Economics is Not a Natural Science

With a great deal of editorial guidance from John Brockman, I’ve just posted my first Edge.org essay, Economics is not a Natural Science.

We must stop perpetuating the fiction that existence itself is dictated by the immutable laws of economics. These so-called laws are, in actuality, the economic mechanisms of 13th Century monarchs. Some of us analyzing digital culture and its impact on business must reveal economics as the artificial construction it really is. Although it may be subjected to the scientific method and mathematical scrutiny, it is not a natural science; it is game theory, with a set of underlying assumptions that have little to do with anything resembling genetics, neurology, evolution, or natural systems.

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Posted on 11 August '09 by Douglas, under Uncategorized.

10 Comments to “Economics is Not a Natural Science”

#1 Posted by Peter (11.08.09 at 21:52 )

Your essay brought together a lot of themes that seem to me to make up the history of cybernetics. For starters, your assertion that economics is not a natural science seems a restatement of Herbert Simon’s idea that many sciences, including economics, are sciences of the artificial, and are characteristically different from natural sciences. Simon, though, was precisely one of those who applied game theory and other trans-disciplinary systems to economics.

You also made me want to argue that cybernetics is (or at least was in the middle of the 20th century) essentially a discourse which allowed scientists in a variety of disciplines to legitimately borrow concepts and principles from other disciplines, often in ways that don’t seem to hold up to outside analysis. Lily Kay’s book Who Wrote the Book of Life? is a history of genetics as an information science in which Kay argues that the idea that genes are information rests on a misunderstanding of information theory but has nonetheless driven much of the discipline of genetics. The parallel history for economics is Philip Mirowski’s Machine Dreams, which is largely an attack on the dominance of game theory and rational choice theory in economics and an argument that economics has drawn on physics and computer science as metaphors at the expense of its focus on the study of real people. (Mirowski’s earlier book, More Heat Than Light, apparently does the same thing for 19th century economics, arguing that it drew on thermodynamics.)

And while I’m in book-recommending mode, Fred Turner’s book From Counterculture to Cyberculture is kind of a cultural history of this same phenomenon of the currency and interdisciplinary of cybernetics, focusing on the counterculture and Stewart Brand rather than on science. What really struck me about it was that in the introduction Turner seemed to share some of his subjects techno-utopianism, to believe that these people, and their organizations like the GBN, really had changed the world. At the end of the book, though, he seems much more open to the possibility that the story of Brand and his friends is one of cooptation, of embracing the existing capitalist system and making computer systems and business models for businesses rather than for people.

#2 Posted by Douglas (12.08.09 at 21:16 )

Turner’s book is fantastic, actually. It helped me sort out a lot of issues I had been wrestling with about just what happened, and how big Stewart Brand’s influence had been. And I agree about the ending, which left me with the sense that it had all just become grist for the corporate mill.

And I have to admit I’ve been just as guilty of stringing biological metaphors to cultural phenomena. Not quite as dangerously, perhaps, because I didn’t look at the economy this way. It’s really a writerly thing more than a scholarly thing – the use of metaphor to help describe something.

Except for Media Virus, though, where I attempted to show that culture had become truly organismic, I kept reminding readers that I was using metaphors, not trying to prove a genuine scientific relationship.

Where it gets truly nuts, of course, is with stuff like The Secret or What the Bleep – which just bastardize everything.

#3 Posted by mason (13.08.09 at 10:24 )

Honey, you know i love it when you get writerly.
You can deconstruct my lingerie any day.
Just like Roland Barthes in diamonds
I’ll get back in the box if that’s what you say
Handy Dandy….

http://www.youtube.com/watch?v=FrEHyK8UrEs

#4 Posted by Brandon Heckman (13.08.09 at 15:06 )

Great article! I’m really thrilled to see increasing criticisms of our culture’s unquestioned assumptions/first principals entering the public discourse. Your insights and voice are a welcome addition, so far as I’m concerned, to the Sam Harrises, etc., of the world. I’m particularly pleased that you drew some parallels between our adherence to assumptions about economic “truths” and our adherence to assumptions about religious “truths.”

I work in the financial sector. I entered it somewhat accidentally–I was educated in the fine arts (painting) and philosophy, but when I entered adulthood/TheMarketplace I discovered that temping more reliably paid the bills and put meat on my bones. I ended up temping for a financial company (now part of BofA) and impressing the right people; I was groomed; 10 years later, I’m a well-respected bean counter.

I have not sat peacefully in my role–for numerous reasons, ethical and philosophical. The one that’s bugged me the most consistently, though, is the zealousness with which folks in my industry cling to their models and presumptions. I grew up in a Baptist/evangelical household and when I really got my feet in my first banking job I saw very clear parallels between the psychotic eagerness to hold as truth the Evangelical community’s models of the physical world and of human behavior and the equally vigorous eagerness financiers and economics regard the application of their own models. These people forget–readily and willfully–that their models are models and delude themselves into thinking that the development of a new financial instrument is not a human invention but a discovery of an exciting new expression of the greater order.

When I tried to confront my peers and supervisors in 2005 with my concerns about what I thought at the time were our industry’s unsound presumptions about the nature of personal property values and about the supposedly immutable behaviors of mortgagees, I was resoundingly ridiculed for my concern. My fear was rooted not in economic theory but just in good sense–I saw that a great number of my friends and their friends and family were being issued mortgages they simply could not and could never afford, all based on what I then and still deemed to be asinine presumptions about ever increasing propertyv values and income levels–and from that conducted some research that concluded that my industry was in a much higher risk position than its models were leading it to believe. But my peers and superiors veered (then as now) away from empiricism and directly toward their presumptions. For them, their models transcend fact and approach infallibility.

It astounds me that we as a species can’t learn–after thousands of years of recorded history–that incredulity is the correct first response to zealous behavior.

Thank you, again, for your excellent contributions to the public discourse and to our human inquiry.

#5 Posted by Abe (13.08.09 at 16:13 )

Hey Doug, good stuff, a little bit like a 21st century version of Veblen’s classic 1898 essay “Why is Economics not an Evolutionary Science?” which 111 years later is still a very valid question…

Definitely would recommend Philip Mirowski’s _More Heat than Light_ and _Machine Dreams: Economics Becomes a Cyborg Science_ for people who want to dig deeper into this thesis, he digs WAY deep into how economics was built up as a mathematical universe completely divorced from the real world.

#6 Posted by ABM (13.08.09 at 18:18 )

A publication put out by a “club” of people who declare themselves “some of the most interesting minds in the world,” as appears to be the case with Edge, does not inspire much hope for overcoming our “relentlessly top-down society.” The path to a better society calls for resistance to “tops” associated with all manner of elitists, not just market-reliant plutocrat elitists.

#7 Posted by Brian (13.08.09 at 19:29 )

I think the point can be more pointed — “the market” (a way of organizing social life to produce profits to accumulate wealth) is A SYSTEM OF POWER, a socially-constructed system of inequality. Adopting a historical-sociocultural perspective necessarily deconstructs the reification of the market and exposes attempts to naturalize it as plutocracy protection practices. Such a viewpoint also leads to seeing the corporation less as the key to the problem than as one tool the plutocrats have developed and used to create, instantiate, and extend their power. But the ultimate form of that power is deeper — it’s the basic requirement that “money makes money” and the ability to spread commodification (i.e., bringing things under the logic of profit practices), by force, persuasion, deception, or ignorance, to every existing and newly-created aspect of society, life, and self.

Aside: maybe I missed the point, but Gregory Bateson died in 1980, and therefore was not around to consult the world’s biggest corporations on the web economy.

#8 Posted by Douglas (14.08.09 at 13:53 )

I don’t know that the people participating in discussions on the Edge have declared anything about themselves. Does participation in a conversation constitute tacit acceptance of everything someone else says about it? That’d make it really hard to say anything, anywhere.

I have to get back to my Veblen. Talk about one of the most interesting minds in the world. He really counts as one. I haven’t touched Mirowski, and have been scolded about that before. Will do.

#9 Posted by gebloom (14.08.09 at 16:49 )

I read Life, Inc.,and the Edge lecture, and felt that I was enlightened regarding the history of the corporation, the modern banking system, and the possibilities to circumvent those systems via local economies. That said, it does rub me the wrong way when you take potshots at the likes of Bateson and (to a lesser degree, Gladwell). I get the feeling that you know little about Bateson (who, as someone noted, died on July 4, 1980), and never read Gladwell’s Blink. Bateson called Marxism and capitalism equally monstrous. You could look it up. He was no shill, and never cashed in. In Blink, Gladwell is not talking about reptilian brain function. He’s stating that we can and do use our vast acquired knowledge, accurately, and sometimes inaccurately, very quickly. The subconscious is not the same as reptilian brain function.

#10 Posted by Peter (18.08.09 at 21:22 )

I forgot to recommend some science and technology studies stuff on the performativity of economics, which parallels this essay more closely than the stuff I did recommend. If you haven’t seen it, the edited volume Do Economists Make Markets?: On the Performativity of Economics seems like the place to start.