Economics as a discipline has always been considered both a science and an art: an investigation into how the economic world works and an associated set of recipes for shaping it to work better in some way or other, so carrying a moral or normative element. Mary S. Morgan (2012), 400.
Abstract
Economics is not simply about representing reality; it is also about shaping it, an approach encapsulated in Donald MacKenzie’s aphorism that economics is best conceived as an “engine, not as a camera” (MacKenzie and Millo (Am J Sociol 109(1):107–145, 2003). The making and application of economic theories and models contribute actively and intentionally towards the making of our social world, by encouraging, guiding and legitimizing actions and decisions, or discouraging others, and by steering them in certain directions. It follows that economists do not simply draw maps of the economic territory within their compass: they are not straightforwardly the cartographers of the economy, and cannot be seen as the disinterested observers that they commonly represent themselves to be, and indeed are often thought of as. Their theoretical work has or aims at practical consequences for the economy, and indeed for society at large, and their interests and influence are thus by no means confined to academia alone. This article calls for a discussion of the ethical responsibilities of economists, and of economics, and challenges the discipline properly to assume those responsibilities; and it concludes by considering the key questions—what makes a ‘good’ economic model; and what criteria should be used to distinguish the good models, and the ‘good ways’ of handling models and their results, from the bad ones. As far as epistemology, the methodology of research programmes and the relation of theory and (social) practice are concerned, the insights of mainly von Hayek (Br J Philos Sci 6(23):209–225, 1955, The pretence of knowledge. Lecture to the memory of Alfred Nobel, 1974; Individualism and economic order, University of Chicago Press, Chicago, pp 33–56, 1980a; Individualism and economic order, University of Chicago Press, Chicago, pp 57–76, 1980b; The theory of complex phenomena. Readings in the philosophy of social science, MIT Press, Cambridge, 1994) and Popper (e.g. The myth of the framework: in defence of science and rationality, Routledge, New York 1994a; Models, instruments, and truth. The status of the rationality principle in the social sciences, pp 154–184, 1994b) provide the background of my discussion of the mentioned issues.
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Notes
The, in my view, best account of the very basis of the human condition is Giovanni Pico della Mirandola's (1463–1494) Oratio de dignitate homini. This seminal work was first published posthumously in 1496, shortly after the untimely death of this great Renaissance thinker, by his nephew Gian Francesco della Mirandola. For a modern translation and commentary see: Pico della Mirandola (2012).
Author’s translation. The original phrase reads as follows: “Aus so krummem Holze, als woraus der Mensch gemacht ist, kann nichts Gerades gezimmert werden”.
It should be noted, once again, that John Maynard Keynes held quite hostile views, and for good reasons, I think, towards attempts to turn economics “into a pseudo-natural-science”. Instead, to him, economics is much more “a branch of logic, a way of thinking” (Keynes in a letter to Oxford economist Roy Harrod, 4 July 1938). That is, the natural sciences make no good archetype or paradigm for economics, since the “pseudo-analogy with the physical sciences leads directly counter to the habit of mind which is most important for an economist proper to acquire. I also want to emphasise strongly the point about economics being a moral science. (…) it deals with introspection and with values. I might have added that it deals with motives, expectations, psychological uncertainties. One has to be constantly on guard against treating the material as constant and homogeneous in the same way that the material of the other sciences, in spite of its complexity, is constant and homogeneous” (Keynes to Harrod, letter of 10 July 1938).
I subscribe to this view with great enthusiasm and deep conviction, which I hope to elaborate in the following pages.
Of course, things are not as simple as Greenspan wants to make his readers believe. There were a significant number of eminent economists and political commentators who insistently voiced worries from early on, and Greenspan’s account, which in this respect is onesided and objectionably generalising, almost instantly met with critical responses: see Katz (2014, pp. 179–181).
It is as well to remember Keynes (1965, p. 383) famous saying, at the end of his General Theory: “(…) the ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist.”
To some extent I regard models as an expression of what Hans Vaihinger once called the “Philosophy of the As-If”. For the probably still unmatched account of the philosophy of as-if see Vaihinger (1922).
For a brief introductory summary of the origins and subsequent development of the IS/LM-model see Young (2010), pp. 348–355.
This is probably easier for speakers of German. In German, the word “Modell” can be understood on the one hand as “Abbild” (good translations would be map, picture, image or copy), and secondly as “Vorbild” (blueprint, draft, expectation, images which are going to be realised in practice).
So the title of Hayek’s (1974) Nobel-lecture.
For a sound analysis of the concept of economic action—and of action as the supposedly fundamental concept in economics—see Collingwood (1925).
Jonathan Schlefer makes a good point when saying: “Economist’s insistence that their discipline is like physics sounds a little nervous. Did you ever hear a physicist boast to the world that that physics is like economics?” (Schlefer 2012, p. 24).
Quite a few decades earlier Friedrich August von Hayek expressed a similar amazement: “To the physicist it often seems puzzling why the economist should bother to formulate those equations although admittedly he sees no chance of determining the numerical values of the parameters which would enable him to derive from them the values of the individual magnitudes. Even many economists seem loath to admit that those systems of equations are not a step toward specific predictions of individual events but the final results of their theoretical efforts, (…)” (Hayek 1994, p. 63).
It should be noted, however, that there are alternative and more sophisticated mechanism definitions in social philosophy and social sciences well worth considering and discussing in economics.
For a concise and critical overview see: Hedström and Ylikoski (2010), esp. p. 51.
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Acknowledgments
I wish to thank the three anonymous referees for their thorough and thoughtful reports, the editors of this Special Issue for the excellent cooperation and constant encouragement, and James Forder, Henry Hardy and Mark Pottle for their advice and critical comments.
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Groß, S.W. The power of “mapping the territory”. Why economists should become more aware of the performativity of their models. J Bus Econ 84, 1237–1259 (2014). https://doi.org/10.1007/s11573-014-0746-0
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DOI: https://doi.org/10.1007/s11573-014-0746-0