Who will invade economics?
Justin Fox has asked whether the age of economic imperialism is coming to an end and whether economics may be vulnerable to imperialism itself:
Lately, though, I’ve found myself talking to and reading a little of the work of sociologists and political scientists, and coming away impressed with how adept they are in quantitative methods, how knowledgeable they are about economics, and how willing they are to challenge economic orthodoxy. …
Even anthropology, that most downtrodden of the social sciences, has been encroaching on economists’ turf. When a top executive at the world’s largest asset manager (Peter Fisher of BlackRock) lists Debt: The First 5,000 Years by anthropologist (and Occupy Wall Streeter) David Graeber as one of his top reads of 2012, you know something’s going on.
What’s going on is probably not the incipient overthrow of economics. As described by Lazear, its imperialistic power has in large part been the result of its uniformity of approach over the past half century. (That, and economists have actually been right about some things.) As best I can tell, there is no such methodological consensus in sociology, political science, anthropology, or history at the moment. But the economists’ consensus is wobblier than it’s been in a while (especially in macro), there is ample motive for insurrection, and the non-economists’ stores of intellectual ammunition are growing. Economics may well have reached the stage of imperial overstretch. Interesting times lie ahead.
As you might expect me to say, evolutionary biology will be part of the move into the economists’ turf. After forty years of evolutionary biology imperialism, starting in the sociobiology days of the 1970s, evolutionary biology is vital to much of psychology and anthropology. And the potential to reshape economics remains significant. My predictions of the areas of greatest effect are as follows:
Evolutionary psychology will form the bedrock on which behavioural economics sits, and will provide the basis for reconciling rational choice and behavioural economics approaches to decision making.
As economists become increasingly interested in the foundations of our economic preferences, such as risk or time preference, they will turn to the work already being done in the area (see my evolutionary biology and economics reading list for some examples).
Many areas of economic imperialism, such as Becker’s work on the economics of the family and crime, will be updated from an evolutionary perspective. Economics added much to these fields, but the work was incomplete.
Biology will be a source of the understanding of the economy as a complex system. This might include the study of the financial system as an ecosystem or broader consideration of when competition leads to positive outcomes.
Economic policy debates will gain more of an evolutionary flavour. The Evolution Institute is a part of that movement.
In addition, many economists underestimate how many tools and ideas used in economics are from other fields. I continue to run into economists who label John Maynard Smith as an economist, and who don’t consider how many of their statistical and mathematical tools were developed and used outside of economics. This is reflected in Sveriges Riksbank Prizes in Economic Sciences in Memory of Alfred Nobel going to psychologists, political scientists and mathematicians. If anything, the skill of economists is recognising good tools and using them, with much economic imperialism the adoption of tools developed by others and claiming them as their own. But is an economist’s use of game theoretic tools developed by John Maynard Smith classed as economics or evolutionary biology? If an economist uses a tool from a field outside of economics in another field outside of economics, is it economics simply because the user labels themselves as an economist? (I often ask this last question about some of my work.)
As an aside, Fox credits the success of economic imperialism on the scientific foundations of economics, and quotes a passage from Edward Lazear’s 2002 QJE article on economic imperialism:
Economics is scientific; it follows the scientific method of stating a formal refutable theory, testing theory, and revising the theory based on the evidence. Economics succeeds where other social scientists fail because economists are willing to abstract.
Lazear’s description is more normative than positive, particularly in macroeconomics. What was the last macroeconomic theory that was generally rejected through the economics profession on the basis of data? (Or to make it more personal, when was the last time data changed your mind about an economic theory?) Fox hints at this problem, noting the multiple perspectives on the one-off global financial crisis, but the issue is broader. Ask a group of economists what causes business cycles. The consensus will be weak. The lack of consensus is not universal in economics, but where a divide exists, particularly on ideological lines, it is rarely resolved through the scientific method.