A digression on the intellectual autarky of economics

Any sort of technical jargon tends to isolate its users intellectually, but the effect in economics seems exceptionally and unnecessarily severe. Then, too, it is well known that all specialists tend to overes­ timate the fraction of the proverbial elephant that their own gropings have discerned- but economists seem on the average to be unu­ sually oblivious to the existence of this sort of bias, and they respond rather weakly to the intellectual ideal of “seeing the problem whole.” We have no doubt that this defiantly autarkic stance is largely a con­ sequence of the extreme inflexibility of the abstractions employed in orthodox theory, and of undue reliance on the “as if” principle of methodology -reliance that sometimes comes down to saying, “Don’t bother me with facts.” The discipline seems to have an obses­ sive affection for its firs t-approximation answers to a number of questions, and proposals to make room for subsequent approxi­ mations are often treated as dire threats to these cherished inSights. This attitude certainly keeps many economists from engaging in useful dialogue about what those subsequent approximations should be, even with those who are quite prepared to concede that the first approximations of economic analysis have great explanato ry power. In our view, the key problem is that formal orthodoxy’s first­ approximation commitments to unbounded rationality and optimi­ zation are inherently inf1.exible. Thus, whatever their common sense may lead them to concede in appreciative discussion, most econo­ mists simply do not know how to do formal theory in a more flexible style.

One consequence of this linguistic and conceptual isolation is that economics today is quite cut off from its sister social sciences. A number of research findings relevant to economics have accumulated over the years in psychology, sociology, and political science. But most economists do not pay a ttention, for example, to psychologists’ findings that individual choice under uncertainty follows principles quite different from those adduced in Bayes’ theorem and the von Neumann-Morgenstern utility axioms.2 Similarly, they have shown no interest in the findings of students of organizational behavior that have demonstrated that what is done within organizations is only loosely circumscribed by “technology. ” Nor have they made use of the abundant evidence on organizational decision- making processes that conflicts with the notion of maximization.

In analyzing the sources of governmental intervention in the economy, economists tend to wobble back and forth between two models. Sometimes economists try to rationalize governmental pro­ g rams as compensating for some market failure . At other times they see governmental policy as the outcome of a political game among self- interested players. Both of these perspectives were discussed in Chap ter 16 and were found wanting. Given the apparent importance of actual political machinery in  determining policy outcomes,  it would seem that study of the works of political scientists ought to be a central part of the education or self-education of economists who try to understand governmental action.4 For their p art, scholars in the other social sciences tend to take a relatively hostile view of eco­ nomic theory because they find it simply an unbelievable character­ ization of what is going on, inconsistent with what they themselves know. An alternative theory that is prima facie more consistent with what has been learned in the other social sciences, and that is plainly more open to elaborations and corrections from them, would greatly expand the range of knowledge that economists could tap. And ren­ dering the substance of economic models m ore believable would help make the case that social science knowledge in general, not merely knowledge relevant to t raditional economic questions, can be enhanced by the building and exploration of formal models.

Although there are important exceptions, dismal intellectual rela­tions are also the general rule along most of the frontiers that separate economics from research and practice in the natural sciences and the professions. Obviously, for example, nothing could more effectively isolate economists from what is going on in the study and practice of management than their conviction that, whatever it is, it is all (lias if”) optimizing-and they already know all about optimizing. Equi­ librium, similarly, is a concept that leads economists to dismiss the significance of other areas of inquiry . Th e problems of business pol­ icy, for example, hold little interest for investigators who are con-vinced from the start that properly calculated profits are always zero. In the directions of engineering and the natural sciences, the disci­ plinary boundary is well defined by the production set concept: whatever is on the far side of the production set concept belongs to other disciplines; everything on the .near side belongs to economics. In the absence of that wall, the opportunities for cultural interchange would be obvious. The situation is somewhat less oppressive on the frontier with law. In exchange for some help with the economic anal­ ysis of liability rules and other matters, economists have had the op­ portunity to deal with, for example, the fact that contracts are not always clear, not always costlessly enforced, not always written down. But there are still many areas in which cultural exchange has barely begun- for example, in areas of limited liability, bankruptcy, and corporate taxation.

It is noteworthy that, in every one of these areas, the evolutionary viewpoint supplies an immediate argument as to why the area should be one of concern to economists. A significant advantage of adopting an evolutionary theory, we suggest, is that it would be a step toward freer trade in ideas .

Source: Nelson Richard R., Winter Sidney G. (1985), An Evolutionary Theory of Economic Change, Belknap Press: An Imprint of Harvard University Press.

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