12:13 pm

    The author is right. Economist tend to always monopolize the social science as if every social science issue is only solved through economics. Other problems that deal with human behavior are dealt with other social science mediums like psychology, sociology and business. The attempt by economics to miniaturize these into itself is the bigest problem affecting economics, thats why economics needs pluralism now. it needs to distinguish itself from other social sciences else it will still be apart from reality. Human behavior that can be solved through sociology should not be monopolized by economics

  4. graccibros
    August 31, 2015 at 12:42 pm

    Well done Peter. You’ve covered many of the reasons I call myself, chose to be a “social-democrat,” a term that also probably has to be re-invented, re-invigorated at least, so that the laments and warnings of Tony Judt are taken into account. After all, if I am in the same economic camp as the Germans of today, as its dominant financial institutions, I had better take a closer look at the labels we “share.”

  5. charlie
    September 1, 2015 at 1:54 am

    in the beginning there was ‘profound belief in economics’ is this a religion?? so far i continue to read much here and elsewhere that leads me to believe that is what it is and has been.

  6. September 1, 2015 at 4:54 pm

    No culpa, only stultitia
    Comment on Peter Radford on ‘Mea Culpa: Storytelling Part Two’

    You say: “I also recognize that it is not possible to have just one idea or set of ideas as an explanation of human economic activity.”

    As a matter of fact, the psycho-social-behavioral approach is methodologically doomed from the very beginning. “By having a vague theory it is possible to get either result. … It is usually said when this is pointed out, ‘When you are dealing with psychological matters things can’t be defined so precisely’. Yes, but then you cannot claim to know anything about it.” (Feynman, 1992, p. 159)

    The fundamental methodological blunder is located in the commonsensical intuition that economics is first and foremost about human behavior.

    Neither orthodox nor heterodox economists can get their head around the fact that economics is about the behavior of the economic system. What the behaviorals are talking about belongs entirely to the realm of sociology, psychology, anthropology, political science, history, etcetera. It is not economics at all.

    The subject matter of economics has to be redefined. No way leads from the understanding of human behavior to the understanding of how the actual economy works.

    Science is about logical and material consistency. Now, it can be rigorously demonstrated that economics lacks logical consistency and from this follows straightforwardly that it is out of science.

    It is sufficient to take Keynes as concrete example and then to generalize. As a centerpiece of his General Theory he formulated the foundational syllogism of macroeconomics. “Income = value of output = consumption + investment. Saving = income – consumption. Therefore saving = investment.” (1973, p. 63)

    This elementary two-liner is conceptually and logically defective because Keynes did not come to grips with profit (Tómasson and Bezemer, 2010, pp. 12-13, 16).

    The fault in Keynes’s two-liner is in the premise ‘income = value of output’. This equality holds only in the limiting case of zero profit in both the consumption and investment good industry. Hence, Keynes dealt with a zero profit economy without being aware of it (2011). Curiously, Walras’s original model has also been a zero profit economy. Clearly, both approaches are not very ‘realistic’. Yet, both orthodox and heterodox economists lived comfortably with this plain idiocy for over a century.*

    It holds in general: “A satisfactory theory of profits is still elusive.” (Desai, 2008, p. 10). It is pretty obvious that economists know nothing about how the actual monetary economy works when they cannot tell what profit is. A logically and materially consistent profit theory is the first scientific hurdle economics has to take. It did not, and this is a proven fact.

    The problem of economics is not that this or that model is insufficient or unrealistic or oversimplified or whatever euphemism is used. The fact is that economics as a whole is a failure. And the ultimate methodological reason is that it is built upon false premises.

    All theories/models that take one or more of the following concepts into the premises are worthless: utility, expected utility, rationality/bounded rationality/animal spirits, equilibrium, constrained optimization, well-behaved production functions/fixation on decreasing returns, supply/demand functions, simultaneous adaptation, rational expectation, total income=value of output/I=S, real-number quantities/prices, and ergodicity. All these items are economic nonentities.

    From an economist who accepts one of these nonentities nothing of scientific value is to be expected. And this is why economics is caught in the proto-scientific cul-de-sac. Economists have wasted more than 200 years with second-guessing their fellow men’s behavior and telling stories that have less real-world content than a cartoon. Given this abysmal performance, neither Orthodoxy nor Heterodoxy as they stand now, nor the pluralism of defective theories, has a future.

    You rejoice “Economics is wonderful” not realizing that economists in their manifest incompetence have become a plague to their fellow citizens.

    Egmont Kakarot-Handtke

    Desai, M. (2008). Profit and Profit Theory. In S. N. Durlauf, and L. E. Blume (Eds.), The New Palgrave Dictionary of Economics Online, pages 1–11. Palgrave Macmillan, 2nd edition. URL http://www.dictionaryofeconomics.com/article?id=pde2008_P000213.
    Feynman, R. P. (1992). The Character of Physical Law. London: Penguin.
    Kakarot-Handtke, E. (2011). Keynes’s Missing Axioms. SSRN Working Paper Series, 1841408: 1–33. URL http://ssrn.com/abstract=1841408.
    Keynes, J. M. (1973). The General Theory of Employment Interest and Money. The Collected Writings of John Maynard Keynes Vol. VII. London, Basingstoke: Macmillan.
    Tómasson, G., and Bezemer, D. J. (2010). What is the Source of Profit and Interest? A Classical Conundrum Reconsidered. MPRA Paper, 20557: 1–34.
    URL http://mpra.ub.uni-muenchen.de/20557/

    * See also ‘Mental messies and loose losers’

  7. Larry Motuz
    September 3, 2015 at 1:28 am

    Excellent post!

  8. September 3, 2015 at 3:39 pm

    Accepting Peter’s “mea culpa” as an apology for preferring his own interpretation of economics, and agreeing entirely with him on gratitude and its ethical burden, my problem with him has been Ken’s Keynesian one: his (and Franklin’s, and indeed almost everybody’s) difficulty in escaping from the modern observational understanding of complexity and plurality.

    From a mathematical point of view, a market is a variable as against a particular way of exchanging goods, i.e. the big advances were from specific Roman numerals to a few algorithmic (i.e. re-useable) Arab ones, and from arithmetic to algebra.

    From a conventional scientific point of view, Copernicus’s revolution was from earth-centred to sun-centred observation of the solar system. Here the big advance was Descartes’ invention of mathematical coordinates (free to be centred on anything), enabling Newton to plot two-dimensional graphs of three-dimensional space and navigators to plot courses from and to anywhere. Hence complex numbers and (from enumeration of dimensions), Newton’s calculus and Napier’s logarithms.

    Convention-bound scientists (perhaps under the influence of economists with ill-gotten gains to defend) have missed the scientific significance of two more recent revolutions. More than two hundred years ago scientists studying nervous activity discovered that electricity only flows continuously in a circuital path. More than three quarters of a century ago Shannon discovered that opening and closing such circuits performed logical operations (hence electronic computers and brains). Over half a century ago Shannon went on to show that the key to the scientific study of the infinite variety of meaning was not its marking off into species but the measurement of information capacity in Napier’s logarithmic units, wherein intended meaning of signals became distinguishable from random noise and recoverable by feedback of corrective information. By 1968 it was realised that such information had meaning at four levels: as symbols (data), as spaces whose content was variable, as spaces whose dimensionality (hence meaning) was variable and as logic instructions correctible at each of the previous three levels. A scientific language (Algol68) spelled out these levels in its grammar. The scientific understanding of control generalised from control of specific things to logic feedback circuits (PID servos) controlling errors: likened to steering (cybernetics) in 1948 but by 1968 including the position-fixing and look-aheads of navigation.

    The scientific significance of this is manifest not in the detail but in the four-fold architecture-level structure and information processing of brains and computers, whereby more understanding of human nature and its development is to be gained from the complex-number level complexity of Jungian/Myers-Briggs personality theory than from the Santa Fe type complexity of Franklin’s social “science” (where “complexity” is no more than Shannon’s measure of information capacity without the corrective feedbacks which were its goal).

    So, Peter’s “mea culpa” doesn’t extend to his neglect of information science. That’s what happens when Adam Smith’s Humean specialists measure themselves against such knowledge as they have laboriously acquired of their own patch, and become afraid – despite the reassurance and advice of friends – to explore the possibilities of simpler and more realistic ways of understanding themselves and the universe around them. Not knowing is some sort of defence when their employers blame them for not understanding.

    Well, it seems the human party is just about over. In gratitude the least we can do is help with the washing up. The big-wigs, meanwhile, need to get their heads round PID servos so politicians can understand the information feedbacks necessary for population self-control, and economists can understand Keynes’s efforts at unemployment control in similar light. But the big gap in understanding is of digital circuit logic, where the key to not circulating money internationally at interest is to stop circulating it, e.g. by living off personal credit.

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