Defending economics from the anthropologists

Well, one anthropologist anyway. I’m normally the first person to admit that economics would benefit from incorporating findings from other fields into its understanding of human behaviour, be that from anthropology, biology, evolutionary psychology or whatever other field might yield useful insight. After all, that is one of my focuses for this blog. But sometimes the caricatures of economics become too much to bear. So for this post, I want to take a moment to defend economics.

In a post over at The Primate Diaries, Eric Michael Johnson argues that few economists will admit that economics is inextricably tied to moral behaviour. I’m not sure if Johnson has set foot in an economics seminar before, or read the debates on economic blogs, but morality is often at the forefront of economics debates (even if it’s not called “morality”). Adam Smith, who he picks on at one point for getting hunter-gatherer economics wrong, wrote a whole book on morality. It’s hardly a back seat consideration.

But rather than focus on the morality question, I want to look at Johnson’s framing of the state of economics. There’s one paragraph toward the end of the post where Johnson lets loose in particular, so I’ll pull that paragraph apart one piece at a time. First:

Social scientists are increasingly reaching the conclusion that economics is a field in disarray.

So what is the benchmark for disarray? Johnson provides two potential reasons:

Not only is the economic outcome so often in conflict with our most celebrated moral principles, …

Following Johnson’s link, it seems that economics is in disarray because the Pope is concerned about our economic system. So economics in disarray because the subject of study isn’t behaving in the way that someone wants?

Finishing Johnson’s sentence:

… leading economists can’t even agree on the core assumptions in their field.

The article that Johnson links to is a piece in Evolution: This View of Life by Terence Burnham, who points to disagreement between neoclassical and behavioural economists about their assumptions of human behaviour. To illustrate, Burnham notes the dispute between two University of Chicago economists, Richard Thaler on the behavioural economics side and Eugene Fama on the neoclassical. Fama doesn’t think that some of Thaler’s articles should have been published (who hasn’t thought that about an article before?) whereas Thaler has picked on Fama for being “the only guy on earth who doesn’t think there was a bubble in Nasdaq in 2000.”

But how much disagreement is a sign of a field in disarray? Take the bitter struggle over the origins of kindness between groups of evolutionary biologists. Or Dawkins versus Gould. Or David Sloan Wilson and E.O. Wilson against most evolutionary biologists on group selection? It seems sociobiology is in disarray too.

Turning to Johnson’s own field, cultural and evolutionary anthropologists still debate about the blank slate picture of human nature. Napoleon Chagnon’s recent book, Noble Savages, triggered another round of battles between anthropologists about his fieldwork with the Yanomamö, with Marshall Sahlins resigning from the National Academy of Sciences following Chagnon’s election as a member. At least Thaler and Fama still work at the same university.

And of course, Fama and Thaler have much common ground. Even Thaler thinks that the selfish, rational agent model is the best theory of economic behaviour available. The question is when is the right time to use that abstraction, and when not.

As a a result, I’ll accept that economics is in disarray if evolutionary biology, sociobiology and anthropology are in disarray too.

Moving to Johnson’s next sentence,

Despite the millions of dollars that go into economic think tanks and the construction of complicated financial models we can’t even come to a consensus on whether government spending helps or hurts an economy in recession.

Actually, there’s a surprising level of consensus. A poll of Chicago Booth’s Economic Experts Panel found 80 per cent agreed unemployment was lower in 2010 than it would have been without the stimulus bill (and only 86 per cent responded, making it 2 per cent uncertain and 4 per cent disagreeing). There was less (but still moderate) agreement about the long-term costs and benefits once future tax changes and the like were taken into account, but how can there be consensus when you don’t even know what form those future tax and policy changes will take? So who are these disagreeing people who Johnson refers to? Follow the link and you find its Republicans and Democrats.

To be fair to Johnson, there is a lot that economists do not know about stimulus. In an update to his post, he quotes Doyne Farmer, Duncan Foley, Olivier Blanchard and friends on that point. But it’s hardly surprising. We have a highly complex system involving millions of people and firms, complex networks and masses of complex regulation and bureaucracy, together with an astounding range of ways in which stimulus might be implemented. In Australia, one of the prime forms of stimulus after the financial crisis was installation of insulation bats in house roofs. How is that going to play out in your economic model? (So far, the result seems to be a boost to employment in bat installation, more energy efficient houses, house fires, fraud, the occasional electrocution, a couple of government inquiries and continuing debate about whether it was worth it.)

All up, Johnson’s caricatures distract potential supporters of his more important argument. The paragraph I pulled apart could have simply been omitted from Johnson’s post and other statements tweaked, and his central argument would not have been any weaker (and we might be responding to and talking about that instead of the caricature).

Alternatively, Johnson could have acknowledged that economics is a huge field with many economists working on fairness, cooperation and altruism. He could have noted that most economists are actually concerned with “how people behave in the real world” (any popular economics book gives a taste of that) and that morality is often a central consideration in economic thought. Even Alan Greenspan influencer Ayn Rand, who Johnson has targeted before, wrote Atlas Shrugged as part of her work on moral philosophy. And then Johnson could have said that research from anthropology shows that these conceptions of morality are wrong or under-utilised, and that anthropology could provide evidence to resolve disagreements within the field. Not as exciting or politically charged, but more likely to allow focus on the core argument than the burning straw man.

Another alternative would be to get a deeper understanding of which parts of the economics profession deserve to be set on fire and address them head on. There are plenty of potential targets, from the confidence with which economic forecasts are made, to the abuse of complex statistical techniques in econometric analysis, to the question of when it is appropriate to ease the assumption of humans as rational animals in analysis of financial markets. Even drawing a distinction between macro and microeconomics would help (each have their own problems).

A more focussed approach would have the benefit of not turning off those who might learn from Johnson, and give a better picture of what Johnson’s conception of morality would actually add to economics. Because the question I have at the end of Johnson’s post is, “what exactly would change if economists adopted Johnson’s conception of morality in their analysis?” I expect it’s not determining the effects of economic stimulus.

*In the comments to Johnson’s post, Chris Auld makes some good points.