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History and Economics

from Peter Radford

In the ongoing debate about the relevance or otherwise of history as it pertains to economics allow me to add:

Within the enormous pile of instances of history, most of which we have collectively forgotten, there are multitudes of experiences that illuminate any particular view we have of an economy, but none by themselves ‘explain’ economics. This is because they are reflections of relationships between people and the economy extant at the instance of experience. They are more context than subject. But that line blurs to make economics difficult.

Are these instances irrelevant? No. Are they economics? No. They shed light on a phenomenon. They are not the phenomenon itself.

Perhaps.

But this is not being inclusive. I have spoken only of human history. What about a more general history? How about that of the earth? There the instances of history are more relevant because the experience of the earth conforms more closely with the predictions of generalizations. It excludes the overlay of human activity and speak to things like geology and physics which are both less complex because they exclude the exigencies of life.

Am I contradicting myself?

No.

I am differentiating between human history which is more particularly the effects of human agency on both the environment and on other humans, and the deeper history of the environment itself. This latter is amenable to generalization in the mode of scientific theorizing, whereas the former is less tractable because of its inherent complexity. And I mean less tractable, not intractable.

The problem with economics is that it has forgotten that its raw material sits within the set of instances aggregated under the heading of human history. It is not explaining deeper timeless or physical laws, but those that sit halfway up the tree. Some aspects appear to be ‘laws’, others are simply the experiences of people at different points in time and space that may or may not be sufficiently similar for us to generalize.

Cultural, political, institutional, geographic, and many other constraints impinge on how people experience an economy. And since those people accumulate into the population that actually is the economy – it is their collective behavior that is the subject matter of economics – these constraints are vital to our theorizing.

Abstracting from all that muddle and then simply focusing on what rational, or near rational, people might do under certain conditions of scarcity – which is not on its face an unreasonable goal – is just one part of the subject. One part, not the whole.

Which allows historians and other who observe and interpret that muddle as it unfolds to add color to the subject of economics.

Take, for example Wendy Brown’s excellent interrogation of the relationship between neoliberalism and liberal democracy. She is pessimistic about the future for liberal democracy – I must add that she frequently almost sneers at the concept for being a mere anemic representation of the real thing – precisely because in our recent era we have allowed economic thinking to invade spaces where it does not belong.

Setting aside her biases, Brown’s critique is thus an attempt to understand the proper place for economics, with economics being defined narrowly in its neoclassical or Chicago School incarnation.

I have a lot of issues with the details of Brown’s analysis, but as an application of non-economic thinking to economics it is highly illuminating. It helps throw cold water onto the notion that the rational choice collection of ideas is of any relevance to a broader and richer social interpretation of what democracy actually is. Put conversely, Brown’s point is that the application of rational choice theory to social and political questions beyond that of allocation under conditions of scarcity within the realm of economic life is an error that has undermined the validity and potency of liberal democracy.

And, more to the point, that the undermining she refers to has been purposeful. In short economics has been used to invalidate democracy. Economics is a politically potent weapon. Which is a point I have made a few times myself.

Brown is not a historian but a political theorist, yet this example lends weight to the legitimacy of applying non-economic critiques to economics. It sets up, at the very least, a proper contest on the field of ideas that allows us to delimit those areas within which economic theory applies. And it allows us to test whether there are examples from within that muddle I referred to that are sufficiently regular and robust that they demand to be imported into the constructs of economics itself.

Alternatively it warns us against exporting economic theories, especially in their hyper-rational form, and applying them in the midst of the muddle that non-economists are far more adept at traversing, armed as they are with a more plural set of investigative tools.

All of which we know. Or rather we once knew. Forgetting is human, the trick is forget the right stuff, and not to remember that which we prefer to recall because it sits more comfortably with what we currently believe.

Sorting all that out is what historians do well. Rediscovering the past is hard work. It is a lot more difficult than developing rational choice theory for instance. The one has to deal with ambiguities or uncertainties and tease them apart. The other simply assumes them away.

A richer economics has room for both. It is after all about the behavior of human beings.

  1. blocke
    December 13, 2015 at 4:03 pm

    In the debate about economics and history, those who defend economics as a science, usually fall back on physics as an example. Historians are not attacking physics or other physical sciences but economics on the grounds that it is not a science. We are not choosing between economics as science and history but between economics as pseudo science and history. It makes the choice easier.

  2. December 13, 2015 at 4:16 pm

    “It is after all about the behavior of human beings.”

    https://rwer.wordpress.com/2015/12/13/history-and-economics/

    “Capitalism is the “best” system to date devised by mankind. As it is administrated, perhaps, is where the “flaw” is manifested. If capitalism used its Central Bank properly,that is for the betterment of the common good, with equality and justice for all, capitalism would be the best ways and means to help “form a more perfect union….”,(?)(Pontifical Council?).
    SOLUTION.
    Create an honest Central Bank that shall fund-
    ““We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defense, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity,…””
    When a honest Central Bank functions for the betterment of the community in a capitalistic economy, it will be the greatest system ever devised by mankind.

    FREE DOWNLOAD: “The Role Of Money”
    ”http://archive.org/…/role…/roleofmoney032861mbp_djvu.txt

    THE KISS SOLUTION TO DECREASE INEQUALITY GAPS, POVERTY, and NATIONAL DEBT.

    ONE SENTENCE -A CAPITALISTIC ECONOMY WITH A HONEST CENTRAL BANK.

    A BANK (GUARDIAN) THAT BORROWERS MONEY FROM ITS LAWFUL OWNERS, LENDS IT AND CHARGES INTEREST (TAX) TO SECURE AN INCOME STREAM TO TURN OVER TO CONGRESS TO USE FOR THE BETTERMENT OF ALL.

    “There never was an idea stated
    that woke men out of their stupid indifference
    but its originator was spoken of as a crank.”
    — Oliver Wendell Holmes, Sr.
    (1809-1894) American Poet
    .***Why not read and challenge a Noble Laureate for Physics and challenge ? ******Excerpt from http://en.wikipedia.org/wiki/Frederick_Soddy
    “In four books written from 1921 to 1934, Soddy carried on a “quixotic campaign for a radical restructuring of global monetary relationships”[this quote needs a citation], offering a perspective on economics rooted in physics—the laws of thermodynamics, in particular—and was “roundly dismissed as a crank”[this quote needs a citation]. While most of his proposals – “to abandon the gold standard, let international exchange rates float, use federal surpluses and deficits as macroeconomic policy tools that could counter cyclical trends, and establish bureaus of economic statistics (including a consumer price index) in order to facilitate this effort” – are now conventional practice, his critique of fractional-reserve banking still “remains outside the bounds of conventional wisdom”[this quote needs a citation]. Soddy wrote that financial debts grew exponentially at compound interest…”
    http://archive.org/stream/roleofmoney032861mbp/roleofmoney032861mbp_djvu.txt

  3. Alan
    December 13, 2015 at 6:55 pm

    Doesn’t “non-economic critiques to economics” beg the question: what is economics? Trying to understand any type of human behavior by “abstracting from all that muddle and then simply focusing on what rational, or near rational, people might do under certain conditions of scarcity” is an incoherent intellectual activity as it starts with a fundamental misunderstanding of what it is to be human. Neoclassical economics is a social science that begins by expunging the social, cultural and political (see Sahlins for discussion and an alternative economics). It manages to sustain itself by isolation, not hard to do when one is so deeply embedded in the circles of wealth and power. It does this, first, by a complete lack of engagement with other social sciences, except to disparage them as pre-scientific. And, second, by a complete lack of engagement with the humanities, namely philosophy and history, that allows it to mythologize its own disciplinary history (how else can one explain the bizarre claims of kinship to Adam Smith?) and to completely avoid any critical examination of the dubious epistemological basis of its own knowledge claims.

  4. December 13, 2015 at 8:48 pm

    History and the identity problem of economics
    Comment on ‘History and Economics’

    Peter Radford summarizes “Sorting all that out is what historians do well. Rediscovering the past is hard work. It is a lot more difficult than developing rational choice theory for instance. The one has to deal with ambiguities or uncertainties and tease them apart. The other simply assumes them away. A richer economics has room for both. It is after all about the behavior of human beings.”

    Economics is not at all about the behavior of human beings. Psychology and sociology is about the the behavior of human beings.* Economics is about the behavior of the economy.

    Economics is not a social science like sociology and not a natural science like physics but a system science.

    Neither orthodox nor heterodox economists got this point. Rational choice theory, for example, is not economics at all, it is a scaring example of amateur psychology.

    The blatant methodological blunder of Orthodoxy consists in taking the green cheese behavioral assumption of constrained optimization into the set of foundational propositions, aka axioms. Because of this the whole neoclassical axiom set is untenable and this explodes the whole theoretical superstructure.**

    Because economics is not a social science no behavioral assumption whatever must appear in the foundational propositions of economics (Hudík, 2011). The explanation for the manifest lack of success of Heterodoxy in replacing Orthodoxy is that it suffers from the social science delusion just as Orthodoxy.

    The second delusion is that history deals with plain facts while theory takes place in some Platonic parallel universe. Suffice it to remind oneself that historians could not establish beyond reasonable doubt in more than 2000 years whether Jesus existed or not. As a matter of fact, history consists largely of a pointless speculation about nonentities and nonevents. Not to forget that historians have devoted and still devote a considerable part of their ingenuity and energy on the production of ‘historical facts’.

    If Peter Radford means with “A richer economics has room for both” that waffling about utility maximization and waffling about the Medicis and medieval banking can coexist, then he is in full accordance with experience. If he means with richness more scientific knowledge about the actual economy, then he is certainly mistaken.

    It is a historical fact, that, taken as a whole, historical reality as uncovered/produced by historians is less real than theoretical reality as uncovered/produced by scientists.

    The role of history is to gather the facts and the data that are necessary for testing economic theories. To lecture about economic methodology is not the historian’s job.

    Egmont Kakarot-Handtke

    References
    Hudík, M. (2011). Why Economics is Not a Science of Behaviour. Journal of Economic Methodology, 18(2): 147–162.

    * See ‘PsySoc— the scourge of economics’
    http://axecorg.blogspot.de/2015/09/psysoc-scourge-of-economics.html
    ‘The Science-of-Man fallacy’
    http://axecorg.blogspot.de/2015/10/the-science-of-man-fallacy.html
    ‘From PsySoc to SysHum’
    http://axecorg.blogspot.de/2015/05/from-psysoc-to-syshum.html
    ** See ‘How economists became the scientific laughing stock’
    http://axecorg.blogspot.de/2015/12/how-economists-became-scientific.html

  5. December 14, 2015 at 5:45 am

    I wish I could say different but Peter you are like most economists. You miss the forest for the trees. Professional economists constructed a system, a system they named economics. I emphasize two things here. That this system, like all systems is constructed by agents, both human and nonhuman from a stream of experience that has no seams. Economists added the seams for the purposes of the system they were building. In other words, the profession of economics staked out a claim that certain experiences were “economic” and then proceeded to build elaborate theories and methods to “study” and “explain” the system it had itself constructed. Second this construction work also includes histories. Economists set about constructing histories that are consistent with the economic system they had already at least partially constructed. This work is difficult, often incomplete, and no stranger to failure. Brown spends considerable time outlining the mistakes she sees in the construction work of neoliberal politicians, philosophers, and economists and the dangers these pose to democratic political systems. But we should not forget that these neoliberalists are doing exactly the same about the socialist systems Brown seems to favor. Did those who constructed the system of professional economics intend that it replace or subvert any, some, or all democratic systems? Brown says yes for the neoliberals. About the others she says little. But in my view it seems there is little doubt that at least one of the professional economic systems, capitalism is indeed distrustful of democracy and willing to support political alternatives to democracy.

  6. Peretz
    December 14, 2015 at 8:10 am

    We are thus promoting a conception of Money seen as a lever of Growth and not as a predatory organ. This conception applies as much to the financial as the productive sector in as much as the former remains a necessity within a globalized economic system. Indeed, in what possible sense would the hyper-activity of economic growth be beneficial to the evolution and progress of humanity if were to destroy, rather than to consolidate, an integral part of Man’s evolutionary heritage along with his vital resources?

  7. Alan
    December 14, 2015 at 3:12 pm

    Doesn’t “non-economic critiques to economics” beg the question: what is economics? Trying to understand any type of human behavior by “abstracting from all that muddle and then simply focusing on what rational, or near rational, people might do under certain conditions of scarcity” is an incoherent intellectual activity as it starts with a fundamental misunderstanding of what it is to be human.  Neoclassical economics is a social science that begins by expunging the social (see Sahlins for discussion). It manages to sustain itself by isolation, not hard to do when one is so deeply embedded in the circles of wealth and power. It does this, first, by a complete lack of engagement with other social sciences, except to disparage them as pre-scientific. And, second, by a complete lack of engagement with the humanities, namely philosophy and history, that allows it to mythologize its own disciplinary history (how else can one explain the bizarre claims of kinship to Adam Smith?)  and to completely avoid any critical examination of the dubious epistemological basis of its own knowledge claims. 

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