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The Crucial Role of Reactivity in Economic Science

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Book cover Economic Objects and the Objects of Economics

Part of the book series: Virtues and Economics ((VIEC,volume 3))

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Abstract

Many academic economists take it as a matter of course that economics should become a natural science. Such a characterization misses an essential aspect of a social science, namely reactivity, i.e. human beings systematically respond to economic data, and in particular to interventions by economic policy, in a foreseeable way. To illustrate this finding, the paper uses examples from different fields: happiness policy, world heritage policy, and science policy. Reactivity requires a different policy approach from governments claiming to maximize social welfare in the form of happiness. What is needed are basic constitutional provisions, or “rules of the game”, decided behind the veil of ignorance. Moral considerations must enter when the basic rules setting the way in which individuals interact are determined. Moral aspects are also indispensable as guidance to individuals when they take decisions within these rules. It is most unlikely that intelligent learning machines can fulfill this task in an acceptable manner.

Thanks are due to Margit Osterloh, Arjo Klamer , Armin Steuernagel, Christian Ulbrich, Jonas Friedrich, Peter Róna , and László Zsolnai for helpful remarks.

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Notes

  1. 1.

    There are, of course exceptions. A notable and most recent one is by Ariel Rubinstein (2017), himself a leading and highly mathematical game theoretician. He strongly attacks the over-mathematics in economics both with respect to educating students and undertaking research. It should be immediately added that such a critique has a chance to be published in a top academic journal only by a mathematical scholar, i.e. outsiders would be considered to be incompetent to judge.

  2. 2.

    The emphasis is on the reactions by human beings. This is different from the observer effect in physics proposing that observing a situation or phenomenon necessarily changes that phenomenon. For example, it is impossible to see an object without light hitting the object, and causing it to emit light. The object experiences a change.

  3. 3.

    Meteorologists do not always correctly predict the weather because this is extremely difficult to do. Moreover, at least local weather forecasters are sometimes pressured by interest groups (tourist and sports industry) to predict better weather than they objectively believe to be true in order not to prevent people to visit leisure resorts and sports events. It may even be that the weather is influenced when a lot of people are induced to use their cars and therewith pollute the environment. The same view is expressed by Róna (2017).

  4. 4.

    For instance, persons in good health are happier, but happy people are less prone to fall prey to contagious diseases.

  5. 5.

    Though there are still people who believe that persons living in developing countries are happier than those in developed ones, presumably because they are thought to be less affected by stress. All serious empirical evidence rejects this view.

  6. 6.

    These measures are most doubtful and should, in fact, not be used. See e.g. the International Mathematical Union (2014), or the extensive discussion in Osterloh and Frey (2015).

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Authors and Affiliations

  1. University of Basel, Basel, Switzerland

    Bruno S. Frey

  2. CREMA–Center for Research in Economics, Management and the Arts, Zurich, Switzerland

    Bruno S. Frey

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  1. Bruno S. Frey
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Correspondence to Bruno S. Frey .

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Editors and Affiliations

  1. Blackfriars Hall, University of Oxford, St. Giles, Oxford, United Kingdom

    Peter Róna

  2. Business Ethics Center, Corvinus University of Budapest, Budapest, Hungary

    László Zsolnai

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Frey, B.S. (2018). The Crucial Role of Reactivity in Economic Science. In: Róna, P., Zsolnai, L. (eds) Economic Objects and the Objects of Economics. Virtues and Economics, vol 3. Springer, Cham. https://doi.org/10.1007/978-3-319-94529-3_10

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