Econ Art: Divorcing Art from Science in Modern Economics

ECON-ART Divorcing Art from Science in Modern Economics

Rick Szostak

Pluto

P

Press

LONDON • STERLING, VIRGINIA

First published 1999 by Pluto Press 345 Archway Road, London N6 5AA and 22883 Quicksilver Drive, Sterling, VA 20166–2012, USA Copyright © Rick Szostak 1999 The right of Rick Szostak to be identified as the author of this work has been asserted by him in accordance with the Copyright, Designs and Patents Act 1988. British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library ISBN 0 7453 1447 3 hbk Library of Congress Cataloging in Publication Data Szostak, Rick, 1959– Econ-art : divorcing art from science in modern economics / Rick Szostak. p. cm. Includes bibliographical references and index. ISBN 0–7453–1447–3 (hardcover) 1. Economics––Philosophy. 2. Economics––Methodology. I. Title. HB72.S96 1999 330'.01––dc21 98-51471 CIP

Designed and produced for Pluto Press by Chase Production Services, Chadlington, OX7 3LN Typeset by Gawcott Typesetting Services, Buckingham Printed in the EC by Athenaeum Press, Gateshead

Contents

Acknowledgements

ix

Preface

xi

Chapter One Art and Science 1.1 Unveiling Econ-Art 1.2 The Question of Purpose 1.3 The Purpose of Art 1.4 Art versus Science 1.5 Science versus Art 1.6 Art and the Act of Insight 1.7 A Micro View 1.8 Culture and Economics

1 1 3 6 8 13 16 17 19

Chapter Two Surrealism 2.1 Modern Art 2.2 The Roots of Surrealism 2.3 Surrealism 2.4 Surrealism in Econ-Art 2.5 Who Cares About Reality? 2.6 Toward a Better World? 2.7 Primitive Man 2.8 An Orderly World 2.9 The Quest for Understanding 2.10 An Antidote to Nationalism 2.11 Suspicion of Authority

24 24 24 25 28 30 35 39 41 44 47 48

Chapter Three Cubism and More 3.1 Cubism 3.2 The Cubist View of Time 3.3 Technological Incursions 3.4 Return to the Classics

51 51 53 55 56

vi

3.5 3.6 3.7 3.8 3.9

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A Brief Look Back Abstract and Non-Objective Art Self-Reference in Econ-Art The Pursuit of Linearity The Econ-Art Manifesto

58 59 63 65 68

Chapter Four Mathematics as Art 4.1 The Deification of Technique 4.2 Maths as Art 4.3 Automatic Writing 4.4 Maths as Science? 4.5 Yet Another Perversion 4.6 There Exists a Model 4.7 Maths is Easy 4.8 Maths is Unreal 4.9 Mathematics versus Science 4.10 An Example: General Equilibrium 4.11 A Second Example: Econometrics

71 71 75 77 79 86 86 88 89 90 92 96

Chapter Five Ideology 5.1 Ideology in Art 5.2 Ideology in Econ-Art 5.3 Power 5.4 Ideology and the Great Depression

102 102 106 112 114

Chapter Six Econ-Art/Econ-Science 6.1 The Existence of Econ-Art 6.2 Econ-Art/Econ-Science 6.3 The Quest for Econ-Science 6.4 A Lesser Purpose 6.5 Artistic Detachment 6.6 The Existence of Econ-Science

118 118 118 120 123 124 128

Chapter Seven Improving Econ-Science 7.1 Improving Econ-Science 7.2 Reality 7.3 Truth versus Beauty 7.4 Philosophy of Science 7.5 Pancritical Rationalism 7.6 Truth 7.7 Rhetoric 7.8 The Big Picture 7.9 Methodological Diversity

131 131 132 137 141 143 144 146 149 154

CONTENTS

7.10 7.11 7.12 7.13 7.14

A Concrete Example Theoretical Diversity Intellectual Honesty Interdisciplinarity The Role of the Critic

vii

160 160 163 166 169

Chapter Eight The Future of Econ-Science 8.1 A Paradigm Shift? 8.2 Normal versus Revolutionary Science 8.3 Putting Equilibrium in its Place 8.4 Postmodernism 8.5 We Eat Our Young 8.6 But thou economic history, though thou be little among the thousands of econ … 8.7 Preaching What I Practise 8.8 The Survey of Economists 8.9 Rules of the Game 8.10 What of Econ-Art?

171 171 177 179 180 181

Notes References Index

203 235 249

185 188 196 199 202

Acknowledgements

The idea of a treatise on economics as art had occurred to me as early as graduate school. Nevertheless, it was only while on sabbatical in the congenial atmosphere of the University of New South Wales, where I had the good fortune to interact with many scholars with a keen interest in methodological issues, that I began work in earnest. I remember in particular a lengthy lunchtime conversation with Steve Gregory and Alex Blair which encouraged me to focus my energy on this project. Over the next months, a number of scholars gave me further advice and encouragement, most notably Craig Freedman, Frank Barry, John Perkins, Peter Kriesler and George Argyrous. Craig and Frank in particular gave copious commentary on the emerging manuscript. And I would like to thank here many many others who, while aiding Econ-Art only tangentially, made my stay at New South Wales so intellectually fulfilling. John Lodewijks encouraged me to submit a paper to the History of Economics Review, and gave me considerable editorial advice. I thank him and the History of Economic Thought Society of Australia for permission to reproduce herein ideas contained in that article, ‘The History of Art and the Art in Economics’. Returning to North America, I was fortunate to find several more scholars willing to read all or parts of the manuscript, and provide further advice: Henry Van Egteren, Gregory Dow, Robin Lindsey, Morris Altman and Charles Nunn. Denise Young and David Ryan provided very useful critiques of parts of Chapter 4. Warren Samuels forwarded much useful advice and commentary. I also benefited greatly from anonymous commentary. Two art historians, Brian Foss and Bente Roed, read most of the manuscript. They gave a great deal of advice, and saved me from a couple of egregious errors. I thank them for their forbearance as well as their counsel.

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Charleen Borlase and Charlene Hill typed much of the manuscript. I thank them for their diligence, their patience and their disposition. Anne Beech and her colleagues at Pluto Press have been a pleasure to deal with. I have benefited greatly from the counsel of others in the writing of this book. Nevertheless, given the nature of this book I will stress the standard caveat: I bear sole responsibility for the contents of this work, and particularly any errors or omissions it may contain.

Preface This book operates on two levels. Its most ‘traditional’ contribution to the literature on the evolution and practice of economics is to study the cultural influences on the field over the last century. Historians of economic thought have long recognized the importance of such analysis, but have performed exceedingly little of it. It is much easier to trace the internal history of the field – how successive theories have borrowed from predecessors – than to look for external influences. Art historians have boldly gone where historians of economics have been wary of treading. There is now an extensive literature tracing the cultural influences on the evolution of modern art. This book asks a simple question: can the same cultural influences which have been identified by art historians be seen at work in economics? While artists seem more prone than economists to public selfexamination, their utterances often provide elliptical and even contradictory explanations of their work. Art historians have thus had to focus primarily on the works themselves in tracing cultural influences. We must do the same with respect to economics. For each cultural influence identified by art historians, we will ask whether this seems to be reflected in economic theory. We will find it all too easy to recognize examples of each influence at work. I have thus endeavoured to draw upon virtually every field of economics in this book. The second contribution of this book is both more novel and more controversial than the first. The comparison of art and economics raises an obvious second question: if economics has responded to the same influences as art, should we question its scientific credentials? To answer such a question we need to enquire into the nature of ‘art’ and ‘science’ and the possible relationships between them. We must also delve into the philosophy of science literature. We will find that the mere existence of cultural influences on theory hardly discredits economics as a

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science. Philosophers, though, have suggested other criteria by which we might judge how scientific economic practice is. We can push our analysis a step further by looking not just at the works economists produce but how they produce them. This will mainly involve a focus on method, but we will also look at (rare) descriptions proffered by economists of how they approach their work. Our question will be whether economists approach their task more like artists than scientists. We will find that economists do behave much like artists, though scientific principles are not absent. We will identify two types of endeavour, econ-art and econ-science, and conclude that the conduct of the latter would be much aided if the guiding principles of econ-art were less prominent. A first step toward this goal must be the recognition of the existence of econ-art. The concept of econ-art will invite hostility from some practitioners in a discipline not noted for introspection.1 The author has thus had recourse to the all-too-uncommon rhetorical approach of gentle satire. The author confesses both to believing in the existence of econ-art and to gently exaggerating some of his arguments about it. It is his hope thus to entice some who would never otherwise touch a methodological treatise into reading this one, and to allow them to absorb criticism of disciplinary practice without offence. Lest this rhetorical device cause confusion about what the author believes, the author is deadly serious in his proposals for reform of econ-science (see Chapters 7 and 8). This book is loosely structured. Each essay explores a different aspect of the subject of economics as art. The reader should not expect each to lead logically to the next. Still, there is a cohesiveness to each chapter. And the analysis builds toward the conclusions in the last chapters. The first chapter focuses on defining art versus science. As with ‘freedom’ or ‘anarchy’, precise definitions are impossible. We cannot hope to separate perfectly art from science in practice. Still, we can (and should) strive to distinguish them as much as possible, and can know that we should strive for more of one and less of the other. I emphasize this point here, for the reader must recognize at the outset that it is not necessary for there to be a night/day or black/white distinction between art and science for the analysis herein to be valuable. It should be clear from the above that when we speak of ‘art’ we are not referring to the use of that word in the phrase ‘arts faculty’, wherein ‘art’ is extended to include the social sciences. Nor are we speaking of art in the sense which Colander (1992,

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following J.N. Keynes) does, where ‘art’ refers to the process of applying theoretical results to public policy. Kindleberger (1990) uses ‘art’ to refer to the acts of inspiration or intuition required of the scientist. We will discuss in Chapter 1 the possibility that the pursuit of art may aid the pursuit of science. We would hardly wish to define ‘art’ so as to guarantee a particular result. In this book, we apply the same meaning to the word ‘art’ as do art historians. We are aware of no previous attempts to compare art so defined with economics.2 The second chapter focuses on Surrealism. Even those who dislike the depiction of economics as art should see the value in tracing the cultural influences on art (as seen by art historians) over this century and seeing if those influences appear to have affected economic theory as well. As in art history, our analysis of economics will focus on the works of economists, but also to a lesser extent on their views as to why they created what they did. Among the influences on Surrealism which can be found in economics are the pursuit of a second reality superior to the real world of experience, the belief that the practice of art could actually change the world so that it would resemble art, the belief in a primitive man motivated by basic desires (shorn of the philosophical niceties bestowed on humankind by much nineteenth-century thought), a desire for order, a desire for precision in a world of overwhelming complexity, a reaction to extreme nationalism and suspicion of authority. Chapter 3 provides a similar analysis of the forces which art historians believe to have encouraged the rise of Cubism and abstract art. Among topics discussed are self-referential art, linearity, fragmentation of time, technology, trivialization of change and appeals to the classics. While Chapters 2 and 3 look at economic theory, Chapter 4 focuses on economic methodology. We argue that mathematization, while sometimes pursued for scientific reasons, can often better be understood as displaying the artist’s need to incorporate their technique in their view of self. Mathematization can also serve the same subconscious-raising role achieved by automatic writing in the Surrealist novel. Examples of the artistic use of maths are provided by General Equilibrium theory and econometrics. To clarify again: in Chapters 2 through 4 we will borrow from the art history literature the latest thinking as to what have been the major socio-cultural forces shaping the evolution of twentiethcentury art. In each case, we will provide important examples

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from the history of economics in which it appears that the same forces were at work. In some instances, we support our line of argument with the words of econ-artists themselves commenting on why they created what they did. Most often, though, there is no smoking gun: since economic theory evolves in the brains of its practitioners one cannot ‘prove’ why certain developments occurred (innovators themselves need not know their subconscious motivations). This is likely one reason why historians of economic thought pay so little heed to cultural arguments (see section 1.8). As we will see in later chapters, though, economists – as all scientists – never prove anything. We merely make arguments and provide supporting evidence as best we can, and try to sway the opinion of the profession. If the analysis herein appears less ‘conclusive’ than other works in the field, this is a matter of appearance. That links are so readily established between art history and the history of economic thought is itself evidence that they both reflect the same cultural or aesthetic influences. The evidence for each link must be weighed with this wider similarity in mind. A number of art historians have written of the ideological content of art. Chapter 5 looks at the ideological content of economics in terms of this literature. Ideology must operate at the subconscious level, and thus it is foolhardy to accuse individual economists of conscious bias. It becomes that much more important, though, to uncover the cultural preconceptions which may colour academic research. Chapter 6 marks a transition from the first part of the book which shows the cultural and artistic influences at work in economics to the latter chapters which focus on methodological implications. In this chapter, I look at how econ-art and econscience can each be identified and separated. I also note that while art is a laudable goal, the proper pursuit of econ-science is of great importance to society. The remaining two chapters deal with the implications of this study for econ-science methodology. We discuss the effects of the fact that economists are generally ignorant of both the cultural influences and artistic standards which guide their work. The conclusions of recent works in both the philosophy of science and the rhetoric of economics are examined from this novel perspective (and vice versa). It is essential that artistic and scientific motives be separated in economics. There is no natural equilibrating mechanism at work which guarantees that scientific standards will always be valued.

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Recognizing that its present emphasis on only one type of empirical testing is not methodologically justified is a first step which can be taken. Openness to, and the search for, a variety of forms of evidence (which we already do unofficially: how many theories are believed solely because of econometric results?) will help ensure that Truth is not sacrificed to Beauty. I argue at length that the need for methodological diversity and the need for an evolutionary approach (with an emphasis on technology and institutions, and openness to ideas from other disciplines) are not unconnected. Economists explore questions amenable to the use of existing tools, not necessarily the questions of greatest importance. Hopefully this manuscript will help to change this state of affairs in some small way.

1

Art and Science

1.1

Unveiling Econ-Art

The task of criticism is to improve opinion into knowledge. Samuel Johnson

Society has been done a great disservice by existing studies of the evolution of economics which treat it as if it were (entirely) a scientific discipline. Our purpose here is to right this wrong, and highlight the evolution of economics as an art form. It is, to be sure, a complex art form, but any student of art will tell you that a true appreciation of painting or music or literature only comes after lengthy study of underlying principles. So it is with econart.1 Some pieces have an easily comprehended aesthetic effect, while others will to the novice appear to have no artistic merit whatsoever. This is perhaps why society, and even the practitioners of the art themselves, have been largely unaware of the existence of econ-art. This situation should be remedied at once, for just as music is able to evoke elements of the human spirit which the sculptor cannot touch, econ-art explores territories into which none of the traditional art forms can venture. And econ-art is only beginning to show its great potential. Music, painting and literature can all uplift the soul of humanity and transport it far away from the grime and toil of everyday existence. But such journeys are only temporary. The soul inevitably snaps back to earth. Econ-art is capable of so much more than mere momentary refreshment. The true aficionado can be carried permanently away from the cares of this earth, to run carefree through a world far more well-behaved than our own. The beatific smiles of the foremost practitioners can be observed at conferences. Despite – or perhaps because of – their lack of recognition as an artistic elite, they seem untroubled by the legendary traumas of the artist. It is the most peaceful of arts, the most contemplative, the most

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sublime (moreover, it does not require lengthy residence in a garret, at least if one ignores graduate school). Having long pursued recognition as queen of the social sciences, it may soon recognize a higher role as the queen of the arts. One advantage econ-art possesses is its use of multiple media. Rooted in a literary tradition, its use of diagrams (which, while only rarely featured in formal works, play a crucial role in undergraduate education and thus the shaping of the economist’s world-view) renders it also a visual art. More novel is the use of mathematic formulation to achieve purity of both insight and expression; this, we shall see, has emerged as the key element in modern econ-art.2 ‘There is not a generally recognized definition of art’ (Kung 1981, p. 10). We might all think we know what art is, but cannot agree on a verbal formulation of the concept. This could provide a huge stumbling block to an attempt such as this to establish the existence of a heretofore unrecognized art form. Walk through any modern gallery, and you can hear people looking at works of art and sniffing, ‘That’s not art.’ Anger may rise in your throat – say, if your brother had splattered the paint across the offending canvas – but there is no easy answer: one simply can’t say ‘It is art, and I can prove it.’ There will be many who object to the very existence of econ-art. Indeed even the artists themselves in their ignorance may object to such a classification, having so much of their selfimage dependent on the accolade of ‘scientist’ (though we will try to show in what follows that art is a loftier aim than science). I have long thought that the most useful – if tautological – definition of art is that which someone perceives as being art. As long as there is a group of people who perceive random paint splotches on canvas to be art, as long as it moves their souls, then art it is, even if the rest of society looks askance at such work (we could, as economists, impose a somewhat tougher definition: ‘as long as some people are willing to pay for random paint splotches’, but the result is the same). The conundrum of whether econ-art exists is thus solved; the very perception (by me alone, in the first instance) of artistic value in the work of economists makes it art, and no amount of denigration by others can make it otherwise.3 The ongoing debate about pornography highlights the difficulty with this sort of definition. It has proven exceedingly difficult (impossible?) to define pornography precisely. When public figures attempt to use the ‘I know it when I see it’ standard, they are scorned by their opponents. Even if the public were to accept the logic of our definition of art, then, this would

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3

not lead them in any practical sense to an appreciation of this new art form. At some level of consciousness, they would still rebel against the concept of economics as art. Greater evidence is clearly desirable if econ-art is to gain the full light of society’s understanding and criticism. The obvious path to follow is to draw comparisons with the traditional arts (if it looks like a duck, and quacks like a duck, you can’t be entirely sure that it isn’t a carefully crafted imitation, but chances are it’s a duck). We are aided here by advances in the discipline of art history. While the field of art history once focused almost exclusively on the personality of the artist, there is now a large body of work which describes the evolution of art forms as resulting from changes in society at large.4 We will draw heavily on this body in the next chapters. We form a simple hypothesis: if econ-art is art, its evolution will have been shaped by the same forces which have shaped the evolution of painting, sculpture, film, literature and music. Clear parallels should exist. Ideally, we would be able to draw on the work of historians of economic thought; we could then juxtapose their words with those of art historians to show that the same forces have been perceived to have been at work in both areas. With a couple of notable exceptions, though, such works have eschewed the placement of the evolution of economic ideas in any sort of socio-cultural context. Fortunately, the parallels are generally quite obvious. Indeed, we cannot list them all; many more connections will leap to the minds of readers familiar with economic theory and practice. Even those who reject the sobriquet of econ-art may still recognize the value in first reprising the cultural influences which art historians have identified as having conditioned the evolution of modern art, and then discerning the effects these forces have had upon the evolution of economics. This alone fills a notable gap in the literature. That is, even if one remains wedded to the belief that economics is primarily a science, one should recognize the cultural influences on the evolution of that science. Only if one has the truest faith – and doubts that anything but the highest of scientific principles has ever motivated economists – could one casually dismiss this line of analysis.

1.2

The Question of Purpose

But surely art must be purposeful; the artist self-aware of their role as artist? If thousands of economists believe themselves to be pursuing solely the goals of science, then surely this must be so?

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We need not pause here to note that many have in fact recognized non-scientific motives – we will have cause to discuss this later – for even if the whole discipline revelled in the mistaken selfperception of scientist, it would not mean that they could not be artists. We do, after all, admire the beauty of, and display in museums, many artefacts of the past which were designed primarily for their utility.5 Pottery and textiles are the clearest examples. While the art of the potter (or weaver) is tied up with the question of use, it can still be hailed as ‘art freed from any imitative intuition’ (Read 1968, pp. 41–2). Few of these distant artisans would even have been conscious of the aesthetic sensibilities which their craft serves. Likewise, the modern draftsperson would spurn the artist title, but Klingender has argued that technical drawings went through the same sequence of styles in the fifteenth through nineteenth centuries as the other graphic arts (1947, p. 63). The modern economist, then, would be in good company if they were to unknowingly produce works of art.6 Indeed, Meakin (1976, pp. 135–41) has forcefully argued that the dichotomy the modern mind draws between works of utility and art is mistaken (and elitist). While some have viewed art as the expression of humanity’s playful nature, it is more apposite to see it as both reflecting and providing an input into work. Thus, Morris, inspired by Ruskin, could conclude that ‘A true artist is only a beautiful development of tailor or carpenter.’ He defines real art as the expression of joy in labour. Meakin continues, ‘Far from being separate domains, art and labour belong together, and only an unnatural state of affairs has thrust them asunder.’7 In the words of Gill, ‘the artist is not a special kind of man, but every man is a special kind of artist’ (in Meakin, p. 141). These writers see it as only natural that people would express their artistic sensitivity while working, that this should in fact be a major focus of their work and a major determinant therefore of the form their achievements take. Historians of technology have come to recognize the interplay between the practical and the aesthetic in architectural structures as diverse as Gothic cathedrals and modern suspension bridges. Rather than engineering and art being separable, they were often combined in the same person (da Vinci, for example). Recognition of technical possibilities created the Gothic architectural vocabulary; its refinement influenced the direction of technical experiment. Appreciation of the aesthetic appeal of suspension bridges drove engineers to improve their technical capabilities. Historians who attempt to trace either technical or

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artistic evolution in isolation miss half the story (Billington and Mark 1991). Economists have the good fortune to have the latitude – not available to most of modern humanity – to integrate art and work. It is perhaps ironic that a discipline which has for the most part ignored the characteristic alienation of the modern worker should yet strive for such an integration in its own activities. Art satisfies our aesthetic impulses, ‘impulses that exist at the deepest levels of personality’; our modern world gives most people insufficient opportunity to exercise their aesthetic capabilities to the fullest (Feldman 1992). Economists are only human and should be expected to extract the pleasure from their work that the mere pursuit of truth could not provide. One can still regret the lack of recognition of this fact. We should be clear that econ-art is no accident, unlike a brilliant sunset that pleases our aesthetic sense without having been deliberately created (at least by humans). Our subconscious minds are the source of our artistry. And econ-art is far from the first art form to be produced subconsciously. But if Meakin is right, we would be happier if we were conscious of our art. We would likely be better artists too. Read (1968, p. 25) believes that Art expresses the intuitive rather than the intellectual – its message is implicit rather than explicit – and thus it is hardly necessary that the artist be conscious of his art. While the intellect can never dominate, Read (p. 135) feels that modern art is characterized by the reintegration of the intellect, though Feldman (1992, p. 38) argues that it is in modern art especially that ‘The artist becomes a kind of intuitive investigator of forms that are somehow appealing, or unexpected, or both.’ If we accept a role for the intellect, the lack of self-awareness of the econ-artist must bequeath a certain roughness to the work. Chinese scholar-painters have for centuries shown the role the intellect can play in art; econ-artists cannot follow this path to its fullest potential if they do not recognize their artistic motives (just as architects who deny the artistic side of their endeavours are unlikely to produce great works). We can hope our present study goes some way towards rectifying this situation. It might be thought odd that the economists’ pursuit of art could for so long be misinterpreted as the pursuit of science. As we shall see, recent developments in the philosophy of science tell us that we cannot know with certainty whether we are right or wrong.8 This does not mean that inquiry is useless. It does mean

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that knowledge advances through the collective evaluation of new information. Therein lies the danger. With no criteria by which we can prove a theory true or false, it is quite possible that subjective decision making may serve goals unrecognized. Thus art may be rewarded, even though both rewarder and rewarded never use the word. The work of Meakin above implies that the goals of art and science need not be incompatible.9 This point, at least, has recently been recognized by economists Dasgupta and Stoneman: ‘Knowledge, all too frequently, is both a consumption and a capital good. A mathematical theorem is often valued for its beauty, as well as for its potential for the generation of other theorems’ (1987, p. 2).10 Art, after all, is a different medium for understanding the world we live in; it could well be imagined that a symbiotic relationship could emerge between the pursuit of artistic and scientific understanding. However, a problem still arises when the artistic motive is not recognized, for while the two goals may not be incompatible they are hardly similar (see below). Both art and science must suffer in such a state of conscious denial, though we can well imagine that the intellectual and explicit goals of science will fare worse than the intuitive implicit goals of art.

1.3

The Purpose of Art

If art involved the realistic portrayal of the world around us, there would be no reason why the cause of econ-science could not be served by the pursuit of art. Like pottery or architecture or draftsmanship, we could create an economics which served both aesthetic and utilitarian desires. To be sure, the pursuit of the former might tip the focus of economic inquiry away from matters of greatest real-world importance, but this could only slow rather than derail the pursuit of Truth.11 Art, though, is anything but realism. Even those works of art which seem at first glance to be realistic portrayals of the world around us in fact capture our hearts through subtle misrepresentation: Distortion of some kind is present in a very general and perhaps paradoxical way in all art. Even classical Greek sculpture was distorted in the interests of the ideal. The line of brow and nose was never in reality so straight, the face so oval, the breasts so round … . (Read 1968, p. 29)

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To comprehend art at all we must recognize that people derive pleasure (or insight or inspiration; some recognized works of art hardly provide pleasure) from certain sensory stimuli. Even without knowing exactly what these preferences are, we can see that the purpose of art is to transform the world about us into a form which appeals to our soul in some fashion. It is not that Greek sculptors were incapable of providing exact representations of their models – truth does not necessarily mean perfect replication – but that they intuitively pursued distortion.12 Such works should be seen not as definitions but as ‘infinitions’, meant to bring out the viewer’s own enlightenment. Art exemplifies and expresses, rather than describing and depicting (Goodman 1978). We must be careful to distinguish this purposeful ‘misrepresentation’ from the model building which is an essential practice in any science. Models of necessity are not exact replicas of the reality they describe. Thus, for the scientist, distortion is a necessary evil as they focus in on some aspects of reality. The scientist does not value distortion for its own sake. Indeed the scientist carefully tests models against the real world to ensure that the distortions are not so great as to invalidate (all of ) the results produced by the model (only a very misguided science would casually forget the simplifying assumptions it had originally made). The scientist’s models are intended to reveal reality, the artist’s works to take us away from our humdrum reality. The artist often adds additional elements to their image: splashes of colour that were not there; the Cubist representation of figures from many angles at once; the novelist’s juxtaposition of unrelated events. Read’s description of a Chinese horse carving is helpful here: The carver might without much trouble have made his horse more realistic; but he was not interested in the anatomy of the horse, for the horse had suggested to him a certain pattern of curved masses, and the twist of the neck, the curls of the mane, the curves of the haunches and legs had to be distorted in the interests of this pattern. The result was not very much like a horse – in fact this horse is often mistaken for a lion – but it is a very impressive work of art. (1968, p. 32)

The very subtlety of much artistic distortion makes it possible that econ-art could be unappreciated for so long, and poses the greatest danger to econ-science. If the work of our Chinese carver were taken as a depiction of reality, the scientists which followed him must have struggled to fit their observations of horses into the

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image of a lion. The work of the econ-artist, which must involve the transformation of the world we actually live in into one of superior aesthetic form, must inevitably distort the pursuit of econ-science. This is undoubtedly a lesser sin than the perversion through ignorance of the art form itself, but provides a further motivation for the present inquiry. If providing econ-art with the respect it deserves has the effect of improving the practice of econ-science as well, we should not be displeased. We would not, though, wish to cause those who have heretofore displayed such artistry in their work to turn their genius to the performance of mere science.

1.4

Art versus Science

I am continuously amazed by the naivete of [young scholars]; they think of the economics profession as a pure academic pursuit in which the search for truth will be rewarded, quality work will overwhelm non-quality work, and people will be judged on the merits of their teaching and research. To this I say hogwash. (Colander 1996, p. 43)

Perhaps, though, econ-art and econ-science merely cohabit in economics departments, without either perverting the other? Such cannot be the case. Just as the image of science hovers over all economists, the urge to create art must infect them all. Not all are blessed with equal amounts of either scientific acumen or artistic sensitivity, to be sure, and thus left to their own devices would pursue the two divergent goals to different degrees. But economics – like any other discipline – is a community, with its own standards of what is good and what is bad. These standards affect the individual practitioner in two ways. First, they provide her with important personal incentives; hiring, tenure and promotion all depend on publication, and the latter depends on satisfying community standards.13 The psychic benefits of scholarship also depend in large degree on meeting these standards. As Paul Samuelson has said, ‘In the long run the economics scholar works for the only coin worth having – our own applause’ (in Breit and Ransom 1982, p. 107). Earl (1983) discusses at length the personal incentives of academics to embrace the existing value system: ‘The pressures of the modern academic lifestyle make it particularly hard for a scientist to take a detached view of why she is doing what she is doing’ (1983, p. 121). He notes in particular how writing unorthodox papers must heighten the fear of rejec-

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tion. Only the most heroic of scholars can be expected to battle against standards they consider to be misguided. The second effect is more subtle. Lacking objective criteria, the community decides which ideas are correct, and the emerging scholar cannot help but be conditioned by the community values which she inherits. In the words of the literary critic Stanley Fish, intellectual communities ‘will necessarily agree because they will see (and by seeing make) everything in relation to that community’s assumed purposes and goals’ (in Backhouse 1992, p. 21). Of course, other social science disciplines embrace more than one ‘community’ in this sense; economics is unusual (perhaps precisely because artistic motives have overshadowed scientific ones) in the predominance of one theoretical and methodological perspective. Colander (1996, p. 49) advises scholars to do mainstream research at least until they get tenure: ‘The system either trivialises or transforms non-mainstream economists who do not understand and accept the system, or if it can’t do either it eliminates them from the profession.’ This, of course, makes Fish’s argument more powerful with respect to economics. Our subconscious minds, after all, are more selfish than our conscious minds. Unless we consciously force ourselves to question the status quo, our subconscious mind will naturally choose to avoid rejection and encourage us to ‘play the game’ to the best of our abilities. Even the heroic, willing to battle for either artistic or scientific integrity, may be unaware that the battle needs to be fought. We will return in later chapters to the question of what, if any, scientific standards guide the discipline. For now our focus must be on econ-art. While much of the work to follow will highlight the role of artistic ideals in the evolution of economic thought, it is useful at this point to make some general observations about this pervasive influence. McCloskey and others have in recent years stressed the role of rhetoric in economic discourse. Economists do not simply put forth new ideas unadorned to prosper or die in the cold light of truth, but use a variety of argumentative devices to present their case. Recognition of this fact must at least raise the possibility that science need not be the only arbiter of quality: ‘Shakespeare used 200 rhetorical devices; economists do with less, using mainly metaphors but also analogy and appeal to authority, to a person, a mathematical procedure, or whatever else might please a reader by its order or beauty’ (Spiegel 1991, p. vii). The use of the word ‘beauty’ by Spiegel can hardly be viewed as a slip of the pen. Nor for that matter should the frequent use

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of the word ‘elegant’ to praise this model or that. Economics, to be sure, is hardly the only discipline in which words like ‘beauty’ and ‘elegant’ are used. Von Baeyer (1993) has studied the use of the word ‘beauty’ in science, and stresses two points. First, beauty lies not in the equations themselves, but in the promise they hold of enhancing our understanding of the world. Second, while beauty can gain scholarly attention, testing against real-world phenomena serves as the sole arbiter of validity. In economics, it is well known that econometric techniques are generally incapable of showing that one model describes reality better than another (see section 4.11). How then do we choose one over another? The appeal to beauty and elegance must be a powerful influence when scientific criteria are difficult to establish. Beauty ceases to mean ‘this theory enhances our understanding’, but rather becomes a comment on the equations in isolation from the world they supposedly represent. The futile attachment of econ-science to a methodology which purports to be capable of precision and conclusive proof, when such are not possible, merely opens the door to the ascendancy of artistic values. Of course, scientific merit alone is rarely if ever the sole reason for the ascendancy of a new view of reality in any field. Romain Rolland has stated this best: Ideas have never conquered the world as ideas but by the force they represent. They do not grip men by their intellectual contents but by the radiant vitality which is given off by them at certain periods in history … The loftiest and most sublime idea remains ineffective until the day when it becomes contagious, not by its own merits, but by the merits of the groups of men in whom it becomes incarnate by the transfusion of their blood. (in Fleming 1970, p. 439)

Our willingness to accept ‘facts’ as having scientific value depends ultimately on a sense of intellectual beauty or ‘an emotional response which can never be dispassionately defined’ (Polanyi 1958, p. 135). Ideas must always win through appeal to more than our intellect, because humans are not computers but beings, constrained to respond to feeling and intuition as well as logical thought. This may be regrettable at times – when, for example, emotion conquers logic and nationalist fervour leads to death and destruction – but few if any of us would want a world of cold logic (even Mr Spock of the original Star Trek was at his most interesting when his human side overcame his logical Vulcan side). We are not mere machines for eating and reproducing, but beings

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capable of love and compassion, enthusiasm and pain. It is these non-cerebral elements to which art speaks, and we would be foolhardy to wish to excise this influence from our lives. We would also be foolhardy to neglect this inevitable influence, and believe we are pursuing Truth alone, especially in matters of practical importance such as economics purports to be. If we thought poets were plumbers, what sort of world would we have fashioned? In other words, the advance of knowledge must involve the restructuring of the patterns of perception (gestalts) through which people ‘manage’ their experiences – put them in their memory, relate them to other experiences and ideas, and retrieve them. This change in gestalts is at the heart of the study of aesthetics. Our ability to change the world-view of any of our audience (a transformation which may have a major impact on their future actions and beliefs, and may be quite disagreeable) will depend, therefore, on their artistic sensibility. The hidden artistic component of economics may play a much larger role in changing how people think than the supposedly scientific exterior. Keynes, it might be noted, consciously appealed to the aesthetic sensibility of his audience. Great economists, it could be argued, achieve (much of ) their status not by adding another brick or two to that rickety structure called economics, but by creating penetrating images in the minds of their peers which govern how these others view the world. If we don’t recognize that we are enchanted by such artistic creation, we can scarcely expect to more than stumble toward Truth. An example might be helpful here. International trade theory has long been based on the concept of comparative advantage: nations should export goods for which the internal relative price is lower than that abroad; cross-country differentials in relative prices are attributed in general to differences in endowments, in particular to differences in the availability of capital and labour. The truth of the concept is not in question; as with much of economic theory the question is rather of relevance. Yet the theory has been developed in increasingly elaborate fashion. It was shown, for example, that under conditions of free trade, both wages and interest rates would be equalized across countries. Numerous extensions were then required to deal with the divergence between theory and the clear fact that trade did little in the real world to equalize cross-country wage differentials. McCloskey (1996, p. 87) describes the process as theorists alternately proved that wages would or would not converge, and bemoans the

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absence of examination of the real world in the process. There was a similar reaction to the discovery by Leontief that the United States actually exported labour-intensive goods against the predictions of the theory, or the observation that most trade in the world occurs between countries of similar endowments (the developed countries), rather than between countries of radically different endowments. Since economists spend much more time developing theory than looking at issues or data, they were able to continue to take trade theory on faith despite such pieces of conflicting evidence (Leamer 1983). Again, the problem is not that the theory was wrong, or that these extensions were totally without insight, but that they failed to face up to the fact that the theory seemed to be capturing only a very small part of reality. Hufbauer (in Vernon 1970) spoke of the obvious alternative: that international trade was largely determined by international differences in technology. While this sometimes could be reduced to relative price differences, it more often meant that one country produced goods which, at least in quality terms, other countries could not produce at all. Though he and others had been pushing this alternative conception for some time, Hufbauer observed that ‘It can as yet offer little to compare with Samuelson’s magnificent (if misleading) factor price equalisation theorem’ (1970, p. 192). Three decades later, those who favour the technological explanation still must view themselves as revolutionaries and still feel their case is lost until they can formulate an equally elegant model. Relevance could hardly lose out more clearly to beauty. It might be thought that this lack of willingness to eschew a model simply because an alternative explanation provides a better description of reality represents false scientific values rather than artistic values. It must be an incredible perversion of scientific method, however, to disregard the clear implication that reality does not accord at all well with theory. Who, though, that has ever taught international trade – drawn the Edgeworth box diagram, derived offer curves, illustrated the effects of tariffs with production possibility frontiers and indifference curves – who can have done that, that would not shed a tear if this elegant mass of theory had to be pushed to the background for the mere crime of only being a residual claimant on truth?14 Countries producing different products are hard to capture on pretty diagrams. We should not lose heart, though. If econ-science only has place for such diagrams in the footnotes, they will always have a prominent place in the annals of econ-art, for they are exquisite. The world need not work that way for us to treasure them.

ART AND SCIENCE

1.5

13

Science versus Art

We have run the risk in the preceding of defining art so broadly that everything becomes art. The distinction between art and science must vanish if art is all-inclusive. We might hope that science lends itself to a more precise definition, and thus we could build up this distinction from the other end. Unfortunately, if we turn to the philosophy of science literature for a handy definition, we are immediately plunged into a morass. There is, however, a way out. As Redman (1991) notes throughout, the demarcation problem – establishing the boundary between science and nonscience – has plagued the philosophy of science from the outset. Generations of discourse have yielded the conclusion that there is no simple definition of science. All those proffered over time have broken down under attack. Most centrally, Karl Popper and others had argued early in this century that science could be distinguished from other activities by the concept of falsification. Earlier philosophers had defined science in terms of empirical confirmation; Popper recognized that no number of confirmations could show a theory to be true, but argued that one falsification could show it to be false. It was soon shown, however, that scientific theories cannot be objectively falsified. Any test is of necessity a test of both theory and ancillary assumptions, and thus failure can be blamed on the latter rather than the former. Moreover our observations of the world are not independent but themselves theory-laden (see Section 7.4; Lambert and Brittan 1992; Klee 1997). This opens the door for Feyerabend (1978), who argues that in fact there is no distinction between art and science. We can be relieved that the economics profession, with its self-image dependent on an inflated view of the scientific ideal and its own claims (even if scarcely recognized by natural scientists) to be a member of some exclusive scientific club, has been spared exposure to such heretical beliefs. Economic methodologists (Mirowski 1989; Redman 1991; Colander and Brenner 1992) often accuse economists of being more ignorant of philosophy of science than other scientists, though they may give more credit to other disciplines than these deserve. Few philosophers have been prepared to follow Feyerabend’s extreme views (I apologize if I have inadvertently frightened the uninitiated). We cannot, after all, provide a simple definition of such concepts as ‘freedom’ or ‘democracy’ which would allow us to establish without doubt situations when these exist or not. This

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does not make these words meaningless. The same is true of science. We can hope, albeit imperfectly, to be able to distinguish between science and non-science. Chalmers, while going some way with Feyerabend, retains the belief that we can evaluate the activity of any knowledgegenerating community: Each area of knowledge can be analysed for what it is. That is, we can investigate what its aims are, which may be different from what its aims are commonly thought to be or are presented as, and we can investigate the means used to accomplish those ends and the degree of success achieved. It does not follow from this that no area of knowledge can be criticized. We can attempt to criticize any area of knowledge by criticizing its aims, by criticizing the appropriateness of the methods used for attaining those aims, by confronting it with an alternative and superior means of attaining the aims, and so on. (1982, p. 166)

While Chalmers eschews the use of the word ‘science’ in this passage, we could hazard a couple of tentative descriptions of science. First, science, as an intellectual enterprise, must do what it says it does. To the extent, then, that we find in what follows that economists have been pursuing other goals than that of explaining the world around them, they fail as scientists on that score. Second, if other means of investigation would advance knowledge appreciably faster, then the discipline is not behaving in a truly scientific fashion. That is, we can evaluate a discipline both in terms of its goals and the process by which it attempts to achieve those goals. Mayer (1993) and others have bemoaned the sluggish pace of the advance of economic understanding. This, of course, provides only circumstantial evidence. Our later discussion of methodology will provide the smoking gun. Thomas Kuhn has dealt with the question of how to distinguish art from science. In his book The Structure of Scientific Revolutions he had noted some similarities between art and science. Others had responded that science and art were indistinguishable. He is forced to agree that ‘The more carefully we try to distinguish artist from scientist, the more difficult our task becomes’ (1977, p. 341). Many, who would have thought themselves quite capable of distinguishing one from the other, would find themselves after reading the philosophical literature much less sure. If they feel they have left the light and entered darkness, they may yet be rewarded with light at the end of the tunnel.

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Scientists and artists can be distinguished, according to Kuhn, by their aims. Both activities involve both the aesthetic and the technical. For the artist, though, ‘the aesthetic is itself the goal of the work.’ While the scientist ‘like the artist, is guided by aesthetic considerations and governed by established modes of perception … the solved technical puzzle is the goal, and the aesthetic is a tool for its attainment’ (Kuhn 1977, pp. 342–3). Those who might have thought at the outset of this work that my suggestion that economists were artists was misguided or even insulting may be somewhat chastened to learn that leading philosophers of science recognize a role for aesthetic considerations in the pursuit of science. The question, then, becomes one of degree. Have economists pursued the artistic so far that it has ceased to be merely a means to a scientific end but has become a goal in itself? Ignorance of the artistic component hardly serves to ensure the former result. Scientists, Kuhn suggests, share a set of problem solutions ‘but their aesthetic responses and research styles, often painfully eliminated from their published work, are to a considerable degree private and varied.’ Artistic communities, on the other hand, are identified by a shared style and aesthetic. If so, we could, following Kuhn, identify economics as art by simply establishing that economists shared aesthetic values. Yet Kuhn seems to exaggerate his case here.15 If scientists must convince by altering the gestalts of their audience, then shared artistic values would not be unexpected within scientific communities. Kuhn’s focus on goals deflects him from the full realization that we can distinguish art and science by means as well. While aesthetic considerations will infuse both, science should be characterized by a devotion to testing theories against reality. And we could clarify Kuhn’s goal: science is not just the solution to any technical puzzle, but the development of theories with increased explanatory power. In the end we must make a judgement call. Have artistic motives and standards had an undue influence on the activities of economists? This question can only be answered by looking case by case, as we will in what follows. Kuhn makes one final point. Science advances by the sequential solutions of problems. In this way, previous theories are shown to be ‘wrong’ (though they cannot be proven wrong). Outdated artistic practices are never wrong, but simply represent a primitive appreciation of aesthetic values. The readers may judge for themselves which of these descriptions best fits twentieth-century economics.

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In some sense, we are back where we started. We cannot precisely define ‘art’ or ‘science’. Art is what artists do, and science is what scientists do. The lack of precision does not, though, prevent us from distinguishing between the two in practice. Galileo was a scientist, and Michaelangelo an artist. Like da Vinci, the modern economist may be a bit of both. But is modern economics more akin to da Vinci’s Last Supper or his theory of waves?

1.6

Art and the Act of Insight

All who labour in the vineyard of science (even those who merely think they do) have cause to ponder the nature of acts of insight. Much of day-to-day research, to be sure, may be technical plodding incapable of producing, at least directly, anything deserving the appellation of ‘insight’. Yet we have all experienced those moments of inspiration – often when we are far from our desks in both body and mind – when we felt that we had put together pieces of the puzzle that represents our understanding of reality in some novel way. Even if most of us later found that others had previously had similar inspirations, we can still all recognize that such moments are the key to scientific breakthroughs. The way in which these moments of inspiration arise indicates that they are not the result of conscious rational thought, but rather reflect the workings of our intuitive subconscious selves: ‘The rational part of research would, in fact, be useless if it were not complemented by the intuition that gives scientists new insights and makes them creative’ (Capra 1976, p. 32). In large part this is because the ultimate reality about us can never be conceived rationally nor communicated in words or symbols. In the words of Lao Tsu: ‘The Tao that can be expressed is not the eternal Tao.’ Chuang Tsu captured the same idea: ‘If it could be talked about everybody would have told their brother’ (in Capra, p. 27). The worries of the economist may seem a far cry from the questions of Meaning which concern philosophers, but insight still requires getting a better grip on how the world works than the cumulative rational analysis of humanity has been able to provide. We would not, then, wish to limit science to only intellectual, as opposed to intuitive, activity. Since we have associated art with the intuitive, this must raise the question of whether art itself aids inspiration. Indeed, Capra himself suggests that some art forms serve the same inspirational purpose as meditation (1976, p. 39).

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But how does meditation work? By trying to empty our mind, we create the potential for understanding. Ironically, art by the very act of taking our brains away from reality may allow us to achieve insight. This insight must then be translated into language. Here our rational faculties take over. Science is only advanced to the extent that we ourselves and others can understand the import of our moment of insight in words. The translation must of necessity be imperfect. But most of us can at least verbalize the gist of our insight. Art, once again, appears as the handmaiden of science. Artists, whose goal is art, also have acts of insight, which allow them to create works of art. If they mistakenly thought they were pursuing science, they would then think the distorted (that is, transformed for aesthetic purposes) reality they had created represented the world in which we live. The fact that our intuitive side is central to the advance of science does not at all detract from the fact that a true scientist (and scientific community) must always carefully distinguish artistic means from scientific ends. If intuition is essential for inspiration in the mind of one scientist, then appeal to the intuitive is not just likely but even necessary as she tries to sway her colleagues to her point of view. One could, in fact, claim that the great names in economics (or philosophy for that matter) were not primarily those with the greatest capacity for original insight, but those with the greatest ability to appeal to the subconscious minds of their audience. A neat set of equations, a nice diagram, a well-crafted thoughtexperiment: all may win converts more through their aesthetic than their logical appeal. This may not seem quite right, but we should not be too critical of the way we human beings are. We are not machines, and tend to believe with our hearts before our minds. This has not prevented science from taking great strides forward. Economics can do the same as long as we make sure that our rational side makes the final decision. In economics, as we shall see, there are no simple scientific criteria by which to judge, and thus our conscience must be our guide.

1.7

A Micro View

It is not our purpose to defame particular economists16 (we do not in any case consider the appellation of ‘artist’ to be derogatory); all must suffer under the conflicting pressures of art and science. Some, perhaps precisely because of this conflict, achieve

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little in either direction, while others achieve much of both artistic and scientific merit. It is with this view in mind that we take a slight excursion into biography to ask how the conflict is worked out at the level of the individual economist. Breit and Ransom asked Abba Lerner why he had chosen to be an economist. He spoke first of his concern with improving the condition of humankind, but also of the ‘keen enjoyment I have always felt, and still do, in the mental exercise involved in the achievement of elegant proofs and diagrams’ (1982, p. 137). He noted that he could have satisfied the latter desire more fully by pursuing mathematics or chess (the authors later note Lerner’s skill at constructing wire mobiles of animals, ‘a task that Lerner takes with the same seriousness that he does the elucidation of his most abstruse arguments on economic theory’ (1982, p. 142)); it was thus the former desire which drew him to economics. It was perhaps the self-awareness of the aesthetic pleasure he derived from his work that allowed Lerner to shine as an econscientist; by suppressing same, he was one of the first to recognize that Keynesian theory must include a role for money, worked out the basics of fiscal policy, and was one of the first and most successful to grapple with the phenomenon of stagflation. (He was not infallible, of course. His suggestion that governments ‘tax only to prevent inflation’ would be considered misguided by most economists today.) He moved freely from prose to diagrams to mathematics as the occasion suited. To have had artistic motives, and not to have recognized that these were in conflict with the desire to aid humanity through understanding reality, must have severely limited his success in econ-science. Nor is Lerner alone in this insight. Breit and Ransom speak later of Milton Friedman: ‘He agrees with Abba Lerner that [economic theory] is most definitely not a work of art to be developed for its own sake’ (1982, p. 252). Recognition of the artistic side is not a perfect antidote to the subconscious pursuit of art for art’s sake, nor should it be, but it does at least make it possible to pursue science for science’s sake. Herbert Simon is considered one of the very few ‘outsiders’ to have won the Nobel Prize in economics.17 He has consistently challenged the central pillar of economic orthodoxy, the assumption of rationality (though his use of mathematics has appeared, at least on the surface, to be in line with orthodoxy). His autobiography (1991) provides much insight into how he managed to maintain such intellectual independence: he had been a loner as a child and had thus early become capable of independent

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learning and thought (not to mention arrogance); being smart, Jewish, left-handed and colour-blind he had recognized that different people perceived the world differently;18 he hoped to change the world by understanding it (though he consciously shied away from problems such as world peace with no easy solution), and his studies outside economics as an undergraduate convinced him that mathematical elegance and a priori theorizing were less important than the match between theory and reality. His continued involvement in fields outside economics, organization theory and cognitive psychology, with their emphasis on case study and experiment, likely also encouraged methodological and theoretical flexibility. Simon was politically active much of his life, and in his administrative positions actively pushed for such goals as affirmative action. Again, we see that self-awareness and a dedication to helping humanity can help to insulate a scientist from the siren song of art. As well, frequent and varied exposure to life outside of academia – which Simon certainly experienced – serve also to steer the academic toward truth rather than beauty. Simon’s artistic prowess may well have triumphed if not for his focus on real-world problems. One final insight comes from the life of Joseph Schumpeter. He, it is said, ‘evidenced conflicts between the tentativeness of science and his desire for firm convictions’,19 this being one source of the chronic depression which afflicted him throughout his life. As we shall see, it is natural for the artist to believe they have achieved true insight. The scientist is always confronted with the incompleteness of their vision. We should all be aware of the intellectual frustration that comes from recognizing how little we collectively know. We should all recognize the temptation to deny our ignorance and bury ourselves in art.

1.8

Culture and Economics

As we shall soon see, art historians have made great strides in relating the evolution of art to broader cultural forces. As Kung says, ‘Art is related to society and every work of art is actually action on and reaction to sociopolitical conditions’ (1981, p. 23). ‘If art were only, or mainly, an expression of personal vision, there could be no history of art’; thus not everything is possible in every period (Gombrich 1962, p. 3). Historians of art have gone beyond such general observations to relate particular art movements to particular social forces. Historians of science, too, have recognized that it is a mistake to speak of a chronology of

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successes; rather, they need ‘to place the scientific ideas which are in question into their intellectual environment, so as to show what, in that particular context, gave these ideas and investigations their merit’ (Toulmin 1961, p. 109). While this has only rarely been done in the history of economics, it is still worthwhile before proceeding to make note of the recognition which sociocultural forces have achieved. Blaug typifies the attitude of most historians of economic thought. He notes the possibility that ‘shifts in emphasis within economics are due to changes in philosophical attitudes or dominant modes of reasoning’, dismisses some attempts to do exactly that, such as Weisskopf’s (1955) treatise on the psychological basis of economic theory, and then decides to largely ignore questions of social milieu and philosophical currents in order to focus on the momentum of economic ideas themselves (Blaug 1985, pp. 3–7). It is, of course, no mistake to recognize that economic theories have a life of their own, and that today’s theories must represent some evolution of theories of the past. Most art historians strive for a balance between socio-cultural explanation and the long-standing tradition of analysing how artists were influenced by their predecessors. Historians of technology have recognized the interplay of social and technical considerations in the process of technological innovation, and have struggled in recent years to overcome their natural tendency to focus on the latter. Academic specialization is not to be criticized lightly, but when both expertise and ease of exposition lead to an unnatural emphasis on one set of criteria, scholars must attempt to achieve greater balance. The standard portrayal of economic theory as developing of its own accord gives an undeserved paean of scientific validity to the entire enterprise. Moreover, the philosophical rationalization for such an approach is at best shaky. We cannot casually assume that any discipline is advancing toward truth. If not, it would be foolhardy to recount a series of ‘advances’ in economic theory. Only to the limited extent that external criteria indicate that economists do an appreciably better job of explaining how the world works than was the case decades ago, is the dominant approach in history of economic thought justified. If we think advance is sluggish or non-existent we should redouble our efforts to comprehend the cultural influences at work. (We should also recognize that art does not rely on any such criteria of progress.) We should emphasize that we would not want the pendulum of analysis to shift entirely in the other direction. The existing

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body of theory at any point in time creates a mindset which conditions the future research agenda. We will see that many schools of modern art – Surrealism, for example – had great difficulty in becoming established because the audience had to adjust their mode of appreciation. Likewise, new economic concepts can fail because they fly in the face of received wisdom: [A] good deal of received doctrines is metaphysics [unverifiable]. There is nothing wrong with this, provided it is not mistaken for science. Alas, the history of economics reveals that economists are as prone as anyone else to mistake chaff for wheat and to claim possession of the truth when all they possess are intricate series of definitions or value judgements disguised as scientific rules. (Blaug 1985, p. 711)

This situation may be, in part, inevitable: fundamental truths may not be verifiable. Yet the danger clearly exists that ideas which originally achieved currency due to their artistic merit may thus exert a continuing influence on the direction of both scientific inquiry and artistic expression. We will want to remain cognizant of the influence of inertia in thought, while attempting to discern the artistic motives at work in the first place. Schumpeter (1954), Roll (1956), Fusfeld (1977), and Spiegel (1991), are among those who have attempted to discern environmental influences on economic theory: Economic thought reflects specific social or economic[20] conditions, or the spirit of the age; this is confirmed by the observation that many advances in thought were made in the form of multiples – that is, independently by more than one author. (Spiegel 1991, p. xx)

Thus Keynes, Kalecki and a handful of Swedes began speaking of deficient aggregate demand at the same time (note, though, that Joan Robinson and others have claimed that Keynes borrowed many of his ideas from Kalecki) and Robinson and Chamberlin simultaneously developed ideas of imperfect competition. Though the Depression likely spurred these developments, the external forces behind simultaneous discovery are often obscure.21 While the emergence of marginal utility theory contemporaneously (albeit with significant differences in formulation) in three countries with quite different intellectual traditions within economics points strongly toward some common philosophical movement, it is not easy to discern what this movement might be (Blaug 1985, p. 300).

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Given the tendency of historians of economic thought to focus on internal developments, it is especially noteworthy that Spiegel apparently rejects the alternative explanation for simultaneous discoveries: that these reflected the logical working-out of the implications of previous theoretical advances. The tale of marginal utility, where simultaneous discoveries occurred despite divergent theoretical traditions, of course fits the external explanation rather better than the internal. Fusfeld points to one possible cultural explanation, arguing that the rise of individualism and the concept of survival of the fittest in the nineteenth century had more effect on the development of economic theory than the writings of any economist (1977, Ch. 6). However, he favours the idea that marginal utility caught on because it provided a response to Marx. Marx had developed his theoretical edifice on the classical concept of the labour theory of value; the mainstream could most readily topple him by proposing a different theory of value. Thus, the economy, instead of being the scene of worker exploitation, became a pleasure-maximising machine. Marginal utility was not accepted because it was right but because it was useful to those who wished to oppose Marx (Fusfeld 1977, pp. 82, 92; Dasgupta 1985, pp. 6–7). If so, marginal utility would hardly be alone, for many theories, including Austrian capital and Rostow’s stages of growth, were explicit responses to Marx. The first generation of marginal utility theorists, though, wrote before Marx. Fusfeld may be able to tell us something about the idea’s later popularity (as also for the fact that economists increasingly turned their backs on the dynamic analysis of growth which had been the heart of both classical economics and Marx, to focus on short-run allocative efficiency),22 but can hardly answer our original question of why this theory emerged in the first place.23 We can safely say, then, that while the potential role for cultural determinants has been recognized, the actual role these may have played at particular times has been scarcely elucidated. This should not be surprising. Cultural influences, by their very nature, are difficult to establish, for the practitioners themselves will be unaware of the influences which act upon them. We are fortunate, then, that art historians have collectively struggled for decades to uncover the key influences on the evolution of art. Rather than starting from theory and looking for environmental determinants, we can take the findings of art history as our starting point and search for signs within theory and methodology that these influences were important. ‘Proof’ is impossible, as is

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generally the case in science. We cannot know for sure why economists did what they did. Yet if we can readily detect such influences across a wide spectrum of economic thought, we can be confident that it is more than coincidence. We will not be misguided, then, if we attempt first to uncover what influences have conditioned the evolution of the traditional arts in the twentieth century, and second to see whether the same forces appear to have been at work in economics.

2

Surrealism

2.1

Modern Art

Art in the twentieth century has been characterized by a number of movements. Rather than attempting to elucidate the cultural influences on each of these, we will instead select a couple of the most important movements for more detailed analysis. We will focus on Surrealism in this chapter, and turn to Cubism in the next. (Cubism pre-dated Surrealism by a matter of decades, of course, but we will find it easier nevertheless to discuss them in this order.) Both movements are well suited to our purposes of discerning the key cultural influences on twentieth-century art. Both emerged early in this century – Cubism in the first decade of the century, Surrealism shortly after the First World War. Both are widely hailed as among the key artistic developments of this century (each movement indeed has scholars who claim it as the most important, as we shall see). Each also is widely recognized as having had major influences on the art movements which followed, as we will see in each case below. (We will also discuss in the next chapter the emergence of non-objective art, which was of such great importance in the decades following the Second World War.) Each movement has attracted the attention of a large number of scholars, and thus the cultural influences have been analysed to a significant degree. And these movements are different enough that, while they inevitably react to some of the same influences, they also point to different elements of the complex cultural milieu of the twentieth century.

2.2

The Roots of Surrealism

Precursors of Surrealism can be found in the works of artists such as Chagall and de Chirico in the immediate pre-First World War period,1 and, of course, elements of Surrealism can be found in works of previous centuries (for example, the Imagists). But it is generally accepted that it is the horror of the First World War

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which gives birth to the movement. Coming as it did after decades of peace, and inflicting incredible pain and suffering on millions of combatants – and innocent civilians – the war inevitably caused intellectuals and artists alike to question received ideals. The previous sense that civilization was progressing was shattered during those four years, and many began to search for alternative philosophies.2 To a number of artists it appeared that if the outcome of rationalism was war: ‘the only cure for man was irrationality’ (Hedges 1983, p. xii). Spurred on by Freudian psychology’s emphasis on the subconscious and the interpretation of dreams (see Nadeau 1965, p. 81; Rubin 1968, p. 116), they turned to the exploration of humanity’s inner self, in the belief that only there could the basis of a superior civilization be found.

2.3

Surrealism

Surrealism stands out as the most important creative movement of this century. We still live in its shadow and aftermath. (Picon 1983)

Two elements can be discerned as the driving forces behind Surrealism. The first is ‘an unrelenting revolt against a civilization that reduces all human aspirations to market values, religious impostures, universal boredom, and misery’ (Rosemount 1978, p. 1). Surrealists described themselves as specialists in revolt. We must be careful, though, not to conceive of this attitude in the narrowly political sense in which the word ‘revolution’ is normally used. The Surrealists themselves had difficulty in defining their political role. In the 1920s they treasured their artistic freedom. In the early 1930s, key figures, including André Breton, joined the Communist Party. Angry debates continued within the Surrealist movement over the compatibility of artistic and political revolution. Aragon was thrown out of the Surrealist movement for a lack of commitment to communism: ‘the problems raised by the human condition have little to do with the little flicker of revolutionary activity which has appeared to the east of us these last few years’ (in Picon 1983, p. 73). Yet in due time, Breton and other Surrealists were expelled from the Communist Party for their refusal to cleave to the party line (Stalin felt that only realistic portrayals of work, etc., should be pursued by the artist). While we cannot ignore ideological overtones, and must discuss such matters below (section 5.1 discusses why econ-artists, at least

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consciously, pursued a different ideology from Surrealist spokesmen), Surrealists, we should remember, were primarily artists not politicians. Their antagonism to the existing society was much less narrowly focused than that of political activists. In such a world-view, capitalism was at most a symptom, rather than the root cause, of the failure of western civilization. The problem was with the way individuals perceived themselves and their universe. Surrealism had an answer, and this answer was rooted in psychological rather than political theory. This brings us to the second key element in Surrealism. It was Freud, not Marx, that held out hope to Surrealists. The problems of humanity were due to our lack of understanding of our own subconscious. The mission of the artist in modern society, then, was to reintegrate the conscious and subconscious minds, to bring the audience in touch with their own inner beings: ‘Members of the group believed in the superior reality of the dream to the waking state, of fantasy to reason, of the subconscious to the conscious’ (Fleming 1970, p. 521). Surrealists, quite simply, aimed to portray a world different from the one in which we live. They attempted to describe a higher reality, the reality of our inner rather than outer beings: Somewhat like the romantic revolt of a century earlier, the [Surrealist] artist reasserts the primacy of the imagination over the intellect and takes flight from reality in order to find a superior reality in the world of mystery and fantasy. The tendency is anti-intellectual in the extreme, though the symbols and vocabulary are evolved by highly rationalist procedures. (Hedges 1983)

While all art involves decisions about what elements (if any) to include and how these are represented, Surrealism went a step further and purposely tried to create a world different from our own. While their limitations as human beings meant that reality often intruded, and at other times reality and unreality were intentionally juxtaposed, the overriding goal was to create a new and better world, totally cut off from reality. They responded to a ‘longing for the unattainable’ (Fleming 1970, p. 519), a nostalgia for the absolute. The world we live in was the basis only for flights of fancy. Hubert speaks of Surrealist book illustrators: rather than taking the traditional view of the text as a model for which they were to provide a graphic equivalent, they viewed it only as a stimulus to their imagination (1988, p. 344). Never before had art been so detached from reality:3

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In their relentless pursuit of another world, the Surrealists carefully avoid traditional forms of representation that in one way or another favor a mechanical adherence to the tangible world of experience … Artistic manipulation and dream activity provide necessary mediations that encourage them to transform recognizable or descriptive reality into otherness. This does not mean that allusions to everyday existence cannot be traced in Surrealist works in general and books in particular. (Hubert 1988, p. 343)

While Surrealism was born and prospered in the France of the 1920s, its effect on twentieth-century art was pervasive. Hauser (1956) hailed it as the dominant art form of this century. ‘Surrealism is a far-ranging and constantly renewable current of thought and actions which cannot be assigned rigid historical limits, much less confined to the destiny of a single individual’ (Rosemount 1978, p. 7). Sylvester argues that rather than continuing in the post-war world as a narrowly defined school, ‘the spirit of Surrealism … has come to be diffused into most of the outstanding art of the time’ (1978, p. 5). The turmoil of the Depression and Second World War could only encourage the international spread of the movement (in particular, various French Surrealists were forced to take refuge in the United States during the war). Wolfe credits the arrival of Surrealists (and Cubists) in the United States from the 1930s with wiping out the existing schools of ‘American scene’ and ‘social realist’ painting (1982, p. 48). Often under different names, the Surrealist vision grew from inauspicious counter-cultural beginnings to influence almost all modern art: ‘Surrealists adopted ideas which seemed perverse … Today, many of its principles, artistic, political, and moral have begun to appear more significant than the orthodox ideas which emerged during the period between the two World Wars’ (Haslam 1978, p. 6). ‘During the 1960s and 1970s artists throughout the world have acknowledged the influence of the movement’ (Haslam, p. 237). Effects were felt in all fields of art: Joyce, Prokofiev and Ravel were inspired by Surrealism (Fleming 1970, p. 523). The magic realism of Borges and others in literature is one offshoot that we will draw on at length in what follows. We must conclude from its pervasive and lasting influence that Surrealism has captured important elements of the modern psyche, and can therefore suspect that similar influences should have been at work in econ-art. As Rosemount has noted, ‘Surrealism never has ceased to expand its researches into every form of human expression’ (1978, p. 2).

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2.4

Surrealism in Econ-Art

While most of the classic works of economics were written in the eighteenth and nineteenth centuries, which Bertrand Russell characterized as ‘a brief interlude in the normal savagery of man’, twentieth-century theory has had to respond to world wars, mass unemployment and barbaric despotism, all of which posed a threat to liberal philosophy (Spiegel 1991, p. 599). Though Russell exaggerates the tranquillity of previous centuries, the First World War was clearly a watershed. While Spiegel naturally focused on the implications for economic ideology, we can now see that economists were part of a larger culture in which reality was being attacked on a much wider front. Hauser defined Surrealism as the discovery of a ‘second reality’ which, although fused with ordinary reality, is nevertheless so different from it that we are only able to make negative statements about it (1956, p. 223). Our minds are so accustomed to ordinary reality that they can only consciously understand the other in terms of its differentness. Yet when we are truly struck by a Surrealist work it speaks to us directly and transports us into that other reality. Since that other reality is in fact superior to our own, we should accept it; to denigrate its lack of correspondence to everyday reality is to entirely miss the point. Borges, in his collection of fictitious book reviews, Ficciones, captures the Surrealist attitude to reality: It took me eight or nine days to write this story and I remember that during that period I would leave my house, take the trolley to the library, work, return to my house, and all that seemed unreal; what seemed real, instead, was the tale I was dreaming, the story I was living at that time. (1976, p. 25)

An econ-artist striving for the Surrealist ideal of communing with their inner self should scarcely be castigated for omitting the mundane details of real life. They have recognized the unrealness of reality. Lacking this insight, much criticism of modern economic theory has been widely off the mark.4 Of course it doesn’t accurately depict the world we live in: consumers don’t really rationally maximize utility, corporate managers certainly don’t maximize profits, perfect competition (and thus supply curves) never exists, the economy is never ever in general equilibrium, any natural tendencies toward full employment are sluggish at best. The list could be extended almost indefinitely. What might

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once have been dismissed as simplifying assumptions serving scientific principles of investigation have long since coalesced into a body of unreal theory.5 Reality is not even allowed to adjudicate theoretical claims. Economists casually forget the original assumptions and apply the verdicts of the theory of competition to a very uncompetitive world. Experiments show that people don’t behave at all the way our theory presumes: the results are virtually ignored.6 We need not rehash the standard criticism here; writers as diverse as Galbraith, Thurow and Mirowski have made these points before us. Some have attributed nefarious ideological motives to economists; some of these have conceded that such motives are not consciously held. None of the critics, blinded by the illusion of economics as only a science, have been able to see that the humble econ-artist has been doing exactly what society wanted from artists. Like Surrealists in other media, they have created a world to replace the one we must live in. Econ-art has transcended reality, created order out of chaos, invented a world that works, that overcomes human greed, power-lust, vanity and incompetence. It is not just real; it is much better than that: it is surreal. What has been critiqued as bad science should be hailed as a triumph of artistic imagination. Walk into the garden of econ-theory for a moment, and free your mind from the troubles of the day. What worries you? Labour market discrimination? Not in this garden, for if some workers of equal ability are shunned by some firms, the competitive environment ensures that others will not only hire the discriminated, but beat up the discriminators in the marketplace. Perhaps nasty trade wars in this world make you fear for the future? The garden is peaceful; everyone accepts the free trade verdict of the theory of comparative advantage. The swords have been beaten into ploughshares. Do you worry about unemployment? Fear no more. Involuntary unemployment, beyond some trivial transitory job search component, doesn’t exist in the garden. Do you fear that the modern consumer has lost touch with basic human values and is buffeted wildly by advertising and fads? All in the garden are rational independent utility maximizers. Does the onward march of technology cause trepidation? Relax; technological change occurs in the background in the garden; productivity increases virtually of its own accord.7 You get the point. Think of economics for a moment not as science but as science fiction, and that which had previously seemed its worst excesses now become its shining glory.

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Not all of the elements of economic theory are superior to reality. Indeed, homo economicus would be a rather boring species; it would certainly have no need for the appeal to the subconscious of econ-art. It would be a serious error to conceive the purpose of Surrealism as the creation of perfection. One does not consciously create the other world, after all. It must emerge from the subconscious: ‘The dream becomes … in broad sense the paradigm of the whole world picture’ (Hauser 1956, p. 224). Dreams give only a partial insight. Just as dreams combine meticulous details in arbitrary fashion, so also would the Surrealist artist. The subconscious world may be superior, but not every detail it yields will be wonderful. The artist, as unconsciously as possible, builds a picture of jumbled details.8 This is what gives Surrealist art the appearance but not the substance of reality. It is what gives econart the appearance but not the substance of science. One last side-effect should be noted. The essence of works of art, and especially Surrealist works, is that they attempt to illuminate that higher reality by describing in detail some small aspect of that reality, and only sketching the broader picture. It is widely recognized (if imperfectly understood) that artistic meaning can only be transmitted in this manner. Unlike the economics of its predecessors, twentieth-century econ-art has totally embraced this approach. From the late nineteenth century, … economics had ceased to be the proliferation of world views which … seemed to illuminate the whole avenue down which society was marching. It became instead the special province of professors whose investigations threw out pinpoint beams rather than the wide-searching beacons of the earlier economists. (Heilbroner 1968, p. 156)

Econ-art did not need to fill in the big picture in order to create the illusion of completeness. It could shy away from questions of economic growth with which its constructs could not deal. Not only was this possible but the very methodology of the artist made it imperative. The intellectual may conceptualize the big picture; the artist must focus on the particular.

2.5

Who Cares About Reality?

Few people have the imagination for reality

Goethe

Like ‘art’ and ‘science’ themselves, ‘reality’ is a slippery concept. As with ‘art’ and ‘science’, though, the philosophical difficulties

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surrounding the concept need not prevent us from being able to speak in a practical sense of ‘reality’. Descartes raised the point that we cannot be sure of more than our existence as individuals: all else might be a (collective?) dream. Thus, even those items which we take to be most real, such as the chair we sit upon, might not in fact be real. In a practical sense, though, even if this is all a dream, we must still try to understand how chairs (seem to) work by looking at them, touching them and sitting on them.9 Can we really describe reality? Physicists, as they explore the mysteries of subatomic particles, have realized that neither words nor equations can adequately portray reality (Capra 1976, p. 47). Our conscious understanding is always imperfect. That which we describe is not reality, therefore. Still, it was only through experimentation that physicists began to unravel the mysteries of the atom. Our knowledge is imperfect, but it still allows us to generate power and blow up people we don’t like. While we can never perfectly describe reality, we can, by careful analysis of the world we (seem to) live in, hope for ever closer approximations in our understanding. In the critical realist tradition, we can only understand reality by identifying structures which are not readily apparent, and arranging these in a hierarchy of importance (Bhaskar 1989, pp. 2–3). To do this, we must focus on what is, not what we would like to be. Reality in an ideal sense may be unattainable, but scientists must nevertheless attempt to analyse, understand and explain reality if they hope to deserve the sobriquet of science. Surrealists, however, felt that reality was too awful: (artistic) truth was not to be found in the rubble of the First World War but rather in our dreams: ‘The Surrealist manifesto is in fact nothing less than a critique of pure reality’ (Picon 1983, p. 60). Surrealist painting followed two paths. One of these was to attempt to allow one’s subconscious to speak directly to the canvas, by freeing the mind of conscious intent. Miro is likely the best-known artist in this tradition (we will return to the implications of this Surrealist methodology in Chapter 4). The other path involved depicting recognizable pieces of reality out of context, as tends to happen in our dreams. Salvador Dalì became the most famous of the Surrealists, at least in North America, by pursuing this avenue. We can readily imagine that econ-artists, pursuing this form of artistic expression, could be misinterpreted as scientists: there would be just enough reality within an unreal composition to leave this possibility open.

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In their lives as well as their art, the Surrealists’ pursuit of unreality was incompatible with the scientific pursuit of reality. They did dabble in political activity to be sure, but the vast bulk of their time was devoted to inner contemplation. They spent much time in trance-like states or exploring that realm between sleep and wakefulness (especially in the early days of the movement). ‘Surrealism, then and later, proved to be an experience that isolated a man, cut him off from outside conditions’ (Picon 1983, p. 12). The econ-artist, pledged also to the pursuit of unreality, would scarcely have the time or inclination to talk to workers or managers or collect their own data, as sound scientific practice would require. Economists could not know that they were thus practising art rather than science: Science involves a practical engagement in the [real] world. The point is often lost sight of when science is portrayed by both its supporters and critics as a largely intellectual enterprise, as a game consisting mostly of free-form conceptual speculation. (Klee 1997, pp. 3–4)

Once again, a false concept of what is science allowed economists to unconsciously embrace art. Before proceeding to examine in greater detail the elements of the Surrealists’ world, we are advised to digress somewhat to meet again the criticism that economics is just bad science, not art. We can now be more precise than in our discussion in Chapter 1 of the art/science dichotomy, for we now have a particular contention: Surrealist art should turn its back on reality, while the purpose of science is to understand it. Which of these attitudes best describes economics? Friedman has suggested that there is nothing wrong with unrealistic assumptions; as long as the theory makes valid predictions we should not question them (and thus viewed, Chamberlin’s exploration of imperfect competition is largely irrelevant (Breit and Ransom 1982, p. 254)). Even before Friedman, Samuelson had at times strongly criticized this point of view (1947, p. 16) and at others pursued a similar research strategy (see Kendry 1981, p. 225). At times, as long as we are careful to remember the original assumptions, the approach has merit. Even if firms aren’t profit maximizers, the analysis of profit maximization may tell us something about how they will react in particular situations. But the scientist carefully ensures that the assumptions do not compromise the ability of the model to

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capture some element of reality. The scientist asks whether more realistic assumptions signally affect the results. If so we must tread warily when applying the unreal model. The overriding problem is a fact we have mentioned before: we simply are unable, in general, to determine with certainty whether one theory is superior to another on the basis of predictive capability: We are not so good at testing hypotheses so that we can give up any information we have at whatever stage of the argument. The realism of assumptions does matter. Any evidence you have on that, either casual or empirical, is relevant. (James Tobin, in Klamer 1984, pp. 105–6)

We are thus forced to fall back on our common sense to decide which model is superior, and this must necessarily involve looking at the degree of realism of the underlying assumptions. Kalecki recognized that the assumption of perfect competition could to a limited extent serve scientific goals: ‘free competition, as an assumption, may be useful in the first stage of certain investigations, but as a description of the normal state of capitalist economy it is mainly a myth’ (1939, pp. 40–1). He was mostly concerned, though, with the assumption’s role as myth: … perfect competition … is a most unrealistic assumption not only for the present phase of capitalism but even for the so-called competitive capitalist economy of past centuries … Perfect competition, when its actual status of a handy model is forgotten, becomes a dangerous myth’ (1971).10

Thurow (1983, p. 22) and Rapping (in Klamer 1984, p. 221) are two of many who have noted the tendency of economists to forget the assumptions underlying perfect competition ‘in the play of events’. The generation of myths must seem a peculiar occupation for the scientist. By the same token, the insistence on formal modelling in economics can hardly be attributed in its entirety to scientific principles. While mathematization has brought many benefits, it has also been regularly abused. What, after all, is the use of largescale mathematical formulations if it is impossible to reliably test them?11 Some will speak of the greater clarity of mathematical argument, but only the illiterate would push that argument too far.12 Precision, it should be noted, is not the same as accuracy.

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If an unreliable plumber says she will visit next month, she is likely to be accurate but not precise. If she says she will be there next Wednesday at 9 sharp she is precise but not accurate. Too often, economists strive for precision we are not capable of, at the cost of ignoring real-world details (which our methodology is ill equipped to handle) which would enhance our accuracy. We do not deal with institutions because we cannot model them; indeed economists are programmed to ignore all matters which can’t be modelled (Colander 1989, p. 35).13 The scope of scientific inquiry is thus seriously constrained. Moreover, what mathematics may gain in precision is more than lost in comprehension. Once we recognize the absence of clear empirical tests, it should be obvious that we would want models expressed in a form that facilitates analysis of their logical structure (Colander 1989, p. 33). The continued refinement of abstruse unverifiable models proceeds on many fronts in a manner which hardly serves scientific goals. McCloskey speaks of what she terms the ‘Samuelsonian Vice’, which she feels has infected the entire discipline: The Samuelsonian Vice is staying always in a world of theory, spending an academic career imagining alternative worlds in which the sea is boiling hot and pigs have wings. In other words, the Vice in question is simply the plain person’s complaint about academics and poets and artists: they theorize endlessly and without point. (1996, p. 64)

Clower dismisses the work on general equilibrium models since the time of Edgeworth in the nineteenth century as footnoting (1989, p. 28). We have in recent years seen a rash of rational expectations models. While the idea is not without merit – economic agents should take into account all (freely) available information when forecasting the future – the simple concept was used to imply that fiscal and monetary policies could have no macroeconomic effect because private agents would rationally counteract any change in public policy. It was clear from the start that imperfect information, strategic behaviour and financial constraints would prevent this from being the case, but this did not stop a cascade of models on both sides (Colander 1989, p. 33).14 Many of these models required that agents knew the ‘true’ model (even if economists do not): ‘If one takes newspaper editorials as a rough guide to the economic sophistication of the public, such a strong rational

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expectations assumption seems bizarre. For formalist economics it is, of course, acceptable’ (Mayer 1993, p. 117). (Even if they knew the true model, but this as is likely was the sort of system chaos theorists like, they would not know the results of policy changes.) This battle of models could at best do no more than indicate what common sense had already decreed. Now, of course, all models are by definition unrealistic. They must necessarily simplify the complex world we live in, in order to focus on a subset of causal relationships. As noted before, scientists who are careful with their assumptions can learn much from this type of simplification. The problem with rational expectations modelling was that the key result – the inefficacy of changes in policy – flowed directly from the extreme assumptions of the model. Naturally, if we believe that economic agents know the true model of the economy, adjust their expectations immediately to changes in government policy and face no constraints in instantaneously adjusting behaviour (for example, can borrow money they wish to spend), then we can generate a result that policy changes have no effect on business cycles. The assumptions are not extraneous or inconsequential, but rather determine the results. Scientists would simply have noted that private reaction could limit the effect of policy, and perhaps attempted to measure the effect. Only artists would devote such meticulous attention to detail in the construction of an unreal picture.

2.6

Toward a Better World?

The Arts must … contribute forcefully to the education of the public. Jacques-Louis David The music of a well ordered age is calm and cheerful, and so is its government. Lu Be We, ‘Spring and Autumn’, in Hesse 1969, p. 30

One might wonder – if one lacks an aesthetic soul – what useful purpose is served by the creations of econ-artists. Philosophers of art have suggested that art does not simply point to a better world but a world which may yet actually arise: The work of art proceeds from the longing for that perfect existence which is not yet, but which man, despite all disappointments, thinks must come to be when the existent has reached its full truth and reality has been subordinated to actual entities. The tree on the

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canvas is not like that outside in the field … The tree, however, is not sealed in its unreality, but rouses the hope - if it really exists - that the world as it ought to be will at some time actually arise. Thus art projects in advance something that does not yet exist. It cannot say how it will come to be; nevertheless it provides a consoling assurance that it will come … we feel its promise. (Guardini, in Kung 1981, pp. 51–2)

Kung himself echoes these sentiments, though leaving alive the possibility that perhaps the second reality is more a dream than a realistic expectation: [Art’s] particular service to man consists in symbolizing, without cold comfort or false solemnity, what is not yet, how man and society might be, what man’s yearning awaits: in this world of purposes and constraints, a free space for the element of play which leaves open all possibilities. For a great work of art is … more than a downright lie … It is - particularly when it is aesthetically immanently perfected - more than a hint and anticipation of a world still awaiting its consummation. (1981, p. 51)

Surrealists certainly saw themselves in this light. The goal of Surrealism was to lead to alterations in perceptions of reality which would carry over into life (Hedges 1983, p. 58).15 Surrealist art was viewed not as an end in itself but as part of a social revolution (Rosemount 1978, pp. 43–4). We must understand, though, that they felt that society would only be changed if humanity was changed: ‘I insist in believing that a picture or sculpture can be envisaged only secondarily with regard to taste and stands up only so far as it is liable to make our abstract knowledge, properly so called, take a step forward’ (Breton, in Matthews 1986, p. 6). To the extent that people were put in touch with their true inner selves they would be able to fashion a society without conflict. Many Marxists shared a somewhat similar hope of changing humanity. They felt, however, that it was possible to change social institutions first and our basic impulses thereafter. Some might be transformed by philosophy alone; the rest would change if they lived in a communist world. (Other Marxists viewed the change in institutions and ideas as interdependent.) This was the long-cherished dream: that human tendencies toward non-selfish, collectively-oriented behaviour could be brought out by political revolution. If possible, this would be a much quicker path to

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utopia. Changing humanity is no simple task, and doing so through the subtle medium of art is certain not to happen overnight: ‘[Visual] art can indeed make its mark on consciousness and thus, indirectly, change society, but this cannot be brought about instantaneously, only as a long-term effect’ (Kung 1981, p. 24). We cannot yet judge the success of Surrealist art in changing humanity, but its profound influence on later art movements – in particular by freeing other artists to focus on the subconscious – suggests that it has changed the way people look at art if not themselves.16 A generation of Marxists was scorned in the west for the belief that humanity’s attitudes could be transformed by institutions. Economists of the mainstream chased their own dream in more subtle fashion. Perhaps the homo economicus of the textbooks could be created if we just collectively believed in him (it was almost always ‘him’), if we shut ourselves off from the polluting thoughts of psychologists and sociologists who suggested not just that we were needlessly complex but – heresy of heresies – that this was somehow important. If businesspeople could be convinced of the inevitable return to full employment, perhaps investment wouldn’t fluctuate so much in the first place. If politicians were convinced that tariffs were bad, perhaps we could get rid of them. (While there is good reason to suspect some tariffs are good for some nations, much more complicated stories must be told to overcome the implication of theory that they always decrease global welfare). If those with market power imbibed the notion of contestability, they would satisfy themselves with normal profits. A global marketplace with fearful entrepreneurs might even, one could dream, approach the definition of perfect competition. Theory cannot just be judged by the feeble standards of this day, but by the standards of a brighter tomorrow in which such prophecies have had time to be fulfilled. We cannot be sure to what degree a greater dedication to the principles of science might by now have bequeathed to us a discipline capable of providing helpful advice to governments on the crucial issues of the day: encouraging growth, reducing unemployment, controlling inflation, improving the income distribution, etc. Changes in theory, Fish argues, generally have a very small causal role in social change: people must first change their belief system and theory is too open to interpretation (1989, p. 28). Though Keynes believed that in the end only ideas matter, we have good reason to be sceptical of the ability of econ-science alone to alter the world.

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Given the poor (though not empty – see Chapter 6) record to date of econ-science in improving the state of society, we must be relieved that so much effort has been devoted to the artistic goal of changing humanity instead. Econ-science holds out hope for the quick fix, the blazing insight which allows farsighted political leaders to recraft our institutions in miraculous fashion to create a kinder, gentler tomorrow.17 Econ-art must pursue the slower path of fashioning a world toward which we might aim, and urging us to transform ourselves to suit the image. Econ-artists do not forget their assumptions due to amnesia but rather due to hope. The above comparison was biased against econ-art, for it took as its benchmark the ostensible goal of econ-science: the refashioning of society. We must never lose sight of the fact that art serves a loftier goal than science. If civilization is tending toward any goal, it must be the realization of humanity’s true potential. Institutional restructuring is just a means; the goal is self-actualization. Seen in this truer light, it is econ-science which pursues the indirect path, while econ-art speaks directly to our heart and soul. Econ-science still has a role to play: the release from unnecessary toil and discomfort is a prerequisite for the widespread discovery of our inner spirit. But we would err greatly were we to exalt the piano tuner above the concert pianist or composer. This leads us back to the question of whether the reality portrayed in econ-art must be the future which we actually wish to achieve. The answer, surely, is no. Elements of the picture may be exactly that, but other elements may merely represent a purposely idealized version of that which should be but never could be. The goal, after all, is to transform us; if one’s reach did not always exceed one’s grasp there would be no place for curiosity, or hope, or striving, for much of what is best in the human spirit. Art must in the end hold out an unreachable goal; we grow and evolve and achieve some of the possibilities which lie before us, but it is not in us to achieve perfection. What glory, after all, could we find in the vast history of humanity if not for the urge to fashion a better world from that which exists? What would be left for humanity without such striving? In linking together the highly developed fragments of theory into a cohesive whole, the econ-artist may at times even utilize elements that are not desirable at all. This may simply represent the fact that art, like individuals or society, can never achieve perfection. If we knew exactly what it was we yearned for, we would not need the subtlety of art in the first place. Previously, we have raised the fact that life with homo economicus might be

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boring. This fact does not negate the message of econ-art. The heaven of Christianity also seems a tedious place, but millions are induced to forego murder and mayhem in order to gain entrance. In both cases one can look up from one’s nasty, brutish existence and see a bright and sparkling future in the sky.18 Econ-art evokes the future in order to free us from the present. Writers as diverse as Tolstoy and Wordsworth had argued that artists transmit feeling and emotion in their work. But Read notes that the audience need not at all perceive the same emotion that the artist felt while creating. While the artist expresses feeling, that which is transmitted is understanding, and such understanding takes the heat out of our emotional problems (Read 1968, pp. 262–7). Only by recognizing how art inspires the best part of the human spirit can we understand the ancient Greek equation of beauty with moral goodness (or simple truth): The only sin is ugliness, and if we believed this with all our heart, all other activities of the human spirit could be left to take care of themselves. This is why I believe that art is so much more significant than either economics or philosophy. It is the direct measure of man’s spiritual vision. (Read p. 267)

One who absorbs the image of the econ-art world, of a world without discrimination or exploitation and where people get what they deserve, is free. The best of worlds, after all, exists only in our hearts. Note, moreover, that this sort of striving for a better world is of a sort amenable to those who would defend the status quo. Econ-artists, like their Surrealist colleagues, are scarcely the challenge to entrenched privilege that they might be.

2.7

Primitive Man

At one level, homo economicus must seem to be quite a departure from the Freudian construct which inspired Surrealism. To some extent, he undoubtedly reflects the inertia of ideas, the inheritance of concepts from earlier economists. (I may be forgiven, I hope, for drawing on Jung while speaking of Freud.) Yet he also reflects the constraints of the new art form. The painter, the novelist and the sculptor can readily capture the neurotic conflicts of the inner being. The economist has difficulty dealing with conflicting desires. Elaborate models of elegance and beauty cannot easily be created unless people behave in predictable fashion. The assumption of rationality may be essential to the econ-artist.

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At a deeper level, Freudian and economic man are one and the same. Haslam describes the Surrealist discovery as the recognition that modern people were still driven by primitive instincts (1978, p. 7). This, again, was a reaction to the received philosophical tradition in which the civilized person was driven by higher virtues: philanthropy, good taste, philosophical introspection. Freud pointed to a different set of impulses. Econ-art echoes the return to emphasis on selfish motives (always, to be sure, an important element in the discipline). It echoes the desire to put the unmasked individual at the centre of artistic expression. It is, in its own way, a rebellion against the naivete of much nineteenth-century philosophy. (It is, though, only a partial revolution, for economics has retained the belief in an ideal society in which conflict is absent.) One risk associated with this approach is that the audience loses its emotional attachment and thus is affected less than it might be by works of econ-art. Borges has noted a similar danger in his own work: A final criticism is that Borges’ cerebrality, the absence of emotion or deep ethical commitment, creates an impression of coldness and impersonality. Certainly his stories often appeal directly to the mind and to the mind only … Every choice, whether in art or life, involves a sacrifice. Borges’ choice of approach in his fiction involves the sacrifice of our ability to identify ourselves emotionally with his characters. (1976, p. 76)

We risk creating another world in which we (recognizable humanity) have no place, have ceased to exist. Borges’ deserved popularity implies that homo economicus may always have an audience as well. Still, econ-art may have as much to gain as econ-science from a more well-rounded view of humanity: Of course the preference of economists for rational [utility maximization] has not done much to make people more level-headed. Experience suggests that some people are irrational, willful, even foolish. Even some of the sort of evidence economists like to call scientific points the same way. (Koppl 1991, p. 204)

This fact has not swayed economists from their dedication to rationality (it was not always so: Smith believed that people lived in a world of illusion, scarcely knowing their own ends). Rational choice is the key economic metaphor, according to Klamer and McCloskey (1988, p. 14); they recognize that while we owe it much it also limits us. Simon has spent decades arguing for satis-

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ficing (that is, the pursuit of conflicting goals) and bounded rationality. Since information is costly, we only gather it as long as the benefit exceeds the cost (an infinite regress is possible since it is costly to decide which information is worth obtaining); we thus inevitably make decisions with imperfect information. Yet Freedman (1993) shows how numerous authors have misinterpreted Simon due to an inability to conceive of non-rational behaviour; if he wasn’t talking about straightforward constraints on maximizing behaviour he simply wasn’t making sense. I can understand their consternation, for my first reaction was much the same. We can, if we really try, treat individual behaviour as rational maximization subject to the fact we are too stupid (with respect of our inner desires as well as the true state of the world) to know what we really want. It is, however, misleading to operate in this manner. The important point is that in any particular situation it is the constraints on our behaviour that matter; blindly appealing to rationality will usually give us the wrong prediction. Economics as a science would concern itself with the processes people actually use to make decisions (Simon 1991, p. 324). It would recognize that people have numerous conflicting goals of body and mind which change in relative importance and assert themselves differently.19 It would note that decision making is sequential: agents may focus on sub-goals that are not in their long-term interest. It would recognize that people have values (which in areas like pollution control we could try to change), and gain utility from the act of striving toward goals. It would have a place for ideology, myth, prejudice, shared beliefs and creativity (North 1994). It would include such variables as sympathy and duty if/when it designed utility functions, and would recognize that moral codes influence economic performance (Hausman and McPherson 1993). (Radner 1992 notes that organization theory has nothing to say about important managerial functions such as persuasion, exhortation and instilling firm values.) It would, in sum, treat people like the complex, multi-faceted beings that they are (see Medema and Samuels 1996, pp. 271–2). In its attitude toward human decision making, economics is anything but scientific.

2.8

An Orderly World

The great majority of all human beings on the globe lived a life different from that of Castalia, simpler, more primitive, more dangerous, more disorderly, less sheltered. And this primitive world was innate in every man; everyone felt something of it in his

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own heart, had some curiosity about it, some nostalgia for it, some sympathy with it. The true task was to be fair to it, to keep a place for it in one’s own heart, but still not relapse into it. For alongside it and superior to it was the second world, that of Castalia, the world of Mind – artificial, more orderly, more secure, but still in need of constant supervision and study. To serve the hierarchy, but without doing an injustice to that other world, let alone despising it, and also without eyeing it with vague desire or nostalgia – that must be the right course. For did not the small world of Castalia serve the great world, provide it with teachers, books, methods, act as guardian for the purity of its intellectual functions and its morality? Castalia remained the training ground and refuge for that small band of men whose lives were to be consecrated to Mind and to truth. Then why were these two worlds parallel and intertwined; why could an individual not cherish and unite both within himself? (Hesse 1969, p. 100)

We can never know definitively what it is in a given work which attracts us, but we can discern various characteristics of Surrealist art. We can thus go beyond our discussion of the yearning for a better world to look at particular characteristics of that other reality. The first essential characteristic is order: ‘Art is an escape from chaos. It is movement ordained in numbers … ’ (Read 1968, pp. 42–3). Surreal art achieves much of its impact through the very precision with which unreal elements are juxtaposed. Art cannot be a jumble; every element has its place. If this appears not to be so to the audience, this reflects a failure to communicate, which may stem either from the imperfect artistic vision of the creator, or underdeveloped perceptive capabilities on the part of the viewer. In the real world there are always caveats. A may cause B most of the time, but not always, and it may be difficult to enumerate, much less explain, the various situations in which this causal link does not hold.20 In the higher reality of the artist, A can cause B all of the time. Charles Scheeler perhaps stated it best (and shows that decades later artists were still moved by a desire for order): ‘I venture to define art as the perception through our sensibilities, more or less guided by intellect, of universal order and its expression in terms more directly appealing to some particular phase of our sensibilities’ (in Arnason 1986). We have, then, our first limited insight into the preference for mathematical discourse in econ-art. If scientific goals alone were to be pursued, one would imagine that it would soon be recognized that the precision of mathematics is ill-suited to our present

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highly imperfect knowledge of the functioning of the economy. (Solow (1988) estimates that we only understand one-quarter of how the macroeconomy functions; this judgement is hardly precise but may well be accurate.) Maths has its place to be sure, but we would be well advised to devote more attention to uncovering the caveats than working out the mathematical niceties of a world in which A always causes B. For econ-art, though, mathematics is an unmixed blessing (ignoring the unfortunate side-effect of reducing the potential audience, and this is only unfortunate if econ-artists desire to commune with outsiders).21 It guarantees order. Every element of the model is related exactly to every other. If one wishes cerebrally to work out the exact role of any element, this may take some time. But while the art historian may want to examine every paint stroke (or not), the connoisseur appreciates the work as a whole. So it is with econ-art. One does not have to recreate the work of the artist to appreciate the message. A model expressed in precise prose must inevitably encourage intellectualization, and the subtler the message the more difficult it will be to bypass the conscious mind and appeal to the intuition of the subconscious. Mathematical models ‘are attempts to get into a realm beyond human discourse, serene, self-confident, self-referential’ (McCloskey 1996, p. 76).22 Since we know a mathematical model must not defy logical rules, we are able to accept it as a whole. Unless we wish to use it as an input into further artistic exploration, we can accept the message without feeling any need to analyse the details (in practice, we only read the introduction and conclusion).23 Elegance, simplicity, beauty, order: we are transported immediately to that other world. There may be more subtle forces at work as well: ‘The spontaneous motives that lead an artist (and the artist in all of us) to express himself in formal patterns are obscure, though no doubt they can be explained physiologically’ (Read 1968, p. 32). While we can rejoice that we have the comprehension of art that we possess, we must recognize that its very intuitive nature will prevent us always from being able to totally comprehend its power intellectually. We know, though, that formality appeals to (at least some of ) us. It can be little surprise that that which causes much artistic pleasure should also be credited with scientific value: the distinction between artistic means and scientific ends is always difficult to police. We should not neglect the possibility that some of this appeal is misplaced. Philosophers as diverse as Socrates and Kierkegaard have argued that we should not be seduced by order, but accept

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the inherent difficulty and complexity of life (learning that it is difficult but not impossible). Freud recognized that the ability to accept ambiguity when necessary is a sign of maturity. We can be tyrannized by order, as when the laws of economics become excuses for the horrors of economic life (Arrington 1990, p. 92). The difficulty here lies in the confusion of econ-art with econscience. As art, economics services a valuable function in transporting the audience into a better world. Only when art is mistaken for science does it limit our ability to cope with the world we live in.

2.9

The Quest for Understanding

An economist of very keen intuition would perhaps have suspected from the beginning that seemingly diverse fields – production economics, consumers’ behavior, international trade, public finance, business cycles, income analysis – possess striking formal similarities, and that economy of effort would result from analyzing these common elements. (Samuelson 1947, p. 3)

Precision not only serves the aesthetic requirements of all art, but also responds to the desperate desire of modern people for hard answers in a world of uncertainty (some would argue this attitude is now giving way to a ‘postmodern’ rejection of the possibility of certainty). The tight cultural net which bound our forefathers has been cut. Unquestioned religious devotion is no longer commonplace – it remains as a retreat for those unwilling to face the uncertainty of our times. Nietzsche could celebrate the newfound freedom of the individual, while recognizing that some new ethos must be found to guide that individual. Unprecedented rates of change in the world around us served to cause further disorientation: To be modern is to find ourselves in an environment that promises us adventure, power, joy, growth, transformation of ourselves and the world – and at the same time, that threatens to destroy everything we have, everything we know, everything we are. (Berman 1982, p. 15)

In the nineteenth century, writers struggled to deal with the complexities of the world they lived in; in the twentieth century they have tended to the extremes of admiration24 or condemnation. Post-war attempts to achieve some synthesis between these two extremes have failed (Berman 1982, pp. 24, 32).

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Hesse captures the essence of twentieth-century life as seen from the distant future (a future, needless to say, more orderly than the present): They dwelt anxiously among political, economic and moral ferments and earthquakes, waged a number of frightful wars and civil wars, and their little cultural games were not just charming, meaningless childishness. These games sprang from their deep need to close their eyes and flee from unsolved problems and anxious forebodings of doom into an imaginary world as innocuous as possible. They assiduously learned to drive automobiles, to play difficult card games, and lose themselves in crossword puzzles – for they faced death, fear, pain and hunger almost without defences, could no longer accept the consolation of the churches, and could obtain no useful advice from reason. (1969, p. 22)

Even in the glorious 1990s we can still comprehend these words which were set down in the aftermath of the Second World War. Borges is well aware of this modern quandary. In ‘La Biblioteca de Babel’, he writes: The librarians (mankind, and particularly thinking men) are obsessed with the desire to resolve the contradiction between the appearance of the world, seemingly created according to design, and the evidence which more and more in modern times seems to deny the existence of a designer. (1976, p. 37)

Later, in ‘Thom Uqbar Orbus Tertius’, in which he ‘deftly mixes the real and imaginary in order to create the plausible’, he reveals the Surrealist insight: ‘All man-made explanations of reality are fictitious, but people prefer fictitious design to the recognition that reality is not orderly but bafflingly unpredictable and incomprehensible’ (pp. 14–17). It is no surprise, then, that in his conclusion he writes: ‘It can be argued that his creation of a fantastic world inside our own world, operating according to certain imaginary laws, represents a triumph of art over the chaos of reality’ (1976, p. 77). People in the twentieth century must struggle with the meaning of life as never before. Art must, Kung feels, reflect this fact, and deal somehow with feelings of estrangement and isolation (1981, pp. 24–5). This could be done in many ways, but the very act of creating would indicate that the artist believed in some meaning. The artist’s work is her enlightenment. Seen in this way,

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the emergence of Surrealism from Dada can be attributed to the fact that Surrealism provided an answer – the exploration of the subconscious – whereas Dada was anarchic. While humanity can still revel in the subtle discourses of the great philosophers, we cannot deny that there is a taste for the closed system, the feeling that ‘this is the answer; we need look no further.’ Econ-artists, then, by the order and completeness of their creation, satisfy a basic human need. We can understand why Samuelson wished to formulate a mathematically precise general theory of theories. At its best, this can aid the ability of the recipient to cope with reality. Since the nineteenth century, ‘it has been impossible to grasp and embrace the modern world’s potentialities without loathing and fighting against some of its most palpable realities’ (Berman 1982, p. 14). One may have to distance oneself from reality in order to deal with it. The danger of course is that one must be able to separate reality from surreality. Art fails in its mission of understanding if its message is misinterpreted as science. Rather than extol the virtues of art, economists pervert the mission of science. Long after philosophers of science have turned their back on naive concepts of conclusive proofs and falsification – in sum, the idea that we can know truth with certainty – economists still pitifully cling to these notions. Redman perceptively speaks of economists’ ‘inability to accept the uncertainty of our knowledge that can be found in the philosophy of science literature’, and notes that even those who criticize economic methodology suffer from this inability (1991, p. 118). Neither art nor science is well served by such confusion. Collective psychoanalysis is needed to allow economists to face squarely the complexity and uncertainty (that is, danger) which surrounds and envelops them. We cannot speak of the understanding which is the aim of art in the same way that we speak of the understanding which comes from science. Art should increase our capability to cope, to prosper, to grow: ‘Art is rehearsal for those real situations in which it is vital for our survival to endure cognitive tension’ (Peckham 1967, p. 314). While the critics may be right when they claim that economics is cut off from reality, econ-art ironically fails in its mission because it does not always appear to be divorced from reality. It thus inadvertently enters the dangerous arena of demagogues and religious charlatans, and provides false succour by acting as if easy answers existed to life’s harder questions. The starting point of modern philosophy – the new ethos that Nietzsche spoke of – must be the recognition that we can never

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know everything, that we must on many of the central questions of our existence make our best judgement on the basis of imperfect information. While society cannot decide for the individual, it can evolve rules and customs which define the prevailing wisdom on matters of both ethical and practical import. The individual must know that to embrace freedom is to embrace doubt. Society can pursue collective policies which minimize the real dangers of the modern world, but must not strive to minimize the perception of uncertainty by telling people lies. Freedom must be based on truth. Economics has a valuable role to play in this process of social renewal, but cannot do so as long as she is unable to face reality herself.

2.10 An Antidote to Nationalism Surrealism arose as an antidote to nationalism and militarism (Haslam 1978, p. 237). Surrealists, indeed, were constantly attacked in the French press during the interwar period, for their opposition to displays of French nationalism or patriotism (Nadeau 1965, p. 114; Picon 1983, p. 80). From the outset, Surrealist artists strove to achieve a worldwide movement, confident (at least hopeful) of the power of art to unite humanity. Visual art, especially, could easily cross national boundaries. And if humanity could share the Surrealist vision, nationalist tensions must be eased. The implications for econ-art were far-reaching. We have discussed the elegance of international trade theory above. Its conclusion that trade barriers were bad policy could not help but strike a responsive chord in a profession and populace both weary and fearful of war. While wars might still provide economic benefits to a country if it was able to plunder the capital stock or natural resources of the loser, the economic rationale for war had traditionally (if not in Attila’s day, at least in Rhodes’) relied on the ideas of a secure source of raw material imports and captive markets for export: in a world of free trade these motives simply disappeared. Even demagogues must have difficulty convincing the populace to risk sons and daughters for mere plunder. It would not just be in international trade but across the discipline that the reaction to nationalism would be felt. In a time of ethnic turmoil there was a natural attraction of a ‘science’ that focused on what humanity had in common rather than its diversity (Spiegel 1991, p. 650). Tastes could be ignored in favour of

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identical utility-maximizing consumers. Differences in cultures, institutions and technologies could be ignored in product and labour markets with homogeneous labour and capital. The allimportant question of why some countries grew faster than others, or had lower unemployment rates, could be pushed to the background; pure deduction of the driving mechanism of the typical economy would be pursued instead: Only during the past fifty years has there emerged a worldwide homogenized mass culture and, in conjunction with other factors, the acceptance of a mathematical economics world wide in its sweep that abstracts from the specifics of time, place, and national differences. (Spiegel 1991, p. xii)

Through the nineteenth century, different economic traditions were pursued in different countries, for example, the German Historical School,25 the Austrian School. Even into the interwar period, it was common for major developments in theory to remain unknown outside the country of origin for years. Mathematics provided an answer to that. Both by facilitating communication and glossing over national differences, it created one theory for all. Just as painting was the mode in which Surrealism spread most readily from France in the 1930s (Haslam 1978, pp. 240–2), mathematical formulation could readily be appreciated by members of diverse linguistic groups. It can be no coincidence that Von Neumann, one of the earliest popularizers of mathematical economics, was, like Freud before him, a product of the protracted breakup of the Hapsburg Empire and thus especially sensitive to the dangers of ethnic bickering and exclusivism, nor that mathematical economics first caught on in the ethnic melting pot of the United States (see Spiegel 1991, pp. 640, 661). Econ-art brought the world closer together.26

2.11 Suspicion of Authority The First World War could not help but cause people to question the wisdom of those in charge. The later rise of totalitarian governments reflected this dissatisfaction with the traditional elites. Their excesses, and then their collapse, encouraged an even greater suspicion of power. Not only was the State losing its credibility, but the natural authority of the Church was in serious decline. Surrealism was in large part a reaction to the loss of legitimacy by both Church and State; its goal to shock society into a

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new world view (Haslam 1978, p. 7). In the cauldron of the Depression, when much of the intelligentsia, especially in Europe, sided with authoritarianism, Surrealists, to their credit, retained their suspicion (Hauser 1956). While conscious thought could not always see any alternative, the subconscious yearned for images of a world in which the horrors which resulted from the abuse of power would not be possible. The free market orientation of mainstream economics is often attributed by its detractors to ideological motives (see Chapter 5). Yet a deeper and less hostile interpretation exists: It is possible the consensus has been motivated by a desire to find an effective shield against dogmatism and tyranny … there may have been a natural and understandable desire that the choices and decisions of citizens in the capacity of voters or consumers should be treated with the fullest due respect … (Roy 1989, p. 11)

Econ-artists merely reflected the temper of their times. People were justifiably suspicious of public power: the clearest antidote to the abuse of power was the assertion that the world would function perfectly well on its own. No one had to consciously rule the affairs of others; the invisible hand (a replacement for God?) would do this for them:27 ‘That [neoclassical] theory has sought to absolve us of responsibility, leaving outcomes always to the wise guidance of an invisible hand’ (Bartlett 1989, p. 203). When governments had so clearly failed to act responsibly, who can question the desire to abdicate responsibility? Practical considerations might force politicians and some mere econ-scientists to argue for, and achieve, a haphazard accretion of government powers. This could not lessen the attraction of works of theory which argued that such was unnecessary. The University of Chicago has long been the central fortress for the idea that state interference was generally counterproductive. The two leading scholars there during the Depression were Frank Knight and Henry Simon. Simon, like Keynes himself, was only too conscious of the justification which the latter’s theories could provide to totalitarian regimes (Breit and Ransom 1982, p. 209). Knight has left us a clear statement of his views on the matter: I mistrust reformers. When a man or group asks for power to do good, my impulse is to say, ‘Oh yeah, who ever wanted power for any other reason? And what have they done when they got it?’ So I instinctively

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want to cancel the last three words, leaving simply ‘I want power’; that is easy to believe. And, a further confession: I am reluctant to believe in doing good with power anyway. (in Breit and Ransom 1982, p. 198)

It is not a belief in the market, or even of the rights of private individuals, that provides the starting point of his philosophy. A justified fear of the abuse of power encouraged him to look for other mechanisms which could mediate our lives.28 Both Knight and Simon were willing to recognize some role for government. The latter even suggested that natural monopolies should be operated by government, and that other corporations should be limited in size to prevent the exercise of market power. (His willingness to regulate natural monopolies and corporation size has proven a recessive gene within the Chicago tradition (Reder 1982, p. 29). Such ‘purification’ of a more flexible formulation is not uncommon in the history of ideas.) These are hardly the suggestions to be expected of an ideological lackey. They express rather a fear of power in all forms, and the hope that market forces could discipline humanity. We might feel that hope to be misguided or even naive, but can hardly be surprised that it strikes a chord in our soul.

3

Cubism and More

3.1

Cubism

As revolutionary as the discoveries of Einstein or Freud, the discoveries of Cubism controverted principles that had prevailed for centuries. (Rosenblum 1976, p. 13)

One need not look far in order to find evidence of the importance of Cubism as a movement within twentieth-century art. Arnason (1986) feels that Cubism was the most revolutionary change since the Renaissance, and it became the ‘lingua franca’ of modern art for half a century. Golding (1988) concurs in this revolutionary judgement, and notes that the effects are still with us. Rubin also views the rise of Cubism as a seminal event, ‘from which gradually emerged nothing less than a visual dialectic for twentieth century art’ (1989, p. 15). As mentioned in the previous chapter, Cubism pre-dates Surrealism by decades. Between 1908 and 1913, the collaboration of Picasso and Braque yielded an art form of breathtaking novelty. They were soon joined by a number of other talented artists. As the name Cubism implies, the artists rendered their subjects in terms of basic geometrical shapes. Freed from the constraints of trying to paint what the eye sees (a motive which had inspired the post-Impressionists and others from the late nineteenth century), the Cubists were able to represent more than one view of an object (for example, front and profile) on the same canvas. This, they argued, could provide a ‘truer’ depiction than a hyper-realistic portrayal from only one angle. Juan Gris, who joined the Cubists in 1913, viewed Cubism as, at the beginning, ‘simply a new way of representing the world’, a reaction against Impressionism. Cubists wanted to do more than examine ‘the momentary effects of light’. Indeed, early Cubist works, devoted to the exploration of the potentials of geometry, used a very limited range of colours, though by 1912 Cubists such

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as Delaunay and Picabia, and even Picasso, would add the exploration of the effects of placing a particular colour next to another to the Cubist repertoire. Leighton (1989) describes the attraction of many Cubists, including Picasso but apparently not Braque, to the ideals of anarchism. These included opposition to authority, the military, industry, nationalism, property, religion and parliaments. There is a large overlap here with the forces guiding Surrealism. While we will return to these anarchic impulses later, we can avoid repetition best by focusing on Cubist style rather than goals, for Cubists chose a quite different method for expressing their concerns. Leighton (1989) warns of the dangers of studying style separately from substance. Yet she also recognizes that Cubism moved away from its explicit political focus and became an important step on the road to abstraction. While Picasso clung to the ideal that art should be grounded in reality, he also recognized that increased abstraction was itself a political statement of opposition to authority and tradition. The methodological innovations of the Cubists were so great and had such far-reaching effects that they have often been the focus of art historians (Leighton 1988). However, as Gris himself stressed, the Cubists were doing more than playing with technique: ‘Cubism is not a manner but an aesthetic; it is a state of mind.’ Cubists were trying to represent objects as the mind sees them, not the eye (in Cooper and Tinterow 1983, p. 12). Other Cubists concurred: ‘All emphasized that Cubism was an art of realism … ’ (Golding 1988, p. 17). They felt that the world they depicted on canvas was more real than the world we see (Henderson 1983).1 This desire to delve even deeper into reality was typical of the ethos of the pre-First World War period. Who knows what sort of art the twentieth century would have seen if this had remained art’s guiding principle throughout. It was not to be: ‘This is the premise that drops out of Cubism after the First World War: the assumption of meaning in human endeavors that the experience of the war discredited’ (Leighton 1988). While Leighton’s focus is on the practice of art history, can we doubt that those artists who saw themselves as following in the Cubist tradition after that war could not share the same zeal for reality? Leighton (1989) recognizes that Picasso was shocked by the First World War. Artist and art historian alike would care more about form than substance thereafter. Ironically, the Cubist ‘revolution’ gave all subsequent artists the licence to rejoice in the fact that things are

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not what they seem, and thus need not be portrayed as the eye sees them, while neglecting the Cubist concern with reality that had made the discovery possible.2

3.2

The Cubist View of Time

The cubist theory of vision took into account the breaking up and discontinuity of the contemporary world view in which objects are perceived more hastily in parts rather than more leisurely as wholes. The world, as a consequence, was seen fragmentarily and simultaneously from many points of view rather than entirely from a single viewpoint. (Fleming 1970, p. 513)

The Cubist realization that side and front (and back) views could be presented at the same time is, indeed, one of the characteristics of that art form. Leighton (1989) argues that anarchism guided Cubists to reject the past in favour of the spontaneous and intuitive. The fragmentation of time was not unique to Cubism, though their way of depicting it was. From the late nineteenth century, art had increasingly focused on, ‘the momentary, the fragmentary, the everyday occurrence’ in, for example, novels which comprised a series of fragments rather than a logical whole (Fleming, p. 499). Hauser attributes the abruptness with which modern art describes life to the time experience of the modern age which is focused on the present (1956, p. 230).3 Econ-art thus turned its back both on history and on dynamic processes. The historical tradition, which had argued the sensible and correct position that the present could only be understood as a result of the past, was forgotten. Economic historians still exist and still argue for path dependence – that economies don’t naturally tend toward any one position of rest, but rather decisions made in the distant past may influence the course of events to this day4 – but this message is only weakly noted by theorists who continue to focus on ahistorical models with unique equilibria. The lengthy discourses of classical economists on the dynamic forces of growth have been forsaken for the minute inspection of short-run allocative decisions. This last was Marshall’s major contribution to economic discourse; Heilbroner (1968, pp. 190–1) notes that he changed economists’ view of time, and ignored the sudden changes (the motto of his Principles was that ‘Nature makes no sudden leaps’, a dictum, it should be noted, which would be rejected by many modern biologists) and dynamics which are the key to economic life.5 Economics has

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never looked back. Econ-science has thus lost much of its purpose in order that econ-art could prosper. Ideally, in art, the focus on the momentary fragment of the present was not at all incompatible with the comprehension of change. Bergson, in his philosophy of art … ranked intuition as a higher faculty than reason, because through it the perception of the flow of duration was possible, and through it the static quantitative facts were quickened into the dynamic qualitative values of motion and change. Existence is never static but a transition between states and between moments of duration. (Fleming 1970, p. 500)

The moment would be transmitted, but the consciousness of the audience would comprehend motion. It would fill in the gaps in the music of Debussy, and join together the fragments in poems and paintings. Such at least is the principle, and we might question how well the artist generally succeeds in transmitting true understanding of motion. In econ-art, as well, it is often claimed that dynamic processes can be understood through static portrayals.(In many fields researchers are, to be sure, trying to fit their analyses into dynamic frameworks. Since the mathematics soon becomes intractable, and since we are wedded to the use of mathematics, comparative statics remains ubiquitous.) That is, we start with a supposed equilibrium. We then change one or more elements – we may for example change tastes and thus shift a demand curve or two (though we generally don’t mess with tastes) and calculate the new equilibrium. In so doing, we purport to describe a dynamic process of action through comparative statics: In cases where the equilibrium values of our variables can be regarded as the solution of an extremum problem, it is often possible regardless of the number of variables involved to determine unambiguously the qualitative behaviour of our solution values in respect to changes of parameters. (Samuelson 1947, p. 21)

But we can only do so by assuming that dynamics don’t matter, that the process of change itself has no effect on where the system ends up. Even Samuelson was forced to admit this: ‘We find ourselves confronted with this paradox: in order for the comparative-statics analysis to yield fruitful results, we must first develop a theory of dynamics’ (1947, pp. 262–3). Static portrayals are not useless: in many situations comparative statics can capture the

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essence of a transformation. Yet it is too easy to slip into the habit of thinking that this is always the case. That is a dangerous path to take. There is no place for the path-dependence (or disequilibrium) of the real world here. But of course art isn’t about the real world. It is, in fact, primarily about a better world. Change in the real world, at least with our present degree of scientific understanding, is unpredictable, and therefore both exciting and frightening. Society, Berman notes, has contradictory desires for growth and stability. Modern people ‘are moved at once by a will to change – to transform both themselves and their world – and by a terror of disorientation and dissent, of life falling apart’ (1982, pp. 35, 13). We would not want to turn our backs on economic growth (though there are some in modern society who suggest we do exactly that), but we would wish that economic change did not throw innocent people out of work, impoverish whole cities and regions, upset international trade and financial links, or jeopardize our savings.6 Econ-art reflects these contradictory desires by describing growth as obeying simple rules. There is no danger that mistakes made today will deflect us from our pursuit of that better world, for we assume away path-dependence. Disembodied technological change gives us productivity advance without structural change. The fragments we focus on in econ-art are already idealized, and thus the vision of change which they evoke is naturally of a benevolent force for good. If econ-art were to actually devote itself to dynamic portrayal, it could only with great difficulty achieve such an advantageous result. It thus dips its toe in the icy waters of dynamics while wearing the straitjacket of mathematical analysis. This guarantees that dynamics will always be seen as orderly (chaos theory may be an exception), and that we need never be swept out into the icy sea of reality (where we might find inspiration, but might also face unimaginable horror). If we are lucky, events in the real world will never force us to face these fears, and rue the ascendancy of art over science.

3.3

Technological Incursions

To the boy with a new hammer, the whole world looks like a nail. Allyn Young

While the invention of photography (and emergence of Gestalt psychology) had already had an impact on art (Vitz and Glimcher 1984), the development of motion pictures provided a new

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medium in which this emerging conception of time and place could be handled as never before. We speak here not of the simple fact that the eye is fooled into thinking a rapid series of still photographs represents motion. Rather, it is the way in which one scene is presumed to follow naturally from the other, or that intersplicing of separate scenes could create the impression of simultaneity. No other art form had ever been able to bridge the gaps of space and time so freely (though novelists could aspire to doing so). As such, the advent of this new technology could not help but give further impetus to the fragmentation of time. The computer plays an analogous role in econ-art, for it allows the complex economic evolution of decades to be reduced to a handful of numerical series representing economic aggregates. Computers not only allow the compilation of the necessary statistics, but seemingly create the possibility of discerning the causal relations contained within.7 This both depends on and reinforces the view that the process of growth follows a regular and unchanging course. It is now widely recognized that econometric analysis of time series is incapable of solving questions of historical causality (see section 4.11; Szostak 1995, Ch. 2; Klamer and McCloskey 1988, p. 5). The effort provides its own reward, however. Kung noted that the very effort of the artist proved that she believed the world had some meaning. The combined efforts of the mathematical modeller and econometrician give witness to a belief in a simple world of straightforward, unchanging, unidirectional causal links. This would have been barely possible without the development of the computer. This development had a devastating effect on econ-science: ‘The computer revolution has, I believe, induced economists to carry reliance on mathematics and econometrics beyond the point of vanishing returns – something that is perhaps inevitable in the first flush of any revolution’ (Friedman 1991, in Mayer 1993, p. 132) (one might wonder how long the first flush will last). Of course, this was still better for our collective psyche than the elucidation of our pitiful real understanding of dynamic processes. The computer freed the econ-artist from the complexity that is reality and allowed her imagination to soar.

3.4

Return to the Classics

Cubism, as well as Surrealism, had precursors from the nineteenth century which were recognized by the artists in these later traditions (even as they rebelled against classical art). The Cubists

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applauded Cezanne in particular, but approved of a number of other artists (especially post-Impressionists) who had tried to move beyond depicting what the eye beheld. (Rosenblum (1976, p. 15), at least, traces the influences on Picasso to the Renaissance and beyond.) Unlike Dada, which insisted on starting from scratch, the Surrealists devoted a great deal of time to suggesting which previous artists (mainly, but not exclusively writers) were worthy of attention and which were not. Breton hailed Heraclitus as a Surrealist in dialectic, Lulle in definition, and Baudelaire in morality (Nadeau 1965, p. 35). One of the best characteristics of modern art is in fact the willingness of artists to combine elements from previous (even primitive) art forms (Fleming 1970, p. 544). In this way, the best of the past is retained, while the artist tries to improve upon it, and tries also to reflect modern desires. The twentieth century, and especially the 1920s, also sees a classical revival; numerous artists – including Picasso – tried to reproduce works in the classical tradition. While not necessarily a negative development, we should note the false legitimacy which an appeal to the classics can give to a work of art. Hadjinicolaou (1978), indeed, views this as one of the major ways in which emerging social classes seek to justify both their artistic tastes and position in society. Econ-art has often referred to the classics to buttress its legitimacy. Indeed it uses the word ‘neoclassical’ to refer to the main body of modern theory, even though it has jettisoned the concern with growth (and the idea of surplus) that formed the core of classical theory. From the point of view of econ-science, we could scarcely hope for a better example of misplaced reverence. Economists have not kept the best of the former traditions, but have selectively maintained those tenets of the faith which are supportive of modern theory and practice. From the standpoint of econ-art, of course, it is highly desirable to ascribe the legitimacy of the past to works which achieve so many artistic goals. Friedman’s famous claim that ‘we are all Keynesian now’ is a well-known modern example of selective memory. Keynes is still too well known (if not always well understood) for such a claim to go unchallenged (ditto the more recent attempts to claim he would have approved of rational expectations). Many economists, though, are blissfully unaware of the selective borrowing from revered names such as Smith, Ricardo and Mill. Classical economics is thus forced to be consistent with current beliefs. Smith was considered a friend of the masses during the French

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Revolution (see Rothschild 1992). Although he was careful in those days before academic freedom not to say anything too offensive to the powers that be, he was indignant about the inequality of the income distribution (often treating it as a form of oppression) and willing to consider governmental redistribution. He felt governments should actively promote science. He was far from a dogmatic advocate of laissez-faire (Pack 1991). The Smith referred to by those who call themselves neoclassical is a misleading caricature of the actual man (though perhaps we all become conservative when we die). Physicists do not hide behind the skirts of Newton, and biologists regularly disagree with Darwin. This is what Kuhn (1977) means when he says that scientists, unlike artists, bury their past. Why, if they were scientists, would economists feel as compelled to misinterpret Smith?

3.5

A Brief Look Back

We have, to this point, focused solely on twentieth-century art and econ-art. The classical economists, we have maintained, were primarily scientists. They may not always have been right – since they had open disagreements some must not have been – but they do seem to have been focused primarily on examining and understanding reality. Arguably, a handful of scholars achieved more in the century after Smith than have thousands of work-a-day economists since (nor can this be blamed entirely on diminishing returns). Why should this previous group of economists have been so immune to the attraction of art for art’s sake? Their self-image as political economists provides a partial clue. They all envisaged a concern for the populace and a willingness to apply their theories to the political questions of the day far in excess of the average modern economist. Yet we have seen that even those whose hearts bleed in the modern day can still turn their efforts toward art. The answer perhaps lies in the fact that the twentieth century is much more threatening (albeit richer) than the eighteenth or nineteenth, and thus the modern soul has a much greater incentive to flee from reality. Smith and Ricardo and Malthus could see evil around them, but it was an evil they could face squarely. Neither they nor the society they lived in had the same need for what we now call econ-art. It was not perhaps science but art that was so different then. Technology again has a role to play. Before the camera, artists faced conflicting goals: the natural tendency toward an artistic rendering of the subject (with choice about what elements to

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include, and how, determined on aesthetic grounds), and the desire for a realistic record of history.8 In such an environment, any tendency to artistry on the part of economists must still smack of realism. It is no coincidence that Impressionism and the camera were born at the same time (though Impressionists claimed they were rendering the act of vision with scientific accuracy – Gombrich 1962, p. 331). The marginal revolution (for which, we have seen, there is no widely accepted explanation of its simultaneous emergence in three different countries) occurs at the same time, and arguably for the same reason. Realism was no longer desired from the artist.9 Borges, though ostensibly speaking of himself, could be speaking of the beautiful freedom given to econ-artists thereafter: ‘His stories can be seen as one of the peaks of the reaction in twentieth century literature against the former tendency to idolize observed reality, bowing down even before its grosser aspects as before an absolute’ (1976, p. 76). Once we were given the option of artistry, we quickly turned our backs on the mundane reality of the classics. We must honour the classical economists as scientists, and yet pity them for they did not have the opportunity to be more.

3.6

Abstract and Non-Objective Art

It would be too simple to view abstract art (in which, while the artist begins with a subject, her impression of that object contains no obvious representation of it) or non-objective art (in which the artist does not even start with an object, but focuses on form and colour entirely) as a natural and inevitable evolution of Cubism. As we have seen, the early Cubists felt themselves to be exploring reality. While they occasionally dabbled in abstraction, they always pulled back from the brink, and insisted that their art must possess representational elements (Rubin 1989, p. 23; Golding 1988, pp. 197–8). ‘As a movement Cubism had consistently stopped short of complete abstraction’; only the heretics (by definition?) took the next step (Barr 1966, p. 92). Nevertheless, while the Cubists themselves would not countenance abstraction, their work paved the way for it in important ways. We suggested above that after the First World War there was a tendency for both artists and students of art to focus on how the Cubists experimented with form and colour, rather than on their interest in reality. Once the Cubists had taken their giant step away from the ideal of depicting objects as the eye would see them, it became much easier for other artists to think of works of

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art which contained no reference to any object whatsoever. Cubism, in the words of Dabrowski (1985), provided a formal and theoretical justification for non-objective art by altering the identity of the subject, and ignoring the traditional pictorial relationship between form and space.10 The Cubists had directed that ‘the painters would depict the world not as they saw it, but as they knew it to be’ (Golding 1988, p. 17); having made that step they could not determine how later artists would know the world (just as Alfred Marshall could not foresee the directions later econ-artists would take neoclassical economics). The first steps toward abstraction occurred before the First World War. As noted above, some of the Cubists experimented with abstraction (Selz (1981) devotes special attention to Delaunay in 1912–13). Already, though, those who can be considered heretics were appearing on the scene. Notably, these heretics first appeared in countries far from Paris, the then-centre of the art world (see Rosenblum 1976); thus the artist could be aware of Cubism without feeling constrained to follow its masters (much as North American econ-artists would feel free to take only what appealed to them of European traditions in the field). In Russia, Malevich moved past Cubism experiments to nonobjective art in 1913. Kandinsky, though aware of Cubism, seems to have moved straight to non-objective art in that year. In the Netherlands, Mondrian and others in the De Stijl (‘style’) movement (founded 1910) also experimented with non-objective art at the time. Mondrian deserves special attention. While other artists moved fairly quickly to abstraction, Mondrian’s slow but steady progression through various art forms allows us to trace the influences on his work with greater ease. Despite his methodical pace, he was perhaps the greatest pioneer of the new art form, and the principles he followed and espoused can be seen at work in a generation of artists. Mondrian was struggling to find himself as an artist in the early years of the century. His works display talent, but he was searching for a better mode of expression. He was very excited by the advent of Cubism, and moved to Paris to be closer to the source. ‘For Mondrian, as for Marc, the Cubist’s destruction of corporeal matter, their fusion of solid and void, their remoteness from visible reality were all vehicles to articulate a mystic conception of cosmic harmony that lay behind the surface reality’ (Rosenblum 1976, pp. 247–8). Mondrian’s aspiration ‘to liberate art from the domination of sensory perception’ (Jaffé 1985, p. 38) has a strong resemblance to the Cubist view. Yet he

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moved steadily away from Cubism (aided in no small part by the fact he was isolated in the Netherlands throughout the First World War). He first did abstract works which took reference from sea, pier, or church. In looking at Mondrian’s paintings one can see the object gradually disappear – his first rendering of a local church front leaves a clear impression of door and windows; these disappear in a later rendering of the same church. By the 1920s, Mondrian had moved on to completely non-objective art. While the Cubists felt that reality could best be pursued by multiple representation, Mondrian felt that the best path to reality was non-representational art: ‘Cubism did not accept the logical consequences of its own discoveries; it was not developing abstraction toward its ultimate goal, the expression of pure reality’ (Mondrian 1942, in Dabrowski 1985, p. 19). If our eyes did not speak the truth, then perhaps truth was not to be found by studying external objects at all. That the reality which Mondrian pursued is not the reality of the scientists is best captured in Seuphor’s impression: When I look at a Neo-Plastic painting by Mondrian, my mind comes to a stop, I shed all everyday concerns, my thought calmly enters a new realm where everything is noble, true, self-evident. For any contemplative mind this art is a marvelous, transcendent realm. (Seuphor, undated, p. 151)

Once again, the artist seeks to take us to a reality much greater than the one we inhabit. In his rejection of the external world as the cornerstone of art, Mondrian agreed with the Surrealists. He did not, however, follow them in technique or purpose. Later non-objective artists, such as Jackson Pollock, would betray a greater Surrealist influence in trying to display their innermost emotion on canvas. Mondrian, however, favoured meticulous composition, carefully moving lines on canvas until the desired effect was created. The econ-artist, similarly motivated to turn away from the external world for inspiration, could hardly fail to be attracted to a similar form of artistic expression: meticulously adjusting mathematical equations or lines on diagrams until a pleasing overall composition was achieved. It is noteworthy in this regard the precise form which Mondrian’s art came to take. His art contained only straight lines, either vertical or horizontal. It was the guiding principle of his art that ‘All references to the “primitive animal nature of man”

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should be rigidly excluded in order to reveal “true human nature” through an art of “balance, unity, and stability.”’ Human nature would be represented metaphorically or symbolically. This he could only achieve through using solely rectilinear forms (Fleming 1970, p. 531). When van Doesburg, one of his original De Stijl collaborators, used diagonals in his work, Mondrian refused ever again to write for his magazine. He wrote him: ‘After your arbitrary correction of neo-Plasticism, any collaboration of no matter what kind has become impossible for me’ (in Seuphor, undated, p. 149). Seuphor expands on Mondrian’s attitude: Mondrian, exploring for such a long time the theme of the horizontalvertical, proved that this theme had a reality of its own, that it was a universal principle, a source of both life and language … A law? A faith! However elementary or even over-simple the horizontal-vertical principle of pure Neo-Plasticism may be, it becomes an inexhaustible theme from the moment the artist invests it with an occult meaning. Moreover, such attachment to a single theme sharpens his attention, and preserves him from being diverted. Thus there is true wealth in a theme, even if it be the poorest and sketchiest. Those who believe that talent is demonstrated by variety prove nothing but their own restlessness, their instability of mind. A single theme is the hallmark of genius. Diffuseness is to genius what flirting is to marriage. (Seuphor, undated, p. 149)

It is no coincidence, then, that Mondrian’s art is characterized by both a move toward straight lines, and a move away from representation. The two were the same. Only through rigid linearization could Mondrian totally tear free (at least consciously) from the visual world around him and create completely self-referential art. During the interwar period, non-objective art did not attract a huge following. Surrealists and others (such as Picasso) kept it in the background. Surrealists never completely abandoned their literary roots, and Picasso wanted his works to reflect the real world. Mondrian himself marketed paintings of flowers under another name to support himself. Surrealism, not surprisingly, would come to exert an important influence on the later evolution of abstract art. As we saw in Chapter 3, one of the two types of Surrealist painting involved the attempt of artists to transfer subconscious impulses to the canvas. In such works, any subject the artist may have had in mind was inevitably unclear (Arnason 1986, p. 323). Breton himself had hinted at the potential of abstract art: ‘Surrealist beauty, Breton believed, could never be

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attained through the objective representation of the external world’ (Cowling 1978, p. 458). Inevitably, artists like Pollock would view non-objectivist art as the best means of displaying one’s subconscious. It was in the immediate post-Second World War decades that abstract and non-objective art would emerge as dominant forms of artistic expression. Even today, in a world where a variety of styles are appreciated, abstract art remains very popular. This post-war art builds on both Cubist and Surrealist vocabularies (Dabrowski 1985).

3.7

Self-Reference in Econ-Art

It [non-objective art] is based upon the assumption that a work of art is worth looking at primarily because it presents a composition or organization of colour, line, light, and shade. Resemblance to natural objects, while it does not necessarily destroy these esthetic values, may easily adulterate their purity. Therefore, since resemblance to nature is at best superfluous and at worst distracting it might as well be eliminated. (Barr 1966, p. 13)

The phrase ‘self-referential’ leaps from the pen of any historian of non-objective art. This was its glory: art that could convey some sense of that other reality to the audience without any reference whatsoever to any recognizable element of this world. Fleming (1970, p. 506), for example, spoke of pure abstraction, ‘in which a work of art has no representational, literary, or associational meaning outside itself, and the picture becomes its own referent.’ Berman goes a step further, defining twentieth-century ‘modernism’ in art as the ‘quest for pure self-referential art’, reflecting a feeling that ‘the proper relation of modern art to modern social life is no relation at all’ (1982, p. 30). Is econ-art self-referential? Surely some hint of reality creeps into the work of econ-artists? While examples of self-referential work abound in econ-art (see, for example, our discussion in the next chapter of general equilibrium theory), we will, as usual, limit ourselves to one important example. Willem Buiter had this to say about new classical economics (which, while never pursued by a majority of economists, was once very popular, especially within particular influential departments): Direct observation, introspection and common sense, as well as hundreds of empirical studies of market structure and consumer and

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firm behaviour, should, however, suffice to reject … [the new classical] tool kit. For some reason this has not happened (yet). The most plausible reason for this is the increasingly self-referential nature of much of modern economic analysis and by no means just the … [new classical theory]. Models are judged and evaluated not in terms of their success in explaining or predicting real world behaviour, but in terms of their internal consistency and the extent to which their construction and design is true to some a priori set of rules and characteristics. Disciplines develop according to their inner logic without reference to economic reality … . (1989, pp. 8–9)

Lest it be thought that this represents an unfair attack from the outside, we can turn to the writings of new classical economists themselves. Kydland and Prescott discuss the use of calibration rather than traditional econometrics to ‘test’ their models: The issue of how confident we are in the econometric answer is a subtle one which cannot be resolved by computing some measure of how well the model economy mimics historical data. The degree of confidence in the answer depends on the confidence that is placed in the economic theory being used. … [T]he model economy which better fits the data is not the one used. Rather currently established theory dictates which one is used. (in Mayer 1993, p. 88)

We have rarely in this work had the advantage of being able to cite such self-conscious pursuit of an artistic goal by econ-artists. The new classicals may, of course, still shun the label ‘artist’ – we can hope that the next generation will not be so blind – but we at least can appreciate the purity with which they pursue art. They have not just turned their backs on the practice of empirical verification – many econ-artists have mastered that step – but have even convinced themselves that they need not, even should not, strive to relate their models to reality. It is no wonder that new classical models are so beautiful. Totally loosed from reference to this world, who knows what heights of vision such models can scale in coming decades? So in econ-art, we value models not for their relationship to reality but for their own internal logic. Even those who feel assumptions should be realistic nevertheless craft models which are based on totally unrealistic assumptions. Despite the emphasis on self-reference, the body of non-objective art work evolved over time. Insights into form by one artist were built on by the next. So in econ-art, models evolve over time. Simplifying

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assumption is added to simplifying assumption to achieve elegance.11 As model is built upon model, omitted variables are less and less likely to be taken into consideration (Mayer 1993, p. 125). Each work takes the preceding as given. One would search in vain for Cezanne’s models in Mondrian. The lack of artistic purpose has often prevented the total eclipse of reality in econ-art, but who could deny the trend?12 It is worth noting that self-reference is widely believed by philosophers and logicians to be the root of all paradox. For example, the statement ‘this sentence is true’ is true if false and false if true. There are obvious analogues in the visual arts: snakes swallowing their own tail, Escher’s artist hand drawing itself, etc. The casual observer of econ-art can attest to the fact that selfreference has not guaranteed internal consistency in this realm either.

3.8

The Pursuit of Linearity

In our present project, we must be careful to distinguish between the goals of the artist and the means employed by the artist to achieve those goals. The goals, we have argued, were greatly influenced by culture, and thus we could expect to see similar goals pursued in econ-art. The means employed to achieve a particular goal can vary considerably across art media (as evidenced by debates among literary Surrealists about how Surrealism should best be pursued in painting, sculpture, or film). We must thus be much more careful in suggesting that particular techniques employed by some artists would be found also in works of econ-art (though it is possible that econ-artists might have been influenced directly by the world of art in this way). With abstract art, especially, it is hard to disentangle goals and means. Was Mondrian’s emphasis on straight lines a mere technique or was it rather an integral part of his artistic vision? Was it just a means to an end or the end itself? Both Fleming (1970, p. 531) and Jaffé (1985, p. 40) could be interpreted as supporting the latter view in suggesting that these designs were inspired by modern street maps, blueprints and skyscrapers. Still, art historians could well disagree on such a question. Having borrowed so much from art history in this work, we might attempt a contribution to the understanding of Mondrian. If we were to find an urge toward linearity in econ-art, might that not lead us to suspect that this was more than just a technique for both Mondrian and econartists alike?

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We need not look far to find a taste for linearity in econ-art. Mathematical economists often represent linearly relationships which are clearly exponential. Moreover, I am told that earlier in this century much greater care was taken in indicating the curved nature of demand and supply curves, even in undergraduate lectures. It is now commonplace to draw these ‘curves’ as straight lines (students, indeed, often ask why we call them curves). A small sin perhaps, though it does encourage the belief that supply and demand determine one unique price, whereas in the real world the forces of supply and demand usually determine only a range of prices over which bargaining can occur.13 In 1958, Phillips uncovered an empirical relationship between wage inflation and unemployment which had held over most of the previous decades in Britain. This Phillips Curve, which depicted an inverse relationship between inflation and unemployment, was taken as evidence by Keynesian macroeconomists that government policy could affect the rate of unemployment. If governments were to increase spending, they could create jobs, but at the cost of adding to inflation. The Curve itself indicated that when unemployment was high and inflation low (or negative), much could be gained on the employment side with little cost in terms of inflation; while as capacity was approached in the economy, increasingly great sacrifices in inflation would be necessary to ‘buy’ further decreases in unemployment. Normative judgements of the relative discomfort of inflation and unemployment indicated that the optimal position would involve some positive rate of inflation (only decades later do many economists have the temerity to accept the baseless concept of a discomfort index which treats a 1 per cent increase in inflation as exactly as disadvantageous as a 1 per cent increase in unemployment). One of the few empirically-based constructs in economics (and one for which it was straightforward to provide theoretical justification), the Phillips Curve was too realistic to long survive in the world of art. Even before the supply shock induced stagflation of the post-war era, it was to be superseded. Friedman and Phelps independently provided the same answer in the late 1960s. Imagine that the Phillips Curve is a result of myopia on the part of workers. Imagine further that involuntary unemployment doesn’t exist; the unemployed just don’t like the wage offers they are receiving. Then, we can reduce unemployment only by fooling them: by inducing inflation, they will accept jobs at the new higher money wage because they don’t realize that prices have risen by the same amount. It is a credit to the acting abilities

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of the unemployed that they can look so disconsolate when interviewed by TV reporters or sociologists, when a mere 2 or 3 per cent change in their wage perceptions is all it takes to bring them into the work force. You can’t fool all of the people all of the time though. Workers will soon realize that the inflation rate is, say, 4 per cent. One can only fool them again the next year by cranking inflation up to 6 or 8 per cent. The Phillips Curve, grounded in decades of British data though it might be,14 becomes only a short-term relationship. In the long run, you cannot keep unemployment down by maintaining some positive rate of inflation. The long-run Phillips Curve is – wait for it – a vertical line. The unemployment rate associated with zero inflation is the natural rate of unemployment. (Yes Virginia, it’s only frictional or structural unemployment: the fact that it changes so much from year to year shouldn’t make us think there is a cyclical involuntary element to real world unemployment.) Once workers become accustomed to any rate of inflation, unemployment will return to this level. Friedman and Phelps did not immediately sweep the world before them. Artistic impulses could not casually overcome the empirical and theoretical reality embodied in the Phillips Curve. In the 1970s ‘stagflation’ – both unemployment and inflation – rose. Defenders of the Phillips Curve could readily retort that cost-push inflation would shift the Phillips Curve outwards (while likely not changing the short-run tradeoff between inflation and unemployment). They could not readily predict how much the Curve might shift under particular conditions, however. This opened the door for the Friedman/Phelps position. Their theory might be silly, but since any combination of inflation and unemployment could be predicted by the theory it was judged empirically valid. Those concerned with policy (for example, Krugman 1994, pp. 46–7) could ask whether it mattered in any case – as Keynes had said, in the long run we are all dead, and the typical business cycle recession was hardly long enough for inflationary expectations to become hardened (even Friedman had recognized in 1968 that the Phillips Curve would take decades to behave in long-run fashion). Such arguments could not prevent widespread acceptance of the natural rate hypothesis. Indeed, the victory of the natural rate hypothesis is now so complete that many economists mistakenly believe it to have been established by overwhelming empirical support.15 A symposium in the Journal of Economic Perspectives, Winter 1997, however, showed that empirically there clearly is a medium-term tradeoff

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between inflation and unemployment (that is, a Phillips Curve tradeoff), strong enough that government policy-makers should act on it. It remains to be seen whether such a dose of reality will chase the natural rate diagram from its prominent place in our texts and our policy advice. The natural extension of the natural rate hypothesis was rational expectations, though this extension was not formulated by Friedman himself nor accepted by him nor many others who adhere to the natural rate hypothesis (Breit and Ransom 1982, p. 244). We have discussed earlier the logical objections that prevent the kernel of truth contained in the rational expectation hypothesis16 from having the purported implication of denying the efficacy of fiscal policy. The same arguments apply here. The natural rate of unemployment makes for a pretty diagram, but a poor guide to public policy. As a work of econ-art, though, it is perhaps the single greatest creation of the twentieth century. It is simple; with only one or two unrealistic assumptions it serves the goal of replacing the curves which depict reality with the straight lines of true art. But this is not all. It also serves the Surrealist goal of depicting a better world in which public interference is self-defeating. The subconscious mind gained victory over the conscious, for purposeful intervention had unforeseen consequences which made matters worse. And, like any classic work, it spawned whole schools of imitation. Once one stops mistakenly searching for reality in it, one cannot help but be struck by its beauty. If, as a side-effect, the natural rate hypothesis feeds the complacency both profession and public have come to feel toward unemployment – as if there really weren’t anything we can do about it, because it’s ‘natural’, when mere international comparison illustrates without doubt that public policy can reduce it17 – this is a small price to pay for such an artistic advance. When we gaze upon the pyramids, do we worry over much about the slaves whipped to death in their construction? With a suitably low social discount rate, their suffering was worth it. What, then, can be different about the mere poverty and lack of self-respect experienced by the modern unemployed?

3.9

The Econ-Art Manifesto

One ubiquitous characteristic of twentieth-century art has been the art manifesto. Beginning with the Futurists in 1910, virtually every major art movement of this century has produced a mani-

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festo which purported to be the one true path to artistic achievement (Wolfe 1982). Some, such as Dada and Surrealism, produced a host of manifestos. Econ-art could not, of course, consciously follow suit. This does not mean that some outline of the path to be followed could not emerge. The most obvious candidate for the role of Econ-Art manifesto is Friedman’s Essays in Positive Economics (1953). Given the underground nature of Econ-Art, it is the interpretation of this document by the profession rather than the original intentions of the author that concern us. While Friedman has never responded to those who have criticized the philosophical basis of his argument (an attitude more in keeping with the sensibility of the artist than the scientist, one might think), many have come to his defence. Friedman has not pretended to be a philosopher, but merely an economist responding to criticism that his monetarist approach was simply data without theory. He counter-argued that his critics themselves worshipped fancy theory in its own right (a view we have favoured here). He hoped that his excursion into methodology would be iconoclastic and liberating. He suggested that different theories with different assumptions should be applied to the same situation in order to answer different questions (in Mayer’s words, an ecologist is justified in treating the Black Sea as closed, but not a shipping agent). Assumptions which might be unreasonable in one context would be acceptable in others. The paramount criterion by which to judge a model would be its ability to predict. On a close (friendly?) reading, then, Essays appears less dogmatic than it is generally interpreted. The volume can still be criticized. Our ability to test models is simply too limited for us to be at all cavalier about assumptions. Even if a mathematical model did adequately mimic real-world phenomena, true understanding would require that we understand why this is so (still it might provide useful, if risky, policy advice while we feel our way toward understanding). How, though, has the profession at large treated the Essays over the past decades? As carte blanche to ignore the reasonableness of assumptions (if an assumption is acceptable in one context, it is acceptable in all) and concentrate instead on intricate model building and supposedly sophisticated econometric testing. If we shied away from ‘normative’ policy prescriptions, we could pretend to be unbiased ‘positive’ scientists.18 Those who have pointed out that these prescriptions were out of touch with the philosophy of science even then, and have become more so

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over the years, have been quite simply ignored by the bulk of the profession. We have noted before some of the difficulties with relying on prediction and being cavalier about assumptions. In fact, since we do not have a closed system in the social sciences – we cannot speak of invariant empirical regularities – it is possible only for us to explain, not predict (Bhaskar 1989, pp. 82–3). If we do happen to make a lucky guess, it may well be because of the many variables excluded from our model. Pretending otherwise is hardly scientific.19 Roy notes that the exaggerated distinction between positive and normative in economics (some economists may downplay this distinction, but it’s in all our textbooks) supports the mistaken philosophical viewpoint that there are some ideas capable of conclusive proof (though even positivists speak of falsification rather than proof); whereas ‘there is no proposition of any kind held by anyone which must be thought of as necessarily closed to further question on grounds of reason or evidence’ (Roy 1989, p. 4). Economists are afraid of scepticism, but do not realize that we not only can but must speak of objective knowledge without certainty (we will discuss such matters in Chapter 7). Economists have accepted this view due to ‘the widespread belief that such a theory provides a necessary and even a sufficient defence against dogmatism and tyranny’. Even at this they are misguided, for conceding that policy decisions are mere matters of opinion could easily threaten the ideals of freedom and scientific integrity (Roy 1989, pp. 45–6). Scientists must recognize both that we can never be certain and that we can always rise above uneducated opinions. True scientists would hardly be so cavalier as to simply latch on to a discredited methodological approach which they found convenient. Artists do not expect that the guidelines for their largely intuitive efforts should be specified in tight scientifically unquestionable form (indeed, the Surrealists especially disagreed harshly over the form their own manifestos should take – Picon 1983, p. 60). They expect instead that we will not fully comprehend why particular art forms elicit a favourable response from their audience, but will try instead to discern the rough outlines of desirable practice. This we will dress up so that it sounds like Truth, but artists naturally shun a truly precise definition of their craft. If not in its inception, then in the profession’s treatment of it, Friedman’s Essays is much more of an art manifesto than an outline of scientific methodology.

4

Mathematics as Art

4.1

The Deification of Technique

To express an idea mathematically gives it the illusion of unassailable truth and also makes it utterly incomprehensible to anyone untutored in mathematics. (Thurow 1983, p. xix)

The role of artistic motives within economics helps us to comprehend one of the puzzles of the modern profession. This is, admittedly, a puzzle of which most practitioners are blissfully unaware. Yet a novice stumbling upon a conference of economists would undoubtedly be struck by it. In much of the casual conversation, the mutual ego-massaging, the behind-the-back discussion of the work of others, and especially in the official presentations of papers, the focus is on technique rather than results. This is a source of much hilarity among our brethren in mathematics and statistics departments who marvel at how a group of academics supposedly devoted to understanding how the world works can pride themselves instead on the mastery of techniques taught daily to graduate students, if not undergraduate majors, in mathematics. There are, after all, barely post-pubescent nerds on university campuses world-wide who can fiddle with systems of equations as well or better than the representative economist. The economist retort is, of course, that the real challenge is the application of these techniques: the subtle manipulations required to bend the precise tools of the mathematician to the explication of the complex world we live in. The novice might be satisfied, but the initiated know only too well that approximation to reality is not a standard which developments in theory are required to satisfy.1 Perhaps it is inevitable that with thousands upon thousands of economists pressured to publish a steady stream of articles and books, all of which are supposed to contain something ‘new’, that the profession must evolve a standard less

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demanding than that each article actually contains some net addition to our understanding of how the world works. Not everyone can be Adam Smith, and something must be done to keep those idle hands at work. Make-work projects can only be evaluated with respect to the alternative – what else would we have those who are highly educated but not too imaginative do? As well, the growth in the number of publications has necessarily decreased the average quality of refereeing (Redman 1991, p. 164), and thus increased the incentive to employ false, ostensibly ‘objective’, criteria rather than force referees to decide whether articles cast the slightest light on Truth. Yet one can’t shake the (misplaced?) feeling that chemists and biologists, and hopefully physicists as well, are more focused on the results, and less fixated on the means used to derive them. Before discussing artistic motives, we should survey the many non-artistic explanations for this over-emphasis on mathematics. The most obvious is a desire to show off.2 Oskar Morgenstern, no slouch with the maths himself, was well aware of this motive: ‘They [formulas] are frequently introduced, one fears, in order to show off. The more difficult the mathematical theorem, the more esoteric the name of the mathematician quoted, the better. Then one is “in”’ (1976, p. 447). This may seem peculiar in terms of what we said before. Most of the public, we should recognize, finds even fairly basic mathematics difficult, and thus can be easily impressed by its use. Maths easily becomes a shield with which we can protect ourselves from those who would pontificate on economics without being a member of our union (see Mayer 1993, p. 16). Mathematics is a means of enforcing expert control, and distancing science from the masses; thus ‘quantification is a technology of control’ (Porter 1995). This provides a possible explanation for a peculiarity of graduate education in economics. Recent surveys have found that the level of mathematics in graduate training is not only significantly greater than the level which all but a few of the students are prepared to handle from their undergraduate preparation, but much greater than the level the students will use in their dissertations and later research (Hansen 1991, p. 1074). This ensures that members of the union will have a much above-average facility with maths. Note that if we were concerned only with mastering the mathematical skills necessary for careers in science, there would be no justification for requiring a level of mastery significantly in excess of that which is required for scientific research. (Some partial justification might

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come from a desire to allow students to experiment widely before choosing their research agenda, but this hardly justifies the opportunity cost.) Artificially high standards not only serve a misguided screening role, but serve to shape the attitudes of future members of the profession. As numerous psychologists will attest, those who survived Marine boot camp (in the bad old days before sergeants were told they couldn’t belittle recruits) came out with a deep inner belief that being yelled at and dehumanized for months was both good and necessary. Likewise, those who survive grad school in economics are programmed to believe that the years they spent mastering mathematical technique rather than learning how the world works were not somehow wasted. They must forever be impressed by technique, for to do otherwise is to downgrade their own expertise. Another explanation of the overemphasis on maths is that hiring decisions, like refereeing decisions, are biased in favour of technical virtuosity, because this is much easier to evaluate. Those at the top schools, who set the tone of graduate education, need not excel in vision, perception, or imagination, but will in terms of mathematical skill. As masters of technique, they will naturally inflate the value of their own work by exaggerating the importance of mathematical economics (Grubel and Boland 1986, pp. 422–4). If not overwhelmed, economists might have left grad school under-awed by technique. Few graduates would be unable to master any of the techniques used in the discipline, but none would be able to master them all, even if they totally turned their back on reality to bury themselves in mathematics. Thus, technique retains its panache even within a discipline of technicians. We can easily forget how easy maths is when gazing upon unfamiliar techniques: ‘Economists are an inbred race and seem to recognize things only when they come from within the tribe, expressed in the local dialect, paying homage to the special deities’ (Bartlett 1989, p. 18). At the same time we applaud the author for their virtuosity, we applaud ourselves for being a member of the club:3 Modeling … makes an argument more ‘scientific’ than it would be if the assumptions were introduced throughout the argument, if words were used in place of the mathematical symbols and if the names of the variables were written out rather than abbreviated. If the author is lucky the reader may fail to notice if no mathematical operations other than simple addition or subtraction are taking place, and the paper will still seem ‘scientific’. (Mayer 1995, p. 48)

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As long as we don’t pay much attention to the laughter of mathematicians or the rantings of madmen like myself, the illusion is maintained. Since physicists seem to use lots of maths, its use also makes us look more scientific to both the public and ourselves4 (though we will find that physicists are horrified by our abuse of maths). Mirowski (1987) has expanded on this point at length, arguing that maths not only legitimized the discipline, but the ideas that the economy is stable, people are rational and capitalism natural. Since maths is seen to enhance the scientific status of the profession it is naturally over-used (Mayer 1993, p. 12). Economists, by speaking primarily to each other, find themselves serving a producer-dominated market, much like elements of the health care and military-industrial complexes. When taxpayers foot the bill, but producers call the shot, there is a natural tendency for high-tech goods to be produced (Mayer 1993, p. 11).5 Our mistaken perception of the rules of science provides one final rationale for mathematization. Naive ideas of falsification and conclusive proof lead economists to treat each others’ work harshly. If the conclusion is not liked (or even if it is), any minor flaw in all that precedes it is not just dissected remorselessly but purposely misinterpreted (see Freedman 1993, for numerous examples). Faced with an openly malicious audience, economists naturally retreat to a medium of communication that bewitches the opposition.6 Once we accept that science only advances through an open and honest interchange among scholars, we will hopefully evolve a different code of conduct for the profession, and economists will not need to bury their ideas in formulae in order to escape purposeful misinterpretation. It is not that words are inherently less precise than symbols7 but that by evoking the world we live in words invite the calumny of the close-minded. Economists naturally recoil at the idea that maths is over-used because it makes refereeing and hiring decisions easier, allows them to show off, gives economics a false patina of scientificity (rather than the real sense it might strive for), has become force of habit,8 and because they do not at this point in time have to be responsible to the taxpayers and donors who pay their salaries. While there is much truth in all of these claims, economists can be forgiven for clinging to the notion that there is some higher purpose served. As with the theory of economics so with its practice: that which at first glance seems bad science turns out on closer inspection to be nothing less than art.

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Maths as Art

As a mathematical discipline travels far from its empirical source, or still more, if it is a second or third generation only indirectly inspired by ideas coming from ‘reality’, it is beset with grave dangers. It becomes more and more purely aestheticizing, more and more purely l’art pour l’art. This need not be bad if the field is surrounded by correlated subjects, which still have close empirical connections, or if the discipline is under the influence of men with an exceptionally well developed taste. But there is a grave danger that the subject will develop along the line of least resistance, that the stream, so far from its source, will separate into a multitude of insignificant branches … In other words, at a great distance from its empirical source, or after much ‘abstract’ inbreeding, a mathematical subject is in danger of degeneration. John von Neumann

Painters are often known by their brushstrokes, composers by their innovative use of various instruments, and novelists by their vocabulary or manipulation of grammar. While there is much debate on the issue, the style of an artist is still considered an important focus for the art historian. The econ-artist too is observed to take great pride in their mastery of the tools of mathematics. Two criticisms of this analogy can be raised, which on further inspection arise from the same source. The first is that while economists have undue pride in their mastery of the basics of mathematics (one should not be too critical; they rarely boast of their ability to add or subtract), the musician makes no mention of his ability to read music and the novelist of her ability to read and write. The second is that true artists never entirely dissociate their technique from their purpose. An artist’s virtuosity with the paint-brush is only hailed when they are perceived to evoke some aspect of the human spirit. Sculptors brag not of their skill with a chisel, but of the emotive power of the finished work. Nimbleness on the piano keyboard might be recognized in its own right, but the true artist is deified only for their ability to make the music come alive. The economist too is hailed on occasion for her view of reality, but is much more likely to be hailed for technical virtuosity alone (note, for example, the difficulty the Nobel Prize committee had in discerning any real-world application of the life work of Debreu). We have noted before that the techniques of the artist in one medium may have no counterpart in other media at that time. A similar argument can be made about attitudes toward technique. One of the great ironies of the practice of econ-art is that while its

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goals are those of twentieth-century artists, its attitude toward technique is more in line with previous artists. The Surrealists were opposed to the very idea of artistic genius; they felt that anyone could produce Surrealist art by bringing their subconscious to the fore. In the words of Aragon, ‘Artistic skill is a mummery that compromises all of human dignity’ (in Nadeau 1965, p. 85). Picasso had greater scope for the display of technical virtuosity in his pre-Cubist work, but not only embraced Cubism but readily admitted that the technical demands of the art form were not great (Rubin 1989, p. 16). The Marxist critic Einstein noted favourably at the time that Cubist works were devoid of ‘professional tricks’ and displayed ‘total indifference to technique’ (Rubin, p. 20). Mondrian, too, had displayed a facility for preCubist art, but moved on to a non-objectivism where facility with a paint-brush mattered little. Why should these artists have focused on the goal of their art to the extent of denying the role of technique, while econ-artists harkened back to an earlier era where the self-esteem of the artist depended on technical virtuosity to a much greater extent? The fact that econ-artists were not conscious of their artistic goals is a possible explanation; they could embrace a love of technique without recognizing that they were artists. Even were they selfaware, the very novelty of the art form may have encouraged a conservative attitude toward talent (to prove their worth to the wider community). But finally, we must realize that academic communities need standards of judgement; if the econ community could not recognize its goals it had no choice but to hand out bouquets on the basis of technique. Technique has a place in both art and science, and therefore putting it on centre stage does not require any discussion of the higher purpose of economics. Yet mathematics, which sometimes does and other times does not service the interests of economics as a science, is admirably suited to the pursuit of economics as art (though with the unfortunate side-effect of making it difficult for the uninitiated to appreciate the effects which can be achieved). While econ-artists have thus successfully blended technique and artistic sensibility, they have only generally been conscious of the former. This naturally limits the quality of the end product. If economists could openly revel in the other-worldliness of their construction, they would not need to get so excited about their means of constructing those images. In the early days of cinema, moviemakers often discussed the mundane details of splicing footage together. Once the basics of how audiences

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responded to fundamental moviemaking techniques were understood, discussion was able to move on to the artistic impact of the completed whole. Econ-art still slumbers in ignorance. It need not be so. The finished work is sometimes appreciated as a whole: ‘There is a beauty in a neat mathematical proof, and it appears eternal’ (Mayer 1993, p. 17). Mathematical models ‘appeal to those who enjoy the aesthetic pleasure of reading a tightly organized argument’ (Mayer, p. 130). Yet economists, unaware even that art has a rightful place as servant to science, place strict bounds on such appreciation.9 Thus, Herbert Simon coined the phrase, ‘mathematical aphasia’, to refer to the practice of removing mathematical intractabilities from a model at the expense of removing all reality, and acting as if this were the original purpose (in Redman 1991, p. 125). From the curmudgeonly standpoint of econ-science, we can see his point. From the perspective of econart, we can now see that this was exactly the point all along, and that such works deserve our appreciation rather than our contempt.

4.3

Automatic Writing

If one were omniscient, i.e. if all the implications of any assumptions were intuitively obvious, the [implications] would be known as soon as the [equilibrium equations] were given. (Samuelson 1947, p. 11).

Mathematics is more than just a tool with which the econ-artist can achieve elegance of creation. Art, as we have emphasized before, is intuitive rather than intellectual. Picasso in particular stressed that his work was the spontaneous expression of spirit (Leighton 1989). This, we have seen, is why econ-artists are never able to visualize more than small parts of that other reality. Only through intellectual activity can the big picture be imagined, and if the merely intuitive is lost the result is no longer art. Even when focused on a small part of unreality, the econ-artist must constantly struggle to suppress the intellect, and allow her dreams to be realized (this struggle is made that much more difficult by the lack of conscious appreciation that this is in fact her goal). Mathematics, like meditation or self-hypnosis, is a technique for bypassing the conscious mind to commune with the subconscious. Surrealist artists had to struggle with this dilemma as well, but to differing degrees. We saw in Chapter 2 that some Surrealist

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painters attempted to transfer subconscious impulses to canvas – this was called automatic drawing or painting (Barr 1966) – while others attempted to combine conscious images in a dreamlike fashion. Most difficult was the work of the novelist or poet, for writing must of necessity require some conscious thought. The technique devised to overcome this was called automatic writing. Rather than consciously deciding what they wished to put on paper, the author should concentrate as little as possible, simply put down words as they emerged in his mind, and try to let the words take on a life of their own. André Breton, the founder of Surrealism, felt that, ‘The greater the disorientation of [the artist’s] mind, the more meaningful will be an artist’s creation’ (Haslam 1978, p. 31). Through this stream-of-consciousness approach, it was hoped, some of the true inner being would be transferred to the page. The Surrealist manifesto of 1925 described the method (and indeed, Surrealism itself) as … pure psychic automatism by means of which one sets out to express, verbally, in writing or in any other manner, the real functioning of thought without any control by reason or any aesthetic or moral preoccupation. A dictated record of the mind, in the absence of any control exercised by reason, over and above any aesthetic or intellectual preoccupation.

Revolutionary at the time, such an approach to writing is now a staple of writing courses and how-to-write books world-wide. (The Surrealists themselves, no slaves to technique, soon advocated other approaches and recognized that automatism was not the sole path to enlightenment.) Economists are not unaware of the appeal to intuition involved in mathematical formulation. An economist working out a theory in words must consciously conceive of each step. A mathematician can write down a set of equations and be surprised by the result the solution of the system throws out. The economist may attribute such moments to the fortuitous intervention of the gods. In the very form in which the original equations are set down on paper, the subconscious mind is able to work its magic. The conscious mind may receive a shock at the end, but this is only because it is not in better touch with the true inner self. Thus elements of unreality, which the conscious mind could never imagine, are craftily imbedded in innocent-looking symbols, and fused into a system which captures some aspect of the other world. Communion with our inner beings being generally imper-

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fect, the economist may still have to consciously fiddle with the equations to ensure artistic acceptability. Still, most of what passes for modern economic theory could never have been crafted consciously. It thus owes not just its widespread acceptance but its very existence to mathematization. It is not just that formalization allows economists to forget the assumptions they originally made (a danger long since noted by Leontief),10 but that such assumptions need not even be consciously stated to begin with. It is no surprise then that the existing canons of the profession do not require authors of mathematical models to explain the intuition behind their models (as would surely be the case in a science) for this would defeat the whole purpose. Gill (in Coote and Sheldon 1992) compares art to alchemy, and suggests that it awes us only to the extent it is not obvious how the artist achieved their end. Ideally, the magician herself never knows when the rabbit went into the hat.11

4.4

Maths as Science?

There now exist whole branches of abstract economic theory which have no links with concrete facts and are almost indistinguishable from pure mathematics. (David Worswick 1972, in Blaug 1980, pp. 253–4)

We should digress again, to deal with the contention that mathematics serves primarily scientific goals within economics. We need not look far to find suggestions that mathematics is the salvation of economics as science: ‘More mathematics and statistics and more pure theory have been instrumental in lifting economics out of literary mumbling and fuzzy thinking over the years’ (Fortin 1993, p. 67). Given that we have no objective criteria to decide whether economics has advanced rapidly in the mathematical era (in an absolute sense, much less a per capita sense),12 except for the widespread dissatisfaction within the profession which indicates the opposite, such an unsupported statement smacks more of artistic pretence than scientific achievement. Fortin, later in the same paragraph, recognizes the downside: ‘Playing games is not the essence of economics, and we should make sure that our present reward system does not let mathematical charlatanry, measurement without theory, and theory without testing slip into our house.’ Like him, we must move past a blind faith in the ‘scientificity’ of mathematics. We must recognize both the non-scientific motives behind the use of

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maths and the scientific rationale for the use of alternative methodologies. Timing is certainly on our side. Irving Fisher had tried to create an association of mathematical economists in 1910 but could find no takers. Twenty years later he tried again, and the Econometrics Society was born. A scientific motive for this sea change in attitudes is difficult to uncover. Karl Popper had once likened the mathematical revolution in economics to the Newtonian revolution in physics (he thus partially retracted an earlier suggestion that the social sciences had not yet found their Newton or Galileo). T.W. Hutchison knew what nonsense this was: But the mathematical revolution in economics has been one mainly (or almost entirely) of form, with very little or no empirical, testable, predictive content involved. In accepting as ‘Newtonian’ a purely or almost purely formal or notational ‘revolution’, Sir Karl seems to have allowed himself to be taken in by over-optimistic propaganda. (1977, p. 40)

One likely explanation of the shift toward maths in the 1930s is the substantial influx of mathematicians and engineers into the discipline in that decade; these found it easy to produce papers which translated mathematical physics into economics (Mirowski 1989). A more compelling explanation would be that the First World War, which was behind the rise of Surrealism, and affected the evolution of Cubism, was also the watershed event which convinced the econ to turn away from econ-science toward econart. The war blasted away the happy optimism of the previous decades. Who could be confident any longer of the ability of science to fashion a better world? We have argued at length above that the concerns of Surrealism can readily be traced in econ-art. While our purpose has not been to provide a chronology of econart developments, it is certainly plausible that the rise of econ-art would have occurred at the same time as Surrealism. Leighton (1989) showed that Cubists responded to a similar set of cultural influences as Surrealists. She also described how the Cubist emphasis on form in the interwar period could be seen as reflecting their disdain for tradition and authority. We have seen in the previous chapters that the works of econ-artists reflect similar attitudes. It should hardly be surprising, then, that econart has focused on a technique which distanced it not only from reality but from the discipline’s past.

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Marshall, at the turn of the century, had asserted that there was a body of fact which could not, at least at that time, be assimilated mathematically (Roll 1956, p. 396). In 1972, Phelps-Brown could assert that economic theory was still not ripe for mathematization (Spiegel 1991, p. 666). Surely, nobody can doubt that there are still wide areas in which our understanding of economic processes is so limited that the employment of the precision of mathematics as an explanatory device is laughable. In their study of scientific discovery, Langley et al. (1987, pp. 11–12) note that the more we know about a problem the more precise the heuristic we can use to solve it. There are, quite simply, major economic questions about which we know too little to be able to apply the precision of maths. We could take as our guide none less than Aristotle, who wrote, ‘Our discussion will be adequate if it has as much clearness as the subject matter admits of, for precision is not to be sought for alike in all discussions, any more than in all products of the craft’ (in Mayer 1993, p. 56). Important quantitative relationships in physics, biology (genetic inheritance) and chemistry (classification of chemicals) were only established after lengthy exploration of qualitative relationships (Langley et al. 1987, pp. 195–6). If economics were just a science, maths would be employed selectively. Even if it were self-consciously an art, it would have room for many techniques, as in music, painting or literature. Only as false science and unrecognized art is it methodologically bound. Economists often claim that mathematization of economics was natural and inevitable: [T]he development of mathematical economics [was] a powerful, irresistible current of thought. Deductive reasoning about social phenomena invited the use of mathematics from the first … economics was in a privileged position to respond to this invitation, for two of its central concepts, commodity and price, are quantified in a unique manner, as soon as units of measurement are chosen … The differential calculus and linear algebra were applied to that [commodity-price] space as a matter of course. (Debreu 1984, p. 1261)

Yet early economists saw little use for maths, and those who were mathematically inclined failed for centuries to develop a mathematical approach which could generate self-perpetuating interest within the profession. The econ-artists of the 1930s had to ignore the criticisms of other economists, such as that price and quantity need not be additive in the way the new theory required (due to

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uniqueness of individual products, arbitrary weights and measures, price discrimination, etc.). They also had to ignore the criticisms of physicists: centrally that physics only ‘worked’ because of the law of conservation of energy, and if utility and expenditure were substituted for potential and kinetic energy in the equations, then, since we could not presume that these were conserved, we should not presume integrability. Physicists can only speak with precision about the dynamic properties of their system because of the laws of conservation; economists can only pretend to such precision (Mirowski 1988, pp. 36–44; 1991, pp. 145–56). Keynes used mathematics sometimes, but was well aware of the danger of losing track of the complexity of the real world in the use of symbols (Spiegel 1991, p. 667). In his words: Too large a proportion of recent mathematical economics are merely concoctions as imprecise as the initial assumptions they rest on, which allow the author to lose sight of the complexities and interdependencies of the real world in a maze of pretentious and unhelpful symbols. (1973, p. 298)

The fact that he therefore moved from one form of exposition to another (he varied his prose styles greatly) to explain different elements of his theory was a source of confusion to his readers even in the 1930s. Since that time, of course, the mass of economists has only come in contact with those elements of his work which could be highly formalized. While models ostensibly serve the goal of precision,13 we have, from the beginning, proven quite willing to pervert our perception of reality in order to squeeze economic phenomena into mathematical form. Much of Samuelson’s system would collapse if we accept the argument that the capital stock is inherently unmeasurable. Most economists at the time viewed the Cambridge controversy over this issue as an arcane dispute; most, now, would say that Samuelson won the battle but would be unable to say how (Boland 1989, p. 171). Certainly, economists regularly develop models which assume additive capital. Yet there are intractable difficulties in adding capital. We can only add capital in value terms, but this depends on the interest rate; we can’t then use our capital stock figure to estimate the interest rate. Moreover, the view that capital is somehow substitutable ignores the fact that once embodied in physical structures it is quite inflexible; in particular, as Joan Robinson noted, technological

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change continually renders some of our capital stock obsolete. Samuelson’s Foundations also gave a big boost to the idea of building models with consumption and production functions that we cannot measure: because the functions are so poorly specified, we have to use difficult solution techniques to get incomplete and partial (that is, imprecise) answers (Blatt 1983, p. 170). Still, Lucas believes that the book showed that unending verbal debates could be ended with mathematics (in Klamer 1984, p. 49).14 Weintraub has attempted to defend the role of maths within economics. Those who take this role for granted might well be horrified by the logical contortions he feels compelled to undertake. He readily admits that mathematical modelling must be appraised differently from the testable elements of a theory (and thus sacrifices the ideal that modelling should aid testability). Why, then, is maths used? He proffers two explanations. One is that people like to have logical arguments presented in this way. ‘What is it about humans that leads their analytical skills to be made manifest in the activity of doing math[s]?’ he asks. It is not that maths serves any special deductive role – doing maths is no different from doing history – but that the human mind seeks structure and turns naturally toward maths for this structure. This line of argument is suggestive of the artistic desire for order more than of science (though, of course, Weintraub could not have realized this). Weintraub has a final defence: economics and mathematics have been intertwined for centuries in which economics progressed in a Lakatosian (that is, problem-solving) sense (1988, pp. 167–80). Even if there was substantial advance in this period (which we can easily doubt), it may well have occurred despite rather than because of the use of maths. The rising tide of criticism of economics in recent decades indicates both that advances have been sluggish, and that they would have been more rapid if there were greater methodological flexibility. Leontief (1971) ably captured this sentiment: In no other field of empirical inquiry has so massive and sophisticated a statistical machinery been used with such indifferent results. Nevertheless, theorists continue to turn out model after model and mathematical statisticians to devise complicated procedures one after another. Most of these are relegated to the stockpile after only a perfunctory demonstration exercise. (Leontief 1971, p. 3)

Herbert Simon would disagree with Weintraub’s denial of a special deductive role for maths. While in favour of methodolog-

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ical diversity, he finds maths provides him with a non-verbal heuristic approach to problem solving (though he and his coauthors in Langley et al. (1987, pp. 315–26) find that scientists think neither in words nor equations but in ‘images’). He saves his scorn for those more dangerous advocates of maths such as Koopmans who claimed that it provided rigour and proof: ‘It is [Koopmans’] view, of course, that prevails in economics today and to my mind it is a great pity for economics and the world that this is so’ (Simon 1991, pp. 106–7). Again, the key point is one of flexibility. If Simon felt maths guided him to insight, so much the better (though our discussion above shows that we must always be on guard for hidden assumptions in mathematical reasoning – this danger is much reduced if intuition must be published alongside formulae). However, we must not block those who seek insight in other ways, nor raise maths on a pedestal it does not deserve. Weintraub recognized one danger of mathematization: that mathematical tools were not devised to solve economic problems but rather that the questions we ask and assumptions we make were determined by these tools. Thus, Lucas could suggest that unemployment be viewed as entirely voluntary because all markets must be modelled in equilibrium. Koopmans had recognized that this was a particularly grave problem in dynamics, and went so far as to suggest that assumptions should be drawn from careful observation first (Weintraub 1991, pp. 96, 121). While leading proponents of mathematization could recognize that economics should be more methodologically flexible, maths steadily pushed other forms of discourse to the sidelines. The use of maths can of course be defended on scientific grounds. Its complete domination of the discipline cannot: ‘As a general rule, whenever mathematics is applied to science the minimum possible mathematics should be used, and it should play a subservient role to the matter being discussed’ (E.C. Zeeman (mathematician), in Mayer 1993, p. 154). This sentiment was echoed by Harberger (1993, p. 12). Lanham argues: Each field has its ‘hard’ and ‘soft’ branches. The ‘hard’ branch is theoretically rigorous, mathematically based if possible. But it can prove strong theorems only for trivial problems. The softies take on real problems but come up with nonrigorous solutions. (1993, p. 250)

In economics, we might fear, the ‘softies’ have been squeezed out. It is worth noting that when physicists and economists were

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brought together by the Santa Fe Institute, the former were astounded to find the latter more mathematical, especially in their theorizing. A perusal of leading physics journals finds that they put less stress on mathematical formalization (Mayer 1993, pp. 20, 50).15 ‘The process of translation [into mathematics] required the abandonment of that tension-fraught world of the earlier economists, but it yielded in return a world of such neat precision and lovely exactness that the loss seemed amply compensated’ (Heilbroner 1968, p. 174). It is due to its artistic virtues that mathematics was able to achieve total dominion. Scientists are critical not of the use of maths, but of the use only of maths,16 of the view, ‘that the only scientific method worth the name is quantitative measurement; and consequently that complex phenomena must be reduced to simple elements accessible to such treatment, without undue worry whether the specific characteristics of a complex phenomenon, for instance man, may be lost in the process’ (Spiegel 1991, p. 646). They fear, correctly, that insistence on mathematics severely limits the scope of economic inquiry: But you can become so enraptured with technique that you lose sight of the underlying processes. You ask the wrong questions as you get enraptured by mathematical and mechanical issues; you start to ignore important behavioral processes. This is not an argument against technical training, just against excessive reliance on it. (Rapping, in Klamer 1984, p. 230)

We are usually not even conscious of the degree to which maths restricts us: ‘Mathematics is a language that can impose its own limits and structuring on our perception of reality’ (Samuels 1990b, p. 6). The far-reaching speculations of the classical economists could not be translated into the new language: ‘Obviously, the purification of the utility concept, the opportunity-cost doctrine, and the marginal-productivity theory of the productive shares are more appropriate to the neutral language of functional equations than were the doctrines of John Stuart Mill’ (Roll 1956, p. 463).17 Of the three main elements of Adam Smith’s theory of growth, only one – capital accumulation – found its way into modern growth theory, due to its (supposed) capacity for formalization (Mayer 1993, p. 57). (Romer (1994, p. 20) has recognized that he himself had earlier turned away from technological causes of growth toward capital accumulation because this allowed greater use of mathematical methodology.) Many questions of great interest were simply forgotten.

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4.5

Yet Another Perversion

It is better to deal imperfectly with that which matters than to gain virtuoso skill in the treatment of that which does not matter. Paul Baran

We have already seen two serious side-effects for econ-science of the near-monopolization of the discipline by mathematics. First, we have turned our back on the most important questions within the purview of our discipline. Second, even for the questions we do choose to examine, we choose assumptions for our models based on mathematical tractability rather than realism.18 From the point of view of science, there are still other perversions. We will mention only one. Despite our focus on the less-than-biggest questions, it is still true that most questions of any practical policy importance involve complex chains of causation. As has been well documented by Mayer (1993, esp. Chapter 5), economists tend to focus their attention on the strongest links in the chain of argument.19 That is, if we are claiming A causes B causes C causes D, and we can build fancy mathematical models which deal with B causes C, this is where we devote almost all our attention. We then denigrate the importance of the other links, or casually assume they must be as we hope they are. In our conclusion we casually act as if showing that B causes C with precision must mean that A causes D. For science, this is an execrable way to proceed. For those with the cupidity to rely on our policy prescriptions, it smacks of demagoguery (Mayer 1993 notes the similarity with what magicians do). As art, though, it is perfect, for we saw in Chapter 2 that the practice of art involves capturing some elements of that other reality with precision, and letting the audience intuitively fill in the rest of the picture.

4.6

There Exists a Model

Economists, like artists, tend to fall in love with their models – with decidedly less enjoyment, I imagine. (Leamer 1983, p. 437) It is crucial to recall what everyone already knows, that one can always devise a set of logical connections to get conclusion C from assumptions A as long as one is free to choose A. (McCloskey 1996, p. 83)

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For the artist, each work of art must seem to have a certain completeness. The good artist will be driven to elucidate more (or at least some different aspect of their ‘reality’) in their next work. Picasso apparently destroyed many canvases which he concluded did not come together. He would have done so with all his works (and likely been judged insane in the process) had he expected each one to provide complete enlightenment. Each artist can only try in each work to capture a piece of (this or some other) reality. The econ-artist, too, strives for brief glimpses of a better world, rather than some comprehensive examination of our own. How else could we understand the predilection for outlining models of no scientific value? The fact that many (most?) modelling exercises in economics are divorced from the possibility of testing is odd from a scientific standpoint, to say the least. Papers are often written whose sole objective is to show that a model exists which generates the desired result. Whoopee! It is a simple fact that a model can be derived which will generate any set of results which are not logically inconsistent. Results are driven by assumptions, and economic modellers have a huge array of these to choose from.20 The sole challenge is to pull (one of ) the right combination off the rack: Carlos Diaz-Alejandro once wrote, ‘By now, any bright graduate student, by choosing his assumptions regarding distortions and policy instruments carefully, can produce a consistent model yielding just about any policy recommendation he favoured at the start. It is tempting to add that in the intervening 15 years economic models have improved sufficiently to make the statement apply to even notso-bright graduate students … The purpose of modeling [should] remains, as Diaz underscored, to ‘force a discussion of the realism of assumptions that are crucial to theoretical demonstrations’. (Rodrick 1992, p. 102)

Since all assumptions are drastic simplifications, the model is necessarily unreal. If it cannot be tested, we have little scope for measuring the degree of unreality. If we are going to evaluate it non-econometrically, then we hardly needed a formal model in the first place. Indeed if we cannot test a theory econometrically, we should state it as simply as possible so that we can evaluate it by other means (Colander 1991). If we can’t actually do anything with a model, and we knew a priori that one existed, what is the use? (At the very least, we should spend much more time ques-

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tioning the assumptions than outlining the model.) It is either sheer folly or art.

4.7

Maths is Easy

Without doubt there is too much mathematics in the economics journals, because mathematical elaboration is a time-honored way of dressing up a bad idea. (Krugman 1994, p. xi)

If mathematical facility is used as a screening device in hiring decisions and professional advancement, then the domination of the discipline by mathematical economists need not reflect their superiority as economists in any holistic sense. Mayer questions, without completely overturning, the prejudice that those who use sophisticated techniques are somehow ‘abler’ or ‘better’ (1993, pp. 47–9). We can go further. We have seen how laughable the claims of economists are from the point of view of mathematics departments. We are a pitiful discipline if second-rate technical skills are our greatest boast. No. We must exult (as scientists, that is), if anything, in our ability to comprehend the complex world around us. And, as Keynes noted in 1924, understanding the economy is no easy task but requires a variety of skills: ‘Good or even competent economists are the rarest of birds.’ Mathematical manipulation is simply easier than figuring out how (any little part of) the world works. This is reflected in the fact that papers in theory and econometrics can be produced much more quickly than can case studies (Earl 1983, p. 98). Mathematization frees economists from the toil and discomfort of acquiring specific knowledge. Moreover, the option of pursuing a successful academic career by grinding out minor adjustments to existing models frees economists from the necessity of uncovering real insights into how the world works. This, rather than technique, is why we should pat each other on the back. Instead, as an audience for each other’s work, the profession ensures that those who eschew formality for reality will be treated with suspicion. Why are they choosing a rocky path when a freeway to glory exists? Why, more importantly, are they trying to hurl rocks from the path they have chosen onto this freeway? Why, that is, should the process of model building be interfered with by real-world insights? We could easily hold economists to a higher standard. Authors could be forced to outline the real-world applicability of their model. We could insist that the intuition be made explicit, and

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questionable (unreal) assumptions justified. Given the surfeit of material in our journals, imposing such a speed limit on the freeway could not but help the advance of science. Artists study their craft more than we realize. Zen Buddhist paintings, for example, while the result of hours of tedious work, seek the appearance of being quick and easy in order to mimic the sudden enlightenment believed in by some Zen adherents. Yet the image of the painter strolling into the meadow with her easel and within hours capturing on canvas the essence of the scene before her is not completely misplaced. Artists need not know how trees grow or why ducks fly south to capture such a scene. When the mood is upon them, they can create works of unsurpassed beauty in hardly any time at all. While being an artist carries its own set of traumas it is in that sense easy. The econartist, imperfect in much of her creation, has at least mastered this element of her craft. How much skill must our artist in the meadow possess? This depends, of course, on the standards by which she will be judged. We noted above that econ-artists value technical proficiency to a much greater extent than leading twentieth-century artists. We suggested that the explanation for this could be found in their lack of self-awareness. Yet here we can see that econ-artists nevertheless made a technical choice just like their artistic brethren. Surrealists, Cubists and abstract artists each strived in their own way to develop an art form which was less demanding in terms of technical skill than that which had gone before (they may, of course, have downplayed the difficulties inherent in the new art, and thus succeeded less than they imagined). Econ-artists, by embracing maths exclusively, did the same thing (but much less self-consciously). Is this just coincidence? We must be careful in drawing methodological parallels (especially as artists could claim that modern art requires as much or more in the way of imagination or understanding, an unlikely claim with respect to mathematical econ-art) but the similarity is striking.

4.8

Maths is Unreal

As far as the laws of mathematics refer to reality they are not certain, and as far as they are certain they do not refer to reality. Albert Einstein

Economists, accused of abusing maths, will attempt to hide behind physicists. We have seen, though, that physicists actually

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employ mathematics more sparingly precisely because physicists are actually trying to understand how the world works. Mathematical equations, they have come to realize, even when they appear to capture what is happening in the real world, do not actually ‘explain’ this. One has to go past equations to words if one seeks understanding: With the language of mathematics we have reached a point where the links with reality are so tenuous that the relation of our symbols to our sensory experience is no longer evident. This is why we have to supplement our mathematical models and theories with verbal interpretations, again using concepts which can be understood intuitively, but which are slightly ambiguous and inaccurate. (Capra 1976, pp. 33–4)

The mathematics of quantum physics has been accepted for decades, but physicists still debate its verbal interpretation. To be sure, the necessity for words increased as physics progressed farther and farther into the realms of relativity theory and subatomic particles, which seemed to defy the lessons of everyday experience. When it was assumed that atoms behaved much like billiard balls, equations of motion required little explication. Now, when subatomic particles are recognized as particles/waves which exist/do not exist, mathematical description does not yield understanding. So it is with economics. If we are to pretend that our equations both explain reality and convey more than common sense, then we must go past the symbols and explain in words what is happening (in detail). This, of course, is rarely a feature of modern economics articles. Nor was it typical of Samuelson’s which set the standard for post-war theorizing: ‘The laborious literary working over of essentially simple mathematical concepts … is not only unrewarding from the standpoint of advancing the science, but involves as well mental gymnastics of a peculiarly depraved type’ (1947, p. 6). The real scientists know that this isn’t science we’re doing.

4.9

Maths versus Science

The mathematician’s mad pursuit of consistency is aesthetic, not practical. (McCloskey 1994, p. 166)

‘There is much of economic theory which is pursued for no better reason than its intellectual attraction; it is a good game. We have

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no reason to be ashamed of that, since the same would hold for many branches of pure mathematics’ (Hicks 1979, p. viii). Hicks, as I read him, is not advocating that we pursue economics as a parlour game (though many economists have said exactly that to me)21 but that we can gain scientific insight from solving mathematical puzzles. If maths itself is a science, and it advances in this fashion, then surely economics can advance in the same way. This view, I suspect, would be held by many economists. Surely maths is a science? In Chapter 1, we had recourse to Thomas Kuhn’s views on the difference between science and art. It is worth taking a look at what he had to say about mathematics: Note that, with respect to many of the differences under discussion, the development of mathematics resembles that of art more closely than of science, and that crises in mathematics are correspondingly rare. Few mathematical puzzles are recognized before the moment of their solution. In any case, failure to solve such a puzzle, unless it lies at the foundation of mathematics, never casts doubt on the presuppositions of the field, but only on the skill of its practitioners. In the sciences, on the other hand, any puzzle raises foundation problems if it strenuously resists solutions. (Kuhn 1977, p. 349)

Mathematics is not a science in the sense of an attempt to understand some element of the world around us. It is, rather, a formal logical structure. It cannot, then, be revolutionized by real-world data which disagree with its basic precepts (Lambert and Brittan 1992, Chapter 5). Mathematicians are thus a very special sort of scientists: due to the fact that they are not trying to explain realworld phenomena their discipline advances more like the arts than the other sciences. Economics cannot claim the same exemption from the art/science dichotomy. We, just like physicists, chemists and biologists, are trying (in theory) to comprehend how the world works. Since our goals are more akin to those of the biologist than the mathematician we would be well advised to ape the former’s methods rather than the latter’s. While Hicks may well be right that we can gain insight from solving mathematical puzzles, we run the risk of being just second-rate mathematicians and developing a mathematical structure which has no direct correspondence with reality.22 If all, or even most, economists were to engage only in puzzle solving, this result would be a certainty. Indeed, Rosenberg (1992) concludes that our fate is already sealed.

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Kuhn’s insight is of great importance: the mathematician, like the artist, is not expected to confront the question of whether their work adequately reflects reality. Our presumption should be, then, that when we see mathematization it is for the laudable aims of econ-art. If the creator wishes to claim some scientific value for their creation, the onus of proof must be upon them.

4.10 An Example: General Equilibrium The general equilibrium framework would seem to lack any bridge by which to cross over from the world of theory to the world of facts. (Blaug 1980, p. 191) But without denying its beauty and difficulty and the smartness of its developers, abstract General Equilibrium theory seems for the most part to have been a waste of talent. (McCloskey 1994, p. 223)

Weintraub’s books (1988, 1991), which appraise the evolution of general equilibrium (GE) theory, have been attacked from both sides. John Whitaker, in a September 1992 Journal of Economic Literature review, felt that Weintraub was too critical in suggesting that an interesting debate had degenerated into game playing. Mayer (1993, pp. 37–40) feels that Weintraub is much too kind, and doubts that proofs of the existence and uniqueness of general equilibrium have much practical importance. Not surprisingly, while scientific judgement of the value of GE is divided, its artistic value is unquestionable. One can think of two facets of GE-modelling. There is, first of all, the core element, what we can think of as the general equilibrium model. Here it is that proofs of existence and uniqueness of equilibria are derived. Establishing this core theory was solely a mathematical exercise: ‘Some [practitioners] defend the view that it is a mathematical subdiscipline, and so the rules for evaluating it are those that guide appraisals of mathematical formulations’ (Weintraub 1988, p. 54). Thus, it is unfalsifiable: real-world observation that we are never ever in general equilibrium cannot destroy the fact that we can construct a world in which it exists. Within a Lakatosian framework, scientific programmes have unfalsifiable core elements; the validity of the programme is established by examination of peripheral elements. Weintraub, favouring a Lakatosian perspective (in 1988; in 1991 he approaches from the perspective of literary theory), is thus able to dub this core element ‘scientific’.

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We have seen, though, that the behaviour of the mathematician is similar in important ways to that of the artist. Moreover, we know that artists in this century have striven to picture a world which is orderly and easily understood, and which takes care of itself without any human purposive intervention. Weintraub describes how economists’ real-world concerns with the problem of dynamics were replaced by efforts to create unreal models with the appropriate properties: The rich discourse about dynamic problems of the economy, and the complicated analysis that a dynamic economy required economists to master, was transformed over the period from the mid-1930s to the mid-1950s to a particular language game in which the rules required the analyst to specify a mathematical general equilibrium model, to determine whether or not it possessed a competitive equilibrium, and then to establish the stability. (1991, p. 139)

Can one doubt that the concept of general equilibrium provides us with a sense of peace in this ever-changing world? A few simple equations, and a handful of assumptions: taken together they give us a glimpse of the eternal laws that should govern our universe. Who would not wish to live in that world? Who cannot doubt that they have touched God when they gaze upon general equilibrium?23 Is this, or not, a reflection of our world that we look upon? Let us, for the moment, join with the defenders of GE as science, and cast aside the fact that our world has for millennia – if not forever – changed too fast for us to ever hit general equilibrium as a mere quibble. (If we engaged in interdisciplinary research we might ask anthropologists about the existence of GE among traditional societies, but perhaps it is just as well that they don’t know too much about what we do with our time.) The casual observation that economic life carries on within ‘acceptable’ bounds (Does anyone remember the 1960s, when unemployment rates of 5 per cent were considered unacceptable?) and doesn’t regularly plunge us into disaster, would seem to indicate that there is a GE and that we actually tend toward it (albeit sluggishly at times). We might have to erase the Great Depression from our collective memory (our parents likely exaggerated its extent, after all) in order to defend this vision, but so be it.24 It is possible, of course, that economic life is governed instead by loosely interdependent forces of a conflicting nature: we would still get ‘acceptable’ behaviour most of the time, with just the

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occasional disaster (see Szostak 1995). Such a reality would be less sanguine, but if we were able to comprehend these dynamic forces and fashion policy tools which affected them we might be able to bring economic fluctuations within even narrower bounds. If that is the way the world works, focusing on general equilibrium would severely limit the advance of scientific understanding. It is notable that there is no reason within GE theory to believe that the economy dynamically moves toward equilibrium (Blaug 1980, p. 188). Theorists devoted considerable effort to establishing the stability of GE (they recognized that capitalism if subject to major crises was also susceptible to revolution), but were forced to admit in the end that stability only held under extremely strict conditions (Weintraub 1991, pp. 120–3). As any good first-year student can tell you, an equilibrium isn’t unless the system tends toward it. We wouldn’t care about the intersection of supply and demand in a market unless we had good reason to believe excess supply would lower prices. We have no reason to care about GE unless we have reason to believe that we tend toward it. The casual empiricism discussed above, even if not misguided, would thus provide no real justification for GE models as they exist. Econ-scientists must cringe at their inability to provide a mathematical proof of stability. Without this, appeals to common sense cannot provide intuitive acceptance of the unverifiable core. The econ-artist need not fret, for his duty does not extend to filling in every piece of the puzzle. GE theory need not be complete if it describes a world other than our own. It is too easy to point to improbable assumptions at the core of GE theory. (Arrow, and others, have questioned the value of GE, because of the many restrictive assumptions it requires – see Hodgson 1993.) First, it relies on perfect competition (Grossman and others have recently tried to overcome this). Second, it presumes that contracts are always enforceable. In the words of Bowles and Gintis (1993) economic theory thus requires a very peculiar view of humanity: individuals are perfectly rational, but a handshake is a handshake. It is better to just assume this than to be diverted to the rocky path of understanding ethics. If we can’t rely on our intuition to tell us that GE theory serves largely scientific goals, then we are forced to look at the second facet, the peripheral elements which supposedly apply the core theory to real-world problems. Lakatos (1978) forgives a great deal here. The failure of peripheral elements need not imply any problem with the core. Only if a theory is developed which explains reality better than the old one do we overturn it. If we

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never investigate the possibility that our world is an unstable (adaptive?) dynamic system, we need never fear rejecting the applicability of GE. Of course, the neo-Walrasian (GE) research programme rules out consideration of irrational behaviour or theories without equilibrium (Weintraub 1988). Art can continue to prosper under the banner of science. The second facet of GE theory seems hardly designed with falsification in mind either (see Blaug 1980, pp. 191–2). Still, one can hold it up to standards of consistency and relevance. Weintraub (1988) argues that GE models have proven to be valuable public policy guides. He points to a particular case in which North Carolina’s taxpayers were saved millions by GE predictions that electricity demand would tail off and thus there was no imminent need for increased generation capacity. Of course, decades earlier similar models had predicted an unending increase in electricity use. One didn’t really need a model to recognize that electricity consumption had been consistently overestimated for years. Anyone who has followed any major public policy debate knows that competing GE models generally make widely differing predictions (the North Carolina taxpayers were apparently spared this indignity). So much for consistency. The ceteris paribus assumptions protect any of these models from being disproven: any unexpected result can be blamed on extraneous factors. If different models make different predictions, though, they can’t all be right. One can be forgiven for suspecting that none of them are. Weintraub suggests that the fact people pay for such models is evidence of their utility. If we stick naively to the assumption that all consumers are rational, this might be so. If, however, we recognize, for example, that agents in both public and private bureaucracies might hire consultants just so that they do not have to shoulder all the blame for bad decisions, then we must recognize that GE models need not be accurate to be bought. It is, of course, important that cross-market interactions which would be ignored in partial equilibrium analysis be accounted for when making policy. If our computable GE models cannot reliably predict the magnitude of these, then they take us no further than a verbal discussion of such cross-market effects. Perhaps, sensitivity analysis can give us some information on the role of particular assumptions (taking other assumptions as given). But economists who work for a living, whether in government or the private sector, will tell you that it is verbal arguments rather than fancy models which carry the day.

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It might be argued that the problem is not with GE models per se but with the content of particular models. Like computers, GE models can only produce quality predictions to the extent they are programmed with realistic elements. This, of course, begs the entire question. If the problem is with our understanding of reality, and if manipulating GE models for decades has not, on its own, brought us any closer to a reliable description of reality, then what are we doing? Why do we continue to devote so much time and effort to mathematical manipulation? ‘The operative question is not why we should need such a framework but why we should go on investing scarce intellectual resources in continually refining and elaborating it’ (Blaug 1980, p. 189). Even if we grant some scientific value to the construct, any dispassionate observer must recognize that we are far into the region of diminishing returns.25 Yet courses on microeconomic theory in graduate school continue to devote one-third to one-half their time to general equilibrium and welfare theory (Brenner 1992). Even that is not the worst of it. GE theory is omnivorous, and invades areas where previously econ-scientists had quietly contemplated the world. Tirole’s (1988) industrial organization textbook hails the ‘beautiful treatments’ of general equilibrium while dismissively reducing the wide-ranging empirical research in the field to ‘the old oral tradition of behavioral stories [and] stylized facts’. Even a field which is focused on the real-world diversity in industry structure cannot escape this exaltation of form over substance. What use are fancy models if we don’t have real-world observations to guide their construction? Who can doubt then that it isn’t science at all? GE theory is such an obvious outcome of the artistic impulses outlined in Chapter 2, and serves the goals of art so well, that it deserves much better than the calumny it must receive if it continues to masquerade as science.

4.11 A Second Example: Econometrics I am bold enough to conclude from these considerations that the usefulness of ‘statistical’ or ‘stochastic’ methods in economics is a good deal less than is now conventionally supposed. We have no business to turn to them automatically; we should always ask ourselves, before we apply them, whether they are appropriate to the problem in hand. Very often they are not. (Hicks 1979, p. 121)

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We saw in Chapter 3 that Surrealist art was motivated in large part by a suspicion of authority. The same view could be expected of key early econometricians, such as Marschak, who had fled Lenin and/or Hitler: ‘their hope of building a wertfrei social science, immune to propaganda of every kind, gave motivating force to the econometrics movement’ (Craver and Leijonhufvud 1987). Econometrics is the necessary counterpart of mathematical model building: the illusion of science depends on the remote possibility that these models might be tested. To be sure, modellers are rarely even aware that minor changes in assumptions can have a major impact on testability, and often use assumptions that make testing practically impossible (see Boland 1989, esp. Chs 2 and 3). Nevertheless our pretence of absolute knowledge depends on objective technical standards of proof. Kaldor, for one, knew that not only did mathematical modelling generally lead nowhere but … it is also recognized that ‘econometrics’ leads nowhere – the careful accumulation and sifting of statistics and the development of refined methods of statistical inference cannot make up for the lack of any basic understanding of how the actual economy works. (in Roy 1989, pp. 141–2)

Faced with a lack of real understanding, we could either be scientists and search for insight along many avenues or be artists and pretend to have the answer. We have followed the second path. We suggested above that one could devise a model which would say whatever you wanted it to say, as long as this was not logically inconsistent. Econometrics is only slightly less forgiving: ‘To my knowledge no economic theory was ever abandoned because it was rejected by some empirical econometric test’ (Spanos 1986, p. 660). Mayer (1995, Ch. 8) surveys the extent to which the latest econometric techniques have helped answer important macroeconomic questions; even trying to be generous he uncovers only a handful of cases where this could be true and concludes, ‘Given the vast amount of labor and ingenuity expended, this is a disappointing result.’ Only the rare economist is willing to go so far as to admit that econometrics can neither confirm nor falsify economic theories. In practice, though, this is exactly the case. Why would a science hold on to the ideal of conclusive evidence, when in practice such is never the case?26 Elsewhere in this book (sections 1.5, 7.4) we discuss the key finding of modern philosophy of science: that no empirical test of

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any sort, not even the controlled laboratory experiment, can objectively prove or disprove any scientific theory. This result alone is enough to make a mockery of the reliance by economics on only one form of empirical test. If science must advance through the collective analysis of inconclusive bits of evidence, then it is obvious that it is foolhardy to eschew all but one kind of evidence. But the sins (as science) of econometrics only begin with its pretence to monopoly. We need not rehash the list of problems with econometrics as practised. These include technical problems such as omitted variables, multicollinearity, misspecified lags and incorrect functional form, framework problems such as aggregation (is the data consistent with the assumptions of the model?) and the tenuous connection with economic theory, and interpretation problems such as treating correlation as causation, and confusing statistical with economic significance. Nor are these merely new criticisms; the same concerns have been voiced since the time of Keynes (Redman 1991, p. 121). It is the pretence that we are something which we are not which concerns me here. We all know that science calls for us to establish a hypothesis and then test it once, but that in practice we fool around until we get the results we want: The econometric art … involves fitting many, perhaps thousands, of statistical models. One or several that the researcher finds pleasing are selected for reporting purposes … The concepts of unbiasedness, consistency, efficiency, maximum-likelihood estimation, in fact all the concepts of traditional theory, utterly lose their meaning by the time an applied researcher pulls from the bramble of computer output the one thorn of a model he likes best, the one he has chosen to portray as a rose. The consuming public is hardly fooled by this chicanery. (Leamer 1983, pp. 36–7)

We are not surprised when researchers at Chicago produce empirical results in favour of one theoretical position and those at Yale results in favour of a different position. We know that individual researchers and editors have a bias toward publishing only ‘good’ results, and that less than 5 per cent of published work can be considered verification (Mayer 1993, pp. 140–2). We know that puzzling data sets are only published if they fit some fancy model. We know, in fact, that applied econometric works breaks every rule of scientific conduct. Yet we cling to the idea that econometrics is somehow the scientific path to truth. Our blind-

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ness prevents us not only from seeking other sorts of evidence, but from reforming econometric analysis itself (despite the laudable efforts of Leamer, Hendry, Zellner, Poirier and others to encourage reform). It is not that econometrics is that hard to reform. There are, indeed, applied econometricians who struggle (generally in obscurity) to perform econometric analysis the way it is supposed to be done. Since prior opinion affects results (that is, econometrics is subjective because we must always subjectively choose the set of relevant data), we should be (and usually are) wary of any result until it has been replicated many times (the American Journal of Political Science has recently begun to devote a section to attempts at replication; the editors believe they are the first to do so). Still, the original researcher should do and report much more sensitivity analysis to determine how the result changes with different assumptions, different sample periods or polynomials of different degree (Leamer 1983, p. 38). We should present the results from all reasonable regressions, not just the ones we like. We should seek out qualitatively different data sets to provide further tests. We should examine anomalies to see if these point to omitted variables. Our journals should emphasize the validity of a test over its technical sophistication. We should care more about whether a measured relationship has any economic importance than whether it is statistically significant (the latter, after all, only tells us whether our sample size is large enough to fulfil an arbitrary criterion for deciding if our results can be believed; yet if the sample size is large enough the null hypotheses must inevitably be rejected).27 We should publish scatter diagrams to show how tenuous some relationships are, and to spot discontinuities in these relationships (Cromer 1997). We should devise tests which compare competing models rather than simply testing our own favourite model and leaving it at that:28 we will never be able to decide between models on this basis alone but it would still be a valuable exercise. Our knowledge that econometrics is often performed improperly has the usual lemon effect: we become suspicious of all econometric results. Mayer reports on a survey of economists in which the vast bulk admitted to a suspicion that published results often reflect data mining (and other econometric sins). Most still claimed that they would be swayed by several papers pointing in the same direction. It is difficult for a journal to reject a paper for committing econometric sins common in the literature (Mayer 1993, p. 138). This makes replication by different people using

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different data sets that much more important, but our profession scarcely rewards such efforts. Our unwillingness to face the defects of econometric analysis makes econometrics even less useful to science than it could be. The appearance of certainty, though, is essential to art. Econometricians usually work with published data: they are thus often blamed for foregoing the important task of creating new data sets and for ignoring the footnotes which outline the problems with published data (R. Nelson (1995) surveys our sloppy approach to data). Economic historians have taken the folly a step further. Jealous of the lack of published data before this century, they have taken to estimating annual data for money supply, gross national product, productivity, and a host of other variables. Such series involve much guesswork, and a fair bit of interpolation from decadal censuses. It is, of course, valuable to have such figures: one cannot begin to ask why some countries grow faster than others unless one first knows which were growing faster in the first place. However, annual (or quarterly or monthly) data are only necessary if one wishes to run regressions. Yet running regressions on ‘created’ data which was generated by using existing theory to fill gaps in our knowledge, as well as interpolation, clearly violates the basic rules of statistical analysis. In a science, created data would be published with some indication of the reliability of the numbers, and others would be circumspect in applying sophisticated statistical analysis to such data. Few are the voices raised, though, against this application of artistry to the past: ‘There is a need for a scholarly effort at reassessment of commonly used materials to provide good user’s guides as to what various figures can and cannot reasonably be used for and to assess possible margins of error.’29 Indeed. But what reward is there for the artist in performing such an assessment? Early in this century econometricians thought that they had a role to play in contributing to the development of theory. That role was abandoned, and they came to see their purpose as testing theory (Morgan 1990, p. 264). It is time for the profession to realize that this goal, too, must be abandoned. Mayer suggests that we should focus on estimating coefficients and making forecasts, and recognize that we do not in fact test theories (1993, p. 132). Redman concurs that econometrics in general does not test theories, but merely attempts to attach numbers to theoretical relations accepted on a priori grounds (1991, p. 122). If true, this would still leave valuable goals for the econometrician to pursue. We can perhaps salvage somewhat more: Mayer himself

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recognizes that econometrics can help establish the plausibility of theory. While we can never confirm theories econometrically, if we did it right we could gain considerable insight into plausibility. Once we step away from the artistic pursuit of certainty, we can see the value in all types of investigation. An artistic community believes in a unique path to truth. A scientific community believes in the necessity of applying its collective judgement: ‘The disagreements on how to test economic theories indicate that judgment plays a role in empirical discourse as much as it does in theoretical discourse. Just as there is no definitive theoretical argument, there is no definitive empirical argument’ (Klamer 1984, p. 244). An art form masquerading as a science suggests that it has found the one path to truth and ignores the clear evidence that this path cannot bear all the traffic placed upon it.

5

Ideology

5.1

Ideology in Art

We noted earlier the fact that many artists, especially the Surrealists, possessed quite radical political philosophies (Cubists in turn being much influenced by anarchism). Haslam, sharing that ideological perspective, characterizes the early Surrealists as feeling that art was only valid if it denied middle-class values (1978, p. 11). Rosemount feels that true art must be revolutionary (1978, p. 184). Fleming (1970, pp. 526–30) recognizes that many artists protested in their work against economic exploitation and war (for example, Picasso’s Guernica portrayed the suffering of innocent civilians from aerial bombing during the Spanish Civil War). Even the casual observer must note that mainstream economics has borrowed not at all from this tradition of protest. This raises the question of why econ-art appears so different from other arts in this regard. In this context, it is worth noting, as Rosemount does, that Surrealism as transferred to the American market was largely sanitized of its revolutionary content; it was not Breton but Salvador Dalì, who replaced revolutionary fervour with whimsy, who was identified with Surrealism across the Atlantic (1978, pp. 57–8). (Breton had expelled Dalì from the Surrealist movement for his seeming support of Franco.) Marcel Duchamp and Max Ernst, other early carriers of Surrealist ideas to the United States, were also less political than their Parisian counterparts (indeed Surrealist painters in general were less political than the writers (Arnason 1986, p. 289); it was the painters who had the biggest impact in North America).1 Since the United States increasingly became the centre of the world of economics as the century progressed, this could go some way toward explaining the less revolutionary orientation of economics. However, we have not in this work suggested in the main that economists absorbed cultural influences from the world of tradi-

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tional arts. Though this is certainly possible, we have argued instead that all art forms naturally reacted to the same evolution of underlying cultural influences. It could still be that American culture was much less hostile to the existing economic order (as incomes were higher, and it lacked the same rigid hierarchical past), and this could explain both why Surrealism was ‘sanitized’ and econ-art was developed in a very non-revolutionary fashion. As discussed above, the Cold War also served to suppress ‘revolutionary’ thought in the United States through the 1950s. (Perhaps for this reason, or perhaps because even the Surrealists found it necessary to break their links with a narrowly focused Communist Party of the 1930s, the artistic avant-garde has been less political in the post-war period in which New York has been the artistic centre than in interwar Paris.) I was struck, in reading Leighton (1989), by the number of similarities between modern neoclassical economics and the anarchism she describes as having influenced Cubism. Both display hostility to big government, war, abuse of power and nationalism (concerns shared with Surrealism). Anarchists and laissez-faire economists both embrace individual independence and liberty, while celebrating an ideal of ‘natural’ relations of interdependence and mutual aid (small self-sufficient communities for one, competitive markets for the other). It was only in the anarchists’ suspicion of industry and private property that economists would find offence. In light of the above, we might then accuse economists of having adhered to the anarchist tradition while jettisoning those elements which their audience would find unpalatable. We have seen, though, that artists need not be conscious of the goals which their art serves. The intellectual predispositions of the artist may not be captured in their exposition of their intuitive side. The ideology which the conscious mind espouses may not at all be the ideology which the subconscious mind transmits. Moreover, it could be that the journey to another, better, world which art provides serves to deflect the oppressed from trying to change this world. The radical artist may produce art which is far from revolutionary. Time and energy devoted to art is time and energy unavailable for the barricades, and can only be justified in strict ideological terms if the art drives others to act. The Surrealists themselves, though they accepted Freud’s discoveries concerning the subconscious, never faced up to the possibility that their inner selves might well not share their revolutionary fervour: ‘The Surrealists were resolutely silent with respect to how widely held attitudes … had saturated their

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ideology’ (Belton 1991, p. 8). Belton focuses on their attitude toward women. As Simone de Beauvoir noted in the 1960s they treated women as objects (for example, of love) rather than subjects (with their own ideas). This attracted little comment at the time, but strikes the modern observer as a clear case of gender bias. If Surrealists could inadvertently support the status quo in this manner, perhaps they did so in other ways as well? Hadjinicolaou (1978) has forcefully argued that art (and art history) always reflects the ideology of the dominant social class. He rejects the idea that art transmits true understanding; rather it serves to legitimize the existing social order. The purpose of ideology ‘is not to provide people with a real understanding of the structure of society, but to give them a motive for continuing the practical activities which support that structure’ (1978, p. 10). Since ideology of necessity provides a misleading view of the world, so must the art which represents it. The values of the ruling class permeate those of other classes; when we see a struggle between different artistic styles this generally represents differing views within the ruling class rather than the struggle between classes. Most importantly, artists who consider themselves radical may still produce works that unwittingly support the status quo. The subtle and intuitive nature of art can easily defy the revolutionary intent of the artist. Thus, Hadjinicolaou argues, David during the early years of the French Revolution painted pictures with a classicist composition and naturalistic figures, which reflected the views of the rising middle class. Later, during the Directoire, he painted in the style of a return to antiquity which appealed to the upper middle class and aristocracy. Rembrandt also at times painted in the style of the aristocracy and at others in the style of the bourgeoisie. One can easily quibble with Hadjinacolaou’s analysis. He himself notes that it is difficult to describe visual ideology in words; thus one ends up explaining the purpose of the work rather than the work itself, and this task will naturally be tainted by ideology. References to ‘order’ or ‘classical values’ could easily reflect the common desires of all classes, and need hardly imply an ideological bias in art. We could easily suspect that he has gone too far. He denies that there is any aesthetic value separate from visual ideology; one’s appreciation of a work of art depends entirely on whether one agrees with the ideology expressed. Thus, works of art are viewed differently in different epochs. If Hadjinicolaou were entirely correct, we could never then speak of masterpieces which appeal to people over a period of centuries.

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Hadjinicolaou might attribute our appreciation of great works to the ideological bias which naturally affects art history. The focus on masterpieces, geniuses and the personalities of individual artists,2 which had characterized much of art history, supported the view that art was the heritage of the whole community rather than of particular classes. He thus applauds, as we have, those who have attempted to discern the cultural determinants of art. However, he is only willing to recognize class as a determinant; he is highly critical of sociologists of art for their recognition of other social divisions and their refusal to give priority to class. Philosophers of art are in turn criticized for referring to general social and intellectual conditions, and not recognizing that different groups in society have different views. While it is folly to deny the importance of other influences than class ideology, it is also folly to ignore the effect such ideologies are likely to have on the artistic community. As Kung notes, even art ‘revolutionaries’ are funded by the establishment (1981, p. 12). We thus have good reason for suspecting that the revolutionary sentiments of artists were not always translated into their work, and that econ-art as well may to a large degree reflect ideological biases. Nor must we look far to find evidence that twentieth-century artists have not served the workers’ cause. While the Parisian Surrealists were strident in their revolutionary talk, the Belgian Surrealists rather viewed themselves (self-servingly?) as undercover agents, and happily supported their artistic activities by jobs in law or science or the civil service which left them largely indistinguishable from the rest of the middle class. Magritte was a staunch bourgeois who used his lounge room as a studio and wore the same suits and bowler hats as the anonymous men in his paintings. The absurdity of his paintings did not reflect a deep dissatisfaction with the world he lived in. Rosenberg (1973, p. x) was extremely critical of modern art on this score: ‘Advanced art today is no longer a cause – it contains no moral imperatives.’ Artists, both good and bad, worry only about sales, not political subversion. Thus, ‘the cultural professionals serve the rich.’ Platt (1988) argues that conservative politicians were glad to support the idea that abstract art (with its absence of subversive elements) was the path to freedom, progress and purity (especially after both Stalin and Hitler attacked it for its lack of realism). The situation of econ-artists is perhaps closer to architects, for they too must deal with conflicting goals of beauty and practicality.

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Wolfe (1982) has dissected the Bauhaus movement which has so greatly influenced architecture in this century. This movement consciously strove for a working-class perspective, and decided that all purely decorative elements should be shunned as bourgeois. The result was box-like buildings containing bare cube-shaped rooms. When workers proved unappreciative, it was claimed that they (like Maoist man) had to be educated to appreciate bareness (these artists, needless to say, had ignored the advice of Meakin, Morris and Ruskin (see section 1.2) that art and work be combined). While governments in both east and west seized this ideal as a means of cutting costs on public housing (even they were often disappointed to find that the flat roofs could not hold the snow), workers that could afford better fled to the suburbs. Architects who shunned the international style were derided in academic circles as too bourgeois, but often fared well commercially. Though Wolfe can be (and has been) criticized for being one-sided, it nevertheless seems clear that even artists who say they are serving the proletariat need not actually be doing so.3 We should not be at all surprised, therefore, that econ-art serves to protect the status quo (though some econ-artists mutter from time to time about helping the poor). This is the usual fate of art. The difference between econ-art and other arts in this regard is more apparent than real.

5.2

Ideology in Econ-Art

We must gingerly approach the question of ideology in economics. Economists, if they serve the ruling interest, must do so subconsciously or they would feel compelled by their sense of integrity to dissociate themselves from such behaviour (Ayres 1978, p. 8). Ideology, in order to operate effectively, must do so subconsciously. If we are bending our thoughts in order to accept the existing social order we cannot be aware that we are doing so. And it is impossible for us not to have some particular ideological perspective. We cannot speak about the world without speaking about ourselves. It would, quite simply, be psychologically unnatural for a member of society to be neutral in their attitude toward that society (Heilbroner 1990). Moreover, since we can only individually master a fraction of human knowledge, we must have a belief set which we cannot defend logically (Fish 1989). Scholars, then, are not completely objective, unaffected by events and by the values of the society in which they live. The work done by

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scholars reflects those influences, willy-nilly, in subtle ways that the individual may not be aware of. (Fusfeld 1992, p. 31)

Spiegel (1991, p. xix) provides a fairly standard definition of ideology: ‘the claiming of scientific validity for propositions that in truth are derived from one’s philosophical preferences, subjective valuations, or material interests’. Heilbroner argues, though, that the word need not have pejorative connotations. Since ideology is a framework by which order and legitimacy are imposed on social understanding, the analysis of ideology is simply another way (like the work of rhetoricians) of reflecting the fact that economists cannot approach their subject objectively but carry a host of cultural perceptions with them: ‘Economics … is thus intrinsically normative in the sense of embodying, whether it will or not, the constitutive beliefs of the parent society’ (1990, p. 102). Heilbroner’s key point is that ideology is not knowingly misrepresentative. In this way, his analysis is quite similar to our own, excepting that he, like Hadjinicolaou, emphasizes just one sort of cultural influence. Still, his point cannot be emphasized enough: it is mistaken, not to mention purposeless, to attribute the ideological bias of economic theory to the wilful activity of its practitioners.4 Since economists are unaware of the cultural influences which act upon them, they become understandably indignant at such accusations. Weintraub tries to take this argument one step further. He accepts the existence of ideology (noting that one need not be a post-Keynesian to believe in it).5 He recognizes, further, that methodologists in other sciences – though rarely in economics – have recognized that ‘facts’ are not found but made. From those observations he leaps to the conclusion that, since all scientific inquiry needs a shared paradigm, no harm is done by economists being unaware of their ideological bias (1988, pp. 120–6). Some support for this point of view is found within objective philosophy. Problem situations, it is argued, have an objective existence. Thus, Maxwell, though trying to extend Newton’s theory, instead discovered anomalies which undermined it, and led to unexpected results (for example, radio). Science does not merely reflect the desires of scientists, then, but transcends their beliefs and awareness (see Chalmers 1982, Ch. 10). We have seen, though, that economic theory is generally not confronted with reality at all in the way physics is. Moreover, the ideological ‘problem’ is much more severe in the social than natural sciences, because the subject matter is itself a social construct (Heilbroner

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1990). Thus, we must be much less sanguine about the possibility that the inner biases of economists shape our theory largely unimpeded. Since there must always be considerable scope for the exercise of educated opinion in economics, it seems advisable that we understand the forces which shape those opinions. We have seen often in this work that econ-art has exalted the intuitive. Yet even scientists cannot ignore their intuitive side. As Schumpeter argued, scientific inquiry must begin with a ‘vision’ of how the information to be analysed fits together, and which ‘facts’ to look at. He recognized that this raised the problem of ideology, but hoped that the facts themselves would place severe limits on this. Heilbroner (1993) joins with us in suspecting that economic theory is not confronted by reality to the extent necessary to severely constrain ideology. Alternatively, pragmatic philosophy looks at the evolution of ideas in terms of natural selection: those which are the most useful will survive. As Darwin knew, though, survival need not imply merit (or as Hayek said, just because cockroaches survive and prosper does not give them moral value). Thus there is no necessity that ‘correct’ ideas replace mistaken ones. Rather, natural selection could be expected to reward ideas which are pleasing, especially to those in positions of power. We have had many occasions in this work to recognize that the pursuits of artistic and scientific goals have clashed. That which is pleasing to the subconscious need not always serve the interests of the conscious mind (as legions of psychoanalysts will attest). It is bizarre to suspect that the purposes of econ-science at least, if not econ-art, would not be furthered by economists becoming aware of their biases. It seems entirely possible that their hidden subconscious desires may prevent the profession from achieving key insights, either within the existing paradigm or by overturning it. Thus Eichner suggests that, ‘to those who constitute the “establishment” within the profession, it is more important to limit the power of the state than to understand how the economic system works’ (1983, p. 9).6 Heilbroner recognizes that economics serves a purpose in providing a coherent world-view, whether that view is conservative or radical (a point which echoes our discussion of the human desire for order in section 2.8).7 However, it provides a disservice by virtually ignoring distributional issues and the exercise of power within markets, just as it ignored imperialism in an earlier era (1990, p. 110). The existence of ideology, he concludes, does not prevent economics from proceeding as a science (the ‘great’ economists, he maintains, were driven to great

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heights by the desire to push a particular world-view), but greater self-awareness of its existence would considerably improve scientific analysis. Having had cause to make the same observation about various cultural influences earlier in this work, we can only concur. Recognizing our biases must hasten considerably the advance of econ-science. Much of what we have said here will sound familiar to those cognizant of modern literary theory. Literary theorists often expose the socio-cultural biases of authors as these appear in their words. While some would argue that no one interpretation of a text can be superior to another, others aspire to expose the ideological biases of authors. J.C. Rowe, for example, feels that we can undermine the institutions of power by exposing the disguises used to manipulate readers (see Krieger 1987). While our ideal might be for economists as individuals to root out ideological bias through self-awareness, a more practical strategy may involve applying the insights of literary theory (or rhetoric) to the works of economists in order to identify these biases. The psychological makeup of individual academics is not the only source of ideological bias. Experiments show that economic students are much more likely to act in a non-altruistic fashion than those not ‘trained’ in economics (Carter and Irons 1991). The milieu in which they operate as scholars further encourages a conservative orientation. Funding of both education and research comes primarily from governments and private foundations with an interest in maintaining the status quo. Even if all scientists were value-neutral, funding decisions would still influence the direction of research. In such a world, though, scientists could hardly be expected not to subconsciously orient their activity in a way more pleasing to those with favours to bestow. André Breton’s Manifesto for an Independent Revolutionary Art recognized this danger, quoting Marx: The writer naturally must make money in order to live and write, but he should not under any circumstances live and write in order to make money … The writer by no means looks on his work as a means … The first condition of freedom of the press is that it is not a business activity. (1938, reprinted in Rosemount 1978, pp. 183–7)

Restrictions on academic freedom are much less severe than they were earlier in this century, but it would be hopelessly naive to think that these have disappeared altogether. Within the profession too, economists will see that their psychic and financial

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rewards are greater if they toe the line. We saw in section 1.4 how this socialization process operates to encourage the pursuit of art. Surveys of graduate students show how successful that institution is in making them more conservative (Grubel 1991, p. 7). Later, they will recognize that articles are more likely to be accepted if they are attuned to the value system of the editorial board (Earl 1983, pp. 110–11). Ideological bias is easier to detect in the works of the past, for we can approach these with some historical detachment. The Iron Law of Wages, and the Wages Fund Doctrine, both concepts in nineteenth-century economics, clearly served the interests of those in power by asserting that real wages could not permanently be raised (Spiegel 1991, p. xviii). The farm support policies of the physiocrats naturally served the interests of the landowning class as well. We could easily extend the list. The (supposedly)8 Smithian idea that the exercise of private selfishness mechanically yields harmony naturally supports the status quo at all times. It would be sheer folly to doubt that ideology is not still an important determinant of economic ideas. It may not be coincidence that neoclassical theory so nicely supports the status quo. Our introductory texts say that economics is concerned with three issues: efficiency, equity and growth. We have already seen how the pursuit of art has caused growth to be shunted aside in this century. Equity has suffered much the same fate. Marshall suggested almost a century ago that we should attempt to judge the merits of different income distributions. Modern empirical methods and data enhance our ability to do so. Yet economic theorists deliberately reject consideration of equity issues. Many would argue that setting aside equity issues renders economic theory merely an apologetic for the status quo (see Fusfeld 1992, p. 31). This is hardly the only way in which it can be accused of that.9 There are many ways in which incomes are earned in our society. Are we doomed to a theory which casually assumes that all (legal) activities can be compared according to the sum of money paid for them? Can one person’s day really be worth a million times the value of another person’s? Is the income from a new ad campaign as ‘deserved’ as that from a new technical innovation which saves lives? Given that people find great income disparities disconcerting (even if the utility functions generally used by economists ignore the relative income effect), why on earth haven’t we progressed past some naive belief that everybody gets what they deserve, and gained the ability to

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discern welfare-enhancing improvements in the income distribution? If we rule out stupidity, surely ideology arises as the most likely suspect. Even ideas which might appear ‘radical’ may still serve an ideological function. The Surrealists, while talking revolution, may have unwittingly provided a release which helped prevent revolution from occurring. Keynes, while on the one hand seeming to propose a degree of governmental involvement antithetical to the interests of the business class, provided an answer to the problems of the 1930s which was much less threatening (if at all) to their interests than the interventions proposed by others10 (to avoid misinterpretation, I should mention that I approve of much of Keynes’ prescription). He added to his ‘radical’ image by personal behaviour that was both eccentric and disrespectful of authority (for example, telling Lloyd-George, when asked, that what the latter had just said was totally mistaken, in less than polite language). The new era required a man more rude, less circumspect, than classical economists (Spiegel 1991, p. 599). Nevertheless, Keynes was quite clear on where his loyalties lay, saying in 1925: How can I adopt a creed which, preferring the mud to the fish, exalts the boorish proletariat above the bourgeois and the intelligentsia who, with whatever faults, are the quality in life and surely carry the seeds of all human advancement? (in Spiegel, p. 599).[11]

Not only may seemingly radical statements serve to perpetuate the status quo, but ideology, being subconscious, need not actually serve the long-term interests of those in positions of power. Given that ideology necessarily provides a simplistic and distorted caricature of reality, ideologues may be driven into action which actually weakens the system. Hirschman believes that this is precisely the case today: Once a social system, such as capitalism, convinces everyone that it can dispense with morality and public spirit, the universal pursuit of self interest being all that is needed for satisfactory performance, the system will undermine its own viability which is in fact premissed on civic behaviour and on the respect of certain moral norms to a far greater extent than capitalism’s official ideology avows. (1985, p. 17)

Thus, even those who consciously wish to perpetuate the existing system have a strong incentive to more carefully police the

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outpourings of their subconscious. How many smug members of elite groups through history have delayed pondering their biases until it was too late, and the enemies of the status quo were at the gate? (Tuchman (1984) is full of examples.) For those dedicated rather to science, there are two clear implications. The first is that we should be conscious of our biases, and recognize that as long as these are hidden we will have severely limited our ability to approach Truth (indeed, given the testing procedures presently employed may never approach it). The second is less obvious but perhaps more important. Since ideology necessarily colours our views, and even deep meditation need not always disclose to us the workings of our innermost selves, we should strive for the interchange of ideas between those of different ideological views.12 Given that one’s conscious ideology may not be the same as one’s self-conscious ideology, and that the majority of economists hail from the middle and upper classes, and all reside in these, we will likely still see a bias toward the status quo, but much less than if we do nothing at all.

5.3

Power

With few exceptions (the relatively innocuous ‘market power’ and ‘bargaining power’), the concept of power is one that economists leave to their poor relations in sociology. This does not only mean that it is ignored but that any who speak of power relations will be viewed in the disdainful manner economists reserve for the lower social sciences. Physicists may be snobbish in their relations with chemists and biologists, but the furore over cold fusion is testimony to the fact that they cannot and do not ignore the (supposed) discoveries elsewhere. Their scientific principles leave them no choice. It is easy to understand why econ-artists shun the consideration of power. They are, after all, trying to depict a world in which the invisible hand overcomes the abuse of power. An orderly, non-threatening world has no place for power relations, for modern history tells us all too clearly how inhumane we can be to our fellows given the opportunity. (Marshall was still very interested in power relations, but neoclassical economists turned away from this.) That opportunity, then, must simply not exist. In the garden of economic theory, our baser instincts are not allowed to blossom. There is no need either to change attitudes or to tailor institutions so that power is countervailed. The only thing we have to fear in such a world is fear itself.

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Since those who speak of power – Marxists, sociologists – tend to use a different lingo, it has been relatively easy for the econartist to shun their polluting thoughts. Even institutionalists, who do generally recognize the importance of power relations (Klein 1994; Stanfield 1995), have been pushed to the fringes of the discipline. They, after all, clearly do not have the true vision. They are crawling in the muck and do not know the passwords to our gleaming castle in the sky (since our castle maintains itself, they cannot sneak in through the servants’ entrance). Our castle may be surrounded by monsters, but we are much happier being oblivious to them. Bartlett (1989) has attempted to speak of power in the language of economists. It remains to be seen whether such a transgression of the artistic code of the discipline will be heeded by both econ-artists (to their detriment) and econ-scientists (to their benefit). As dispassionate critics of econ-art, we must pay attention to him, for he shows that power exists even in the other world of econ-art. Power is defined as the ability of one actor to affect the decisions or welfare (lifetime utility) of another (and thus includes power to do good, such as making a better offer than any other actor will). Power can be exercised by affecting another’s decision set, decision choice, or valuation of payoffs. The econ-artistic community may well respond that rational individuals cannot be manipulated by others. Bartlett clearly shows, though, that at least in the real world such rationality as we are capable of is no defence. Other agents can restrict our access to information. The existence of externalities provides a further opportunity for the exercise of power, and even the establishment of property rights still leaves this possibility open. Further, others can exercise power over us by attempting to influence our preferences. To be sure, neoclassical theory, with the addition of auxiliary assumptions, could close off all of these opportunities for the exercise of power, but the list of assumptions necessary for this (see Bartlett 1989, p. 66) is not one that even the most hardened of true believers could lightly accede to (consciously, at least: buried in equations they would be more innocuous).13 Since firing affects the worker’s feeling of self-worth and chances in re-employment, as well as providing a shock to the worker’s consumption stream, employers clearly are able to exercise power in such a situation. Since power exists in markets, government intervention may actually reduce its use and abuse. Given that the world is not made up of independent utility maxi-

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mizers, existing theory gives us not only a misleading view of equity but efficiency as well (Bartlett 1989, p. 203). Once we recognize that power exists within markets, then we must also recognize that we might be able to better the lot of the bulk of the population through institutional reform.14 That is, we may be able to improve the income distribution without lowering total output.15 This would be a laudable goal for econ-science. It would of course undermine the very (ideological) purpose of econ-art. Bowles and Gintis (1993) note that while some economists deal with some elements of power relations – such as enforcement mechanisms or endogenous preferences – the profession is still a long way from dealing with the question of class. Some of this restraint may be due to a justified suspicion of those who view class as the only legitimate unit of analysis.16 Neither view is correct: if you mix hydrogen and oxygen you get a new substance whose behaviour cannot be reduced to that of H and O. Just as we cannot explain all of biology in terms of chemistry, in the social sciences it is sometimes correct to analyse at the level of the individual and sometimes at the level of society. Gordon (1991, p. 49) recognizes an ideological bias in the choice which is made: libertarians prefer analysis at the level of the individual and Marxists at the level of society. It is at least possible then that the insistence of the economics mainstream on the former is in part ideological. Models in which agents are independent rational utility maximizers are much more likely to generate conclusions consistent with maintenance of the status quo than models in which it is recognized that society conditions individual behaviour. While the attempt to establish micro foundations of macro theory may not be without merit, this attempt to reduce all economic phenomena to the level of the individual turns our attention away from the fact that society is more than a collection of individuals. Especially coupled with our extreme assumptions of rationality, this can only reduce our fear (and understanding) of business cycles.

5.4

Ideology and the Great Depression

The utopian philosophy wherein art, ideally at least, was meant to construct a new world, or if not that to form a blueprint for one, did not survive the social disillusionments of the 1930s. (Dabrowski 1985, p. 11)

Faced with the severity of the Great Depression, the most dedicated of econ-artists were forced to confront reality (though not,

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it should be noted, to anywhere near the degree that those who actually lost their jobs had to face reality). Many who still clung to classical theory found themselves nevertheless advocating stimulative government policies. Governments around the world of varying political stripe pursued ad hoc policies of this type for years before Keynes produced The General Theory. His theory provided a fairly innocuous rationale for this government activism in a world where many had come to view the 1930s as a structural collapse, perhaps even the last crisis, of capitalism. The Second World War proved even more horrific than the First. Econ-artists in its aftermath naturally redoubled their efforts to create in economic theory that other world of order and safety where markets provided justice free from the arbitrary abuse of power. It was a delicious dream to a generation traumatized by Depression and War. As long as economics continued to imitate science, though, the very existence of the Great Depression stood in the way of this artistic vision, for who could ignore the fact that markets had failed humanity, and that government intervention had made matters better? The genius of humanity shines best in adversity. This seemingly impossible situation – how could the desire to believe that markets were wonderful possibly be reconciled with the clear evidence that the market system had messed up severely and ruined millions of lives? – brought out the best in many econartists. Most, to be sure, simply ignored the Great Depression, a task easy enough during decades of post-war expansion.17 Some stalwarts set to work, though, on the impossible task of bringing the Depression into the body of econ-art. They could not stand to see such a glaring loose end tarnish the image of econ-art. It might have been better for humanity if they had left it so, for then the task undertaken by this work – the extraction of art from science – might have begun decades earlier. We should not value their artistic achievement any less because of this. Friedman and Schwartz (1963) suggested that most if not all of the Depression experience could be blamed on miscues of the newly created Federal Reserve System. Since it is clear that there were no major changes in fiscal policy until well into the 1930s, this was the only recourse for those wishing to blame the Depression on the government. Friedman and Schwartz were not held back by the fact they had no theoretical explanation of how exactly decreases in the money supply lead to decreases in output. They could not rely on the Keynesian mechanism for this involves a rise in nominal interest rates when these actually fell, and even

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the quantity relation (MV=PQ) which they favour implies that when the price level falls as fast as the money supply as it did in the 1930s there is no necessary reason why output must fall. Nor were they deterred by the facts that it was hard to imagine the Fed doing worse than in the pre-First World War era when it had not existed (supposedly, rational bankers stopped providing other banks in difficulty with liquidity to avert crises under the mistaken belief that the Fed would now do this for them), and that there was no obvious evidence that the decline in the money supply was a cause rather than result of the Depression. In 1963 they spoke only of Fed miscues from 1931 and thus conceded that the United States was already in the grips of the worst recession on record; later Schwartz and others would argue that one could find evidence of monetary tightening as early as 1928 if one just looked hard enough for it and really believed. This argument has had a profound effect on the historiography of the Depression. Almost all economists (even me) would recognize that the Fed behaved sub-optimally and contributed to the severity of the Depression. Yet even those who like the monetarist explanation are forced to admit that there is no compelling evidence that the Fed should be blamed for the majority of the Depression experience (see Szostak 1995, Ch. 2). Given that those who push it tend also to argue that changes in government policy have only a transitory effect on real variables (they thus try to argue that the Fed can do a lot of damage by discretionary policy, but no good), and that few of those who lived through the 1930s thought the Fed was at fault, common sense must lead us to suspect that it is the market system rather than the government which must bear the brunt of the blame for the Depression. The retort of econ-artists must be that no good market-driven explanation of the Depression exists either. ‘Keynesian’ theory relies on an autonomous fall in consumption and/or investment, but stumbles when it tries to explain how these fell in the first place. This should not surprise us. If we start with a neoclassical theory which suggests that the Great Depression is impossible because of the strong equilibrating mechanisms at work (while Keynes spoke of permanent disequilibrium, most ‘Keynesians’ do not), then it can hardly be a surprise that we have difficulty stretching that theory to fit the Depression. Of course, if we were scientists we would view this historical anomaly as cause to consider substantially modifying if not changing our theory (as in Szostak 1995!). As artists, though, we constrain ourselves to a very narrow acceptable area of inquiry, and thus eliminate the

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risk that we derive a result which conflicts with the interests of art. It would be better for the purposes of art (except to the extent that art would be better off if not confused with science) if the Great Depression had never happened at all. Not being able to (pretend convincingly to) explain the most important economic event of this century must severely limit the sense of peace and security which we can derive from works of econ-art. Sensitive to this fact, some have naturally begun to downplay the importance of the Depression. Darby (1976) argued that if we treat those on relief work as employed rather than unemployed, then, heck, the unemployment rates are still a bit higher than those we became accustomed to in the 1980s but only by a couple of percentage points. Margo (1988) has clearly shown that the characteristics of those on relief were quite different from the average unemployed, and thus millions could not view relief as a substitute for working. There is good reason to believe that most of those who could do so did not anyway (again, see Szostak 1995). It is thus wrong, though comforting, to think that unemployment rates in the late 1930s are the result of overly generous government relief efforts. Fiddling with unemployment estimates may appear innocuous, but reflects what is, I suspect, the winning long-run strategy for econ-art. Once all those people who actually lived through the Depression are safely dead, if we don’t (until we do?) live through another calamity of similar magnitude, we will quite simply forget that it happened, downplay its importance, or simply ignore it. If we don’t come up with a convincing explanation in the next decade or so – and we will not unless we widen our scope of inquiry to include different questions and methodologies – then the statute of limitations will run out and the market will be forgiven its transgression. Econ-science will lose the potential for great insight – it is as if physicists turned away from the study of a neighbouring black hole because it was too scary – but econ-art will prosper as never before.

6

Econ-Art/Econ-Science

6.1

The Existence of Econ-Art

The work of numerous art historians has established that cultural influences affect artistic practice. The purpose of the artist is to express society’s inner feelings; the successful artist will be one whose vision strikes a chord with a wider audience. It would be naive to expect that these social desires which manifest themselves in the arts would not also influence scientific endeavours which cannot possess objective standards of evaluation. Art historians have gone beyond the general to point to specific cultural influences which have had particular effects on artistic evolution. We have been able, by comparison, to detect numerous influences on econ-art: the depiction of a better world, the desire for order, the reaction to nationalism, the fear of authority, the elevation of technique, the pursuit of a methodology which would allow the subconscious to dominate, the desire for the self-referential, the quest for linearity (abstraction), the fragmentation of time, the fear of change, the appeal to the classics and ideological bias. There may be some readers who accept the role of (some of) these cultural influences in the development of economics, but still object to the label of art. But one implies the other. Science, to be sure, may not be immune to cultural influences, but if these come to dominate a discipline it ceases to be science. If economists aren’t using scientific standards to judge their work, what are they doing? They are creating works which satisfy some other faculties of appreciation, at least among themselves. What are castles in the sky, if not art?

6.2

Econ-Art/Econ-Science

We do not suppose that we can change anything in the ways of men, but we do think we can show them how fragile their thoughts are … Surrealist declaration, 27 January 1925

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We must now turn our attention to the effects which econ-art and econ-science have had on each other through cohabitation. Since our primary concern has been with econ-art, we will first look at the effects which econ-science has had on it, and suggest ways in which econ-art might be improved by shedding its scientific pretensions. As we have seen earlier, art and science need not be completely antithetical. Positive fertilization of the arts by science has been noted in the literature. From the late nineteenth century: Artists in all fields were aware of the extraordinary success of the scientific method. Realism and impressionism brought a new objective attitude into the arts, together with an emphasis on the technical side of the crafts and a tendency for artists to become specialists pursuing a single aspect of their various media … A painting for an impressionist was a kind of experiment, an adventure in problem solving … The literary realists were cultivating a scientific detachment in their writing and developing a technique that would enable them to record the details of their observations of everyday life with accuracy and precision. (Fleming 1970, p. 498)

While art is intuitive, the intellectual side is not completely ignored. The greater the understanding the artist has of the world she lives in, the greater her ability to transcend that reality. As well, the technical apparatus designed to serve science can be of great value to the artist, for example, musicians have thus been aided by synthesizers, digital sampling and a range of other technologies. Knowing that a model exists which will show that fiscal policy cannot iron out the business cycle (of course, a model has to exist which will show anything not logically inconsistent) is like knowing that blue and yellow make green. Knowing that a stable equilibrium exists in n-space is like understanding the rules of suspense or character development. Most of that which the modern economist ‘knows’ aids naturally the work of the econartist. Indeed, we have seen that mathematical techniques serve the goals of art at least as well as they serve the goals of science. The conscious pursuit of scientific goals must act to limit artistic expression, however. A parallel can be found in the world of architecture: ‘Experimental architecture is possible, but the discipline of sound engineering has kept architects from some of the wilder flights of fancy seen in painting, sculpture, literature, and music’ (Fleming 1970, p. 532). The parallel can only be

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extended so far. While architects must obey physical laws or their buildings will collapse, econ-artists only think that they have to maintain ties with reality. As we have hinted many times before, the only factor holding back econ-art is the lack of self-awareness. If poets were told that their purpose was to unravel the laws of physics, we would have been bequeathed huge masses of stilted and argumentative verse. Artistic temperament would still win out often enough, we must suspect, to ensure that we would inherit some works which are truly sublime. Econ-artists, labouring for some decades under the misapprehension that they were actually scientists, have naturally fallen into a similar trap. While the artistic strain has thankfully (miraculously?) dominated, the field is littered with works of no artistic merit. If we wish to separate econ-art from econ-science (a difficult task since most work combines both elements), we could first sort works by this criterion. To be a scientist, one must focus on the world we live in, and thus turn one’s back on the whole focus of art. The result can scarcely be beautiful, at least to modern eyes.1 This does not mean, of course, that all work which fails as art should be viewed as science. There is, quite simply, work which is just rubbish, and fails to meet either standard. Such is not surprising, especially given the previous lack of articulation of the purpose toward which practitioners should be striving. What must econ-art do to achieve its true potential? It must turn its back on reality in at least four major ways. It must cease to worry about the realism of its basic assumptions; indeed, it must come to revel in their un-reality. It must forego attempts to test its theories against the world we live in; any ‘testing’ which goes on should be based on elegant techniques incapable of determining whether the theory has any relationship to the real world. It should value economic models for their elegance and pursuit of artistic values alone. It should eschew questions which do not lend themselves to elegant expression (or which raise public fears), for artistic understanding does not require that each stone be uncovered. It is amazing how much of this has already been achieved under the false banner of science. Yet, there is still much more which could be done.

6.3

The Quest for Econ-Science

One of the Nobel laureates who has spoken out told me that he had been ‘practically excommunicated’ for complaining about the

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empty formalism in modern economics. The excommunicates might consider forming a new religion, called perhaps ‘economic science.’ It would be empirical to the point of actually observing economic facts, mathematically sophisticated without adopting the intellectual values of the math department, curious about practical applications, aware of its ideological burden, and open to criticism. The proposal, I concede, is Utopian. (McCloskey 1994, p. 177)

There will be those who will eschew the lofty heights of econ-art in order to tread the narrow path of econ-science. ‘Understanding this world is a more laudable goal than sketching fantasies in the sky,’ they will cry. Economics is a vocation. The world needs the advice of scientific economists. Science, they will claim, is more valuable than Art. What can one say to such as these? Surely, at the level of personal advice, one can only say: ‘Turn back. Let your spirit fly. Are people just machines whose sole purpose is to pursue food, clothing, and shelter? Surely not. Does not Art represent the highest achievement of humanity? When one thinks of the most glorious accomplishments of the human spirit does one think of Newton or Beethoven, of Galileo or Michelangelo?’ The case could hardly be clearer. Econ-Science must forever live in the shadow of Econ-Art, as the manufacturers of toilets live in the shadow of the makers of fine pottery. We would not wish the battle between utility and beauty to be decided in any other way. No. To pursue econ-science must be a lonely and thankless occupation. One can appeal to narrow self-interest to encourage the pursuit of econ-art. But those who view science as their calling cannot (consciously) heed such advice. ‘What is the use of being at Yale or Chicago if this means being surrounded by art?’ they will ask. (They can perhaps be forgiven for overlooking, in their frustration, the scientific accomplishments of the profession.) Since it is easier to evaluate a job applicant’s technical skills than their imagination or insight, the ‘best’ schools hire technicians (Mayer 1993, pp. 19–20). If the true scientist must be a fringe element, this can be done anywhere. Thus the true believers will brush away the entire internal reward structure of the profession as irrelevant. They may direct their energies toward an external audience. Or they may dream of a day when economists put science first.2 In order to confront the real world outside academia, they may have to mislead themselves about the future of our profession. Or maybe, just maybe, their cause is not lost.

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I have myself through ignorance trod the narrow path of science. In books and articles I strained to explain the world as it existed, not as it could have been. The contradictory details which the true artist brushes over were instead my focus. If theory and fact were in disagreement, I tried to adjust the theory. I purposefully held my artistic side in check. Ah, what folly! I was vain, perhaps. I had seen the beatific smiles of my peers as they built their mathematical castles in the sky. ‘But it’s not science,’ I had thought, as if that were all there was. I would deal with reality, or I wouldn’t play the game at all. (It might be thought by the naive that economic historians must deal with the world as it exists or existed; a perusal of the literature of the last decades will show that even here there is much scope for the display of artistic temperament.) Such biases can become quite deeply held, I fear. Even now, though I have seen the folly of my ways, I cannot shake the idea that econ-science is worthy of pursuit. I can at least warn others: ‘Follow me not but go ye up into the light.’ There is also a psychological cost of science. To gaze on the great unknown that is our universe is to be humble. The great scientists have always known how ignorant they were. This ignorance was both their incentive and their curse. To want to know and yet not to know is to experience extreme frustration. Great artists are allowed and forgiven their pomposity. Wonder and humility are more to be expected from the scientist. Those of frail ego must choose econ-art, for the path of econ-science is not for the faint of heart. It is much easier to dabble in the other world of econ-art than to grapple with the complexity of our own. There must still be those who fail to follow such advice. There is room for both utility and beauty in this world, and in this discipline, they will claim. Perhaps they quest for power and influence, the seductive embrace of the politician needing advice. The true artist never consciously panders to popular acclaim (think of Mondrian, selling flower pictures under another name to fund his experiments with abstraction). For those who must prostitute themselves upon the altar of utility (if I may mix a metaphor), the way is clear. So also for those who are driven by some misplaced sense of social duty to try to make the world a better place through understanding it. Take up the cloak, then, and wear it well. Take what pleasure you can from your humble choice (if this involves criticizing the quality of econ-art, so be it). But curse not thy fate, for thou hast chosen it. And take heart in the fact that there is some value in econscience.

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This work should provide the final answer to the heretics, the critics of economic methodology. Economics was in error, they had alleged. The assumptions made and the techniques used were inappropriate for understanding the world we live in. But now we know what should have been obvious long ago: describing the world was not the point. Economists had been pursuing a much loftier goal. Their artistic drive was strong enough for them to ignore the nay-sayers. They could not, and did not, consciously respond to their critics, but knew in their hearts that they were right. Art provides its own reward to the artist. Who can doubt that Friedman sets down his pen with the same lightness in his heart as Picasso?3 While art is a much more valuable pursuit than science, it is nevertheless true that art can have deleterious side-effects if it is confused with science, if the audience mistakenly feels that art is in fact describing reality. The best antidote to this misperception would be for there to be a strong scientific tradition alongside econ-art. Since we will never be rid of econ-science, we must strive to delineate its boundaries clearly, so that art is no longer misconstrued as science.

6.4

A Lesser Purpose

Surrealism would betray itself in its own eyes if it claimed to have given a definitive solution to any problem whatever. (Nadeau 1965, p. 200)

As hinted above, the cleansing of art is not the sole justification for the pursuit of econ-science. The public has, despite its scepticism of the discipline, been desirous of not throwing out the baby with the bathwater. If we can separate econ-art from econscience, the public will be much better served. Those with aesthetic tastes will peruse the works of the former genre with enhanced appreciation. Those of less heightened sensibilities – the poor and downtrodden loom large in this category – can provide an audience for the econ-scientist. Nameless and faceless they may be, but those who would choose science over art must satisfy themselves with rewards other than fame and adulation. While econ-scientists can expect no favour from the econartist, they can, then, have some hope of gaining the attention of those in the wider world.4 The present scepticism of the public can, in a narrow sense, be attributed to the fact that economists are generally seen in the public eye doing what they do worst –

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forecasting the future (and the profession unfortunately has no means to discipline those who would bring it into disrepute in this way). Moreover, journalists have a predilection for finding diametrically opposed opinions on every issue, and are inevitably able to uncover same in such a large profession. In a broader view, the recognition that economists have lost touch with reality – albeit in pursuit of a higher purpose – makes scepticism of their policy prescriptions much more comprehensible. One would not, after all, engage a creator of modern sculpture to fix one’s plumbing. The separation of art and science cannot guarantee public support but must encourage it.

6.5

Artistic Detachment

Those who think they will settle for nothing less than best worlds … surrender the chance of working for better worlds. (Simon 1991, p. 284) An economist who is only an economist is likely to be a nuisance if not a positive danger. Friedrich Hayek

Some economists feel that we have little to say about policy, thus do more harm than good when we try, and therefore we should stick to solving logical problems of no use to policy makers: this, at least is the indictment of Mayer (1993, pp. 44–5), and who within the profession could seriously doubt it? Indeed, to insiders the statement is no surprise at all, and most would pass over Mayer’s casual statement without a second thought. The average taxpayer might be horrified to find that some economists not only don’t do anything relevant but don’t even try to (but taxpayers tend to think they pay us to teach, so what do they know?). Double-digit unemployment, race riots, environmental collapse, world-wide poverty, etc., etc. – the world seethes with problems mostly or entirely within the purview of economics, and yet practitioners turn their backs on policy: ‘We go our merry ways, debating questions nobody has asked with a rigour only a mathematician could appreciate, at the expense of real policy issues’ (Bronfenbrenner 1991, p. 604). The econ-artist naturally recoils in horror at such attacks on their integrity, but cannot readily formulate an answer. Even artists who perceive themselves as artists like to believe their work affects the real world. Mondrian, for example, felt that art must serve some ethical purpose (Jaffé 1985, p. 42). Yet even in the art

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world the events of the twentieth century have encouraged a certain detachment. We have discussed before the misfortunes that befell Surrealist efforts at political activism. Yet even before this, Surrealists idealized the individual pursuit of understanding. ‘This experience (World War One) made the Surrealists attach much importance to the poet’s isolation, his alienation from society, and even from nature’ (Arnason 1986). The world was simply too horrible to be faced (an idea kept alive by the Depression, Second World War and Cold War; and who can read today’s news without wishing to live in a different world?). To focus on policy would not just mean the production of inferior works of art, but would be a source of psychic pain to the artist. The world needs art. The world needs visions of a better reality. It is a basic human desire to yearn for a better world. Without art, without the evocation of that best part of our soul, life becomes little more than a pursuit of VCRs and CDs (okay; there’s still ‘love’ and ‘friendship’, but you get the point: art puts us on a higher plane of existence). But we cannot survive on art. Just as the yogi on the mountaintop must still eat, humanity must take care of the humdrum details of existence before we can dream of a better world. Hesse had apparently begun The Glass Bead Game with the idea that an intellectual community totally divorced from politics was ideal. The Glass Bead Game players would serve society precisely by not interacting with it, by holding up to the population a vision of academic pursuit divorced totally from the cares of the day. We have had cause more than once to quote from this book, and have thus seen some of the parallels between Glass Bead players and economists. In the end, though, Hesse realized that he had to reject his ideal. He disdains the Glass Bead players for not taking the welfare of the world as their main goal (1969, pp. 192–5, 350). So too with econ. While the econ-artist can revel in detachment, the econ-scientist cannot (not all of them, anyway). Affected though they inevitably are by the artist’s urge to turn away from the world, they must fight it (a fight which will be easier after the separation of art and science, for the scientific community will reward it). It is not just that econ-science can aid humanity in the short run, but that econ-science itself will improve as practitioners more regularly confront its postulates with the real world. Indeed, the benefits which econ-science can immediately bestow on humanity may prove quite limited, but the humble task of the econ-scientist is not to create an instant utopia but to painfully crawl toward a somewhat better world.

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Econ-scientists will, moreover, have to overcome a scepticism on the part of policy-makers resulting from the misguided or nonexistent advice they have received from econ-artists in the past. John Raulston Saul has suggested that if economists were doctors they would be overwhelmed by malpractice suits. Economists could at the very least obey that part of the Hippocratic oath which proclaims, ‘First do no harm … .’ Henry Aaron introduced a symposium in the Journal of Economic Perspectives (Summer 1992) by noting: ‘While economists were busily engaged in important intellectual work of academic interest, men and women of affairs were going about their business, dealing with matters on which economists could constructively comment, often without the contribution of economists.’ A congressman and a former presidential adviser, asked by Aaron to describe difficulties with policy advice given by economists, had, between them, a handful of specific proposals. Policy tends to depend on basic rather than complex theory.5 Economists fail to translate complex mathematics into basic theory. They ignore distributional issues. They seem ignorant of the human costs associated with some policies. They ignore political constraints: they would achieve more if they focused on possible policies rather than preaching the impossible. They fail to honestly reflect areas of disagreement within the profession, instead acting as if they spoke with greater certainty than they in fact have a right to. Such complaints clearly reflect the inadequacy of advice given by artists. Econ-artists are too proud of their intricate models to speak in plain English of the simple economic insights which even they are forced to realize are the only contribution economics has to make to policy discourse. (Surveys of economists employed by government itself show that they generally only use the simplest (undergraduate) theory and quantitative methods; see Boland 1989, pp. 12–13.) Those who provide practical advice based on simple theory work in the shadow of those who build complex theories of no use. Econ-artists are so busy painting pictures of a better world that they are unable/unwilling to lower themselves to the consideration of political reality.6 They can’t even recognize the pain felt by the worker casually thrust out on the street by economic rationalization, because such pain doesn’t exist in the garden of econ theory.7 Their quest for order and certainty in a complex and confusing (that is, scary) world causes them to speak as if they actually possessed the one true answer.8 They cannot admit ‘that their knowledge and models are imperfect guides to

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policy’ (Hamilton 1992, p. 62). Moreover, they have spent so much time mastering the techniques of their art that their expository powers are poor (see Krueger et al. 1991, pp. 1048–9). They work to serve only fellow econ-artists rather than the world at large (thus, Dréze (1995) complains that economists have not developed public sector pricing schemes to the extent necessary for governments to use them). This has caused economic practitioners to reduce their subscriptions to journals; econ-scientists should respond by thinking more about what practitioners need (Harberger 1993) Econ-art has much to offer to the world,9 but our public policies are destined to be pitiful if room is not made in the discipline for a clearly defined econ-science. A century ago, at a time when scientific motives still held sway (if not complete domination) in the discipline, Alfred Marshall astutely commented on the relationship between theory and policy: It is now patent, even to those who are in a hurry, that no practical economic problems can be settled offhand by appeal to general doctrines; for the things of which account must be taken are so diverse, and our knowledge of them so slight, that they yield no firm hold for formal proof. Much must be taken on conjecture; much must be decided by commonsense rather than by reasoning on strictly logical lines. Thus the growing perfection of scientific machinery in economics, so far from lessening the responsibilities of commonsense, increases those responsibilities. (1897, in Deane 1989, p. 139)

Model-building is not a substitute for, but at its best a complement to, intelligent policy advice. Decades of artistic devotion have drowned out this common-sense notion, and seriously reduced the efficacy of economic policy advice. Thus, Colander (1992) notes that there is no practical use in economists attaining precise results when policy decisions must incorporate social and political dimensions which are necessarily imprecise: in particular optimal tax and tariff results are meaningless given the profession’s unwillingness to analyse the historical, institutional, political, social and distributional dimensions of these issues. Harberger (1993) maintains that economists could help in forecasting much more by concentrating on areas in which we know little rather than fine-tuning areas in which we know much. Mayer (1993, p. 75) argues that economists focus on dealing elegantly with the strongest link in a causal argument, while ignoring the weakest link. The quality of our policy advice would obviously be greatly improved if we

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dropped our pretensions, and were willing to give attention to aspects of important policy questions which we cannot deal with in a precise, elegant (artistic) manner.

6.6

The Existence of Econ-Science

Has econ-science actually progressed behind the scene-stealing activity of econ-art? We have seen that all economists have both scientific and artistic motives, but suggested that the internal reward structure has tended to emphasize the latter. The fact that economists perceived themselves to be performing science is no guarantee that they in fact did so. Certainly, much of the research output of this century has enhanced our understanding of reality not at all.10 McCloskey (1988, p. 290), for example, argued that there had been no big advances in trade theory since 1965,11 no econometric success in deciding between alternative explanations of important issues since 1940, and no additional insight gained from the reworking of general equilibrium theory since 1950. He recognized that some advances had occurred in some areas, though, arguing that economic history and labour economics had been most successful in this regard because they were forced to face ‘facts’ moreso than other areas. Moreover McCloskey (1996) recognizes that there is no conflict between recognizing that some economics is useful while criticizing the non-scientific nature of the discipline. Our purpose here, though, is not to catalogue the failures of econ-science. It is too easy to criticize any science for its imperfections; we should look instead for some signs of hope (Gordon 1991, p. 590). The ‘birth’ of macroeconomics in the cauldron of the Depression must be considered a scientific advance. We might regret that the classical focus on economic growth was not regained, but at least the profession was shaken from its undue emphasis on what would come to be called microeconomics. The contemporaneous elucidation of the theory of imperfect competition must also be considered an important advance (even if Friedman considered it irrelevant). On a lesser plane, we could note the important role econ-science has come to play in debates about such key issues as regulation and pollution control. Econscience is still far from having all the answers even in these areas (we are only beginning to unravel the strategic impediments to the operation of the economist’s favoured effluent taxes and tradable permits; when tried these have not worked as well as theory would predict), but it would be a mistake to think that

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econ-art has so dominated the discipline that it has entirely ceased to be of any practical use. Indeed, one reader of this manuscript suggested that the latest in economic theory was a considerable improvement on that which had gone before. He pointed in particular to game theory, new Keynesian macroeconomics and new trade theory. While I am happy to concede that these are an improvement in some ways, I do think we must be careful of exaggerating the degree of advance. Econ-science is not completely crushed by econ-art, but nor is it freed from all constraints. Game theory can be hailed for telling a less harmonious story than general equilibrium. But it can be criticised for being almost as wasteful of the time and effort of economists. As with rational expectations, there is a core idea worthy of note, in this case the recognition of the ubiquity of strategic behaviour. In general, though, there is too great a variety of games, and these generally with multiple equilibria, that can be applied to a particular situation. The fanciest maths thus rarely takes us closer to understanding than the basic intuition. The latest Keynesian macroeconomics can be hailed for recognizing a host of market imperfections, and because of these the possibility of involuntary unemployment. Sadly, the greatest service of these models is to provide an alternative to models with no place for involuntary unemployment, which common sense should have recognized as ludicrous long ago. And note that most of the market imperfections referred to have been known for some time; the novelty has involved squeezing these into a set of formulae. Moreover, these models still for the most part try to comprehend fluctuations without reference to growth, which must appear to be an inherently misguided approach. The new trade theory may be applauded for integrating concerns with oligopoly and strategic behaviour. Krugman (1996) has described its birth. His account focuses on the difficulty of translating a fairly obvious insight into mathematical form. Trade economists knew that market structure mattered, but ignored this fact until models of increasing returns were available. Though one of our better econ-scientists, Krugman unabashedly talks of making unreal assumptions in order to render the maths tractable. We have noted before that trade theory would benefit even more from a focus on technology. But this, alas, is difficult to treat mathematically. It is dangerous to make predictions from three cases. On the positive side, one might suspect that as the memory of war fades

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economists are somewhat less driven to describe an orderly world. A much clearer implication is negative: adherence to one narrow and restrictive methodology severely limits the speed of advance. In other words, even if economists are willing to throw off some of the artistic elements embedded in their theory, they will be severely limited in their ability to do so by adherence to an artistic method.

7

Improving Econ-Science

7.1

Improving Econ-Science

The twentieth century will feel the need of entrusting the social sciences to men of general culture who are accustomed to thinking both inductively and deductively and who are familiar with reason as well as experience. Leon Walras

Science is best viewed not as a body of knowledge but as an activity; philosophers of science should thus concern themselves with how this activity can be organized so that it is most likely to yield reliable information (Gordon 1991, p. 624). A science which is governed by artistic criteria which are not made explicit must of necessity be far from the optimal path to knowledge. While it has not been our purpose to do so, our analysis points to a number of ways in which econ-science can be improved merely by shedding characteristics imported from econ-art. First, it must face up to reality; it must both recognize and constantly strive to overcome the temptation to distort reality. Guidelines may be devised to encourage this but eternal vigilance is necessary to ensure the result. Of course, this requires that economists become self-aware of the conflicting impulses which act upon them. Second, economists have to realize that the real world is complicated, and thus economic theory must become less beautiful the closer it comes to approximating reality. Third, they must return their attention to aspects of the economic question which had no appeal to the econ-artist. More effort must be expended on describing the big picture. Narrowly focused studies must always have their place, but the discipline is destined to advance slowly if at all if continual efforts are not undertaken to tie the pieces together. In particular, the stress upon dynamics and growth which characterized the work of the classical economists must be regained. Fourth, and necessarily related to all of the above, economists must recognize that their present methodological biases

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are not firmly rooted in scientific principles, and open their minds to a greater variety of methodological approaches. Style and substance are not readily separable, and the insistence on only one form of argument needlessly limits the scope of economic inquiry. These implications will seem familiar to those cognizant of recent work in economic methodology (and thus philosophy of science) or rhetoric. Yet we have reached them through a quite different path: rather than holding econ to the standard of science to see what is missing, we have started from econ as art to see what is there. Economists face a choice: they can recognize themselves as artists or change their ways in order to become scientists. This may seem a choice already made, but must now be made consciously.

7.2

Reality

One of the strengths of scientific inquiry is that it can progress with any mixture of empiricism, intuition, and formal theory that suits the convenience of the investigator. Many sciences develop for a time as exercises in description and empirical generalization. Only later do they acquire reasoned connections within themselves and with other branches of knowledge. Many things were scientifically known of human anatomy and the motions of the planets before they were scientifically explained. (Williams 1966, p. 20) Most of the day to day business of science consists in trying to find out if our imagined world is anything like the real one. If it is not, we have to think again. Sir Peter Medawar, Nobel Laureate in biology

We have seen before that artists always distort; that is, they choose which elements to represent and how to do so on artistic grounds. We cannot, then, take works of art as a realistic portrayal of the world we live in. This is especially true in the twentieth century. The Cubists, Surrealists and abstract artists all felt that they were portraying a superior reality to our own. They purposely turned away from the world as our senses describe it. If econ-art has at all heeded the same impulses, it too must be unreal. The case is admittedly more complex. With econ-art and econscience existing within the bosom of the same discipline, we might expect that scientific impulses would have pulled the disci-

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pline as a whole closer to reality than was the case in the unadulterated arts. But if we look at how econ theory has been developed, we can quickly see that science was no match for art in this context.1 Art having struck the econ community as a more noble goal, that community – unconsciously, no doubt – developed standards which rewarded artistry. And mere humans do not come equipped with warning lights that tell them when they are not doing what they think they are. Art historians and psychologists are both aware of the fact that we perceive reality (we discussed the philosophical difficulties with this term in section 2.5) only in terms of our pre-existing view of the world. People develop frames of reference which allow them to impose some order on the complex events occurring around them. In the world of art, this means that the audience naturally expects new works of art to conform to the principles of previous works (for example, novels will have plot, theme and continuous characterization). New genres, such as Surrealism, will at first seem alien, and thus the reader/viewer will be forced to work harder until the new genre becomes the norm (Hedges 1983, pp. 38–9). In science, too, existing ways of viewing the world have immense staying power. It was only through careful detailed analysis that the heliocentric view of the solar system replaced the geocentric, or relativity theory replaced Newtonian physics. In economics, once economists have come to accept mainstream theory as the norm, they must have a natural tendency to evaluate any new theory primarily for its violation of the norms of the existing theory, rather than its approximation to reality. Even though many of the tenets of mainstream theory are merely beliefs that have never been tested (Blaug 1985, p. 701), they have a captivating effect on the minds of economists. While logical abstraction is necessary for the advance of science, there is a danger of this becoming the normative standard (Whitehead 1985). Once the idea of self-adjusting equilibrium is accepted, then any real-world deviations from this are either ignored or attributed to institutional malfunction. If rationality is tautologically true, attempts to show irrationality experimentally must be misguided. Classical physics rested on such seemingly unassailable truths as the concepts of absolute (not interdependent) time and space, the existence of elementary solid particles, the strictly causal nature of physical phenomena and the ideal of the objective description of nature. All of these had at least as much logical

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appeal as the basic precepts of neoclassical economics. Yet all have had to be sacrificed as exploration of subatomic reality threw up anomalies which could not be ignored (see Capra 1976, p. 53). The core theory of Econ-Art need not be any truer but is unassailable if we simply ignore contradictory evidence. The unrepentant economist might reply that they regularly confront reality. The evidence does not support this contention: Mainstream economics as one sees it in the journals and the textbooks and in the courses taught in economics departments has become more and more abstract over time, and although it purports otherwise, it is in fact little concerned with what happens in the real world. (Coase 1998)

In a recent survey of non-academic employers of PhDs undertaken by the American Economics Association, they were found to be quite dissatisfied: the problem was that graduates were too distanced from real-world problems and had little idea of how (or motivation?) to apply the tools of economics to real problems. Thus business schools and public policy programmes were placing an increasing number of graduates in jobs previously the province of economists. Krueger et al., in presenting the Commission’s report, knew where to place the blame: neither core theory nor even the fields emphasize applications enough; the shortcomings in graduate teaching merely reflect (and reinforce) the shortcomings in research (1991, p. 1047). Both faculty and graduate students consistently indicate a desire for greater real-world orientation and less technique (Hansen 1991, p. 1066). A discipline unaware of its artistic side cannot fully comprehend why nothing is done about this. The pursuit of artistic goals severely exacerbates the tendency to focus on self-referential theory. While deduction from first principles has its place in the discipline we could well heed the words of Kaldor: Contrary to the prevailing trend, one should subordinate deduction to induction, and discover the empirical regularities first, whether through a study of statistics or through special inquiries … One should also seek the most reasonable explanation capable of accounting for these ‘facts’, independently of whether they fit into the general framework of received theory or not … In comparison with the high-sounding principles of the great systematisers, this kind of inductive-deductive theorizing may appear pedestrian. But it is far

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more likely to lead to a better understanding of how capitalist economies work than the all-embracing principles of the great systembuilders who, in the field of economics at any rate, are more likely to obstruct the progress of knowledge than to promote it. (1985, pp. 8–9)

Swaney and Premus (1983) argue that our empirical work is so unproductive precisely because our theory is developed too deductively on the basis of casual empiricism, rather than inductively. Several authors in Medema and Samuels (1996) also urge an increased focus on induction. Hicks notes that Newton’s inverse-square law of gravity was arrived at inductively, but was considered ‘proven’ by the great variety of types of observation which supported it (1979, Ch. 3). Only if we open ourselves to evidence which either contradicts or is not explained by existing theory, and are openminded enough to consider alternatives, can we take the first step toward developing a better theory. To do so though, we must stop behaving like Surrealists who ‘discount knowledge gained through experience in the real world’ (Matthews 1986, p. 8). Historians of technology now recognize that technological developments have likely influenced the course of (natural) scientific development more than science has influenced technology. Science often struggled to explain the achievements of innovators or to answer questions only made apparent by technical progress. In exactly the same way, applied work in economics should be a valuable incitement to the development of theory. Yet as we have seen theory is insulated from reality. The value system of the profession raises theory far above practical concerns, and doesn’t require the theorist to dirty their hands with the latter: Continuous preoccupation with imaginary, hypothetic, rather than with observable reality has gradually led to a distortion of the informal valuation scale used in our academic community to assess and to rank the scientific performance of its members. Empirical analysis, according to this scale, gets a lower rating than formal mathematical reasoning. (Leontief 1971)

Moreover, our present methods of ‘testing’ serve artistic goals, and are at best an imperfect guide to the relevance of theory. Econ-science must open itself to other sorts of observation. Economic history, while far from immune to artistic temptation, has always been held in check by the fact that it must deal with

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particular historical events; this has meant both greater methodological diversity and more realistic explanation.2 In Rostow’s words: As an economic historian I had to deal with a world in which the price of [key products] was always changing because of supply factors screened out in macroeconomics. I had to pay attention to new technologies and demographic changes. Therefore, I had to be, in my generation, a rather unconventional economist to be a good economic historian. This freed me from the limitations of the reigning macrotheories. (1988, p. 432)

Economic theory is as yet a distant echo of reality (except when it reflects reality not at all); to continue to devote the vast bulk of our efforts to refinement of theory and technique is to guarantee disaster.3 Our attitude toward developing economies is indicative of the profession’s disdain for reality. How many practising development economists have never actually been to a developing country (or, if they have, got much past the doors of the Hilton)?4 Our development texts are now full of lessons learned from failed development projects (such as, ‘Hey, it’s a good idea to confer with local people before plunking an irrigation dam in their midst – they might know something about local agricultural practices, institutions, etc.’), but many economists still feel free to engage in arm-chair theorizing. Lucas presented a paper at the 1991 European Econometrics Society Meetings which ostensibly tried to explain why, for example, South Korea had grown faster than the Philippines. His actual purpose was to show that ‘theorists need not visit LDCs and NICs to model their behavior’. He set up a model which has no place for differences in technology, capital, or education, and derives the result that the different growth experience of the two countries is entirely due to learning by doing. He then moved directly to policy: the Philippines should, in fact, do exactly what South Korea did not and be very open to foreign direct investment. (A favourable review of the paper can be found in the Journal of Economic Surveys, vol. 6, no. 1, p. 85.) The policy advice may be good or bad, but the analysis is best judged by the standards of art. How might we force economists to face reality? Electroshock therapy, or even compulsory conversations with the unemployed or firm managers or government bureaucrats, are unfortunately beyond our power. We can impose simple rules, for example, that

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authors of articles indicate which broader questions their work aids our understanding of. Some flexibility will be necessary due to the fact that we approach Truth in small steps if at all, but some of the more blatant excesses of theory for theory’s sake might be curbed as a result (in scientifically-oriented journals). We can instruct our referees to rate relevance more highly than elegance. We can recognize that a partial answer to an important question is better than a precise answer to a trivial question. As Hicks said: If one is firm in judging theories not by their intrinsic beauty, nor by their value in supporting (or confuting) ideologies, but by their usefulness as means of explanation, one must classify them according to the kinds of problem (of real problems) to which they claim to have relevance. (1979, p. x)

An elegant model of a trivial situation should hardly grace the pages of our top journals, when there are huge problems crying for our attention.5 In the end, though, we can only succeed by changing attitudes. If the bulk of the profession remains wedded to existing theory, then it is highly unlikely that truly new insights will emerge, no matter how much better these accord with reality. A new theory is like an infant; it will not survive unless nurtured: ‘An argument becomes effective only if supported by an appropriate attitude and has no effect when the attitude is missing’ (Feyerabend 1978, p. 8). Economists need to be more open-minded, more willing to accept the seemingly obvious fact that they don’t have all the answers. Such a sea-change in attitudes may seem a hopeless dream. However, if those with the greatest artistic drive devote themselves to econ-art, econ-science will be left to those who exalt the merely practical. This group must still be ever-vigilant, but could well create the appropriate scientific ethos. An important first step in this direction is the recognition that the real world is nowhere near as pretty as the theory is.

7.3

Truth versus Beauty

We have not developed an intellectual culture that can deal with the complexity and ambiguity of real economic phenomena … Not even in whispers do we admit it but we do know that our models are neither true nor false. They are useful sometimes and not so useful other times. (Leamer 1983, pp. 436–7)

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The cultivated man of today is gradually turning away from natural things, and his life is becoming more and more abstract. Piet Mondrian (in Jaffé 1985, p. 39)

Science isn’t pretty. Elements of a theory may be elegant, but real scientific understanding of complex phenomena cannot be so. Say we have a nice little theorem that says, ‘if A, then B’ under a set of specified conditions. Even in the natural sciences, there will always be cases where the specified conditions do not hold. For example, Newtonian physics, which many economists aspire to imitate, is only a good approximation for particles moving slowly relative to the speed of light. Thus, the true theory must be an amalgam of caveats. The purpose of science, after all, is not to describe selected parts of reality in excruciating detail, but to strive toward a complete understanding. Abstraction is just a means to generalization rather than an end in itself. Only when we have clearly outlined the limits of a particular theory and established its importance relative to other theories can we claim to understand. The point should be obvious, but since it is never stated economists have easily been seduced by the attraction of art. Acting as if one simple theory explains everything is mere artistic pretence. The problem with economic theory is not so much that it is wrong but that it is irrelevant.6 Simple comparative advantage could well drive trade flows if not swamped by much stronger forces. Rational expectations naturally abstracts away from constraints on behaviour which are conducive to business cycles. Common sense should have told us this from the beginning. Our quest for elegance has stood in the way of our quest for understanding: As long as we’re not willing to deal with the real messiness of our subject, we’re going to live in a ‘crisis’ – not just in macroeconomics but in microeconomics. Economists are trying to say too much about things where they haven’t the knowledge to improve on refined common sense. (Clower 1989, p. 29)

The econ-scientist must purposefully turn away from refining the existing body of theory and focus on the gaps in our knowledge. She must recognize that numerous often-conflicting forces act on both individual agents and the macroeconomy. Some of these we comprehend but others we have scarcely investigated. We must discover which forces are strongest at which times, and why. Especially in the beginning, this cannot be a pretty task.

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Philosophers of science have asked whether there is any reason to prefer simple to complex theories (see Chalmers 1982, pp. 132–4). If a simple theory explains reality as well as a complex one, the former is likely preferable. For one thing, it will point more clearly in the direction further research should take. However, if the complex theory has more explanatory power than the simple, it should be preferred. In particular, one can conceive of a complex theory as an amalgam of simple theories (think of a giant decision tree, where at each point we choose between assumptions). Specifying the limits of a model is one of the most difficult but also one of the most important scientific tasks (Capra 1976, p. 43). It is one at which economists signally fail. Physicists came over time to recognize that Newtonian physics applied only to supra-atomic particles moving much slower than light. Econartists show no willingness to put similar bounds on their creations. Art is universal, after all. Complexity need not imply confusion, but is necessary for completeness. This insight, while lost on most economists, has been shared by a few. Hirschman speaks thus of Sen: ‘Like any virtue, or so he seemed to say, parsimony in theory construction can be overdone and something is sometimes to be gained by making things more complicated. I have increasingly come to feel this way’ (1985, p. 8). Herbert Simon (1991) urges us not to pursue the chimera of monolithic theory, but rather build a set of theories which focus on different elements of reality. Marianne Ferber, in her Journal of Economic Literature review (September 1992) of Reskin and Roos’ (1990) book on gender discrimination – a book which departs from simplistic equilibration theorizing to make the un-artistic observation that employers have a large body of applicants to choose from for the best jobs and can thus discriminate – concludes: ‘Their theory affords a far more complete and realistic picture, albeit also a more complex and less elegant one, than the models economists are used to.’ We cannot hope to achieve real scientific insight while we cling to the standards of art. Some economists might respond that complex theories are their goal but that one must walk before one can run and build up from simple to complex theory: This excuse cannot be taken seriously. If the profession really wished to come closer to reality, the basic assumptions underlying these mathematical models should be the subject of lively discussion and frequent alteration and improvement, within the profession itself.

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Nothing could be farther from the truth. As soon as they hear any basic criticism at all (criticism of the assumptions, rather than criticism of the mathematical manipulations based on these assumptions), the practitioners of the orthodox game somehow lose all interest. They do not oppose or dispute the criticism – they ignore it. (Blatt 1983, p. 183)

Simple models are beneficial in the sense that they allow us to clarify our understanding of a piece of the puzzle, and thus make it easier to teach our students. Remember, though, that a complex theory can be thought of as an amalgam of simpler ones. Thus, these purposes can still be served without economists giving in to the temptation to forget the limitations of any set of assumptions. We must be clear that the misplaced desire for simplicity reflects economists’ unconscious yearning for artistic achievement, rather than some overarching human need for simplicity. A glance through texts in any of the hard sciences will betray these to be anything but simple. Econ-scientists, once they have recognized the error of their ways, need not find it that difficult to reform. Humanity has not, in the end, turned its back on the exploration of complex issues. It has, indeed, even found substantial intellectual stimulation in the exploration of deep philosophical questions: ‘There is, it must be confessed, a curious fascination in hearing deep things talked about, even though neither we nor the disputants understand this’ (James 1981, p. 8). There is an attraction to this type of research which we can hope will replace the artistic impulse in economists’ hearts. Why do we treasure the classics of philosophy? Everything said by Plato or Aristotle has been built upon by generations of subsequent scholars, and thus can be found in condensed form elsewhere. There is no strict need for most of us to go back to the originals (philosophers, of course, often find insights overlooked by interpreters). Yet we do return, because we appreciate the efforts of the human mind to grapple with life’s big questions. If we had to suddenly evacuate the planet, and the memory banks of the starship could not contain the sum total of human scholarship, many would urge the salvation foremost of the works of physics, chemistry and biology, for therein are contained the (not quite) definitive relationships on which our technological future depends. Yet while society recognizes the greater ‘concreteness’ of the discoveries of science, it would not wish to toss away our greatest works of philosophy or art or social science. There is something wonderful about the struggle of the human spirit to

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answer the (so far?) unanswerable. Yet philosophy done well is clearly science for it is focused on answering questions rather than displaying fine argument (it was for allegedly pursuing the second goal that Plato heaped scorn on the Sophists). The complexity of the subject matter of economics may frustrate the fainthearted, but must appeal to the noblest yearnings of the human spirit. Once we cast off the security blanket of belief that we have the answer, the heady adventure of discovering how the world actually works awaits us. Art may be psychologically easier to pursue, but science promises the courageous much greater rewards.

7.4

Philosophy of Science

There are no shortcuts to knowledge.

(Redman 1991, p. 129)

While scientists elsewhere have moved past a naive view that scientific theories can either be proved correct or at least falsified, economists cling to the fanciful notion that research can somehow establish unquestioned truths (to be sure, non-positivist views are occasionally espoused in non-mainstream journals such as the Journal of Post-Keynesian Economics). They thus claim that theory is true because it has not been falsified. As Redman has noted, though, ‘defending a theory because it has not yet been “falsified” may sound sophisticated and scientific but is in fact indefensible’ (1991, p. vii). All philosophers of science are aware that, ‘there is just no method that enables scientific theories to be proven true or even probably true’ (Chalmers 1982, p. xii). Induction at its best could only do the latter: the fact that A preceded B a million times does not mean it will always do so.7 Moreover, our very observations of ‘A’ and ‘B’ are grounded in prior theoretic constructs. Since we cannot confront reality directly but only through the lens of theory (even the concepts we utilize, such as utility, only acquire a precise meaning within a well-structured theory), the best we can hope to do is observe a variety of ‘facts’ in a variety of circumstances to see if the theory holds (see Chalmers 1982, Ch.2). We cannot even conclusively falsify theories; since observations depend on theory any clash between theory and observation may mean the observations are wrong. Refuting a model does not mean refuting the theory. In practice, various assumptions will have to be made about such matters as experimental setup. Since no general theory by itself implies a particular state of affairs, it must be combined for testing with ‘a myriad of independent

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beliefs, presumptions, guesses, and other theories’ (Klee 1997, pp. 53–7). These can be faulted for negative results rather than the theory being tested.8 In economics, many important variables, such as expectations, are unobserved. Even if difficulties with subsidiary hypotheses could be overcome, most theories have a probabilistic element which prohibits falsification (McCloskey 1983, p. 487). Nor is any of this philosophical nitpicking. The history of science shows that theories have often been maintained even though they conflicted with observation. The Copernican system was at odds with much of observed reality for centuries (Galileo’s elaboration overcame much of this) but was not discarded. Nor are new theories established by some crucial experiment as is commonly believed: Kuhn recognized that theories are usually accepted for a long time on the basis of equivocal evidence, while more compelling evidence is accumulated. It is a mistake, then, to criticize economic theory for having moved away from the possibility of falsification (see Blaug 1985, p. 697), for this was a false god in any case. We would have to abandon many areas of research if we did not recognize that disturbing influences around economic events rendered falsification impossible (Blaug 1985, p. 703 – he recognizes the general impossibility of falsification, but then advocates more). Why have economists clung to a philosophical notion that has been rejected by philosophers for decades? How could they do so when their own investigations required breaking these rules they held so dear? Practising economists are generally offended by methodologists’ answers to these questions, for it is hard to justify this behaviour as science. From the beginning, though, it has always been art. We saw in Chapter 3 that Friedman’s advocacy of positivism fits well within the genre of art manifestos. It is noteworthy that Friedman was unaware of the philosophical debate which undermined his position (Beed 1991). Boland (1989, p. 174) has suggested that Samuelson’s Foundations (1947) rejected the authority of philosophy for that of mathematics. Yet we saw in Chapter 4 that the rules governing mathematical inquiry are closer to those of art than science. What better reason could there be for ignoring decades of insight in the field of philosophy of science than that the discipline was primarily concerned with art – and knew in its heart that it was behaving as artists should? It may seem dangerous to abandon long-held scientific beliefs and set sail upon a murky sea where common sense is recognized as the final arbiter of truth. Some philosophers of science fear that this inability to achieve consensus on the rules of science opens

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the door for the encroachment of non-scientific crank elements (Redman 1991, pp. 85–6, 94–5). However, we cannot wish rules into existence just because they are comforting. Galbraith has rightly parodied the desire to adhere to a misguided standard: ‘It is far better to have a firm anchor in nonsense than to put out on the troubled seas of thought’ (in Breit and Ransom 1982, p. 172). And McCloskey (1994, p. 311) compares this concern to the fear of anarchy with which many greeted the eclipse of religious orthodoxy or the divine right of kings. We should not be surprised that adherence to false rules perverts the pursuit of science more than recognition of the non-existence of simple guidelines. In practice, we ignore our own supposed rules of conduct, in any case. We interpret statistical results in the light of prior beliefs which we form on the basis of a variety of evidence (McCloskey 1983, pp. 494–5). Adherence to false guidelines, instead of admitting that no single rule exists, serves only Art. The best we can do in econ-science is be honest with ourselves and accept that we as a profession have the joint responsibility of evaluating diverse pieces of information in order to arrive at our best guess as to how the world actually works: ‘Certainly mathematics and econometrics have a place in economics, but they cannot immunize the discipline against nonsense’ (Redman 1991, p. 125). Once we recognize that we must rely on collective decision making, it is essential that we be self-aware of our biases (see Chalmers 1982, Ch. 12). We must struggle to evaluate the work of our colleagues for its scientific merit alone. We can only be good scientists by being aware of our artistic impulses.

7.5

Pancritical Rationalism

[Dada and Surrealism] are not art movements … They are religions, with a view of the world, a code of behaviour, a hatred of materialism, an ideal of man’s future state, a proselytizing spirit, a joy in membership of a community of the likeminded, a demand that the faithful must sacrifice other attachments, a hostility to art for Art’s sake, a hope of transforming existence. (Sylvester 1978, p. 1)

Economics, like Surrealism, has a code of behaviour, a view of the world and a sense of community, which protects the faith against apostasy. Those who might prefer science to religious fundamentalism need only embrace the ideal of criticism. Let a thousand flowers bloom.

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William Bartley’s ‘pancritical rationalism’9 seems to me to be the most useful philosophical guide to the performance of science. While no view (except, perhaps, the non-existence of falsification and thus of a simple definition of science) is held unanimously in philosophy of science, many economists may be impressed by the fact that Popper in his later writings spoke much like Bartley. While rationalists tried to ground beliefs in reason, Bartley recognized that this led to an infinite regress where each reason had to be justified by another. The only real definition of rationality is criticism: we should strive to leave all of our beliefs open to criticism. When criticizing a particular position, we will naturally appeal to other positions which we see no reason to criticize at the moment; we may, though, decide to criticize them at a later date. A theory is only held rationally (that is, is only scientific) if it contains no criticism-deflecting devices, and its proponents open themselves to criticism. A theory, then, is only rational to the extent the community which proposes it is. Scientific communities should strive to create institutions and traditions which expose beliefs, conjectures, ideologies (and even the institutions and traditions themselves) to the optimal amount of criticism. This would both minimize the possibility of error and maximize intellectual fertility. Others have raised the supposed criticism that the tenets of pancritical rationalism cannot be accepted as the word of God but must also be subject to criticism. But this involves a misconception. Bartley does not believe that because something withstands criticism it is true or that because it is criticizable it must be false. As we have seen, undeniable truth is beyond our grasp. Openmindedness is our only hope of approaching it. A discipline which is unaware of its artistic side, and which treats a huge array of theory as unassailable truth, clearly fails Bartley’s test of science. Of course, since openmindedness is hardly a cherished characteristic in our society, no science within it is perfect. Econ-science, though, has more room for improvement than most.

7.6

Truth

‘Oh, if only it were possible to find understanding,’ Joseph exclaimed. ‘If only there were a dogma to believe in. Everything is contradictory, everything is tangential; there are no certainties anywhere. Everything can be interpreted one way and then again interpreted in the opposite sense. The whole of world history can

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be explained as development and progress and can also be seen as nothing but decadence and meaninglessness. Isn’t there any truth? Is there no real and valid doctrine?’ The Master had never heard him speak so fervently. He walked on in silence for a little, then said: ‘There is truth, my boy. But the doctrine you desire, absolute, perfect dogma that alone provides wisdom, does not exist. Nor should you long for the perfection of yourself. The deity is within you, not in ideas and books. Truth is lived, not taught. Be prepared for conflicts, Joseph Knecht – I can see they have already begun.’ (Hesse 1969, p. 83)

Some philosophers of science (notably Feyerabend) go so far as to suggest that science cannot be said to approach Truth. Those who pursue the goal of science could be easily disheartened by such a conjecture. The criteria by which we choose one theory over another are so subjective that we need not over time come any closer to understanding how the world really works. ‘There is no purely formal argument’: we always have to believe unprovable assumptions in order to accept the conclusions of any theory (Feyerabend 1978, p. 8). One cannot disprove such a conjecture. But surely there is a Truth out there toward which we scrabble, if we have but the guts and integrity to do so. Our increasing mastery of the natural world must be taken as evidence that at least in some lines of inquiry we have advanced. The fact that complementary scientific discoveries are made in quite different cultures may also be taken to indicate that there are objective standards of scientific discovery (Chalmers 1982, p. 106). While we cannot simply extrapolate the direction of past discovery in order to discern the direction of Truth, we can be confident in our heart that humanity’s knowledge does progress (Papineau 1996). The Pragmatics (for example, James 1981) viewed a true idea as one that guided us to correct actions. While this had the unfortunate side-effect of suggesting that religious ideas must be considered ‘true’ if they make us feel and act better, we can still see that exposing our ideas to concrete experience and its consequences, as the pragmatics suggested, must, in the long run, lead us toward Truth. Scepticism on this score, while not unknown in science, is much more common in art. Indeed, many scholars would feel that art’s purpose is to explore the inherently unknowable (this does not clinch the case; as noted above, just because we may never have all the answers does not mean we might not get ever closer approximations to truth). The frustration of the artist may

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come from their ability to capture only a fleeting glimpse of their other reality. The Surrealists began their adventure with high hopes, but came to the sad realization that the unconscious was ‘a force of dissolution which sweeps knowledge itself away in its havoc’ (Picon 1983, p. 74). Is it perhaps because the realm of art has no standards by which progress can readily be judged that this pessimism emerges? The scientist, too, must be aware always of how much they do not know, but can take solace from every step toward mastery of our world that we can approach Truth. Economists might respond to our concern that the discipline has advanced slowly by arguing that it makes no sense to speak of scientific progress. This would not be the most untenable philosophical position taken by the discipline. Nevertheless, it is more in keeping with the principles of art than science to give up on the pursuit of Truth.

7.7

Rhetoric

Conversation does not consist of monologues in series. (McCloskey 1994, p. 100) Science works as a collaborative community because that is the only way it can work. (Hatton and Plouffe 1997, p. ix)

McCloskey, Klamer and others have investigated the rhetorical devices used by economists. They have recognized that economic discourse is a continuous argument, and have suggested that economists would be well served by an understanding of the devices they and others use to persuade. Within this framework, the present methodological bias in the profession is seen as a collectively sanctioned set of criteria which have no inherently superior scientific validity relative to other modes of argument. Mathematics is a tool used by economists to lend scientific credibility to their ideas. McCloskey describes the present standards of consistency and prediction as ‘six inch hurdles over which the economist leaps with a show of athletic effort’ (1988, p. 289). Klamer and McCloskey conclude that other rhetorical devices would serve the interests of science just as well (1988, p. 17).10 Among many possible definitions of rhetoric, McCloskey borrows this from William Booth: ‘… careful weighing of moreor-less good reasons to arrive at more or less probable or plausible conclusions – none too secure but better than would be arrived at by chance or unthinking impulse’ (1983, p. 482). This statement

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captures well what we have suggested is the appropriate scientific attitude: we must abandon certitude, but this does not mean we are thrown back on impulse. Maki (1988) has defined plausibility thus: a statement is plausible if people believe in it. The task of persuasion is to convince the persuadee to transfer plausibility to the conclusion desired by the persuader. As in pancritical rationalism we use some statements to argue for the correctness of others. Roy (1989, Chs 7 and 8) provides examples of how honest conversation between those with differing views on either microeconomics or macroeconomics can lead to an elucidation of where these differences stem from and how analysis of these might be possible. While anyone watching a faculty senate meeting could be excused for doubting that academic discourse will lead to advances in understanding (McCloskey 1983, p. 510), we can aspire to higher standards of argument in our books and articles. Fish (1989) notes that there is no such thing as literal meaning: every statement is interpreted. Theories are just rhetorical devices, and our methods of evaluating them are themselves established by rhetorical means. However, this realization has no practical effect on our lives (1989, p. 26). Humanity has been able to accumulate a substantial body of knowledge over the millennia. As Maki (1988) noted, and McCloskey agreed (though Maki has some doubts about McCloskey’s degree of agreement and Gordon (1991) remains critical of rhetoricians for seeming to deny the existence of Truth), the rhetorical approach does not preclude speaking of the pursuit of either truth or reality. It just means that we should not be naive about the path to Truth. Recognizing that science is but an argument may seem unscientific but is conducive to the proper performance of scientific inquiry. The rhetorical approach provides more than just a further rationale for methodological diversity. It highlights the fact that style and substance are inseparable: ‘What is the distinction of style and substance in ice skating or still life painting or economic analysis?’ (McCloskey 1988, p. 286). Or, as Yeats said, how can you tell the dancer from the dance? Aesthetic appeal becomes a natural goal of the economist in her attempt to attract others to her point of view: Rhetoric, again, gives a way to understand the persuasive power of diagrams in economics, their metaphors and symmetries, which I came like so many others to admire passionately in my second year.

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For the same aesthetic reasons I came in my third or fourth year to admire the mathematics. (McCloskey 1988, p. 284)

If the profession values artistic merit, then economists will naturally strive to achieve artistic value in their work. McCloskey, though, does not recognize that the pursuit of artistic values may be antithetical to the pursuit of science. He completes the statement above with ‘Its truth is its beauty, or it had better be.’ There is, of course, no necessity that this be the case, and we have seen at length that good art is not good science. The fact is that the profession accepts as valuable many characteristics of economic research which serve no scientific purpose. Rhetoricians provide another basis for this observation but seem loath to reach the damning conclusion toward which their analysis tends. They do, though, make a valuable plea for honesty. We must first of all be honest with ourselves and recognize the nonscientific motives we pursue. Then, we must be honest with others and try to present our ideas in as straightforward a manner as possible (whether ideas are expressed as words or symbols or diagrams). We should, as referees, insist on honesty on the part of our colleagues; this is likely much less futile – and just as worthy – as insisting on honesty from our politicians. Rhetoricians have made a valuable first step toward these goals. We have taken matters a step further by suggesting particular ways in which economic practice is opposed to the pursuit of Truth. Only by separating art from science can we hope to achieve an honest and progressive econ-science. We must recognize that that which we admire most about works of economics is not science at all. Econ-science must take as its sole standard the ability to ‘explain’ the world around us. The profession as a whole can do much – for example, requiring authors to indicate the relevance of their work – but in the end it is an individual responsibility. The scholar who takes satisfaction from publication success alone need never contribute to our understanding of how the world works. The scholar who looks beyond the easy kudos of the profession to the eternal mission of the discipline (at perhaps no small cost initially in self-esteem) can accomplish so much more. The journal editor or book reviewer who applies this higher standard strikes a blow for Truth. Econ-science may live forever in the shadow of econ-art. Econscientists must consciously eschew the goal of art in their work, and mercilessly excise it from scientific discourse in the works of

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others. Econ-art, after all, has a much greater role to play in this world than mere interference with the pursuit of science.

7.8

The Big Picture

As anyone who reads the current economic literature can testify, our economists are capable of considerable flights of fancy, not to say fantasy. Yet one flight that they seem to be incapable of making is that required to see the technology of our time as fundamentally reshaping the relationships between man and nature, and between man and man, on which present economic society is based. When we compare the fast-changing technological environment with its static economic representation. I am afraid we must declare that plus ça change, plus c’est la même chose. (Heilbroner 1966) Although modern economics claims to be a science which is progressing rapidly on a number of fronts, there remain large areas of inquiry where little progress has been made. Economists cannot answer a very fundamental question of why some countries do grow rapidly and other countries grow slowly. In the final analysis there are no generally accepted economic theories capable of explaining with any degree of success the process of economic growth. (Carr 1989)

The classical economists tried to comprehend how the economy as a whole functioned. This naturally caused them to simplify much, but their theoretical inquiry was always guided by their quest for the big picture. Economists in this century have turned increasingly toward narrowly focused research.11 We train (and test) our young only to use the approved techniques to answer tightly specified questions (Krueger et al. 1991, p. 1048). To mask our inadequacy, we act as if there is nothing more to be done: ‘The only way to salvage the incontestable worth of those models for all economic questions is to define as valid only those questions for which such models can yield useful predictions’ (Bartlett 1989, p. 201). Specialization has its place, to be sure, and much has been gained in the process. Science will be forever limited in its advance, though, if there is no interplay between the narrow focus and the big picture. We would not want all economists to turn back to the big picture – science, like its technological cousin, advances through the synthesis of many small ideas into grand ‘breakthroughs’ – but it is essential that some do so if we are to avoid the pursuit of mere trivialities. This

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provides one of the greatest reality checks the discipline could hope for (again remember that the problem with economic theory is often relevance rather than correctness), and must also prove an antidote to the desire for elegance. A reference to physics may be helpful here. Physicists, in exploring subatomic reality, were forced to come to grips with the fundamental ‘restlessness’ of matter (at the cosmological level too, it was recognized that the universe is steadily expanding). Like eastern philosophy, physics had to conceive the world in terms of movement, flow and change rather than steady states and equilibria.12 Particles must be viewed as processes rather than objects; mass is not an absolute but the embodiment of energy (Capra 1976, Ch. 13). This led to the bootstrap hypothesis: In the new world view the universe is seen as a dynamic web of interrelated events. None of the properties of any part of this web is fundamental; they all follow from the properties of the other parts, and the overall consistency of their mutual interrelations determines the structure of the entire web. (Capra, p. 302)

Science is only an approximation; we cannot completely understand any one phenomenon without understanding everything else. We must, of necessity, abstract away from this interconnectedness to proceed as scientists (just as modern organization theory recognizes that complex decisions need to be broken into parts for analysis, and then the pieces put together – Radner 1992), but cannot lose sight of the fact that understanding these connections is our final goal. We should strive, then, for a network of theories containing fewer and fewer unexplained (exogenous) features (see Capra 1976). Economic phenomena are unlikely to be less complicated than their physical counterparts.13 Econ-science, then, cannot hope to achieve understanding – decent approximations to reality – if analyses of narrow questions are not constantly juxtaposed with efforts to comprehend the interrelatedness of all phenomena. It is not uncommon for economists to bemoan the narrow focus of most practitioners. Indeed, the American Economics Association founded the Journal of Economic Perspectives so that economists could be aware of what their colleagues were doing. Yet big thinkers such as Galbraith are marginalized. The economist may accept much of what he says (most might deny even this), but wonders what to do with a man who discusses issues ignored by the mainstream, and which moreover do not lend

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themselves to the usual methodology. The answer, of course, is that you first recognize the question, and then realize that both the big picture and the exploration of new questions do not readily lend themselves to the precision of mathematical exposition. Once we choose reality over elegance, we naturally become more encouraging of those who think big thoughts. We must, as always, clearly distinguish between art and science. Andy Lo – a lecturer in economics who is a much appreciated artist in Australia, where he has applied Chinese painting techniques to the unique Australian landscape – has attempted to explain his philosophy of art to me. A painting of a fish should reflect the artist and fish becoming one. It will still look like a fish – possess ‘fishness’ – but can be recognized as the work of a particular artist. Art, he concludes, should recognize that the world is one, while science must focus on one part at a time, for the intellect must of necessity categorize to understand. We can see, then, that the attempt to treat neoclassical theory as allencompassing is to strive for art (and remember from Chapter 2 that artists do not have to capture every element in order to portray one-ness). It is, however, very bad science. Science cannot treat a partial, and therefore misleading (think again of how misleading Newtonian physics is when we look at phenomena, both at the level of subatomic particles or star systems, which move fast relative to light) picture as the whole, but must force its attention toward areas of ignorance, in order to slowly and methodically try to approach the true big picture. Only if we were to abandon hope that economists could ever grasp enough of the big picture to provide useful advice, could the (comforting) artistic pretence that we have already done so be justified.14 It would be sheer folly to attempt an exhaustive list of the areas of inquiry which have been ignored by economists. Only as we become more openminded in orientation will we collectively realize the full scope of what has been left out.15 Still, there are some areas in which there is a glaring deficiency in research: ‘Above all, [economists] don’t know how to make a poor country rich, or bring back the magic of economic growth when it seems to have gone away’ (Krugman 1994). Economists have over the last century turned away alarmingly from the analysis of economic growth: ‘It is in fact something of a scientific scandal that economics has not explained modern economic growth’ (McCloskey 1992). Closely connected to this is the minimal attention paid to technological change. Recent moves in these

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directions are still far from redressing this imbalance, and are likely, unless science moves from the shadow of art, to prove little more than a passing fad. Snooks (1993) thus maintains that the best work in growth theory (including a recognition of the role of technology) was done before the First World War; while the ‘new growth theory’ of recent years has returned to an interest in technology, learning and trade, he suspects it is too abstract to answer key questions. I, while ever open-minded, share his scepticism, as does McCloskey (1996). In particular, the attempts to make technological change endogenous – that is, a result of previous economic changes such as investment in research – make the maths tractable at the expense of ignoring the inherent unpredictability of technological change, the importance of independent researchers in technological change and the fact that technology spills across firms, industries and countries in a chaotic fashion. Such theory displays not only methodological rigidity but an unwillingness to deal either with uncertainty or the insights of other disciplines. The result is that in a world where the person on the street could tell you that the reasons for differences across time and space in rates of economic growth must be (one of?) the most important economic question(s), and that understanding technology is essential to understanding the modern economy, the modern economist has little to say about either: Judging from recent economic studies, the real-world importance of technical change in contrast to factor substitution is the inverse of the attention their respective analysis now receives in economics textbooks … The simple explanation of this theoretical lacuna is that technical change is a very difficult problem. But difficult or not, decades of neglect of the problem have left economists ill-prepared to deal with it. (Blaug 1980, p. 484)

Given that technological and scientific innovation occur in similar ways, this helps explain why economists do not understand how science advances. The methodology-constrained attempts to date to deal with technology have yielded limited insight. One result is that we have a simplistic view of the effect of innovation on the skills required of our labour force, and this often leads to misguided policies (see Howell and Wolff 1992). Given the importance of technological innovation in the modern world, it should not be surprising that the failure of economic theory here limits our understanding of many related

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concepts. In particular, one of the major incentives for investment in our society is to adopt new technology. Thus capital must be seen as (in part) embodied knowledge. If economics were to drop the untenable assumption that technology is exogenous, then capital would have to be reconsidered in a dynamic context (Boland 1992, Ch. 7). Even those who recognize the need for a new technologycentred theory of economic growth feel constrained to develop that theory mathematically (see Dosi et al. 1988).16 They know that the medium is the message: ‘What you say will be considered “informative” only when it is properly stated. What is proper is not a matter for free choice since it is dictated by the tastes of the intended audience’ (Bartlett 1989). If economists will only listen to mathematics (since they are primarily concerned with their own research, and only know how to tweak mathematical models), analysis which does not rely on this will go unheeded.17 Economics is tied together not by a common set of questions but a common set of methods; this makes it easy to ignore work of a non-mathematical nature, and indicates that the internal reward structure of the profession is not focused on truth (Colander 1989, pp. 32–3). Yet surely we should focus first on qualitative dynamics (directions of change) rather than attempting high-tech quantitative analysis (Harberger 1993, pp. 13–14). I suspect that the precision of mathematics is ill suited to the early exploration of any area of study. Moreover, Mirowski (1988, p. 168) has suggested that evolutionary economists would be well advised to pursue the research methods of biologists: this would involve studying firm histories and collecting data on firm size distribution, age structure and survival rates. Many institutionalists (old and new) have also been sceptical that one can capture all characteristics of evolving systems formally: ‘The standard techniques of formal analysis have significant limitations in their ability to handle complex evolving systems. The degree of abstraction and the type of simplification required does obvious violence to the subject matter … ’ (Rutherford 1995, p. 29). The economic historian Snooks (1993) concurs that quantitative methods are of little use in understanding the very long run. Formal models by their nature cannot capture the uncertainty and path dependence inherent in any evolutionary process. Economists will only slowly, if at all, tackle those questions they have swept under the carpet if they feel bound by existing methods. The question of scope of inquiry is thus inextricably linked to the question of methodological flexibility.

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Methodological Diversity

When you cannot express it in numbers, your knowledge is of a meagre and unsatisfactory kind. Lord Kelvin When you can express it in numbers, your knowledge is of a meagre and unsatisfactory kind. Jacob Viner

Econ-art, as we have seen, is less like other arts in its attitudes to method than in the goals it pursues. This is sad, for the world of art tends to be much more open to diverse methods. Even the Surrealists, who castigated previous artists and expelled their own for deviation from the cause, nevertheless upheld the virtue of methodological flexibility: ‘In the Surrealist movement there can be no occasion for the imposition of confining regularities’ (Breton, in Matthews 1986, p. 8). More broadly, the twentieth century has seen a tremendous diversity of styles and techniques.18 The econ, due in large part to their lack of self-awareness, have been unable to find or accept more than one avenue of artistic expression. If the methodological bias of economists serves artistic goals, it is only natural to suspect that this bias stands in the way of scientific inquiry. One does not have to look far to find economists who have realized that econometric testing leaves much to be desired: ‘Econometric work often is done to demonstrate mastery of new techniques, rather than to answer questions’ (Colander 1989, p. 33). Kerr (1995, p. 141) bemoans the fact that scholars in general, and economists in particular, ‘use the easy methods of statistics alone, rather than looking for all good evidence, in part so they can publish more and faster’. Eichengreen, following Cagan, has concluded that time series econometrics is incapable of solving questions of historical causality. McCloskey (1996) has suggested that econometrics has not settled any major debate in economics; since economists tend to ignore empirical results they do not like, it would be better for us to recognize that we rely on various sorts of evidence. Leontief argued that, ‘in no other field of empirical inquiry has so massive and sophisticated a statistical machinery been used with such indifferent results’ (in Beed 1991, p. 485). Solow has noted that the profession has refined econometric techniques beyond the capacity of the data. Testing, he argues, serves the professional interests of economists; there is no belief that it exposes truth: ‘The only possible solution that I see is to enlarge the class of eligible facts, or class of observations, that

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one is willing to take account of. I think you have to include anecdotal facts, impressions, and direct observation’ (1989, p. 40). The answer is not to turn our back on econometrics, just on bad econometrics. The development of econometrics, after all, witnessed the same confusion between the purposes of econ-art and econ-science as the rest of the profession. Some of its theory proposes solutions to real problems of statistical testing. The rest simply builds an impressive edifice of pseudo-testing. Beyond its own aesthetic values, econometric testing provides a pseudoscientific rationale for the mathematical machinations of others. The recognition that data do not exist with which their models can be tested often drives economists in exactly the wrong direction. A common practice is simulation, where ‘plausible’ values are inserted in a model in place of un-estimable parameters. Models can be ‘tested’ by seeing whether numbers can be chosen that will generate a result which resembles reality. The profession has no standards whatsoever for judging simulation results (McCloskey 1983, p. 502). Yet they are regularly used to evaluate policy proposals. In the Canada-United States Free Trade debate, for example, the Canadian public was justifiably bewildered by a series of general equilibrium simulations which predicted widely different impacts on incomes and employment (even though all took standard trade theory as their starting point). Notwithstanding this, some economic historians have felt that we can accurately simulate the working of eighteenth- and nineteenth-century economies about which we know even less. The popularity of simulation is symbolic of the fact that our desire for the appearance of understanding and our taste for mathematical elegance can too easily overcome the common-sense realization that such works capture only a small part of reality. Science, it must seem, is less well served than Art by such pretence. To turn even in part away from econometric testing and simulation is to admit that the discipline only advances through the development of collective judgements, that we can’t prove what is right or wrong but must creep along evaluating various forms of information. There is no one methodology which captures all that is science (Caldwell 1991, p. 30). This is a fact of life which is known but not admitted. Economists must only ask themselves how much of their belief set either has never been empirically tested or has failed such tests. Experiments, after all, regularly claim to disprove the basic tenets of microeconomic theory. The shreds of wisdom which the econ-scientist possesses are due not

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to the high-powered techniques of the artist but to informed observation of the real world. Economists, in practice, are more convinced by ‘lower level’ work than by fancy econometrics (Summers 1991): ‘Economic doctrines are usually tested, not by systematic methods, but by a Darwinian struggle for survival in the arena of history’ (Niehans 1981). To bring collective common sense consciously to the forefront of the evaluation of economic theory might offend our artistic pride, but would act to keep econ-science in touch with reality. An example may be helpful here. In our attempt to touch on almost every field, we can turn to agricultural economics, which even the sceptic Leontief had hailed for its impressive mix of theory and econometrics. Gardner (1992) has summarized the post-war evolution of the field. Below-average farm incomes had long been explained by an intuitively appealing model which relied on inelastic demand (people have to eat, but can only eat so much), and inelastic supply (fixed amount of land) which was increasing over time faster than demand due to technological innovation. Why did factors not migrate out of agriculture?: even skilled farm labour was semi-fixed and thus did not migrate to equilibrate the wage, and over-investment resulted from rigidities in adjustment and supply irreversibilities. Over the post-war decades, firm econometric support was accumulated for the various facets of this model. Unfortunately for the sake of the model, farm incomes rose from 61 per cent of those in the nonfarm sector in 1960 to 147 per cent in 1973 and 119 per cent in 1989. Eventually such a blatant result stirred agricultural economists to work on a flurry of questionable analyses of the costs and benefits of government farm policies. The reader can refer to Gardner for the perverse effects these studies may have had on the GATT negotiations. For us, the important point is that, ‘changes in opinion about the farm problem have occurred on the basis of data evidence, but in none of the instances discussed did econometric investigation make the difference’ (Gardner 1992, p. 97). Rarely could we expect reality to step up and smack economists in the face as hard as in this instance. Unless we are constantly on the lookout for less sophisticated evidence, econometric results, even when buttressed by seemingly reasonable theory, can easily lead us astray. If we recognize that sophisticated econometrics is not the sole path to Truth, then much of the rationale for mathematical modelling disappears – what after all, is the use of defining precise relationships between variables if we are not going to apply these

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models to data? What we have said about flexibility with regard to testing must apply equally to theorizing. Leontief in 1982 and Morgan in 1988 had written articles complaining that roughly two-thirds of the articles in the American Economic Review and Economic Journal were models without empirical tests. Fels in a letter to the Journal of Economic Perspectives (Winter 1992) has suggested that both had exaggerated the problem. The proportion is more like one-third, and most of these set the stage for future empirical research (he does recognize that editors over-value these works because they display technical sophistication). We need not determine which of these authors is correct; that is, whether the situation is merely bad or execrable. All had started from a much greater faith in econometric testing than is deserved. Once we recognize that econometric testing is inconclusive, then we are faced with a situation in which most mathematical modelling is purposeless. Some might have the temerity to claim that even un-testable models serve some ‘scientific’ goals of precision: ‘But a rigorous deduction from a questionable premise accompanied by no adequate tests of the conclusion, does not guarantee truth’ (Mayer 1993, p. 120). Once we realize that we cannot conclusively test theories, then we can no longer ignore the lack of realism in our assumptions as Friedman (and numerous other economists – see McCloskey 1983, p. 486) would have us do (Blaug 1985, p. 703). In any case, models usually are qualitative in the sense that they only predict the direction of change: if econometrics cannot give us reliable estimates, then the models themselves are hardly precise. In the hard sciences they recognize that different questions require different levels of precision (think of the difference between medicine and physiology, or engineering and physics), but not in economics (Mayer 1993, p. 24). Nor is maths the only means of providing precision.19 Models need not be mathematical – think of model airplanes and model homes – words can describe how certain assumptions generate certain results. Mayer (1996) thus advocates informal models, with realistic and transparent assumptions, the inclusion of variables which are hard to represent formally, and which give a clear intuitive feel for the causal forces at work. There is a tradeoff between mathematical rigour and the explanation of real-world phenomena; we would not all wish to make the same choice between these two, but are pressured to do so by the standards of the profession: we are poorer for this (Mayer 1993, p. ix). Especially at this stage of our knowledge, there are

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some phenomena which we should not attempt to deal with mathematically: a fact not lost on Morgenstern or von Neumann (see Redman 1991, p. 114). It is, of course, not always easy to tell which methodology is best. Still: Whether the application of a particular method or technique to a particular economic problem indicates a lack of responsibility or imagination or critical thinking, or whether it has led to greater clarity or precision or falsifiability, or to what extent it has done a combination of these things, is a question capable of a disinterested and objective answer. (Roy 1989, p. 145)

We must once again rely on the collective judgement of the profession, a judgement that in the past has been neither disinterested nor objective in its pursuit of art. We should not go overboard and reject mathematics. Even those who criticize existing methodology recognize the danger of over-reacting to abuse by sacrificing a powerful tool (Blatt 1983, pp. 184–5). One who demands flexibility from others can scarcely justify closemindedness on his own part, in any case. Roy Radner (1992) has recently recognized that game theory has so far not advanced (appreciably?) our understanding of how firms work. He is hopeful, though, of success in the future. I would concur. I would think other avenues of exploration more likely to yield insight – such as surveying firm managers; Coase feels large-scale study of business records is what is most needed (Posner 1993) – but it would be a mistake to turn our backs on game theory. Economics is a ‘big tent’; we can add new areas of research without necessarily squeezing out much that is done now (Harberger 1993, p. 2). Would that those who favour mathematization could be onetenth as generous. At present, ideas stated in words are generally ignored (for example, Colander 1991, pp. 12–13). There is an inherent contradiction in the discipline’s methodological pretence. Non-mathematical work is ignored or castigated because it is viewed as imprecise or incomplete. Yet models are published with ridiculous assumptions, and econometric results which are severely flawed. These we are to treat charitably, for they may lead to realistic models and valid tests in the future. Why, then, can other methodological approaches not be valued for whatever incremental effect they may have on our understanding? If there is no scientific standard at play, then it must be art. We are clearly in the region of sharply diminishing returns in many areas of economic inquiry, and thus stand to increase our

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average productivity substantially by reallocating some resources to different lines of inquiry (though the advantages of alternative methodologies are hard to explicate, simply because they have been almost completely eradicated). Rather than all trying to excel at the same thing, we should follow different paths. There is only so much time in one’s day; the pursuit of mathematical expertise must mean some sacrifice in other important areas of study. It is not at all unusual for academic economists to spend most of their research time solving mathematical puzzles. There is virtually no time left for reading widely and thinking about the real world. At least some of us must do so. Methodological diversity should provide even greater gains in the long run than in the short run. We have argued that artistic and scientific capabilities are unequally distributed across the population. Solow recognized that most modern economists are ill-suited to the non-quantitative forms of observation which he recommended. To require that all economists be mathematically facile is to close the profession to those whose strengths lie in other areas: ‘The trouble is that if … only those whose writings are pockmarked by algebraic symbols receive kudos, one can expect a misallocation of resources like that which always results from a distortion of relative prices’ (Baumol 1991, p. 2). Only economists with a lengthy record of mathematical publication can, in general, get non-mathematical pieces published in top journals – the insights of those who approach the world differently are lost forever. Keynes spoke of the breadth of vision and knowledge required of the good economist – he also recognized that different forms of expression were important for different ideas. There is much to be gained within this generation of scholars through openmindedness, but much greater achievement will be attained by the next if we alter now the standards of the profession. My inquiries into the causes of technological innovation, ranging from the Industrial Revolution to the twentieth century, as well as the works of others in this field, have highlighted the importance of the interaction of diverse people for the generation of new ideas. Transport improvements in the eighteenth century caused a dramatic increase in the interaction between industrialists and potential innovators: this was a key determinant of the increased rate of innovation which largely defines that revolution (see Szostak 1991). The modern industrial research laboratory works its magic by intensifying the contact between scientists and engineers and production managers with different areas of expertise. This fact was not lost on John Stuart Mill:

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It is hardly possible to overrate the value, in the present low state of affairs, of placing human beings in contact with persons dissimilar to themselves, and with modes of thought and action unlike those with which they are familiar. Such communication has always been, peculiarly in the present age, one of the primary sources of progress. (in Dornbusch 1992)

Economics, by closing itself to those who would wish to employ different methodologies, severely limits this interchange of ideas and thus the probability of advance. We need a wider variety of people and points of view in economics. We need a place for those who are better with words than maths, and for those who care only for technique if it helps them answer particular questions (Bartlett 1995). By coveting only those with an artistic temperament, we guarantee the subjugation of science.

7.10 A Concrete Example Herbert Simon, in the 1950s, while establishing an interdisciplinary department at Carnegie-Mellon University, had substantial grant money to support research into whether firm managers behaved the way economic theory predicted. Most economists balked at the suggestion that they engage in this sort of research. It was neither the sort of question they were prepared to ask nor the sort of analysis – case studies which would involve actually talking to managers about what they did – they had been trained to perform (see Simon 1991, p. 143). In a book review, Simon wrote: ‘Methods for using case studies systematically could provide cumulative tests of theory, but “Organization Theory” does not show us how to exploit such studies’ (Journal of Economic Literature, September 1992, p. 1504). Case studies, ironically, strike the modern economist as somehow unscientific. Methodological inflexibility serves as a buffer preventing the examination of the applicability of economic theory. The technique of the artist serves the goal of art.

7.11 Theoretical Diversity It is through an exercise of freedom, perhaps only through an exercise of freedom, that the complex and sometimes momentous questions of political economy may find their most reasonable answers. (Roy 1989)

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The problem with neoclassical theory is not so much with the model itself but with neoclassical economists who insist that it offers a universal explanation of human behavior. I believe, as do a growing number of economists, that we need a variety of approaches to study the vast array of economic and social institutions which human beings have constructed to solve the problem of making a living. (Gowdy 1994, p. xii)

Our concrete example suggests what we have alluded to before: methodological inflexibility serves theoretical inflexibility. A theory which serves deep psychological needs (desire for order, fear of authority, etc.) naturally is protected by a decision that contradictory evidence is somehow ‘beyond the pale’. Since econometrics is incapable of ‘disproving’ theories, economists have little incentive to develop new theories (Thurow 1983, p. 120). ‘Forced consensus may be psychologically more palatable than differences of opinion, but collective security does not rate as science’ (Redman 1991, p. 167). Econ-artists, clinging to the illusion of science, think that science is characterized by unanimity of opinion.20 They are mistaken. If classical physicists had viewed Newtonian physics in the same way that we view neoclassical economics, relativity would never have had a chance. Diversity of opinion, far from being a barrier to scientific advance, is essential to it.21 Since social scientists especially cannot be objective, we can best approach the goal of objectively advancing knowledge through ‘pluralist environments of intellectual independence’ (Gordon 1991, p. 668). Lavoisier and Priestley in the 1770s performed similar experiments which involved heating an ore of mercury and thus changing the nature of the air above it. Lavoisier interpreted this to reflect the fact that the mercury ore – which he later called an oxide – gave off a ‘new’ substance which he named oxygen. Priestley, an able scientist famous in his own right, imagined instead that a substance called phlogiston left the air and entered the ore. Only decades of debate among scientists, with recourse to many additional items of evidence, decided the issue. Popper noted that we make scientific progress only if we are prepared to learn from our mistakes; bad theories will only be replaced with better ones if criticized. While Popper tended to assume scientific communities would be naturally self-critical, Redman (1991, p. 132) responds: ‘In reality there is no reason to assume that an academic or scientific environment that fosters progress through honesty and mutual criticism will exist even in a

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democratic state’; Caldwell (1991) following Popper, argued for ‘the provision within economics of an environment in which the optimal amount of criticism is able to flourish’. If we immediately banish new ideas from consideration, then no matter how many anomalies crop up within the existing theoretical structure it cannot be overturned or even substantially revised. We must, instead, let a thousand flowers bloom. Nor can this attitude of openness be attributed to idle philosophizing. A close reading of the history of economic thought leads to the same conclusion: The lesson, it seems to me, that we should draw from the history of economic thought is that economists should resist the pressure to embrace a one-sided or restrictive consensus. There is no one kind of economic truth which holds the key to fruitful analysis of all economic problems, no pure economic theory that is immune to changes in social values of current policy problems. The scope and method of our discipline needs at all times to be defined in relation to the social problems which give purpose to it and there is room for more than one progressive research programme [theory] in operation at the same time. We ought indeed to profit from the divergent approaches of leading theorists, provided that they and their disciples avoid the kind of arrogance of which Wagner complained a century ago and are scrupulously openminded in the conduct of the necessary debates. (Deane 1983, p. 11)

We have had cause to note before how various minority traditions – institutionalist, Marxian, evolutionary – have been pushed to the sidelines, as even have entire fields such as economic history and development economics. It can hardly be a surprise that these are generally found guilty of both methodological and theoretical apostasy: by asking questions outside the mainstream they are guided to the use of non-mainstream methods, and by using such methods they gain insights unavailable to the mainstream. Kirzner (1997), Rosen (1997) and Yeager (1997) discuss Austrian economics, suggesting that Austrians and neoclassicals could learn much from each other,22 noting that Austrians have difficulty getting published in mainstream journals, and sketching the links between Austrian theory and method. Of course, for those who have the true faith, and believe, truly believe, that the existing body of theory with only minor modification has all of the answers to life’s problems, then this is entirely beside the point. This chapter, though, is not aimed at the econartist.

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7.12 Intellectual Honesty The only way in which a human being can make some approach to knowing the whole of a subject is by hearing what can be said about it by persons of every variety of opinion and studying all modes in which it can be looked at by every character of mind. No wise man ever acquired his wisdom in any mode but this. John Stuart Mill, On Liberty

The pleas for honesty in preceding pages may seem (are?) hopelessly naive. But real insight when found is often glaringly simple. Redman (1991) too, has recognized that ethics is the key to being a science (she notes that we should instil the ideals of honesty and openmindedness in our students). McCloskey (1996) concurs that science depends on the ethics of practitioners; she preaches prudence and modesty above all. Since none of us can know but a fraction of the sum of human knowledge, we must each have a belief set that we cannot defend logically. As scientists, though, we must not confuse these beliefs with revealed truth. In fact, honesty is the one criterion by which science can be distinguished from pseudo-science. This point was made by Richard Feynman, a Nobel Prize winner in physics: But there is one feature … that is generally missing in … [pseudoscience]. It’s a kind of scientific integrity, a principle of scientific thought that corresponds to a kind of utter honesty – a kind of leaning over backwards. For example, if you are doing an experiment, you should report everything that you think might make it invalid – not only what you think is right about it; … (1985, p. 311)

Feynmann worried that natural scientists often fell short of the ideal. While no science is perfect, economics must appear much less prone to confronting its pet theories with real-world evidence than the natural sciences. Economists, to the contrary, do not just keep dishonesty in their heart, but are all too willing to bear it in public. Weinstein (1992) is justifiably critical of famous economists who provide legal briefs, often in areas remote from their expertise, which are so one-sided as to ignore conflicting evidence. The distinction between paid work and scholarly work has become so blurred that it is difficult for him as a journalist to find a disinterested scholar: ‘The nation is not well served with economic advice that conceals scientific disagreement or genuine uncertainty about the economic consequences of particular actions’ (Aaron 1992, p. 64).

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The popularity of Lakatos among economists has been attributed by Mirowski to the fact that his philosophical approach allows scientists to excuse adherence to any set of theories by claiming these as the core of a progressive research programme. Science can too easily be identified as the dominance of accepted theory and discouragement of work outside this theoretical structure. In the natural sciences scientists are (surprise, surprise) keenly aware of competing theories, but economists tend to master only one (as many of Klamer’s conversations attest). They have not heeded the words of J.S. Mill: He who knows only his side of the case knows little of that … If he is unable to refute the reasons on the opposite side, if he does not so much know what they are, he has no ground for preferring either opinion. (in Redman 1991, p. 150)

An econ-scientist need not master the argument of every quack that comes along – again, the community must decide on potential merit – but scarcely deserves the title of scientist if she always ignores other points of view. How can economists so unselfconsciously act in an unscientific way? It is not, as we have seen, that they know themselves not to be scientists. Rather, it is because as artists they have absorbed the ideal that we do know the one path to Truth. The public does indeed want in their hearts for us to be certain, but in their heads they know that we are not. We must separate the times when we appeal to their hearts from those when we (should) appeal to their heads. To be honest with the wider world we must first be honest with ourselves. The naive belief in certainty perverts the way we read each other’s work and therefore the way we write. We do not approach papers in an openminded friendly manner seeking to learn.23 Rather we search for the weak points which we can savage, and if we find such we dismiss the entire work (see Freedman 1993). I have in this book ranged over practically every field in economics, and a number of other disciplines. I am likely to have made some slight error here or there. Yet there will be those who will seize on any weakness to dismiss the work as a whole. The result, not surprisingly, is that we (well, you) write in a defensive style. We choose narrowly defined questions to reduce the chance of abuse. We repeat ourselves to reduce any chance of misinterpretation (the determined reader, if they dislike our conclusion, and can find no egregious error, will attack anything we have not made

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abundantly clear). We favour maths over words, because any chance to pervert the meaning of the latter will certainly be seized. We use the accepted panoply of assumptions, rather than risk having to delineate all the disadvantages of an alternative. As more people over time came in self-defence to write trivial, repetitive, overly mathematical pieces, this naturally became the industry standard, and the penalties for not following it even more severe. Freedman (1993) carefully defines the presently accepted article format, and shows how flexibility has decreased over time. Art historians will have no trouble recognizing in this the solidification of an art form. Indeed, the behaviour of economists bears no small similarity to that of the Surrealists. Breton and others mouthed the right sentiments: since they could not know where their art was leading, they could not possibly divine standards by which to evaluate it. In practice, though, the history of Surrealism was filled with the expulsion of members on one pretext or another. In particular, Breton’s second manifesto was largely a petty attack on those who had deviated from the true path (see Picon 1983, p. 114). This compares well with McCloskey’s description of the hostile closemindedness that often greets her seminars on statistical significance (1996, p. 53). To be sure, science depends on criticism, but this must be honest criticism. Keynes, perhaps prescient of how his own works would be misinterpreted, noted that ‘an economic writer requires from his reader much goodwill and intelligence and a large measure of cooperation.’24 We must first attempt to understand what the author’s argument is, and then ask ourselves whether our quibbles actually serve to destroy it. If not, we have to recognize that there may be some shred of truth therein, and proceed to an open debate which attempts to discern how much. Only after giving the author the benefit of the doubt and still being unable to rescue their work from attack should we dismiss it. We have questioned above the practice of producing models which can never be tested. Those who pursue such a practice would defend it by claiming that their work provides potential building blocks for further work. Given the limited likelihood that this will happen, it is especially ironic that the same people expect non-mathematical work to provide complete and flawless answers at the outset. Along with honesty, we sacrifice clarity. As Blaug noted, ‘[to] be intelligible is to be suspect’ (1990, p. 213). Popper and other philosophers have stressed that scientific advance depends on

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criticism of clear ideas. Hutchison notes, though, that mathematical and econometric work is guilty of obscurity (in Redman 1991, p. 130). Bartlett concurs: There is really no need for the writing in economics to be as horrid as it is. Meaningful analysis does not have to be so painful to read. There is a tendency in economics to equate turgid prose or elegant mathematics with careful thought. They are not inconsistent, of course, but neither are they identical. It is possible to care about both substance and style without sacrificing either. (1989, p. ix)

Journal editors look for displays of virtuosity and skill because this serves the artistic pretensions of their audience. If their readers would change their tastes, editors could be convinced to prefer articles which clearly stated the author’s position. (If we continued to maintain many of our present misguided positions, this might open them to embarrassing criticism, of course, but this is as it should be.) The cause of econ-science would be much advanced.

7.13 Interdisciplinarity Economics is the only social science which effectively uses inference from clear and statable abstract principles, and especially intuitive knowledge, as a method. In contrast with it, all other social sciences are empirical … The relationship between observation, induction from observations, and inference from ‘a priori’ principles forms the very pivot of the problem of collaboration between the social sciences … (Knight 1941) I have been gradually coming under the conviction, disturbing for a professional theorist, that there is no such thing as economics – there is only social science applied to economic problems. (Boulding 1962)

We have seen many examples in this work of artists in different mediums – painting, sculpture, music, film, architecture, literature – cooperating and learning from each other. Econ-artists, conversely, have virtually ignored the insights of the other social sciences. Few economists have the audacity to publicly slander our fellow social sciences, though most seem privately to cherish a self-image of superiority. Some might, in that regard, refer to the

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lesser use of maths or the lack of unifying theories in other disciplines, but we have seen that econ-scientists would be misguided to crow too much about these. Given that the claim of scientific superiority is groundless, econ-scientists have no excuse for ignoring work in other social sciences. These other disciplines also have no reason to be smug: if we had focused our attention on any other social science we could likely have found numerous hidden cultural and aesthetic influences at work there as well. (See, for example Tooby and Cosmides’ 1992 critique of modern anthropology and psychology, in which they argue that these have turned their backs on an unpalatable reality, or Hendershott and Wright’s concern that, ‘As academic sociology moved toward sophisticated mathematical model creation, it was increasingly viewed as isolated from the central problems that confront society’ (1997, p. 312).) Mathematization has been a major barrier to interdisciplinary work. It not only impedes communication but severely reduces the time the econ-scholar has to devote to reading the work of others. This shows up even within economics, where scholars have only a dim idea of what goes on in other fields. Even graduate students bemoan the lack of breadth in their knowledge (see Grubel 1991, p. 11). This makes it difficult to perform properly the role of undergraduate teaching (Kasper et al. 1991). It also severely limits the possibility of forging interconnections which would advance scientific understanding. As we recognize our overemphasis on maths, we must naturally be nudged toward interdisciplinarity.25 Even mathematical formulations in other disciplines are ignored if they do not fit mainstream theory. Krugman (1998) notes that geographers from the 1950s had developed models which could explain locational concentration, an important characteristic of the real world which economic theory could not explain. These insights from geography were ignored, however, because they depended on increasing returns, and economists had not discovered how to include increasing returns within their own models. This having been achieved in the 1990s, economic geography is a growing field, though the models are still full of unrealistic assumptions and thus of limited empirical value. We have seen before that subsequent scholars took only from Keynes that which lent itself to mathematical treatment. His emphasis on the role of ‘animal spirits’ in investment was ignored. Yet, psychologists (cognitive dissonance) and sociologists (studies of fads and rumours) both provide a great deal of support for this

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perspective (Levin, in Kuiper et al. 1995). Hausman (1992) and Mayer (1993) have both stressed the need for an interdisciplinary understanding of the social and psychological influences on the behaviour of economic agents. Rosenberg (1992) asserts that as long as the discipline refuses to cope with psychological complexity it is not a science but merely a logically consistent framework. An increased focus on growth must also nudge us toward interdisciplinarity. It is impossible to study the actual evolution of firms and industries through time without recognizing that culture and institutions matter (Boylan and O’Gorman 1995).26 Nor can we understand economic institutions without the insights of psychology and anthropology (Williamson 1998). Economic historians have thus long been concerned with a range of issues – ideology, demography, psychological theories of innovation – which many economists would consider somewhat beyond the pale. Many social scientists in the late nineteenth century felt that the increased scientific understanding which came from Darwin made them worse off by threatening their image of what humanity was (they were mistaken in this, for the evolutionary perspective need not imply we are not ‘moral’ – see Cosmides et al. 1992). While one of the most impressive characteristics of the modern natural sciences is that they are consistent with each other, social scientists reacted to the Darwinian threat by asserting that they need not be consistent with the natural sciences (biologists, under fire from those offended by evolutionary theory, were only too happy to agree). It was an easy step, then, to behave as if the social sciences need not be consistent with each other either. While chemists and physicists would attack any apparent inconsistency in their theories or experimental results, economists and sociologists and psychologists are completely unruffled by their lack of agreement. We discussed above the advantages of different theoretical perspectives: if we took the social sciences as a whole we would have a wide range of perspectives to choose from. This does us no good at all if we are each unaware of more than one. Once again, the real scientists have shown us how to proceed. If a mainstream economist were to present a paper in front of other social scientists, they would tend to suggest that the economist was ignoring social norms.27 But where do social norms come from? Society only exists through human agency, after all. While unintended consequences and unconscious motivation will mean that social practices cannot simply be reduced to reflections

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of conscious individual decisions we can and must still try to understand how individuals shape society (see Bhaskar 1989). Neither individualism nor collectivism are correct as methodological attitudes. Economists cannot ignore social pressure, and other social scientists cannot ignore individual motivation, a point recently stressed by evolutionary psychologists (see Tooby and Cosmides 1992). As scientists we should all be less smug in our belief that any of humanity’s problems can be solved within a single discipline. We will never understand the complex interaction between the individual and the wider society unless we talk to each other.

7.14 The Role of the Critic Economists understandably rise in alarm when politicians attempt to interfere with the freedom of government granting agencies to decide which econ research to fund. Even I, sceptical though I might be of the standards we use to evaluate each other, recoil from such a possibility. Yet we have seen in this work the dangers which arise when a profession judges its own output. And Snooks (1993) and others warn us that the public which funds us is losing patience, and may yet demand realism from us. Econ-art has been the most fortunate of the arts in its ability to ignore public tastes. Artists freezing in their garrets could not afford to be so blasé. They need the approval of critics and buyers who are not themselves artists (though arms-length government granting councils may have increased artistic freedom too). We have noted in the last few sections that econ-art deviated from other arts in its willingness to accept methodological diversity, theoretical diversity, criticism and interdisciplinarity. In each of these cases, the different relationship which other arts have with the public looms as a major source of this difference. Artists cannot ignore the opinions of critics and buyers. And while these bring their own biases with them, they are at least (usually) not artists themselves and therefore have a freedom to criticize the status quo which is lacking in everyday economic discourse. In the twentieth century at least, there has not been one narrow social group which could claim for itself the right to decide what was art; the resulting diversity of artistic audiences guaranteed a diversity in both artistic vision (theory) and method (Zolberg 1990). Econ-artists, who sell their wares only to each other, form exactly the sort of narrow social group which in Zolberg’s eyes would have prevented artistic diversity. Finally, since critics and

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buyers tend to know more than one medium, and tend also to always be on the lookout for novelty, the artist is guided to look about themselves for inspiration from all other sources. We would be well advised to figure out how to achieve the benefits of external criticism,28 before the public imposes it in a form determined by politicians.

8

The Future of Econ-Science

8.1

A Paradigm Shift?

We know little of how traditions get established, while it seems clear that once established, a tradition does not get changed through calling attention to its absurdity or that of the factual assumptions upon which it rests. Such things happen when the time is ripe. (Knight 1955)

We have striven to plant the insidious thought that much of modern economic practice is driven by societal tastes rather than an objective pursuit of Truth. We have thus questioned much of modern theory as well as the methodological bias of modern economics. We have suggested at times that econ-science needs a paradigm shift.1 It is easy to be pessimistic about the future of econ-science, but if we accept the optimistic view of the history of science we must be confident that truth will conquer some day. While the average economist is pressured to conform and publish, they are unhappy with the state of economics (Redman 1991, p. 165). If internal decay does not lead to revolution, then surely external forces – demands from the consumers of policy advice – will require a reorientation (just as demands for calendar reform aided the Copernican Revolution – see Chalmers 1982, p. 90). McCloskey (1996, p. 125) foresees only another decade or so of normal science before a revolution. The arts, too, are characterized by revolutions in both style and substance (though these tend not to supersede all that went before), and these result both from external pressures and the internal dynamics of the field (Coote and Sheldon 1992, pp. 5–7). One can discern hopeful signs in many fields – trade theory, industrial organization and macro are the clearest cases – of the realization that a much greater understanding of dynamic processes is required. The study of technological evolution has shown (asserted?) that research along any one trajectory naturally

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encounters diminishing returns. Yet technological innovation continues, and seemingly at an increasing rate, due to the discovery and exploitation of new lines of inquiry. To be sure, neoclassical theory has over the years thrown up a number of new wrinkles which have kept countless economists off the streets. But sooner or later the whole research programme must run into minimal (negative?) returns, and economists will be forced to look elsewhere. The inevitable paradigm shift need not wait for that day (which could be centuries from now). A farsighted few began work on the jet engine while the bulk of the engineering community concentrated on perfecting the piston. Ridiculed in their time, they set the stage for a revolution in aircraft technology. Likewise in economics, a growing but still small band of heretics have recognized the shortcomings of the existing paradigm and begun the task of constructing an alternative which places economic growth and technological change at centre stage (for example, Dosi et al. 1988). There is still much which can be accomplished within the mainstream. Some narrow but important policy questions, such as regulation, can be illuminated imperfectly by the existing body of theory (even here, dynamic theory could generate a different policy prescription). The engineers who worked on the piston engine did not waste their time either; it still has a role to play in short low-speed flights. We would not want to see wholesale abandonment of the existing structure of econ-science (econ-art must, of course, be judged by different criteria). Newton’s mechanics still had a place in the age of relativity. But we would want the profession to recognize the need for a growth-centred theory. Like relativity, this will yield insights at odds with the theory which went before. In the editor’s introduction to the inaugural issue of the Journal of Evolutionary Economics (1991), Dosi suggests that while technological and institutional change, non-equilibrium dynamics and other such matters are occasionally dealt with within mainstream economics, one can still identify an evolutionary perspective which takes as its starting point views quite different from the mainstream. His personal definition of evolutionary economics involves recognizing that the world is full of opportunities but our competences limit our exploitation of them, actors are not strictly rational but are affected by culture, uncertainty, endogenous tastes, etc., and that we are generally in disequilibrium. We thus need to focus on human decision-making rules and learning processes, need to interface more with history and other

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social sciences, and need to develop theory which is more context-specific and less deductive. My own vision of a new paradigm would stress six characteristics. Institutions would move from the periphery to the centre of economic theory, as would technology. The core theory would be evolutionary. Economics would become open to the insights of other disciplines (indeed, the ideal may be the submergence of economics within a broader human science). In particular, we would move away from exclusive reliance on the assumption of strict rationality. And these theoretical innovations would be coupled with methodological flexibility: case studies, surveys, historical analysis, experiments and informal modelling, among other approaches, would have a central place in the research of the discipline, with purveyors of any theory seeking evidence in as many forms as possible. A final note: I would not wish to see a new orthodoxy replace the old; while institutional and evolutionary analysis will be essential, there will be room for all sorts of theories (as with methods) within this glorious new economics, including even those from the old paradigm which, like Newton’s laws, will be found applicable to some special cases. Neither historians nor philosophers of science can give us clear guidance as to when a paradigm shift should or will occur. Any new paradigm will at first seem uninviting, for ‘the first expressions of new and better approaches often look worse than the latest and most elaborated expressions of older and more deficient ones’ (Cosmides et al. 1992, p. 3). Still, if there are many elements of reality which cannot be explained by existing theory, and seem in fact to contradict it, the new should be investigated. Kuhn speaks of the ‘tenacity’ with which an academic community may adhere to an existing paradigm in the face of anomalies. The ‘old guard’ inevitably fights for the paradigm that has sustained their careers. They use their institutional power over journals, hiring at top universities and research grants. Unfair and ugly means are employed to stifle non-mainstream research, and even careers. Instead of a Socratic pursuit of Truth, one finds a political fight over self-interest. Some of the ‘old guard’ may suddenly see the light, and embrace the new paradigm, but others will not. While the new paradigm may seem obviously superior to later historians, there is no meta-paradigm by which the contesting views can be judged (Klee (1997) feels that Kuhn may have exaggerated this latter point). The successful revolution may require that alternative journals, departments and even funding sources support the new paradigm.2

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The economics profession is likely even more tenacious in this respect than other (officially) scientific communities: There is no easy way out of the current state economics finds itself in. It is a self-reinforcing state that will require Herculean efforts to change, because change goes against the very interests of the individuals who would be required to make that change. (Colander 1989)

The artistic appeal of the existing paradigm is an important source of tenacity. This is especially important precisely because it is unrecognized. Nor should we forget ideology: while a dynamic theory need not have different implications for public policy, concepts such as ‘dynamic comparative advantage’ and ‘industrial policy’ could certainly make the ideologue hesitant to embrace the new paradigm. Unless we consciously overcome our ideological bias, change may be impossible.3 Economic knowledge advances through the changing consensus of the profession. Every economist who recognizes the need for a paradigm shift takes us a step closer to that goal. This happens in two ways. The first is that the scholar reorients her work toward building the new paradigm (and there may well be increasing returns in the early stages of developing a new paradigm, as the need is great for the exchange of ideas).4 The second is more subtle but, I fear, equally important. The existing theoretical approach will only be overthrown when another is judged superior. Economists abhor a theoretical vacuum as much as nature abhors a physical one (Blaug 1985, p. 703). If existing methodological standards are to be maintained, the new approach requires a theoretical structure of surpassing elegance. I am perhaps a bit of an outlier even among heretics in doubting that this is possible (and even if so, we would not wish to doom the new theory to the empty formalism which afflicts the old). It is certainly not easy. It has taken decades, after all, to sculpt the existing body of theory. The acceptance of such a strict standard must delay the necessary paradigm shift for decades. If much of the attraction of the present paradigm is due to the beauty of its mathematical constructs, we can hardly expect to overturn it readily while relying on the same methodology. If, though, econscience is to shake free from the artistic orientation of econ-art, and pursue Truth rather than Beauty as its guiding principle, then the revolution can happen tomorrow, for any fool knows that constant change is the major characteristic of our time, and that technology is the main driving force behind change.

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Kuhn recognized that a scientific community is defined not so much by its shared knowledge but by its shared ongoing research agenda (see Argyrous 1992). A successful paradigm cannot provide all the answers but must point the way to problem solving. Those who are working on building the new paradigm must be careful to indicate promising areas for research. (Argyrous notes that post-Keynesians have failed to define a comprehensive research agenda.) While the number of potential questions is inevitably vast, scientific communities need to recognize well-defined questions seemingly capable of solution: To be a reasonable subject of scientific research a question must have two properties: the answer must have significant interest for basic or applied science, and some ideas must be available as to how to begin the process of searching for an answer. (Langley et al. 1987, pp. 302–3)

In economics, especially, we would be foolhardy not to recognize that the latter is a more important criterion than the former. Colander recognizes the problem faced by heterodox economists: ‘They set forth a research program requiring an array of creative, insightful, nonparallel thinkers, and then wonder why their ranks don’t fill’ (1991, p. 132). As Kuhn recognized, a paradigm will win out if it has the greatest puzzle-solving potential within the value system of that scientific community. Again, we can hasten this end by changing the methodological values of economists (and, following Colander, encouraging different types of thinker to enter the field). The history of science does permit us to at least suggest ways of proceeding. Just as Fleming undertook to find out which moulds affected which bacteria and to what degree, we must first identify factors conducive to growth and then use cross-country and intertemporal comparisons to identify the circumstances in which they are strong (and how strong). (Fleming, it should be noted, would not have spent the countless hours of research along these lines if he had not been driven by the recognition of the potential real-world importance of a bacteria-destroying mould such as penicillin.) As we gradually build up the body of evolutionary theory, it will become increasingly clear that this has superior explanatory power. The history of science tells us that anomalies are only recognized when a better theory comes along to explain them. Evidence that the Americas had once been attached to Africa and Europe piled up for centuries but was ignored until plate

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tectonics provided a plausible theory. The existence of flightless birds with wings or blind cave rats with useless eyes posed a problem to creationist theory but not one even recognized until after the Darwinian alternative was developed. Various peculiarities of planetary orbits within an earth-centred system were explained away until it was clear the Copernican system explained them better. We should not be too harsh then in our judgement of economics: a scientific community cannot just abandon a paradigm because it does not fit all the facts. With continued development of the new paradigm, however, we must reach a point where these anomalies force a paradigm shift. As Simon says of bounded rationality, if a theory fits the facts it must win in the end (1991, pp. 364–5). Coase (1998), indeed, takes an optimistic view of the coming paradigm shift. He suggests that small groups of scholars pursuing evolutionary and institutional research, and refusing to define economics in terms of one method, will slowly overwhelm the mainstream. The old guard, though perhaps impervious to frontal assault, will claim that they believed in the new paradigm all along when it quietly overtakes them. Coase is certainly right that the entrenchment of the old guard makes a revolution without a shot highly desirable; I fear, though, that for the same precise reason it will prove impossible. Revolutions in the real world do not happen overnight. There are too many sunk costs, too much human capital which would have to be discarded, to expect sudden change. We may debate whether they are artists or scientists, but economists are surely human. Every economist who is not part of the solution is part of the problem. The author is not so naive as to expect this work to induce an instant revolution in the profession. But he is confident that an increasing number of economists over time must see the light. By making some economists – especially those at the start of their careers – question the inherited wisdom, this process can only be hastened. This work has tried to cajole some true believers into questioning their faith. The marginal revolution was not recognized for decades after it happened. Walras died unable to imagine the fame his work would achieve. Those who choose to work toward the future, rather than wearily retread the steps of the past, cannot know when the new paradigm will become dominant. Beyond the comfort that the pursuit of Truth itself must bring, they can know that posterity must some day treat them well. Decades from now, historians of economic thought will give scant space to most of

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present-day theorizing, just as Rostow’s (1988) idiosyncratic history of growth theory gives scant space to leading theories of the recent past. Those who focus on issues of growth, technological and structural change, and development, those who focus on institutional change and are open to other disciplines, those who realize that methodological flexibility is required in the study of dynamic processes: these may earn little kudos in the present but the future is theirs.

8.2

Normal versus Revolutionary Science

In an ideal world you would demonstrate your cleverness by developing blindingly original ideas or producing definitive evidence about how the economy actually works. But most of us can’t do that, at least not consistently. So professors look for more surefire approaches: And thus the most popular economic theories among the profession tend to be those that best allow for ingenious elaboration without fundamental innovation. (Krugman 1994, p. 8)

Normal science involves the working-out of the implications of the existing paradigm. Revolutionary science involves overturning one paradigm and replacing it with another. We should hardly be surprised if the motivation and rules of conduct governing these two enterprises are quite different. We could question whether economics is actually even normal science – Redman (1991, p. 167) doubts that it qualifies due to its lack of openness to new ideas and criticism, and Weintraub notes that without competing research programmes it is impossible to judge whether the neoWalrasian programme is advancing – but can at least recognize that this is what economists perceive themselves to be doing.5 When the scent of revolution is in the air, what motivates scientists to continue in the normal science tradition? Where is the glory for econ-scientists? What major discoveries can we point to either individually or collectively? Surely it must be enticing to pursue a more promising path? Of course, those who have devoted much of their careers to building (?) the existing framework will not wish to see it overthrown and will provide incentives for their younger colleagues to stay the course. And certainly many historical figures such as Galileo were only appreciated for their revolutionary insights long after their deaths. Science at all stages requires a range of different capabilities. Perhaps at this stage the new paradigm has limited use for those of weak heart, frail mind, or limited imagination. These are well cared for by

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normal science, and should perhaps consider staying behind for the time being. They need not feel compelled to do so, for (on the margin, at least) even the new paradigm already has use for the varied skills and inclinations of the profession. Some artists are like normal scientists, others like revolutionary ones (Zolberg 1990). The leaders of the art movements we have focused on in this work displayed a commendable willingness to subvert their own careers in the pursuit of an artistic revolution they believed in (and ironically became famous in the process). The Surrealists attacked the very idea of genius, and many of their works bore the signature of all or none. Sylvester (1978) hails the members of the movement for being willing, in an age of individualism, to cooperate in a joint endeavour. Picasso and Braque as well experimented with not signing their paintings (Rubin 1989, p. 19). The econ-scientist could do no better than to copy these examples of self-sacrifice for a greater good (and might just be hailed for their audacity in time). What of methodology? We have suggested more than once that the new paradigm, especially in its early stages, needs to be more methodologically flexible. Langley et al. (1987, p. 22) suggest that this is in fact a general rule for revolutionary science: It is understandable, if ironic, that ‘normal’ science fits pretty well the description of problem solving by experts and ‘revolutionary’ science the description of problem solving by novices. It is understandable because scientific activity, particularly at the revolutionary end of the continuum, is concerned with the discovery of new truths, not with the application of truths that are already well known. While it may incorporate many expert techniques in the manipulation of instruments and laboratory procedures, such activity is basically a journey into unmapped terrain. Consequently, at the level of overall strategy, it is mainly characterized, as is novice problem solving, by trial-anderror search and the extensive use of weak methods. The search may be highly selective (the selectivity depending on how much is already known about the domain), but it generally reaches its goal only after many halts, turnings, and backtrackings.[6]

Whether purposefully or not, then, the present methodological bias of the profession serves to hinder the possibility of a paradigm shift. It is simply stupid to expect that we can treat a new and more complex theoretical structure in the same fashion as the old familiar one. As we have seen, it is not science that causes us to want to do so.

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179

Putting Equilibrium in its Place

Most contemporary economists seem to be drawn to equilibrium theories. These are seen as elegant, and theories that depart from these canons are seen as somewhat ad hoc. (R. Nelson 1995, p. 49)

Equilibrium is beautiful. The certainty that the concept bestows on economic analysis clearly serves the goals of the artist. Moreover, as a description of a state toward which certain simple systems might tend it is not without scientific merit. The trick, of course, is knowing when this is not the case. We have had much cause to note that in the absence of dynamic analysis, we must be sceptical of the predictions of comparative statics: If the predictions of comparative statics are to be interesting in a world in which conditions change, convergence to equilibrium must be sufficiently rapid that the system, reacting to a given parameter shift, gets close to the predicted new equilibrium before parameters shift once more. If this is not the case, and, a fortiori, if the system is unstable so that convergence never takes place, then what will matter will be the ‘transient’ behaviour of the system, as it reacts to disequilibrium. Of course, it will be a misnomer to call such behaviour ‘transient’, for it will never disappear. (Fisher 1983, p. 3)

Dixit (1992) has noted that with the addition of basic dynamic considerations, investment, firm closure, and hiring and firing decisions do not obey simple static rules. They can only be understood historically. Lowe (1976) developed a dynamic model which suggested that a decentralized market system would hardly ever generate full employment because the market would transmit the wrong signals about the optimal structure of production and intersectoral flows. Moreover, we should note that in the real world equilibrium is not always as wonderful as it appears in the world of art (a point which is recognized, to be sure, in the Nash equilibria of some games, but these are a minority of economic equilibria). An (over) crowded beach is in equilibrium when people no longer see it as worthwhile to enter. The whale population is in equilibrium when the costs of finding the depleted herd cause whaling catches to fall to the level of natural increase (Schelling 1978). But economists, though driven by ideology, shy away from value judgements about their equilibria.

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Equilibrium will likely continue to exert a siren-like call on economists. You can all too easily in science get too much of a good thing. We should reorient ourselves to recognize that there is a lot of slack in the system. A variety of forces, of differing magnitudes, and with combinatorial effects, drive economies in a variety of directions; equilibrating forces are not absent but are far from the whole story. Slack, rather than a precise equilibrium, should be our watchword, even if it does not make for pretty pictures (of course once we recognize this, then discrimination ceases to be impossible and becomes, instead, rather likely). Rather than acting as if we had the one solution to an economic problem, we would do better to delineate the historical and strategic determinants of the dynamic trend observed.

8.4

Postmodernism

We have avoided the words ‘modernism’ and ‘postmodernism’ so far in this work, for greater precision in analysis was possible with our focus on Surrealist and Cubist art. Many scholars would refer to the common cultural influences we have attempted to delineate for this century under the rubric of modernism. Further, these scholars suggest that the modern world is giving way to the postmodern; what changes might this portend for economics? According to Ruccio (1981), modernism was a reaction to the loss of spiritual order, fixed conventions and tradition; in literary criticism this meant turning away from the social context to focus on eternal understandings, for society as a whole it meant searching for scientific solutions. For Klamer and McCloskey (1988), modernism means a celebration of academic specialization, and an appreciation of abstract, ahistorical, amoral and mechanistic metaphors. Arnason (1986) views large housing projects as epitomizing modernism’s taste for the grand solution which ignores individuality and context. Postmodernism, the inevitable reaction to modernism, involves turning away from the belief that any one theory can explain everything, and instead emphasizing humble, diverse, empirical work. Postmodernists are very conscious of the role that ideology plays in both art and science, and urge a diversity of viewpoints in response. They are especially sensitive to distinctions such as gender, ethnicity and class (which have been sadly neglected by economists). Arnason (1986, p. 691) hails postmodern architecture for embracing the irrational and eclectic (two elements badly needed

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in econ-science). Some scholars consider the move away from the positivist belief in falsification in philosophy of science as an aspect of postmodernism. While some postmodernists feel that the social world is too complex for scientific understanding (or that our subjective biases are so strong that we each face separate realities), most recognize the need for both theoretical and methodological flexibility (Cloke et al. 1991; Blau 1993). If modernism in its day shaped much of economic theory and practice, then postmodernism may yield many of the changes we have spoken of, especially methodological and theoretical diversity. We would do well, though, not to rely on this but to continue to fight for Truth.

8.5

We Eat Our Young

Men are not narrow in their intellectual interests by nature. It takes special and rigorous training to accomplish that end. (Viner 1958)

Dissatisfaction with graduate training in economics has become so endemic that the American Economic Association has sponsored surveys of both students and faculty in recent years to get to the root of the problem. One could, of course, view this as a healthy sign of the capability for self-examination of the profession as a whole. Governments, though, are often accused of establishing commissions of inquiry merely to delay decision making: the proof of the pudding must come from action rather than words. The results of the surveys were certainly clear: both faculty and graduate students felt that mathematics and computing should be less important and communication skills and imagination more important (Hansen 1991, p. 1071). Liberal arts colleges reported at the same time that their top graduates were often turned off before or during the first year of graduate school because this deprecates the creative talents of these students and does not involve the advanced specialization of undergraduate education as it used to (Kasper et al. 1991). (These colleges were also disappointed that fresh PhDs were too narrowly trained to adequately fulfil their role as teachers.) One should not hold one’s breath waiting for the leading grad schools to reform themselves. Indeed, the liberal arts colleges, though highly critical of the existing state of affairs, wondered if they should not change their approach to match the perverted preferences of grad schools. The problem, as should be clear by

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now, is one not just of education but of the abuse of maths by the profession as a whole. Teachers of graduate courses view their jobs as explaining the literature of the last decade or two to students.7 To do so requires cranking through a lot of technique: even those who make a special effort to explain the logic and purpose of a model (and, unless memory serves me ill, this propensity is far from universal) will find themselves spending most of their time on technique. Their students can be forgiven for thinking that that is all there is. Graduate school both reflects and reinforces the biases of the profession. While there are limits to how much the former can be improved without the latter, reform must start somewhere, and there is much that can be done at the level of training. Leontief likened the discipline among economists to that among the Marines. If the Marine Corps can change its training methods in response to criticism, surely the economics profession should be capable of the same. The existing bias introduces an unnecessary and harmful truncation in the supply of economists (of course, by turning off those who question the status quo, econ-art insulates itself from potential internal criticism: econ-science clearly suffers). Student dissatisfaction with graduate training was inversely related to their mathematics background; indeed, while undergraduate maths was important for success, undergraduate economics was not (Krueger et al. 1991, p. 1042) (Note that there is limited time at the undergraduate level: my memory is that many of my fellows with a good maths background had a very weak grasp of economics.) We cannot know how much we lose in this way, but one surprising statistic is indicative: despite all the changes in society in the intervening period there was actually a higher proportion of women in PhD programmes in economics in the 1930s than in the 1950s and 1960s (Redman 1991, p. 162). We all know that, for whatever reasons, women are less likely to pursue undergraduate maths, and must suspect that our continuing poor record among social sciences in attracting women is at least partially due to this. (Ferber and Nelson 1993; Ferber 1995; R. Nelson 1995; and J. Nelson 1996, discuss the advantages that would accrue to economics from an increased feminist influence, including methodological and theoretical diversity.)8 Beyond this unintentional (consciously, at least) gender discrimination, I can only remark that my memory of grad school – that many of those with the most imagination and perception didn’t make it – is hardly unique.

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Grad school not only introduces a selection bias, but shapes those it graduates (well, most of them). Reder notes that the high failure rate at both the exam and dissertation stage ensures that Chicago’s graduates have the ‘right’ attitude: ‘… the learning process inculcates distinctive habits of thought’ (1982, p. 9). His remarks could as easily apply to other schools. Just like the Marines, students come to accept the value system of those who abuse them: The need to get established in an increasingly technical discipline has forced students to accept its norms. This acceptance has taken place in spite of the students’ conviction about the importance of less technical knowledge and the risk that the discipline is becoming irrelevant for policy and current problems. (Grubel 1991, p. 21)

There is no place for rebellion (that is, open intellectual disagreement with the existing methodological bias). Students accept the existing emphasis or fail. Beyond this, there is the simple fact that there is only so much time in the day. Those who had hoped to spend their grad school days learning how the world works instead spend most of their time mastering mathematics (as we saw in Chapter 4, far beyond the level they actually will ever use). They are taught that mathematical skills are more important for advancement than ‘broad historic knowledge of the economy’ (Grubel 1991, p. 11). Their courses force them to focus on maths, and gradually they are convinced to spend their ‘free’ time doing the same. Despite pleas that we can only teach the subject as it exists, no matter how perverse that may be, there is much that can be done. Mayer notes that we tend to teach models rather than theories, and thus our students lose their mental flexibility (1993, p. 126). Theories, of course, are a step closer to real-world problems than models. It is more in the character of art to teach students the techniques and let them (hopefully) absorb the purpose of art through osmosis. A science, one would think, would start with an explication of the question to be answered, and then work from general toward specific attempts to deal with these questions. To look at graduate education, one would almost think the analysis was so divorced from the question that the latter had been forgotten.9 As a result, since most students are unable to develop an ‘intuitive feel’ for the subject on their own, they are rendered capable only of grafting minor changes onto existing models (Mayer 1996).

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Surveys indicated that students want a greater real-world orientation, less technique, more economic history and more history of thought (Hansen 1991, pp. 1066–7). One obvious policy implication has already been voiced by Bateman in a letter to the Journal of Economic Literature (September 1992): Because the skills that are important to professional economists (application, communications, and critical judgment) are those emphasized in economic history and the history of economic thought, these are courses which we should be working to keep as a part of the education of economists.

I would tend to replace ‘are’ with ‘should be’, but otherwise wholeheartedly concur (see also Colander 1992). Though economic history has itself gone astray, few economic historians could teach a course that did not put fundamental questions front and centre. Requiring such courses must serve as an antidote to the slop served up elsewhere, until such time as other field courses also put reality up front. Even ‘descriptive’ history of thought courses serve a further goal if we recognize that classical theory focused on important questions ignored by modern theory. We must recognize that we have not steadily improved on the work of others, but have quite simply ignored that which provided no scope for artistic embellishment.10 Problems with modern theory can be highlighted by evaluative thought courses (Backhouse 1992, p. 29). Reflections on cultural context would be a useful antidote to the naive belief that economics is purely scientific. Finally, history of thought courses are the natural place for methodological analysis, and we have seen that economists need to be much more aware of methodological issues. Given this, it is nothing less than horrifying that those whose area is history of thought do not teach at the top ten universities nor have much access to the top journals (Boland 1992, p. 172): leading economists are therefore entirely ignorant of what they have to say. Truly revolutionizing graduate training of course requires that economists shed their methodological bias.11 Boland speaks of a liberating experience he had as a graduate student when he read a book which said that there wasn’t just one ‘right’ methodology for economics (1989, p. 8). Most grad students never have such an experience, for their teachers, as artists, do not admit that there is another path to enlightenment. One purpose of this book has been to show that econ-scientists not only can, but must,

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pursue diverse methodologies. This is a lesson we should share with our students.

8.6

But thou economic history, though thou be little among the thousands of econ …

It is, I believe, the fact that most of the fundamental errors currently committed in economic analysis are due to lack of historical experience more often than to any other shortcoming of the economist’s equipment. (Schumpeter 1954)

A Benedictine monk criticizes the Glass Bead players thus: ‘You treat world history as a mathematician does mathematics, in which nothing but laws and formulas exist, no reality, no good and evil, no time, no yesterday, no tomorrow, nothing but an eternal, shallow mathematical present’ (Hesse 1969, p. 168). Given how much the general attitude of economists reflects that of Glass Bead players, we should not be surprised that economic history too has been infected. Much of recent work aims at establishing trends in economic aggregates. Such work is valuable, of course, but often the important historical questions do not hinge on whether GNP was 1 per cent higher or lower in particular years. Aggregates hide all the action and mystery of the real world. Nice smooth series give the unfortunate impression that economic development is a smooth continuous process. Turning points – even the Industrial Revolution – disappear. All is just another day in the park. It is not surprising that such a methodological approach has had relatively little to say about why history unfolded as it did.12 Yet even a generation of ‘smoothers’ cannot erase the richness of history, and many in the field have continued to ask the question, Why? The ability of economic history to answer that question has been limited by the fact that economic historians have shown a surprising disinterest in theoretical innovation. They have remained as wedded to the neoclassical paradigm as other economists. This, to be sure, has provided much insight into many historical questions, and has helped to clarify the loose theorizing of a previous generation of scholars. Since neoclassical economics has little to say about economic growth, economic historians have naturally had more success in recent decades attacking the theories of others than with providing answers of their own. Nobel laureate Douglass North (1997) attributes sluggish advance in economic history to its emphasis on neo-

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classical theory, which has no place for demography, technology, or institutions: Although the systematic application of price theory to economic history was a major contribution, neoclassical theory is concerned with the allocation of resources at a moment in time, a devastatingly limited feature to historians whose central question is to account for change over time. (North 1990)

Hesse’s monk knew that we could and should recognize rules of history and try to find them, but also must recognize the incomprehensibility and uniqueness of events: ‘To study history one must know in advance that one is attempting something fundamentally impossible, yet necessary and highly important’ (1969, p. 169). (Gordon 1991, pp. 392–5, reaches the same conclusion from a philosophy of science perspective.) It is the glory of history that one must grapple with complex real-world events. To do so, though, is to try to know the unknowable. As in all scientific endeavours we can only attempt to increasingly approximate the truth. The key to success in economic history is to never lose sight of the goal of general rules, and to strive always for comparison. Yet while individual economic historians study different times and places to a much greater extent than other historians, research of an explicitly comparative nature is still rare, and courses are still focused on time and place rather than topic. Economic history, as practised in North America, has scarcely escaped the methodological bias of the economics mainstream. Non-mathematical discourse was eclipsed more slowly in Europe, and is still common in southern and eastern Europe. Snooks (1993) feels that only in Australia has the desired methodological plurality been achieved, but one could maintain that even there the marriage is rocky. Such a state of affairs is hard to explain scientifically, given how often economic historians come face to face with questions which mathematical models and econometrics can scarcely illuminate.13 The primary question facing economic historians is that of why economic growth occurs faster in some times and places than others. Most, if not all, the questions asked by economic historians can be (should be) subsumed to this.14 As elsewhere in economics, the work of historians should be judged for the importance of the question asked more than for the fanciness of the techniques employed. If economic historians were to focus, as they should, on the explication of long-run dynamic processes of

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economic development, they could earn their rightful place in the core of economic theory (and provide much-needed concrete policy advice to LDCs). If, instead of thinking of micro, macro and history, we thought of trivia, magic and growth, we would view works of economic history in a much more favourable light. Ideally, there should be a course in economic growth at the core of economics curricula. Can anyone doubt that if we had a theoretical apparatus as pretty for describing growth as for describing efficiency that such a course would exist? One can easily imagine the rough outline of such a course. The causes and effects of technological and institutional innovation would loom large. Competition between firms and industries in terms of products, processes, marketing and distribution would be discussed within an evolutionary framework. The limits of formal growth theory (new and old), and of growth accounting, would be discussed. Discussions of convergence between countries and regions would move beyond highly aggregative models to see how particular firms and industries fare. Convergence and trade flows would both be discussed in terms of the time path of technological innovation. Lengthy periods of sluggish or negative growth (such as the Great Depression) would be noted and analysed; more generally the relationship between growth and employment would be discussed. Infrastructure, health, education, culture, demography and environmental sustainability would all have a place. After such a course, evolutionary approaches to industrial organization, international trade, or business cycles could be pursued readily. What is true for teaching is true also for research: an understanding of growth is a necessary component of comprehending most if not all fields of economic inquiry. Why doesn’t such a course exist? Because we can’t handle growth in the fancy ways that we deal with micro and macro. The fragments of knowledge we have about various facets of the growth process would more than fill an intellectually challenging semester or two and give students an important new perspective on economic questions. It would, however, not be pretty. We do not have a cohesive body of growth theory that allows us to hide from our students and ourselves the gaping holes in our knowledge. If we cannot satisfy the taste for order, we cannot serve any of the other goals of art.15 The economist might respond that it is natural for any field to explore the easy questions first. Since statics are easier to model than dynamics, we have naturally put off analysing growth, and wish to teach our students the material we understand best. There

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are several problems with this argument. First, it presumes the pre-eminence of one methodology; the classical economists had no trouble studying growth. Second, since the growth process is central to modern economies, we could hardly justify paying it so little attention on scientific grounds (it is like the drunk looking for his keys under the lamppost rather than where he dropped them, because the light is better). Third, we do know something about growth, but only in a fragmentary and generally informal way. And we would know much more if we welcomed nonmathematical analyses of growth in our journals, and exposed the gaps in our knowledge to our students. Finally, we should not exaggerate the degree to which we know less about growth, and note that our ignorance here has been less hidden by a series of unreal models which pretend to explain much more than they do. Some day, some department where econ-science dominates will revolutionize the structure of economic education by placing growth at the forefront. In the meantime only a handful of large departments are irresponsible enough to have no place for courses in economic history. These courses can potentially serve as an imperfect substitute. Economic historians should toy with courses focused on themes – innovation, internal labour markets, evolutionary industrial organization – rather than particular places and times. Preparing those lecture notes might just point the way toward valuable research in comparative economic history. Hicks (1979, p. 4) noted that there can be no logical distinction between how we study the recent past and the distant past. Since econ-science must deal with change, it is inherently historical. All economists have an eye to the present and future as they examine the past.16 Once we slip out of the mindset of the artist we will find that all economics is economic history.

8.7

Preaching What I Practise

Ultimately, any scholar, wherever located, must recognize that professional recognition and status are different from and often in conflict with meaningful achievement either as a scholar or as a teacher. (Getman 1992, p. 265)

If economists are to turn away from art, what sort of research should they undertake? Insistence on both methodological and theoretical diversity makes this question impossible to answer precisely. We do not want everybody doing the same thing. We do, though, want all who would pursue science to understand and

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share scientific values. Researchers should start with important questions, and choose the tools best suited to answering those questions. They should pursue Truth rather than the acceptance of their peers. I would not wish to be accused of attacking the existing methodological bias in economics without providing some insight into the concrete advantages of focusing on the big picture in a methodologically flexible manner. My own work serves as the handiest concrete example to which I can turn. The reader who has stuck with us this far may well be curious as to what type of economist has written this work. What type of research does he do? It should come as no surprise to the reader that the methodological prescription I have outlined in the previous pages turns out in the end to describe exactly the approach to research I myself have always undertaken. I did not begin my career, though, with a well-developed sense of the right way to go, but only a deep suspicion that the dominant mathematical bias was less than ideal, and a dogged determination to pursue Truth. It was a pleasant surprise when I discovered in the course of this project the justification for what I had been doing all along. I will attempt in just a couple of pages to give an overview of the two largest projects of my career to date: one dealing with the Industrial Revolution and the other the Great Depression. The reader will be forgiven if this brief overview leaves them wishing to consult the works in question for further elucidation. I should be clear that I did not begin the Industrial Revolution project as a dedicated methodological revolutionary. I was merely one who had dozed off during the indoctrination lectures. I set out fully intending to employ maths in my dissertation, but was not dismayed to find that it seemed inappropriate to my purposes to do so (and thought my supervisor must be kidding when he suggested I might never get a job if I kept this up). After a lengthy period of narrowing in on a topic, I had decided that the literature on the English Industrial Revolution neglected the role that transport improvements had played in allowing and inducing the two defining characteristics of that Revolution: the ‘emergence’ of the factory, and a dramatic increase in the rate of technological innovation. The Industrial Revolution was a key turning-point in history: we can think of the modern era of rapid change and growth replacing a pre-modern era in which change occurred slowly enough that most viewed the world as static. Yet the literature possessed no compelling explanation of the timing and placing of this event (indeed, as with the Great Depression, the

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lack of a compelling explanation had induced many scholars to downplay the importance of the Industrial Revolution). As I delved into the topic, I became convinced that England had by far the best transport system in the world in the late eighteenth century, and this was largely due to a series of improvements over the previous century. The transport system was thus not itself a result of industrialization but could potentially ‘explain’ (at least in part) why the Industrial Revolution happened both when and where it did. The trick, of course, was to show that transport improvements mattered. The Industrial Revolution largely boils down to the action of some hundreds of inventors and entrepreneurs who experimented with new methods of organization and developed (or borrowed) new technologies. This essentially dynamic process, I soon realized, was not going to be amenable to the static techniques commonly employed. It was suggested that I calculate the social savings of turnpikes and river improvements as Fogel, Fishlow and others had done for railways: that is, estimate for a particular year (say 1750) the cost relative to GNP of performing all of the transport activities in that year using ‘outdated’ transport techniques. Data problems made such a programme highly suspect in my eyes (there is a real philosophical problem with the social savings work: the hundreds of assumptions made and sheer work involved in constructing a counterfactual world without railways guarantee that replication is impossible. I myself would not have believed any result I would have derived for England without turnpikes in 1750). In addition, the programme seemed to miss the point. The authors of social savings calculations themselves recognized that they assumed away dynamic effects of transport improvements on other sectors of the economy (for example, there were no economies of scale in industry). Employing such a methodology to analyse the dynamics of the Industrial Revolution struck me as simply bizarre. I delved into the secondary literature which described in excruciating detail the organizational and technological innovations of the time, looking for indications of the forces causing agents to act differently than ever before in the late eighteenth century (this, of course, is the inductive method, though I scarcely realized that at the time). The existing literature on transport pointed to some possible lines of causation. As speed and reliability of transport improved, the size of desired inventory holdings would decrease; this, coupled with the knowledge that factories were an inherently less flexible form of industrial organization than putting-out in

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which workers produced at home, provided one reason for entrepreneurs to begin to favour the factory. Only through actually looking at the details of the eighteenth-century economy did others become apparent. For example, with the completion of a national network of roads capable of supporting year-round wheeled traffic, there emerged also a national network of professional carriers. Merchant-manufacturers who before 1740 travelled around selling their wares from the backs of packhorse trains (which were often dozens of horses long), were after 1760 or so sending out salesmen or catalogues, despatching orders by carrier and receiving payment by carrier. Amazingly, this key transformation had been overlooked in the existing literature. Yet it had two important effects: entrepreneurs could now focus on production, and were much more likely to consider a form of organization where workers were supervised (the creation of a ‘reputable’ body of middle managers occurred only in the nineteenth century as firm size grew – see Pollard 1965). Even more important was the fact that, in order to take advantage of the new distribution system, producers had to produce a standardized product, and this was simply impossible if workers worked separately in their own homes. I could go on. I developed a model in the form of a flow chart with improved transport as the exogenous (I did, in a later chapter, discuss the institutional reasons for England having previously developed this superior system) variable, new methods of organization and technology among the endogenous, and well over fifty arrows connecting these through a host of intermediate variables. In sum, a potential entrepreneur, beyond the three effects listed above, also faced a wider market as transport costs fell, could more easily ensure that a concentrated work force had access to food, was increasingly desirous of overcoming the carriage and embezzlement costs associated with home work as division of labour expanded, had access to supplies of skilled labour, repair services, etc. as urbanization (largely a result of transport improvements) proceeded, and was (in many industries) desirous of rapid throughput as national and quickly changing fashions replaced stable provincial tastes. Transport improvement also encouraged technological innovation in a variety of ways. Potential innovators were more likely to recognize problems (and believe they were worth solving) as regional specialization led to unprecedented industrial concentration and as information flows improved, as entrepreneurs became involved in production, as division of labour increased the advantage of

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mechanization, and as production became concentrated in factories (many innovations involved hooking identical machines together). They were more likely to be successful in their innovative efforts as well for much the same reasons (we should note the special importance of interaction between people of diverse backgrounds and expertise in leading to the new synthesis of existing ideas which is technological advance). It was suggested that this was not the way I was trained to model (one does not, after all, get a PhD from Northwestern without mastering the art of mathematical modelling). But why use maths? A verbal explanation of each causal link was provided, so that we went past ‘A causes B’ to ‘A causes B for this reason(s)’. No fancy empirical test was possible. Rather, case studies were performed of the development of the textile, iron, coal, steam engine and pottery sectors which showed in each that these causal links were important in generating the organizational and technological changes observed. To provide a benchline case I performed case studies of the same industries in France to show how an inferior transport system (I had previously performed a detailed comparison of the two, which showed England clearly superior in all respects) prevented the same transformations from occurring there. The question I posed led naturally to a non-mathematical (but still precise in its theoretical arguments) exposition. If I had been determined to display my mathematical skills, I would not have uncovered the relations which I did. Some may bemoan the lack of a fancy econometric test. But once we recognize that these are not conclusive then the literally hundreds of pieces of fragmentary evidence I assembled17 in support of my argument must appear more compelling. If my case is to be overthrown, this I suggest will come not from some fancy model but from further analysis of the case studies. I can remember telling my fellow students of my complicated new view of the Industrial Revolution. ‘Do you have data to test this?’ was a common rejoinder. It surprised me. I was telling a complex historical story and had never imagined that there would be some huge data set with which to test this econometrically. They, in turn, were, I think, astounded that I could set out on a project so at odds with the existing methodology. I had obviously missed something in my graduate education, some important clue as to how the game was played. In my case, perhaps what I missed was indoctrination into the artistic elite. I was not openminded enough to embrace art and was thus doomed to science.

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Some might wonder at the ‘importance’ of studying an event which happened two centuries ago. There are many responses. We cannot really pretend to understand the modern era unless we understand how it began. Transport is today one of the largest government budget items in both developed and underdeveloped countries: it is clearly valuable to comprehend the dynamic effects transport improvements can have on economic development (see Szostak 1996; many LDCs, we should note, are poorer than England was in 1750). The question of why the factory emerged is important to modern organizational theory (see Szostak 1989). The forces which favour technological innovation must be understood if we are to understand economic growth. The English Industrial Revolution is a key historical example of one country developing faster than others (the nineteenth century in European economic history is largely a period of Continental catching-up, with different countries doing so at different rates): our ability to answer the general question of why some countries grow faster than others depends on the continued elucidation and comparison of particular cases. Finally, my result suggests that it is misleading to view development as a smooth process. Transport improvements were not an inevitable result of previous economic growth: geographical, social and political obstacles prevented other countries with similar levels of wealth from achieving what the English had. Institutions which serve a country well at one stage of development may hamper them at the next. I had always thought that our collective inability to explain the Great Depression was one of the major failings of our discipline, and a clear indication that our theory was, at best, incomplete. I suspected that standard macroeconomic theory, no matter how refined, was never going to give us the answer – a view apparently shared by most macroeconomic theorists, for they devoted little of their collective efforts to the interwar experience. I have never been one to insist on having many research projects on the go at once. After finishing the Industrial Revolution book I indulged myself with a month or so of uninterrupted reading. One of the things I looked at was the long wave literature. I still don’t believe in regular long (Kondratief) waves, but I could not help but recognize as an economic historian that there are decades-long periods of rapid growth interspersed with periods of stagnation or decline. Business cycle theory is aimed at much shorter movements. While the long wave literature is diverse, technology looms large as an explanatory device. Since I recognized that technological innovation was the

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major source of growth since the Industrial Revolution, it struck me as reasonable that discontinuities in innovation might be responsible for the unevenness of that growth record. As before, I read widely in both the theoretical literature and the historical record of the interwar period, and over a period of months put the two together to create a novel explanation of the Depression. The interwar period, it appeared, could be characterized by a severe shortage of new product innovation, but a surfeit of labour-saving process innovation. How would this affect consumption and investment decisions? Consumption does not just depend on income but on the basket of consumption goods available. If productivity increases without an expansion in product choice we must expect the average propensity to consume to fall (could we easily spend our income if we had only the consumption opportunities of our great grandparents?). The spectacular rise and fall of consumer durables purchases in the 1920s (especially, but not exclusively, automobiles and radio) severely exacerbated this tendency for consumption expenditures to fall. Investment naturally depends in large part on new product innovation. In addition, the emergence of a new generation of machine tools in the early 1920s which would not become technically obsolescent for decades, plus a surge in structural investment, together meant there was little reason for new investment in existing product lines either (the exception proves the rule: major improvements in rolling mills led to new mill construction through the early 1930s). The average person on the street would not be surprised if told that lots of labour-saving technology, coupled with a virtual lack of new product development, would result in unemployment. Yet our theory tells us that labour markets should clear. In the long run, we can certainly claim that technological advance appears to have had no clear impact on the unemployment rate. In the medium term, though, this may not be the case. Entrepreneurs need to see a profitable niche which they can exploit. In 1931, with no new products, and with producers of existing products operating well below capacity, entrepreneurs were unlikely to see opportunities for profit no matter how low wages fell. Why, though, would we see a surfeit of process technology and shortage of product technology in the interwar period? Keynesian explanations of the Depression, such as they are, have been criticized for relying on a coincidence of unfortunate events to explain an autonomous fall in consumption and/or investment. I had to do better. Since the Great Depression is (so far) a unique event in

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our history, it seemed to me reasonable to look for unique historical causes. Still, if I had not read widely in the literature I would never have come up with an answer. I argue that there is a natural order in which the technological potential of new discoveries is worked out. Simple innovations precede complex. Thus, radio comes before television, cars before airplanes, and rayon before nylon. The three key innovations of the late nineteenth-century Second Industrial Revolution – electrification, chemicals and internal combustion – each yielded new products both well before and well after 1929. All three also yielded process improvements – electrical machinery, continuous processing and assembly lines – which had their major impact across the whole range of American industry in the interwar period. This situation was further exacerbated by the rise of the industrial research laboratory after 1900 which tipped research toward process technology in their first decades. We have, then, a theoretically plausible explanation of the Depression (there are of course numerous necessary caveats – see Szostak 1995, Chs 3–5 for a lengthy discussion of these issues; I also discuss how the international extent of the Depression can be understood). This explanation may require the economist to back off a little from a religious belief in equilibrating mechanisms, but any reasonable portrayal of the 1930s will require this. How could one go about ‘testing’ such a theory? Some minor pieces of the puzzle might lend themselves to mathematical modelling or sophisticated econometrics. Again, the only reasonable course of action was to pursue case studies of key sectors. Since in trying to explain high levels of unemployment we must explain not only why workers lost jobs but why they could not find others, it is necessary to cover a wide range of sectors, not just in manufacturing but in mining, agriculture, construction, transport and services as well. First, it must be shown that across these sectors the same technological forces were at work. Then, trends in investment and consumption must be analysed. Finally, it is possible to estimate, industry by industry, how many were destined to lose their jobs in the early 1930s (with no place to go) even before aggregate demand fell. A conservative estimate would be about four million, which with a reasonable multiplier could account for all of the observed unemployment in 1933 (I do not, though, claim to have the only answer, and feel that other factors, including Fed miscues, contributed to the Depression experience). Those who think I exaggerate my case can put forth reasons why any or all of these sectoral estimates are too high.

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Still, the temptation to ignore an argument not couched in the usual artistic fashion is great. One conference participant informed me that my technological explanation could not be right because technological change is the key to Real Business Cycle models and he had applied an RBC model to the Depression and it hadn’t worked. I informed him that since RBC models rely on intertemporal substitution to generate unemployment, neither he nor I – nor, indeed, any sentient being – should be surprised that it poorly fitted the 1930s. The number of unemployed in 1931 who were simply choosing leisure and waiting for real wages to rise just a little bit higher was, I strongly suspect, virtually zero. It is, of course, ludicrous to ‘test’ my view of the Depression by referring to a quite different (and fairly silly) theory which shares only the use of the word technology (I discuss RBC theory briefly in Szostak 1995, Ch. 2). It would be equally ludicrous to attempt to force my dynamic argument into mathematical form since testing this would not be possible. We should not be too disheartened. It is now recognized that time series econometrics is unable to choose between competing macro explanations of the Depression. I have proposed not only a better explanation but a superior methodological approach to assessing its validity. Some economists, to be sure, would have the temerity to question why we should study the Depression, but most (I hope) will recognize that an improved understanding of that event could and should inform modern policy discussion. One conclusion of my study is that it provides yet another rationale for government support of research. As well, I argue that (as Roosevelt himself believed) during decades of sluggish economic performance, traditional demand management policies such as tax breaks are likely to have a limited effect on employment due to a low marginal propensity to consume and the existence of excess capacity; the government should instead target public works programmes to employ directly the involuntarily unemployed. There are, I might note, a number of other important conclusions in that work.

8.8

The Survey of Economists

With our mistaken view that econometrics is the only path to empirical verification of theory, we disdain surveys as something that sociologists do. Mayer suggests that we should survey managers to find out why many use FIFO accounting techniques when LIFO would save on taxes, but suspects journals would reject such a paper (1993, pp. 76–7). It is as if journals were full

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of first-rate work taking us rapidly toward understanding. Blinder did publish a survey of firm managers in the American Economic Review in May of 1991 (the ‘Papers and Proceedings’ issue of course); he argued that since all theories of price stickiness involved the purposive behaviour of managers, it made sense to ask them what they thought they were doing (the famous are given a certain latitude for eccentricity). The misguided antipathy to surveys among economists forced him to devote a section to justifying surveys (R. Nelson 1995). The comments on his paper are illuminating. Shiller applauds: while Friedman had once said that physicists would not ask a billiard player how their shots worked, they should be asked about strategy, the use of English, etc., for this would help the physicists to understand. R.J. Gordon accepts the idea of a survey, but suggests different questions might have been much better – such squabbling is unavoidable in the early days of a new research tool. If Mayer is right about the profession, then the comment of Grossman comes closest to representing the view of most economists: a survey can only find out what managers are doing not why; we already know as neoclassical economists that managers are solving some constrained maximization problem. Grossman wonders whether it is just this survey which is stupid or surveys in general. If you have the true faith, why ask agents what they are doing? Becker (1991) developed a model to explain why his favourite seafood restaurant always had lineups but did not raise prices. How many economists reading this paper wondered why he did not just ask the owner? His model was of course artistic. But as scientists we know that there need not be just one fancy explanation of a real-world phenomenon. If our purpose really were to comprehend reality there would quite simply be no substitute in this case for asking the management what they thought they were doing. Perhaps we are simply afraid that economic agents would tell us a story quite different from the one we would want them to tell.18 I could go on with suggestions as to valuable uses of survey techniques. I will concentrate instead on one: that we survey ourselves. We have seen in this work that the claim to possessing clear insight into pressing economic problems is nothing but artistic pretence. Neither sophisticated models nor advanced econometric techniques are able to prove without doubt the superiority of any one economic theory. Once we accept that we as a community of scholars must collectively evaluate various types of evidence and decide on the likely validity of theories, then it is

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simply bizarre that we do not undertake a regular survey of economists (unless, that is, we suspect that economists never change their point of view as new information rolls in). There is no other way of objectively measuring our collective judgement. If we really were scientists, we would insist that our national organizations perform such a survey as a matter of course. Questions are not hard to frame.19 In the macroeconomic sphere, members could be asked to indicate their degree of agreement or disagreement with statements such as: ‘Fiscal policy should not be used to iron out business cycles’ or ‘Fiscal policy is neutralized by a matching change in private expenditures as expectations of future government debt change; this problem could be overcome by countercyclical public works expenditures (that is, temporally adjusting anticipated expenditures).’ It would be of considerable interest to ascertain whether those who define themselves as macroeconomists have different views from those in other fields, or those in the top twenty schools (that is, those who think they are in the top ten) differ from those elsewhere. Over time, we could find out if the views of the former groups change more quickly than those of the latter, and perhaps attempt to discern whether developments in theory or the economy are more powerful sources of such changes. Other fields of economics yield questions of comparable interest. One could mention international trade policy, pollution control strategies, labour market discrimination,, and the sources of economic growth. Should we have a negative income tax? Should we move toward providing the unemployed with jobs rather than welfare? The answers to such questions would be of interest far beyond the confines of our profession: ‘We need help in distinguishing between policy advice that represents a broad consensus among economists and advice that has not yet achieved such a consensus or even represents only a fringe minority of economists’ (Hamilton 1992, p. 63). Much misplaced public disdain of economists could be overcome if we could point to areas of widespread agreement. The survey could also ascertain the degree of acceptance of existing methodology: Do computable general equilibrium models provide a reliable guide to the likely quantitative effects of such policy initiatives as tariff reductions and changes to the tax structure? More centrally, do we abuse mathematics, and should we therefore reserve some space in top journals for low-tech work?20 McCloskey (1996, p. 124) recommends that we ‘outvote’ the arrogant minority that dominates the discipline with

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false methodological values. At present, we have no mechanism to even estimate the size of the majority. Or, we could even establish whether the profession feels its priorities are presently misplaced. How would you rank the importance of the following economic questions: the causes of the business cycle, the causes of economic growth in developed countries; in less developed countries, optimal taxation, the effects of trade barriers, determinants of technological innovation, etc., etc.? The range of possible questions which would be of interest to both the profession and the wider public is obviously large. I think it odd that we, who pride ourselves on our empiricism, have not availed ourselves of this source of information. I was told (when I suggested it) that the idea is suggested to the American Economic Association from time to time but is generally turned down, not, it appears, due to cost (how much could it cost to throw in a questionnaire with the annual mailing to members?) but a feeling that it is not worth the effort. Occasional small-scale surveys of faculty and graduate students do exist. These show that economists do tend to agree on tariff policy, rent control and taxi regulation (especially given the misplaced values of the profession, agreement need not, of course, mean the profession is correct). While macroeconomic questions show greater diversity, the public and even many in the profession might be surprised to find that a solid majority of economists continues to believe that active fiscal policy can limit the extent of recessions. On the methodological side, Grubel and Boland (1986) in a fairly random survey of American and Canadian economists found that almost two-thirds felt that there was too much mathematics in journals and that journal editors should try to cut back on this. Without the stamp of approval that would come from an official survey of all members of national economist organizations (note that Grubel (1991) found significant differences between graduate students at Canadian and American universities), such survey results can only be suggestive and have a negligible impact on the profession. We could, I suppose, first survey members on whether they thought a survey was a good idea.

8.9

Rules of the Game

Many who labour in the field of methodology have come to think that they should concentrate on how economists should/do perform day-to-day research rather than on larger philosophical questions. This work has been devoted to showing the misper-

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ceptions which govern the work of economists. The last two chapters in particular have been devoted to showing what is wrong with econ-science and suggesting practical ways in which it can be improved. One recurring insight is that flexibility in both theory and methodology is required. In terms of the latter, we have described at length the value of case studies, surveys, historical analysis and informal models, and hinted at the value of experiments; this list does not exhaust the range of methods we could and should employ. Those who claim that there are simple rules of play to be followed by all economists are pursuing art not science. Keynes knew this: ‘The theory of economics does not furnish a body of settled conclusions immediately applicable to policy. Likewise methodology does not furnish a body of settled rules for the successful appraisal of theories’ (in Redman 1991, p. 129). We have seen, though, that this does not mean that anything goes. There are, in fact, standards of judging scientific work which the discipline would do well to follow. Lest some of our readers have missed the point we list some of them here: (i)

Clarity – Once we recognize that science is a community endeavour then common sense dictates that scientists have a responsibility to make their work as easy to read as possible. Obfuscation, whether with words or equations, is a child’s game which we should disdain. Those who write mathematical papers should be forced to explain what drives their results in words. (ii) Importance – Every work should be placed in context, so that the reader is made aware of what important questions it is attempting to elucidate. Statistical significance should at the very least be supplemented with a discussion of the realworld significance of a particular relationship. We should always ask what the work has taught us about the real world. (iii) Logical consistency – We live in a complex world. Nevertheless, if a theory is going to claim that A causes B sometimes, and B causes A at others, it must be clear as to what other circumstances must have changed in order to generate the opposite result. (iv) Consistency with collateral theories – As Bartley suggests, we must hold some of the existing body of theory to be true while criticizing other aspects. A theory which is at odds with much of accepted wisdom need not be wrong but must face tougher criticism. (Thus it is both difficult and necessary to build up the new growth-oriented paradigm.)

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(v) Theory depth – We should seek empirical evidence of many types and from as many times and places as possible. No one piece of empirical work, no matter how fancy, can carry conviction. The community must always evaluate a range of evidence. (vi) Subsidiarity – Wherever possible, theories should be broken into their constituent parts and these evaluated on their own merits according to the criteria above. This can provide a superior test of theory to (v). Innumerable observations of ghosts and UFOs have had little impact on the scientific community because these observations conflict with theory. Subsidiarity provides some protection from the human tendency to only appreciate data which confirms our worldview.21 This is yet one more reason to distrust theories which ‘seem’ to make decent predictions from unreal premises. One might add prediction to this list, though I personally think our knowledge is far too imperfect for this to be a good scientific criterion of judgement (though public policy may require our predictions). I don’t intend this list to be earthshattering but to illustrate three simple points: we have deviated much from simple rules of scientific evaluation; we need not fear the ascendency of foolishness if we abandon the misguided rules that have governed us, and we will in fact be better scientists if we do so. While we can accomplish much by changing our rules (that is, by journal editors asking referees to use the above criteria, and ignoring reports based on the false criteria of the present), I would emphasize again that real change in the discipline depends also on a change in our hearts. Eric Ashby has suggested a code of ethics for all academics, which includes tolerance, non-discrimination, honesty, openness and teaching competing viewpoints (in Kerr 1995). McCloskey (1996) would add prudence and modesty. I myself would emphasize flexibility, and the recognition that there is generally a kernel of truth in the arguments of those we disagree with. I would also argue that writers of textbooks have a special responsibility to admit to competing viewpoints, unrealistic assumptions and areas of ignorance. Kerr decries various unethical practices all too common in our discipline: not hiring colleagues of diverse theoretical approach or method or – incredibly – even covering all fields, doing research only because it is easy to get a grant or publication, and avoiding mentoring responsibilities. As Chalmers (1982) has noted, we can only judge an

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endeavour scientific if its practitioners obey scientific principles. At present, economics fails this test.

8.10 What of Econ-Art? In an ideal world, we would just ‘do’ good economics. In the real world, methodological criticism is necessary to ensure that we do not veer too far off course. I have in this work set out workable definitions of art and science, and shown how work in economics can be seen as serving primarily the goals of art. Mirowski has claimed that economics is second-rate (misguided) physics; his impact has been limited because economists take the idea of being compared to physics as a compliment. The art/science dichotomy is different, for economists know that art is not what they are supposed to be doing (though perhaps some will unabashedly declare themselves artists after reading this). There is much that can be done along these lines: detailed art critiques of particular works in economics is just one possibility. Such work can easily be tied into constructive methodological work: this is art for the following reasons; if we wished to tackle this situation scientifically we would do this and this and this. We should not pass up any opportunity to bludgeon economists with their shortcomings and point them in the right direction.22 Too many real people out there need an improved econ-science for us to give up.

Notes Notes to Preface 1.

2.

Economists even ignore the insights of their fellow social scientists, and thus, ‘The suggestion that the study of literature or communication or even the nonliterary arts might speak to them would be regarded by many economists as absurd’ (Klamer and McCloskey 1988, p. 4). Klamer and Amariglio have spoken of art as the paradigm of modernism, and argued that economics is modernist, but the modernism they speak of is a philosophy which predates modern art and economics by centuries (Wendt 1990).

Notes to Chapter One 1.

2.

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While Spiegel bemoans the fact that economics is no longer accessible to the intelligent layperson (1991, p. xvii), Hauser has argued that progressive creative art must be complex and is therefore not to be understood without some education (1956, p. 346). To use accessibility as a criterion for art would elevate popular pieces above masterpieces. As we shall see, mathematical symbols have their own visual appeal. Econ-artists are far from the first to recognize (at least subconsciously) the artistic potential of mathematics. Greek philosophers such as Protagorus spoke of its beauty and sought parallels between music and mathematics. Greek astronomers were sure that the planets were spaced harmonically. One could, alternatively, follow a residualist or utilitarian approach to defining art: art is that which serves no practical purpose, but is intended to satisfy aesthetic tastes (a view trumpeted by the fin de siècle ‘art for art’s sake’ movement). This ignores the possibility of servicing both utility and

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beauty, ignores as well the possibility of being neither art nor science, raises the thorny issue of intentions, and would offend econ-artists even more than our previous definition. It would, however, be straightforward to establish the case for econ-art under such a definition. Ezra Pound once referred to the artist as the antenna of society. Many have since suggested that we may see changes in art preceding corresponding changes in society. As we will see below, many artists and scholars feel that art can/should induce changes in society. For present purposes, the important point is that we can learn much about changes in society by analysing the evolution of art. Archaeologists suggest that ancient cave dwellers had entirely practical reasons for painting scenes of the hunt on their walls. This does not blunt our aesthetic appreciation of the outcome. Music is the only art which can appeal to its audience directly without using a medium of communication common to everyday life (Read 1968, p. 17) Klingender feels that an important element of the division of labour which characterized the Industrial Revolution was the separation of design from production. Thus, pottery, toys and textiles all saw increased artistic attainment in the eighteenth century (1972, p. 38). Recent works on economic methodology recognize that the best ideas need not win out (Colander 1989, p. 2). The lack of ‘timeless criteria by which to judge’ economic ideas was credited by Mirowski (1989) with encouraging economists to ‘usurp the legitimacy of science’ by imitating physics. It is entirely possible that misguided scientific values could coexist with unrecognized artistic values. Klingender feels the bond between art and science built up in the eighteenth century was destroyed in the nineteenth when political economy abandoned humanism to protect property. Still, artists glorified the railway, Samuel Smiles glorified the engineer, and artists employed the scientific method to evaluate the new materials made possible by technological advance (1972, pp. 38, 100). They note that even a new musical harmony is in part a capital good, for it provides the basis for the further development of musical ideas. Some philosophers question whether there is an objective reality ‘out there’, and thus whether we can claim increased

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understanding. Others doubt our ability to comprehend this, even if it does exist. Most, though, think that the increased explanatory power of science is powerful evidence that we do increasingly approximate Truth (Papineau 1996). Klee (1997) defends both Truth and the idea of scientific progress. ‘Illusion is hard to describe or analyse, for though we may be intellectually aware of the fact that any given experience must be an illusion we cannot strictly speaking watch ourselves having an illusion’ (Gombrich 1962, p. 5). Many feel that ‘ … in economics normal science has run amok. The invisible hand of truth has lost its guiding influence,’ precisely because the internal reward structure does not necessarily reward truth (Colander 1989, pp. 31–2). Colander notes that most social sciences have splintered due to an inability to define scientific achievement, but not economics. ‘All the emphasis falls on teaching the analytical subtleties of the Hecksher-Ohlin theorem at the expense of time devoted to considering the simply overwhelming evidence against the theorem’ (Blaug 1980, p. 256). Blaug notes that product cycle, scale economy and technological explanations have all fared better empirically (1980, p. 215). Another attempted distinction is even less helpful. Kuhn suggests that scientists speak primarily to each other, while artists seek a wider community. This reflects his well-known unwillingness to treat social sciences as science. We will see below that artists need not seek the understanding of the wider community, and suggest that one side-effect of devotion to art is that economists do not have the public policy input that they could and should have. Schoeffler (1955) noted that methodologists often criticize those who they respect the most: ‘And this somewhat melancholy situation is even aggravated by the fact that the methodologist will usually “pick” on the most creative and most productive scholars in the field – since their work is the most important, it is also the most “worthy” of methodological analysis’ (in Redman 1991, p. viii). We would concur with McCloskey’s view of economists: ‘They are of good will and good mind. They do not deserve to have a science lacking scientific findings. No one with an ounce of human pity would be happy that such a good group of men are so wrong’ (1996, p. 13).

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Simon himself notes that, while much of the profession considered him so, he was well known by the elite. As one of the earliest members of the Econometric Society, and a participant in the Cowles Commision, he had close personal ties with almost all the previous prizewinners. He feels that he would not have won otherwise (1991, p. 226). In high school debates, Simon learned that, ‘You do not change other people’s opinions by defeating them with logic. People do not feel obliged to agree just because they cannot reply at the moment’ (1991, p. 14). He would appear, then, not to be ignorant of the non-scientific basis of persuasion. Warren Samuels, in his review of R.L. Allen’s ‘Opening Doors: The Life and Works of Joseph Schumpeter’, Journal of Economic Literature, March 1992. Roll (1956, p. 14) notes that it is difficult to establish causal links between changes in the economy and changes in economic theory. This is a fact widely recognized by both economic historians and historians of economic thought. It would seem to reflect the loose connection between theory and reality. Dasgupta (1985) provides one broad typology. In the preindustrial era of abundant labour, economists favoured a subsistence theory of wages. Industrialization encouraged the use of demand-and-supply analysis. The rise of unions led to ideas of bilateral monopoly and suggestions of government intervention. Kalecki and many postKeynesians have questioned the neoclassical belief that the same theory applies to all times. Blaug feels that this was the major paradigm shift of the late nineteenth century. The so-called marginal revolution, he recognizes, did not happen until the twentieth century (1985, p. 306). Economists, while adopting ‘survival of the fittest’, thus rejected the Darwinian emphasis on long-run evolution. The possibility that Menger, Jevons and Walras were reacting to the rise of capitalism, or other broad economic forces, is contraindicated by the radically different level of development of the three countries involved (Blaug 1985, p. 300). Perhaps we should look instead for evidence that there was an increased appreciation in the late nineteenth century that something infinitesimal could still be important.

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Notes to Chapter Two 1.

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Fleming, at least, perceives the ‘same juxtaposition of banal and fanciful’, the ‘same weary lyricism’ (1970, p. 519). Barr (1966) sees two broad traditions, one through Cezanne and Seurat, and Cubism, the other from Gaugin via Matisse and the Fauve school. The Murrays (1968) see precursors in Bosch, Arcimboldi, Goya, Redon and others who expressed the weird or fantastic. Balakian (1947) traces literary roots. The first post-war reaction was Dadaism. This short-lived phenomenon focused on denouncing previous artistic sensibilities. Dadaist exhibits were designed purposely to shock the audience into a new world-view by failing to fulfil their expectations. Poetry emphasized circular word games. Dada manifestos denounced manifestos. Though some modern musicians, and performance and conceptual artists claim to work within a Dada tradition, this art form could on its own have had little effect on econ-art, for it was only capable of destroying that which had gone before. We could, perhaps, all think of many works of econ-art in this vein, but could scarcely imagine a decades-long exchange of only destructive works. Dada’s importance lies in illustrating the extreme disapproval of society which characterized the artistic avantgarde of the period. Moreover, Dada provided the necessary dissolution preliminary to the recombination of elements into a new vision in Surrealism (Hedges 1983, p. 33). Though Surrealism greatly extends this notion, it had long been part of artistic sensibility. Plato had described art as the making of a dream for those who are awake (in Gombrich 1962, p. 7). For example: ‘The achievements in economic theory in the last two decades are both impressive and in many ways beautiful. But it cannot be denied that there is something scandalous in the spectacle of so many people refining the analyses of economic states which they give no reason to suppose will ever, or have ever, come about’ (Hahn 1970, in Mayer 1993, p. 2). Borges sensed the motivation for such critiques: ‘Yet the reader is left with the uneasy sensation that all may be merely a sick fantasy. The centre of the labyrinth may exist only as a wishful dream’ (in ‘El Sun’, 1976, p. 69). One can, at least in some fields, see movement in the opposite direction: attempts to loosen simplifying assumptions and generalize theories. Progress is sluggish at best. In the

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meantime, simplified models exert a much more powerful influence on the mind sets of economists than they should. Mark Machina and a handful of others have attempted to develop mathematical models which would generate some of these experimental results. Each of these models relies on a different set of restrictive assumptions. Their complexity renders them almost impossible to teach or apply. A true science would tackle these anomalies both with more bodies and more than one method. Even if some economists do not doggedly adhere to these views, our textbooks, the repository of our shared beliefs, describe a lovely garden. Keynes, in The General Theory (1973, p. 292) described the relationship between micro and macro: ‘[We] have all of us become used to finding ourselves sometimes on the one side of the moon and sometimes on the other, without knowing what route or journey connects them, related, apparently, after the fashion of our waking and our dreaming lives.’ Realists argue that science describes reality, while instrumentalists feel that science is useful but not realistic. In particular, instrumentalists argue that ‘theoretical objects’ are convenient fictions rather than approximations of real phenomena. Lambert and Brittan (1992) argue that this question can only be answered empirically on a case-by-case basis. Note that both perspectives start from a belief in an external reality. Klee (1997) provides a spirited defence of realism. Keynes, sceptical of both the idea of imperfect competition and Kalecki’s habit of basing his assumptions on real-world observations and building his theory from that base (rather than Keynes’ approach of starting with a general theory and adding simplifications), criticized Kalecki for not making his assumptions clear or establishing their effect on his results. I am indebted to Peter Kriesler for bringing this interchange of ideas to my attention. Colander notes that there are advantages for both teachers and students in teaching models versus ideas. Concepts which can’t be reduced to diagrams are generally not taught to undergraduates (1989, p. 36). Surely, this isn’t the reason we prefer them? Samuelson is one who has argued strenuously in favour of the clarity of mathematical expression. Yet his own works generally combine mathematics with verbal clarity (Kendry

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1981, p. 223). Solow recognizes that the desire for clarity does not necessarily imply formal modelling (1989, p. 38). I am told that at the 1993 AEA meetings, a real business cycle theorist noted that RBC theories had many methodological (that is, mathematical) advantages and only one major disadvantage: they fitted poorly with empirical reality. He was surprised when his audience laughed. RBC continues to be popular in certain journals and departments. Some economists, such as Sen, ignore such programming, and attempt to model institutions. A more flexible methodological approach on the part of the profession (as in the Journal of Law and Economics, the Journal of Economic Behavior and Organization, the Journal of Evolutionary Economics, and the Journal of Law, Economics, and Organization) would still increase our ability to deal with institutions. Rational expectations was based in part on models of efficient markets developed by Samuelson. He had taken pains to note all along that his work didn’t imply that actual markets were efficient. Rapping, despite (because of?) his early collaboration with Lucas, has said, ‘Frankly, I do not think that the rational expectations theorists are in the real world’ (in Klamer 1984, p. 234). Again, Surrealism was not entirely novel in this regard. Oscar Wilde had said that there was no fog in London until Whistler had painted it. Impressionists had seen the world in terms of bright patches and dabs of paint, and recognized that their view could change how others saw the world (Gombrich 1962, p. 275). New Age mystics feel the same way. It is noteworthy that even Nadeau (1965), the first chronicler of Surrealism, felt that Surrealism failed when it backed away from political activism to refocus on the pursuit of art. Looking back ‘thirteen years later’ for the English edition, he is less hostile. The slow path to salvation perhaps seemed more reasonable then than in the last days of the Second World War. To do this, of course, econ-scientists must integrate their dreams with a thorough understanding of reality. McCloskey (1994, p. 167) notes that, ‘The values of the poet assist science but do not constitute it’; dreams of a better world can be no more than a first step for the scientist. Lest I offend, religious faith is, at its best, much more inward looking than I portray it here. My contention that we do not achieve perfection can be no more than an educated

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hunch. Since we can never know what perfection is, we cannot be sure that we do not occasionally achieve it. Evolutionary psychologists argue that Darwinian adaptation would have acted to select mental mechanisms which enhanced reproductive potential during humankind’s millennia as hunters and gatherers. It could not, though, have acted to select one generalized programme, but rather a set of competing programmes focused on different intermediate goals: eating, sex, learning, etc., etc. (see Symons 1992). Evolutionary psychologists are attempting to revolutionize not just psychology but anthropology and other social sciences. Their impact may yet reach economics. Nietzsche, Hegel and Marx emphasized that in the modern world everything is pregnant with its contrary (Berman 1982, pp. 21–2). We should note that Surrealists, as well, refused to cater to public tastes or sensitivities. They, too, pursued the purity of their art form. Econ-artists, at present, have even less of a financial motive to cater to the masses (the taxpayer) than do Surrealists. Society could benefit from econ-art without comprehending it, just as Hesse’s Glass Bead players provided their society with the stability of a spiritual foundation of moderation and law, by being totally dissociated from that society (1969, p. 150). It could be that McCloskey’s remarks apply more to economics than to other fields. Meteorologists may earn little serenity from messy attempts to model climate. Serenity may only come from mathematical modelling sufficiently divorced from reality. Ironically, we thus consciously only approach the least satisfying elements of econ-art. While the middle sections of a paper are generally full of meticulous precision, the opening discussion of assumptions and closing discussion of implications are generally rushed, oversimplified and unsatisfying (McCloskey 1996). Some celebrated the order of the modern machine factory (Berman 1982, pp. 26–7). One could argue that econ-art portrays the economy as a well-ordered machine. Berman notes that the difficulty with such a conception is that it leaves no role for humanity except to plug in. ‘The rise of mathematical economics meant defeat for historical economics and removed the threat that historicism had posed to the unity of science’ (Spiegel 1991, p. 646).

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Undoubtedly, other forces were at work. Ross (1991) argues that social sciences in the United States had been guided through the nineteenth and early twentieth centuries by a view of US exceptionalism. As land became scarce, population pressure created class divisions and American social scientists moved toward an internationalist perspective. Marginalism was attractive as it stemmed the rise of classbased analysis. Michel Foucault would take exception to the artistic portrayal of humans as free and independent beings. Modern life is a prison, he would claim; once we recognize that fact, we can at least relax (Berman 1982, p. 35). ‘Like Adam Smith, he had little hope that social reformers or “do-gooders” would solve problems, and he was thus willing to allow the market to solve them’ (Breit and Ransom 1982, p. 198).

Notes to Chapter Three 1.

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Henderson focuses on the role of scientific speculation about an unseen ‘fourth dimension’. Though Picasso never mentioned it, other Cubists (and many Surrealists) used it to explain their work. They did not trouble themselves with the science itself. Indeed, Einstein’s revelation that time was the fourth dimension had little effect. Rather, ‘the fourth dimension was primarily a symbol of liberation for artists.’ The lasting impact of scientific speculation on art was a mystical belief in a reality greater than our perceptions. For a century which questioned the very concept of absolute truth or value, Cubism created an artistic language of intentional ambiguity: ‘In front of a Cubist work of art, the spectator was to realize that no single interpretation of the fluctuating shapes, textures, spaces, and objects could be complete in itself’ (Rosenblum 1976). One must be careful in attributing intentions, of course. Other explanations are possible. While Fleming (1970, p. 542) recognizes that ‘it is both impossible and undesirable to make any precise analogy between cubist principles and the mathematics of space-time,’ he suspects a causal link from the theory of relativity to artistic perception. Henderson (1983) detects a link between scientific curiosity about a fourth dimension and Cubist belief in the unreality of the world we see. Vitz and Glimcher (1984) argue that

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non-Euclidean geometry and scientific reductionism, along with photography, served to show how both space and time could be broken into discrete parts. Even if art were influenced by science as these authors suggest, we would still be sceptical of wholesale application of artistic standards in econ. A classic example is the QWERTY keyboard, which by some estimates slows typing speeds 40 per cent over a keyboard designed with the most common letters in the middle; only historically can we understand its dominance. (Those who believe markets are always efficient naturally discount the QWERTY advantage – the evidence is admittedly unclear.) Among the ‘cultural’ influences at work on Marshall were the Darwinian theory of (gradual) evolution, and the Victorian faith in the inevitability of (gradual) progress. This could help explain the short-lived success of Futurist art. Futurists cited Nietzsche to the effect that history is a means by which the dead bury the living; one manifesto celebrated ‘the beauty and spiritual qualities of gears, pulleys, pistons, locomotives, steam shovels, fly wheels, and pinions’. They wanted to include dynamic motion in art. Though welcomed by the Fascists, the movement did not survive the interwar period (Fleming 1970, p. 514). Simon (1991, p. 107) discusses how the development of the computer changed the orientation of researchers across all disciplines post-war. Knowing that computer-generated results are only as good as the inputs does not, I would suggest, prevent the mystique of computers from encouraging econ-artists not to notice the un-reality of these inputs. Gombrich, while recognizing that for millennia it had been thought the purpose of art was realistic portrayal, notes that even those supposedly striving for realism were driven to illusion (1962, Ch. 1, p. 278). One side-effect was the emergence of competing schools in both art and econ-art. In the latter, as in the former, these schools generally had more in common than they liked to recognize. The marginal revolution in fact ended a halfcentury (after Ricardo) of dispute over major issues in the discipline (Deane 1989, p. 134). In the nineteenth century, music was often hailed as the purest of art forms because of its non-representational

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quality. Cubists commonly employed musical analogies in describing their work (Golding 1988, p. 20). Abstract artists naturally also evoked the comparison with music (Barr 1966, pp. 13–14). At times, of course, economists struggle to relax simplifying assumptions. In the long run, though, who can deny that modern Keynesian models are simpler than Keynes’ own ideas, or that rational expectations analysis is simpler yet? Early Cubists purposely used neutral colours – grey, green, olive, ochre – in order to emphasize design and texture (Fleming 1970, p. 514). They also wished to differentiate themselves from Impressionists. Economics likewise has ignored much that gives colour and vitality to life. Perhaps they thus hoped to differentiate themselves from psychologists and sociologists. Cubists, at least, moved away from this cold, impersonal style. Of course, even strictly convex curves still yield a unique equilibrium. However, if both are highly inelastic near that equilibrium, then large changes in price yield small excesses in supply or demand. In such a case, if we relax our ludicrous assumption of perfect competition the slightest bit (easier to achieve in science than in art), we get the realworld observation that market forces determine at best a feasible range of prices, and bargaining determines where within that range we end up. Moreover, recent research on endowment effects suggests that there is a significant gap between the price at which an individual will buy versus the price at which that individual will sell, even for goods they have only held momentarily. From these insights, we might even progress to the point of not blindly applying supply/demand analysis to markets for which our own theory tells us supply curves do not exist. Wulwich (1986) claims that Phillips’ original study was flawed in many ways and that modern econometric techniques would not have produced his smooth curve. Breit and Ransom note that while Friedman and others believe the natural rate hypothesis to have been empirically verified, Samuelson is not alone in believing this not to be the case (1982, p. 127). Solow (1988, p. 36) also argues that the empirical evidence in support of it is flimsy. Such is the reality of empirical verification of modern theory. It is worth noting the special self-referential nature of rational expectations models. These models actually refer to

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themselves: the agents in the model are assumed to know the true model of the economy, which is the model postulated by the economist. It might be argued that these cross-country differences reflect differences in attitudes or resources (or statistical procedures), and are thus not amenable to change by government policy of either a macro or micro nature. The telling fact is that incredibly little effort has been devoted to analysing why unemployment is so much lower in some countries. The desired result is more easily assumed. Moreover, if the natural rate is so natural, why does it differ so much by race within countries? Even Phelps and Zoega (1997) suggest that the natural rate depends on interest rates, labour force growth, education, age structure and demand for skilled and unskilled labour. Some of these at least are affected by policy. Friedman had argued that normative differences between economists depended more on different beliefs about the effects of policies than differences in values, and suggested that this was itself a positive statement which could be accepted or rejected. While Gordon is right that Friedman’s paper has become only a ‘footnote in the debate over the philosophy of the social sciences’ as its inadequacies were recognized (1991, pp. 609–10), the simplistic view of science which it proffered has prospered. If we could predict the future with any accuracy, we would be able to make a killing on stock, commodity and exchange markets. The fact that some of us are paid for our predictions reflects the desire of firm managers for a false sense of security rather than the predictive power of our models (McCloskey 1996, pp. 111–13)

Notes to Chapter 4 1.

Robert Clower, longtime editor of the American Economic Review, has noted that most models are presented without any indication of what real-world phenomena they might actually explain. Most economics, he concludes, serves simply to make common sense difficult. Economists are more concerned with techniques and game-playing than ideas. Thus, most of the papers he received while editor should not (from a scientific standpoint) have been written, much less published (1989, pp. 24–7).

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Alfred Marshall, the father of neoclassical economics, was trained as a mathematician, and therefore likely less proud of his technical capabilities than those who were to follow. He asserted that, ‘The right place for mathematics in a treatise on economics is in the background,’ and left the equations in the appendices in his Principles. The high moral purpose he brought to political economy caused him to relinquish with regret purely speculative exercises which smacked of ‘l’art pour l’art’ (Spiegel 1991, pp. 553, 563). As Freedman (1993) perceptively notes, mathematics panders to the reader by signalling the exclusivity and selfimportance of the audience. The article is structured so that the reader need not actually work through the maths to reach the conclusion: this recognizes how valuable the reader’s time is. If the reader does delve in deeper, the very complexity will, like Marine boot camp, serve to convince them that it must have been worthwhile. There is some tendency for maths to be esteemed within other sciences, and also to be used as an indicator of the relative value of different sciences. The correspondence is imperfect (Mayer 1993, p. 47). It may also be misguided, of course. Dawkins (1986, p. 2) perceptively discusses why biologists use less maths than physicists: ‘The behaviour of physical, non-biological objects is so simple that it is feasible to use existing mathematical language to describe it.’ More sinister motives can also be discerned. In the early decades of this century, academic freedom was often interfered with by those who financed and administered American universities. McCarthy reinforced this earlier state of the world. Maths became a means, then, by which academics could gain some independence from outside interference by speaking in a manner the public could not comprehend. (McCloskey 1994, p. 98, notes that economists in communist eastern Europe turned to maths to avoid political problems.) The techniques were taken over by orthodox economists, and are still dominant decades after the motive had receded (see Redman 1991, pp. 156–7). Most economists have stories of incompetent or malicious refereeing to tell. For those who work outside the methodological traditions of the discipline, these experiences can be career-threatening. While I have been fortunate enough to get almost everything I have written published, I have

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quite a collection of referee reports which were based on the philosophically untenable belief that only mathematical models and econometric testing counted as science (one referee had the audacity to admit I was likely closer to the truth than an article I was responding to, but felt my effort unworthy because it would not stimulate future research as readily). Early in my career, a journal editor took me aside after I had complained of referee error to give me the friendly advice that since I did work that was different from others I had to expect to get dumped on. A less pig-headed academic might well have changed their ways. When it was suggested that it was hard to prove or disprove his ideas concerning power relations or speculative frenzy, Rapping, who has reason to know, responded, ‘it applies to formal models too. They imply more precision than they actually have. People are easily bamboozled by numbers and math’ (in Klamer 1984, pp. 233–4). Mayer would concur: ‘Some people probably assume quite erroneously, that it is not possible to make ideologically charged or silly statements in the form of equations’ (1993, p. 16) ‘Clearly the existence of established standards provides a powerful rationalization for the continued use of formalization. I maintain that formalization for the sake of formalization alone has never been, and will never be knowingly acceptable or confessed to by most economists’ (Katzner 1991, p. 23) Nevertheless, in a survey of economists asking for the criteria they thought mathematical models were judged by, 33 per cent answered elegance, while only 22 per cent suggested practical usefulness (Grubel and Boland 1986). This leads to the intimation that mathematical models are designed to purposely misrepresent reality: It [formal analysis] reaches its tight answers by assuming things wholly inconsistent with evidence and experience. It maintains its respectability by adopting positions implicitly that would be too embarrassing to express explicitly. The special case sounds so strange only when it is fully spelled out and its implications are logically pursued. When it is stated briefly as the axiomatic definition of a formal model, it slips by without triggering any such concerns. It makes all of its leaps of faith before going public. (Bartlett 1989, p. 200)

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Looking ahead to our discussion of ideology, we might worry that the author’s subconscious biases would determine the result. Charles Sanders Peirce, the pragmatist philosopher, noted in 1958 that no theoretical novelty or real progress could be made through mathematics alone since the results were already embodied in the process (in Hodgson 1993). Colander (1991) argues that to advance a science needs an agreed set of questions which if answered would signal advance (we might quibble that few if any scientific questions are completely answered). It is precisely because economics is identified by technique rather than questions that we cannot speak of advance. Jaffé (1985, p. 38) contends that the painters of the De Stijl school were motivated by the technological advances of the day to pursue ever greater precision in their art. The desire of econ-artists to at least give the appearance of precision may reflect a similar technological impetus. Nature’s sloppiness – winding rivers, randomly spaced trees, irregularly shaped mountains – had attracted previous artists. The twentieth century is if anything a technological age, and its machinery is fashioned much more precisely than nature’s. ‘To most of us, at one time or another, there comes the temptation to turn our eyes away from the nasty real world, which is so disconcertingly prone to make hash of our finest mathematical imagination, and instead to develop a world of our own, with rules and axioms which we ourselves lay down, peopled by creatures of our own imagination who can never fight back or vote us out of office. Unfortunately, there is one major drawback to this program: No one else is likely to accept our pet world, to play the game with us. But Paul Samuelson (whether that is what he set out to do is not relevant) has done it! He has postulated an economic universe, and the entire mathematical economics profession has swallowed his universe whole and is dancing in accordance with the rules he has laid down for that universe’ (Blatt 1983, p. 182). We should be as rigorous as we can be, but not more (Mayer 1993, p. 7). Even the philosopher of science most cited by those who push a naive view of falsificationism within economics, is not fooled by superficial formalization: The doctrine that there is as much science in a subject as there is mathematics in it, or as much as there is measurement or

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precision in it, rests upon a complete misunderstanding. On the contrary the following maxim holds for all sciences: Never aim for more precision than is required by the problem at hand. (Popper 1983, p. 7)

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The critics of mathematical economics all recognize that it has its place. Only its proponents often fail to see the advantage of using diverse methodologies. Roy (1989, pp. 139–43) surveys the views of many economists for and against the present attitude toward maths in economics. ‘Economics is tied together not by a common set of questions, but by a common set of techniques’ (Colander 1989, p. 32). He notes that a survey of graduate students found that while 90 per cent felt knowledge of maths and modelling was important, 68 per cent felt knowledge of the economy was not. Heilbroner has argued that if maths provides economics with rigour, it also provides it with mortis. It is now second nature to economists to assume functions are quasi-concave, not because we have any reason to believe this but because we need this assumption to give us an interior solution (see Blatt 1983, p. 168). This is one of our more innocuous assumptions. Samuelson (1947, p. 11) recognized, and then dismissed, the fact that we cannot in fact fit elementary (even exponential) functional forms to any economic relationship. Hahn and Matthews make this point with respect to growth theory: While not disparaging the insights that have been gained we feel that in these areas the point of diminishing returns may have been reached. Nothing is easier than to ring the changes on more and more complicated models, without bringing in any really new ideas and without bringing the theory any nearer to casting light on the causes of the wealth of nations. The problems posed may well have intellectual fascination. But it is essentially a frivolous occupation to take a chain with links of very uneven strength and devote one’s energies to strengthening and polishing the links that are already strong. (1964, p. 890, original emphasis)

20.

McCloskey (1994, pp. 138–9) thus proposes his A’–C’ theorem: for any economic proof that A causes C, there exists a different set of assumptions A’ with which one can

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generate a result C’ quite different from C. Theory without testing is thus valueless. In Hesse’s The Glass Bead Game, intellectual activity is recognized by the public to be ‘nibbling on crumbs’. Being ‘bankrupt in the world’s eyes intellectuals turned toward art and their activity became [just] a game.’ Hesse describes the twentieth century as an age of delight in ‘strict mental exercises’ (1969, pp. 33–4). New classical theory, which we have had cause to question before, is a case in point: ‘I think that one of the reasons why new classical economics did so well is that it is so technically sweet. It involves all those sophisticated techniques; students have to learn something new that other people do not know’ (Solow, in Klamer 1984, pp. 245–6). Rosenberg (1983) has claimed that economics is no longer a science (due to its inability to make predictions) but merely a branch of mathematics devoted to examining the formal properties of a set of assumptions, just like geometry. Hahn has doubted that we will ever have a theory of economic dynamics as elegant as GE (in North 1994). Artists of the GE school thus have reason for complacency. Weintraub (1991, pp. 121–3) argues that of all the possible solutions to the inconsistency between Keynesian macroeconomics and the Walrasian system, GE theory pursued the least threatening: the system was judged to be generally in equilibrium, though return to this was sometimes sluggish if the system was displaced. Kirman (1992) details how macroeconomists pursued representative agent models due to the mistaken belief that these would generate a unique and stable equilibrium. Though it is now recognized that multiple agents is a more realistic assumption, and would likely generate smoother macroeconomic behaviour as all would not move together, representative agent models are still pursued due to mathematical tractability. Delving into the philosophy of science only makes the case more confusing. Realists think our purpose is to uncover the actual causal laws which govern the universe. They recognize that various different causal forces interact historically, and thus econometric analysis is tricky at best. Instrumentalists, on the other hand, argue that all we can strive for is a description of empirical regularities: prediction rather than explanation (though, if we do not understand

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how the economy works, the predictions in a complex world are likely to be mistaken). Econometrics has followed the instrumentalist approach. Yet it has not done so selfconsciously. We act as if econometrics were actually exposing the true inner model (even though all models must be fiction). Thus, we guarantee that realists will always have concern about the practice of econometrics (Lawson 1986). McCloskey (1996) argues that the abuse of the concept of statistical significance requires that all econometric work be redone. She points to papers where economically important relations (and even policy advice) were ignored because they failed statistical significance tests. She notes that statisticians make much of the distinction between statistical and real significance, but econometric texts ignore it. She feels that economists began to abuse statistical significance because of a desire for solid ground after the Depression and World Wars. McCloskey and Ziliak (1996) found that 96 per cent of a sample of papers in top journals misused statistical significance, and 70 per cent relied exclusively upon it. ‘Authors, by not acknowledging views they are excluding, let alone arranging a test of their views against those of others, have diminished their own work. Do they have devastating evidence against the other view that they are holding in wait for the first innocent challenger? Do they themselves suspect their results will be badly damaged in a runoff between the two views? One has no idea’ (Phelps 1992, p. 1489). N.F.R. Crafts, in a book review in the March 1992 Journal of Economic Literature. Allen (in Higonnet et al. 1991) discusses the danger of developing ever more sophisticated theory and statistical techniques to deal with a paucity of data. He notes that if we assume efficiency, we can never find inefficiency.

Notes to Chapter Five 1.

2.

While Duchamp had been in the United States for decades, the great Surrealist invasion of the United States occurred around the time of the Second World War. By this time even the Parisian Surrealists had withdrawn considerably from political activism. He thinks it is a mistake to think the raison d’être for a work is to be found in the artist. He feels the idea of the individual as creator is part of bourgeois ideology. We have, in this

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work, though focusing on cultural influences, taken a less hostile attitude to the individual, feeling that a person is more than just a reflection of social attitudes. Many others, including Mumford, had reached the conclusion that Bauhaus was too impersonal and collectivist to serve the worker’s interest. In 1972, with the demolition of the Pruitt-Igoe housing project in St Louis, many had to recognize that huge square boxlike structures were not the answer (see Arnason 1986, p. 691). We are, of course, conscious of some of our biases. Thus, ‘Blinder acknowledges that he is committed to a particular vision: empirical findings may force him to give up some specific Keynesian ideas, but that does not affect his general beliefs and concerns.’ He is not alone: ‘Economists are not at all wholly detached, but are committed from the start to a point of view which they will then support with different types of argument’ (Klamer 1984, pp. 247, x). Thus, Skousen (1991) critiques (trashes?) introductory textbooks from a libertarian perspective. Colander, in his Journal of Economic Literature review, notes that ‘real world sensibility comes at a high cost in objectivity and perspective’, and we therefore need to be open to a range of views. While Chicago theorists have been unable to explain satisfactorily (they continue to try) why, within their framework, rational voters allow government to grow if it is bad, this has not prevented them from advocating that governments do less (Reder 1982, p. 30). We saw, then, that modern people are naturally fearful of change. Galbraith has suggested that ideas are naturally conservative, and thus economic theory reinforces the public predisposition toward no change (in Breit and Ransom 1982, pp. 166–7). We have seen that Smith is interpreted in ways which appeal to modern economists. In fact Smith spoke of the need for both the correct institutional structure and moral restraint. Fusfeld himself discusses at length whether the eclipse of Ricardian real cost by opportunity cost (both have their merits) was not due to the fact that the latter cannot be measured and leads to laissez-faire policy preferences based on free choice. While we may criticize the classical economists for their own ideological biases, their concern with distribution did cause them to devote special attention to class relations (see Dasgupta 1985, p. 10).

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The interwar years had strangely little effect on economic theory, despite bringing its relevance into question; they induced a split between theorists and policy-oriented economists (Roll 1956, p. 455). Heilbroner feels the attraction of Keynes was his non-radical response to the Depression (1968, p. 254). ‘I can be influenced by what seems to me to be justice and good sense, but the Class war will find me on the side of the educated bourgeoisie’ (Keynes, Am I a Liberal? (1925), in Keynes 1963). He felt himself to be to the left of the average Labour voter, but was repelled by both ideologues and trade unions. The point is not that Keynes did not do much of value but that his bourgeois values may have limited his radicalism. Redman notes that economists often use simple (and incorrect) definitions of science to exclude Marxists, sociologists, etc. from consideration (1991, p. 87). In fairness, it must be recognized that those with ‘different’ conscious ideologies often show less interest than they could in communicating with the ‘mainstream’. Bartlett argues that assuming that we always maximize lifetime utility in decision making is like suggesting that a squirrel which starves because it did not store food for winter has done so. We cannot arbitrarily choose any point in time, even the present, from which to evaluate present value. Every moment is equal, and thus we can only compare lifetime utility streams (1989, pp. 35–6). Thus, we cannot talk about welfare objectively. Simon (1991) notes that we live in an organizational, not market economy. We need to understand non-pecuniary motives within organizations: authority, identification, coordination. Then we should re-open the question of when profit, non-profit and government organization is best. Why does capital hire labour, rather than the reverse, for example? Most economists would assume that, according to ‘survival of the fittest’, this must be more efficient, but if institutions favour capital-management (for example, if banks discriminate in making loans) we would not have seen a ‘fair’ competition between the two. We see labour management in law firms where human capital is specialized and there is little physical capital, but capital management in the more common case where there is much specialized physical capital and (mostly) unspecialized labour. This indicates that

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it is the bargaining power of the suppliers of specialized assets which determines the outcome (Dow 1993a). While there is a danger that labour-managed firms might under-invest, they also likely have advantages in terms of worker incentives, worker-management relations, sharing of information and flexibility (see Dow 1993b). Despite obvious policy implications, a mere handful of economists work in this area, and we are still far from knowing whether feasible institutional changes might lead to an efficiency- and equity-enhancing move toward labour management. Popper and others favoured methodological individualism due to a fear that society-based analysis opened the door to fascism and communism (Gordon 1991, pp. 658–9). As we saw in Chapter 2, it was only natural that economists struggled to avoid repetition of world wars. Even those who called themselves ‘Keynesian’ and continued to advocate government management of the business cycle rarely had the temerity to apply their models to the interwar period. Alas, Keynesian theory itself has done a poor job of explaining the Depression. For this and other points I draw heavily on Szostak 1995.

Notes to Chapter Six 1.

2.

3.

Much as we can appreciate the ‘realistic’ painting style of the Renaissance masters (a more subtle sort of artistic distortion), we can admire the archaic focus of classical economists on real issues of economic growth, while refusing to follow in their footsteps. Eichner felt that economics was more religion than science. He thus directed his book toward the wider public and wider scientific community in the hope that they would decry economics masquerading as science. He did hold out some hope for the younger members of the profession (1983, p. xiii). Given the dissatisfaction shown by graduate students when surveyed, it could be that there is a potential revolutionary force which needs only to be motivated. One colleague, on reading this passage, asked if I had ever read Sen. Yes, I responded, and worry not. I have never denied that some scientific work does occur despite the perverse incentives facing economists. We will soon turn our attention to discussing how science could be encouraged. In the meantime, what’s wrong with Art?

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The social reforms of the Progressive Era owed more to unorthodox economists such as Hobson than to those of the mainstream, according to Fusfeld (1977, p. 96). However, Galbraith (1992) speaks of a culture of contentment in which a smug democratic majority will to a large degree ignore the plight of the disadvantaged unless prodded by economic disaster, military misadventures, riots, or the political mobilization of the disadvantaged. Econ-scientists who hope that public pressure might change the orientation of their fellow economists should take note. McAfee and McMillan (1996) make a similar point with respect to auctioning broadcast frequencies: ‘A lesson from this experience of theorists in policymaking is that the real value of the theory is in developing intuition.’ If we follow Stigler, and believe that politicians are rational utility maximizers only motivated by re-election, then there is no reason for economists to derive optimal policies, as these will be ignored (Reder 1982, p. 26). This is, of course, a problem for econ-art masquerading as science, rather than for econ-science itself. While politicians may find advice about efficiency grating at times, they will be hearing so much contrary advice that economists must force them to recognize tradeoffs (Eizenstat [Presidential adviser] 1992, p. 66; see also Blinder 1987, pp. 198–9). Efficiency wage models are willing to recognize that workers may lose economic rent when fired, but even this small step in the right direction is still rare. Lucas has a model which suggests that business cycles actually have a small impact on social welfare through increasing the degree of uninsurable risk. Such a result flies in the face of survey results which show that people greatly fear the loss of employment which cycles may bring. Among other things the model ignores the fact that the unemployed cannot be sure of future employment, and cannot in any case borrow against future earnings. Mayer (1993, pp. 128–9) is rightly critical of such models. Eizenstat, a former Carter adviser, saves much of his scorn for misleading economic forecasts which caused Carter, so he claims, to feed inflation when he thought he would be fighting a recession. Economists could begin a newfound dedication to honesty by admitting that they can’t provide reliable forecasts. As we saw in Chapter 1, there may be a place for the economist’s artistic side in convincing others of her point of

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view. Congressman Hamilton recalls the ability of Walter Heller to sway opinion by always having a memorable phrase or aphorism at hand (Heller, he notes, also had the advantage of having focused his research on interesting questions). It is noteworthy that the Surrealists, while loyal to the public, felt that artists could not worry about their ability to communicate, but must focus on self-revelation (Matthews 1986, p. 247). Canterbury and Burkhardt (1983) argue that the explanatory power of economic theory has not increased at all, and thus economics fails a positivist definition of science. We have already seen that there are difficulties with the positivist definition. Nevertheless, it is the view of science held by most economists. Kindleberger has noted that the important concept of the Effective Rate of Protection only took off after a mathematic formulation was derived. Moreover, the acceptance of the concept was delayed because there was no place for intermediate goods in the elegant two country/two good/two factor model (in Colander and Coats 1989).

Notes to Chapter Seven 1.

2.

We should remember that some forms of Cubist and Surrealist art involved the combination of realistic elements in an unreal framework. Even if we can point to the occasional data set or assumption which accurately reflects the world in which we live, we must hold econ to a higher standard and ask if the composition as a whole reflects reality. Sadly econ-artists seem even to lack the dedicated analysis of those real elements on which they would base their compositions, such as characterized artists such as Picasso and Braque (see Rubin 1989, p. 16); we copied their desire for unreality but not their technique for achieving it. In an interview in the newsletter of the Cliometrics Society in 1991, Jonathan Hughes argued that economic history has to be more ‘scientific’ because of the existence of hard historical facts. If someone publishes a mistake, it will surely be discovered. Unfortunately, many economic historians do not start with important historical questions and then study the theoretical implications; rather they start with existing theory and methods and look for historical instances (often trivial) in which these can be applied.

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Some economists since at least the time of Marshall have suggested that biology provides a better model for economics than physics, but the profession has found physical theory more attractive. Samuelson ‘appreciates the fact that economic relationships are seldom as simple as the diagrams or equations would lead us to believe’. Noting that much of his theoretical work was highly abstracted from the world of policy, he remarked that he would have to pay in heaven for the sin of stimulating much work in mathematical economics (Breit and Ransom 1982, pp. 133, 111). Herbert Simon, well-travelled though he is, claims there is nothing one can learn from travel that one can’t learn from books. I am somewhat sceptical: I didn’t achieve Nirvana while canoeing the Sepik, but couldn’t have just read about it either. In any case, development economists tend not to read widely about the countries they are supposedly studying. In this regard, we might note Tobin’s willingness to join with Klamer in characterizing the difference between new classical and neoclassical economics as rigour versus relevance (in Klamer 1984, p. 112). He is, perhaps, too generous to the latter. To be sure, some works which appear unimportant now may prove key building-blocks in the theory of the future. We can’t rule that out. The point is that we are clearly not focusing our attention on the most important questions. As Mayer has complained, we focus on the pieces of the puzzle which can be (ostensibly) treated elegantly and ignore the rest. This point was powerfully made by Hume. He noted that our only justification for ‘trusting’ induction was that our life experience taught us that this was usually a good guide to behaviour. But this in itself is an inductive argument. With no external criteria to justify induction, Hume urged scepticism of inductive results, which he recognised formed the basis of the vast bulk of science (Lambert and Brittan 1992). Popper warned against immunizing strategies – making ad hoc adjustments to theory to prevent falsification – but if we were to prohibit these most modern theory would be falsified (Caldwell 1991, p. 27). We must, again, use our judgement as to when a theory has become so convoluted that it warrants replacement (just as astronomers eventually gave up on explaining planetary motion in terms of circular

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orbits imposed on circular orbits ad nauseam, and accepted the ellipse). The easiest source is three articles published in Radznicky and Radznicky (1987). Redman (1991, p. 53) discusses Bartley briefly. Solow (1988) responds that mathematics and statistics are better than reason and anecdote, but does recognize that these other modes of argument should be more common. Dasgupta (1985) notes that neoclassical economics is misnamed as it has abandoned the focus of classical economics. He devotes much of his book to showing how different the two are. Marshall, it should be noted, viewed his static theory as merely a precursor to a dynamic theory which would allow economics to look more like biology (Gordon 1991, p. 533). This vision was not totally absent from western philosophy: ‘Heraclitus taught that all changes in the world arise from the dynamic and cyclic interplay of opposites, and he saw any pair of opposites as a unity’ (Capra 1976, p. 19). Indeed, the fact that economic relations are constantly changing means that we can never aspire to more than partial theories (Dasgupta 1985, p. 8). Still, Popper and other philosophers thought that if we assumed rationality the social sciences might actually be less complicated (Redman 1991, p. 114). Jaffé (1985) felt that figurative art, by its nature, could never capture more than a piece of reality. Abstract art, though, could attempt the big picture. Econ, in pursuing the naive hope of capturing the big picture with a few simple theories, while avoiding the painstaking work of fitting little pieces into a big puzzle, could be seen as producing abstract art. Schotter (1996) recognises that economics is more likely than other social sciences to miss things. He asserts, though, that the gains from methodological unity more than make up for this loss. We cannot, of course, know what we have lost. Even if Schotter were right that methodological rigidity carried benefits, it is hardly scientific to declare important avenues of research beyond the pale. In the editorial introduction of the inaugural issue of the Journal of Evolutionary Economics (1991), Dosi does urge the use of a variety of methodological approaches. In the late nineteenth century, Jevons ‘recognized that the only practical problem which a mathematically rigourous theory was

228

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18.

19.

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capable of handling was the static problem of allocating given resources to produce an optimum return’ (Deane 1989, p. 130). There is widespread recognition that there are many problems with which static theory cannot cope (Hicks 1979, p. 101). Many modern theorists feel that advances in mathematics have facilitated the modelling of growth. Post-Keynesians, though, have debated the methodological implications of focusing on historical time rather than equilibrium. The crafty economist, where possible, allows for this: ‘Most of my theory of the employment contract can be expressed without either equations or maximization. But in that qualitative form it would not have captured the attention of economists’ (Simon 1991, p. 167). We should note that, while mathematical and (the rare) non-mathematical papers do cite each other, they do so much less than they cite themselves (Grubel and Boland 1986, pp. 431–2). Zolberg (1990) notes that whereas scientific revolutions tend to replace previous paradigms, artistic revolutions (at least in this century) are more likely to supplement them. She credits twentieth-century artistic diversity to increased demand, the diversity of art audiences and markets, and a cultural appreciation of novelty. Radner, in his review of organization theory, notes that his paper has no mathematics but it is nevertheless formal theory: ‘Hence you must be prepared to deal with a number of abstract ideas, even if they are deceptively clothed in the English language’ (1992, p. 1385). If words seem susceptible to subtle misinterpretation, this reflects the fact that we live in a subtle world: ‘Flexibility and even sloppiness in semantic matters is a prerequisite of scientific progress’ (Feyerabend 1989, p. 117). By thinking about economic issues from slightly different angles, we are able to move forward. There are, of course, differences of opinion, at least in macroeconomics (differences, I recognize, which may have caused some to question my frequent references to ‘the’ mainstream theory). We would not wish to downplay the important variations in policy prescriptions which these provide. However, we should not overlook the wide areas of agreement (only Real Business Cycle theorists have followed Hicks in recognizing that we must understand growth to understand fluctuations). In particular, we should note that the so-called Keynesian revolution was not as

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revolutionary as it appears at first glance. Keynesian analysis, it is widely recognized, was essentially Marshallian. McCloskey and others have circulated the following letter, which has been signed by numerous prominent economists, including at least four Nobel Laureates: We the undersigned are concerned with the threat to economic science posed by intellectual monopoly. Economists today enforce a monopoly of method or core assumptions, often defended on no better ground than it constitutes the ‘mainstream’. Economists will advocate free competition, but will not practice it in the marketplace of ideas. Consequently, we call for a new spirit of pluralism in economics, involving critical conversation and tolerant communication between different approaches. Such pluralism should not undermine the standards of rigor; an economics that requires itself to face all the arguments will be a more, not a less, rigorous science. We believe that the new pluralism should be reflected in the character of scientific debate, in the range of contributions in its journals, and in the training and hiring of economists.

22.

23.

Austrians take a disequilibrium approach, emphasize agent ignorance – and thus entrepreneurship – and deal with dishonesty, discovery and rivalrous competition. They provide a better understanding of the failure of communism, and insights into business cycle theory and antitrust policy. This, admittedly, is a sin of long standing in the discipline. Malthus’ First Essay on Population spoke of the optimist/pessimist debate thus: In this unamicable contest the cause of truth cannot but suffer. The really good arguments on each side of the question are not allowed … their proper weight. Each pursues his own theory, little solicitous to correct or improve it by an attention to what is advanced by his opponents. (in Dyson 1996, p. 23)

24.

He himself did not receive this. Frank Knight wrote to Oskar Morgenstern: ‘What do you think of Keynes’s book? I haven’t got into it yet, but a couple of friends whom I consider pretty competent judges say outright that Keynes is losing his mind’ (Morgenstern papers, Duke University

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library, letter of 1 May 1936; I thank John Lodewijks for bringing this to my attention). Eric Jones, in an interview in the October 1992 Cliometrics Society Newsletter suggests that we would be better served by economic historians a little less technically proficient but more familiar with other social sciences. One advantage such a shift would have is that we could appeal to a wider audience. ‘In fact the explanation of hierarchy may in many cases be more social and psychological than purely “economic” in the mainstream sense’ (Radner 1992, p. 1384). He recognizes that hierarchical organizations may be accidents of history, or reflect the fact we are raised in hierarchical environments. Redman speaks of the fear that if not for the rationality assumption we would be just like sociologists (1991, p. 155). Such a fear flies in the face of the theory of comparative advantage (I knew we would find some use for it). Brenner (1992, pp. 40–2) reaches a similar conclusion about the need for an external audience from experiments in psychology which showed that both name recognition and referee agreement with conclusions substantially increased the probability of a paper being accepted. On the issue of refereeing, Baron and Hannon (1994, p. 1118) note that economics journals are more likely to let referees know author’s names than is the case in other disciplines, and concludes that this ‘likely fosters a more well-defined and stable intellectual elite within economics’.

Notes to Chapter Eight 1.

2.

Scientists will be unable to precisely articulate the nature of the paradigm they work within, because these are undefinable (Chalmers 1982, p. 89). Lakatos concedes that a paradigm is nothing more than ‘a research program that has achieved monopoly’. Redman suggests that the word ‘paradigm’ has been so abused that it should be banished from use. Our use of the word can only become clear as we proceed. Galbraith (1996), noting that only mainstream work is published in the top journals, argues that our present tendency to rank journals should be replaced by a recognition that different journals have different foci. He also argues that we would be better served by departmental heterogeneity, by both field and theory.

NOTES

3.

4.

5.

6.

7.

8.

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Argyrous (1992) argues that Duesenberry’s relative income hypothesis could have sparked as much research as the hypotheses of Friedman or Modigliani, but did not for ideological reasons. He notes, though, that it is a mistake to criticize mainstream theory simply for being value-laden, as all theory must be. Zolberg (1990) argues that art revolutions are almost always the work of several artists rather than one. Max Ernst felt that the Surrealist revolution had run out of steam when Surrealists fled to New York during the Second World War, precisely because of a lack of interaction. ‘The café life was lacking. As a result we had artists in New York but no art. Art is not produced by an artist but by several. It is to a great degree a product of their exchange of ideas with one another’ (in Rubin 1968, p. 342). Even in terms of aesthetic appeal, then, the new paradigm needs a critical mass. In Krugman’s (1994) description of Real Business Cycle theory, we get a sense that practitioners were pursuing only the appearance of normal science: ‘Its basic story may sound deeply implausible, but for those who brought into its premises it provided a framework for hundreds of theoretical papers and for elaborate if often peculiar assessment of statistical data.’ Asked to solve a system of two equations in two unknowns, the person familiar with maths would employ a simple solution technique: substituting one equation into another. A different person might be forced back on a ‘weak’ solution technique such as plugging in numbers until the right answer was achieved (ideally with use of some feedback method to see if the solution were being approached). We can only develop ‘strong’ techniques as questions become well-defined and familiar. Ironically, at the undergraduate level, we often ignore the most recent advances. To the extent that adverse selection, game theory, moral hazard and information contain hints of reality, we thus exaggerate the artistic side of the discipline at the expense of the scientific. McDonald (1993), speaking of social science more generally, argues that women researchers have tended historically to be empirically oriented. She also notes that empiricists have tended to be more critical of the status quo than those focused on theory.

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11.

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An even more ‘radical’ suggestion comes from Mayer. Rather than forcing all students to become maths jocks, we could have two (or more) track graduate programmes, where some mastered survey techniques, interdisciplinary work, etc. (1993, pp. 162–3). Until the discipline shakes its methodological biases, this runs the risk of creating secondclass citizens. These, though, would have time on their side, for their research would be more interesting and important than that of the Brahmins. ‘Economics is more like an art or philosophy than science in the use that it can make of its own history … Keynes and his contemporaries echo Ricardo and Malthus, Marx and Marshall and are still alive’ (Hicks 1983). If we view past theory as either mistaken or an imperfect formulation of modern ideas this cannot be the case. Yet Chomsky revolutionized linguistics by applying Cartesian ideals, and many modern medical researchers believe that Hippocratic ideas about the relationship between personality and health have merit. The past can only teach us if we are prepared to learn. The volume edited by Colander and Brenner (1992) elaborates on many of the criticisms above, and recognizes the difficulty of reforming graduate training when the profession itself is overwhelmed by methodological bias. Colander suggests a possible way out: there is perhaps some hope that second-tier programmes may try to differentiate their product by teaching only econ-science. Students who are either brave or unwilling to subject themselves to existing programmes would be attracted, and would have clear advantages as teachers and policy advisers even if the profession were slow to recognize their value as researchers. ‘Many research projects of interest to economic historians simply do not require very sophisticated analytical or econometric skills. And research projects that do require such analysis or techniques are dependent on preparatory ground work – done by economists, historians or others – which may again place little demand on the skills just inventoried. Primary source materials, be they documents or statistics, are the bedrock of historical analysis’ (Field 1986, p. 18). David Landes, a leading (old-style) historian, was recently chastised for criticizing another’s numbers without supplying his own. His reply was eloquent. He first made the (obvious) point that he could respect mathematical work without performing it himself:

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Nor shall I apologize for not supplying better figures. I do what I do best (I believe in comparative advantage) … The remarks … imply that those who generate numbers have a higher authority. [This attitude] has had a deplorable effect on recruitment to the discipline … One should not take for granted that the people who produce estimates are the best qualified to interpret them, nor should one accept numbers as defining or definitive just because they are numbers. (Economic History Review, August 1995, pp. 600–1)

14.

History serves lesser goals: Given all the weaknesses of econometric techniques, we should be openminded enough to accept that truth does not always wear the garb of equations, and is not always born inside a computer. Other ways of testing, such as appeals to qualitative economic history, should not be treated as archaic. (Mayer 1980, in Redman 1991, p. 126)

15.

16.

17.

18.

19.

Let us not forget our methodological bias: ‘As long as an economic theory explains the course of economic history it is a good theory, even if it is expressed in casual common sense terms’ (Mayer 1993, p. 31). Such a sentiment would hardly be shared by most econ-artists. Economic historians, by facing historical facts and focusing on the big picture have insight not fully appreciated: ‘I think that economic historians, rather than economists, are the people you should expect to find on the television’ (Eric Jones, Cliometrics Society Newsletter, October 1992). Jurgen Habermas has noted that a lack of historical perspective makes a society conservative. I spent several months in the archives in both England and France: not surprisingly I found that those making the decisions often had some inkling of the forces shaping the world in which they lived. The English hailed their transport system in quite specific terms, while foreigners in similar fashion bemoaned their disadvantage. Solow suggests that those who believe in intertemporal substitution should survey the unemployed (in Klamer 1984, p. 145). We would be well advised not to hold our breath. Whaples (1995) performed a very interesting survey of economic historians. He found a high degree of consensus

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on many questions, but not all (for example, causes of the Great Depression). While C. Romer’s conjecture that business cycles were more severe after Keynes than before received great attention in major mainstream journals, there was consensus in the field that the rejoinders which appeared in lesser journals and showed the opposite were in fact correct. This is one major advantage of surveys: they can tell us when scholars reject ideas published in leading journals. When, early in this century, young Turks tried to ensure that behaviouralist papers would be published in the journal of the American Political Science Association, they found that they only achieved this goal as the old guard retired (Simon 1991, p. 169). Perhaps, we can have better luck. Pepper (1948) discusses two ways of verifying whether a chair is sturdy. The first (along the line of (v)) is to have many people sit on it without it breaking. The second (what we call subsidiarity) is to examine the characteristics which would make the chair sturdy: construction technique, glue, wood, etc. We might think evidence of the first sort superior. If, however, we had a prior reason to think the chair not sturdy (theory predicted this, someone we trusted had said so), then the first sort of evidence could be much more easily dismissed (as somehow exceptional) than the second. Schabas (1992) suggested that historians of economics should recognize that economists have no historical sense, give up on communicating with them, and focus instead on interacting with philosophers of science. The comments on her paper indicate that most in the field feel that they must continue to speak to economists.

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Index Aaron, H., 126, 163 Aesthetic standards in economics, 6, 8–12, 15, 18, 30, 33, 43, 66, 75–7, 79, 86, 88, 96, 118, 128, 131, 142, 147–8, 154–5, 158, 164–7, 174, 179 Agricultural economics, 156 Allen, R., 220 Altruism, 36–7, 40–1, 49–50, 122 Anarchism, 52–3, 102–3 Aragon, L., 76 Architecture, 4–5, 105–6, 119–20, 180 Argyrous, G., 175, 231 Aristotle, 81, 140 Arnason, H., 42, 51, 62, 102, 180, 221 Arrington, C., 44 Arrow, K., 94 Art, definition of, xi–xiii, 2–6, 13–16, 32 Asian art, 5, 7, 89, 151 Ashby, E., 201 Assumptions, 32–3, 64–5, 68–70, 78–9, 84, 86–7, 89, 93–5, 97, 99, 113, 120, 123, 140–2, 157–8, 165, 167, 179, 201 Austrian economics, 48, 162 Ayres, C., 106 Backhouse, R., 9, 184 Balakian, A., 207

Baran, P., 86 Baron, J., 230 Barr, A., 59, 63, 78, 207, 213 Bartlett, Randall, 49, 73, 113–14, 149, 153, 166, 216 Bartlett, Robin, 160 Bartley, W., 144, 200 Bateman, B., 184 Baumol, W., 159 Beauty, 6, 9, 10, 12, 19, 39, 43, 68, 77, 89, 120–2, 131, 137–41, 147, 150–1, 174, 187, 203, 212 Becker, G., 197 Beed, C., 142, 154 Belton, R., 104 Bergson, H., 54 Berman, M., 44, 46, 55, 63, 210–11 Bhaskar, R., 31, 70, 169 Billington, D., 5 Blatt, J., 83, 140, 158, 218 Blau, J., 181 Blaug, M., 20–1, 79, 92, 94–6, 133, 142, 152, 157, 165, 174, 205 Blinder, A., 197, 224 Boland, L., 82, 97, 126, 142, 153, 184 Booth, W., 146 Borges, J., 27–8, 40, 45, 59 Boulding, K., 166 Bowles, S., 94, 114 Boylan, T., 168 Braque, G., 51–2, 178

250

ECON-ART

Breit, W., 8, 18, 32, 49, 50, 68, 143, 221, 226 Brenner, R., 96, 230 Breton, A., 25, 36, 57, 62, 78, 102, 109, 154, 165 Bronfenbrenner, M., 124 Buiter, W., 63–4 Caldwell, B., 155, 162, 226 Canterbury, E., 225 Capital, 48, 82–3, 85, 153 Capra, F., 16, 31, 90, 134, 139, 150 Carr, J., 149 Carter, J., 109 Case studies, 19, 88, 160, 173, 192–3, 195, 200 Cezanne, P., 57, 65 Chagall, M., 24 Chalmers, A., 14, 107, 139, 141, 143, 145, 171, 201, 220 Chamberlin, E., 21 Chaos theory, 35, 55 Classical economics, 28, 30, 34, 40, 48, 53, 56–9, 110–11, 128, 131, 149, 184, 188, 223, 229 Cloke, P., 181 Clower, R., 34, 138, 214 Coase, R., 134, 158, 176 Colander, D., xii, 8, 9, 13, 34, 87, 127, 153–4, 158, 174–5, 184, 204–5, 208, 217–18, 221, 225, 232 Communism, 25, 102–3, 162 Consumption, 28–9, 44, 48–9, 54, 63–4, 83, 95, 116, 194–6 Cooper, D., 52 Coote, J., 79, 171 Cosmides, L., 168, 173 Cowling, E., 63 Crafts, 4, 121 Crafts, N., 220 Craver, E., 97 Cromer, A., 99

Cultural influences, general, xi, xiii–iv, 3, 19–23, 44, 65, 102–3, 109, 118, 167, 171, 180, 184, 212 Dabrowski, M., 60–1, 63, 114 Dada, 46, 57, 69, 207 Dali, S., 31, 102 Darby, M., 117 Dasgupta, A., 22, 206, 221, 227 Dasgupta, P., 6 David, J-C., 35, 104 Da Vinci, L., 4, 16 Dawkins, R., 215 Deane, P., 127, 162, 212, 228 Debreu, G., 81 De Chirico, G. 24 Delaunay, R., 51, 60 Demand and supply curves, 28, 54, 66, 81–2, 94, 156 Development economics, 136, 162, 177, 187, 193, 199 Diagrams, 2, 12, 17–18, 61, 68, 99, 147–8, 208 Diaz-Alejandro, C., 87 Dixit, A., 179 Dornbusch, R., 160 Dosi, G., 153, 172 Dow, G., 223 Drafting, 4 Dréze, J., 127 Duchamp, M., 102 Dynamic versus static analysis, 22, 53–6, 84, 93–5, 131, 149, 171–2, 177, 179–80, 187–8, 190, 227–8 Dyson, T., 229 Earl, P., 8, 88, 110 Econometrics, 10, 56, 64, 69, 87–8, 96–101, 128, 143, 154–8, 161, 165–6, 186, 192, 195–7, 200, 232–3 Economic geography, 167

INDEX

Economic growth, 30, 37, 48, 55, 57, 85, 100, 110, 128–9, 131, 149, 151–3, 168, 172, 175, 177, 185–9, 193, 199, 218, 233 Economic history, 53, 100, 114–17, 122, 128, 135–6, 155, 162, 168, 184–96, 230, 233–4 Eichengreen, B., 154 Eichner, A., 108, 223 Einstein, A., 89 Eizenstat, S., 224 Environment, 41, 124, 128, 198 Equilibrium, 53–5, 66, 84, 116, 133, 150, 172, 179–80, 195 see also General Equilibrium Ernst, M., 102, 231 Evolutionary economics, xv, 153, 162, 172, 175–6, 187, 206 Experimental economics, 29, 155, 173 Feldman, E., 5 Fels, R., 157 Feminist perspectives, 104, 139, 180, 182 Ferber, M., 139, 182 Feyerabend, P., 13–14, 145, 228 Feynmann, R., 163 Field, A., 232 First World War, 24–5, 28, 31, 48, 52, 61, 80, 115, 125, 220 Fish, S., 9, 37, 106, 147 Fisher, F., 179 Fishlow, A., 190 Fleming, W., 10, 26–7, 53–4, 57, 63, 65, 102, 119, 207, 211–12 Fogel, R., 190 Fortin, P., 79 Foucault, M., 211 Freedman, C., 41, 74, 164–5, 215 Freud, S., 26, 39, 40, 44, 48, 103

251

Friedman, M., 18, 32, 56–7, 66–70, 115–16, 123, 128, 142, 231 Fusfeld, D., 21–2, 106–7, 110, 224 Futurists, 68, 212 Galbraith, J., 29, 143, 221, 224, 230 Galileo, G., 16, 177 Game theory, 129, 158, 179, 231 Garden of economic theory, 29, 112, 126 Gardner, B., 156 General Equilibrium theory, 28, 34, 63, 92–6, 119, 128–9, 155, 198 Getman, J., 188 Goethe, J., 30 Golding, J., 51–2, 59, 60, 213 Gombrich, E., 19, 59, 205, 207, 209, 212 Goodman, N., 7 Gordon, R., 197 Gordon, S., 114, 128, 131, 147, 161, 214, 223, 227 Government, role of, 18, 37–8, 47–50, 52, 58, 66–8, 94, 103, 108–9, 111, 113, 115, 117, 119, 169, 196, 198–9 see also policy advice Gowdy, J., 161 Great Depression, 21, 27, 49, 93, 111, 114–17, 125, 128, 187, 189, 193–6, 220, 234 Gris, J., 51 Grossman, G., 94, 197 Grubel, H., 73, 110, 167, 183, 199, 216, 228 Habermas, J., 233 Hadjinicolaou, N., 57, 104–5, 107 Hahn, F., 207, 218–19 Hamilton, L., 198 Hansen, W., 72, 134, 181, 184 Harberger, A., 84, 127, 153, 158 Haslam, M., 27, 47–9, 78, 102

252

ECON-ART

Hatton, J., 146 Hauser, A., 27–8, 30, 49, 53, 203 Hausman, D., 41, 168 Hayek, F., 124 Hedges, I., 26, 36, 133, 207 Hegel, G., 210 Heilbroner, R., 30, 57, 85, 106–8, 149, 218, 222 Heller, W., 225 Hendershott, A., 167 Henderson, L., 52, 211 Hesse, H., 35, 42, 45, 125, 145, 185–6, 210, 219 Hicks, J., 91, 96, 188, 228, 232 Higonnet, P., 220 Hirschman, A., 111, 139 History of economic thought, xi, xiv, 3, 20–3, 162, 176–7, 184 Hodgson, G., 94, 217 Honesty, 74, 126, 143, 147–8, 161, 163–6, 201 Howell, D., 152 Hubert, R., 26–7 Hufbauer, G., 12 Hughes, J., 225 Hume, D., 226 Hutchison, T., 166 Ideology, 25–6, 28–9, 39, 41, 49, 52, 102–17, 137, 144, 162, 174, 179–80, 216–17 Impressionism, 51, 59, 209 Income distribution, 37, 57–8, 108, 110–11, 114, 124, 126–7, 180, 211, 231 Industrial organization, 32, 37, 50, 96, 128–9, 158, 160, 167–8, 171, 187–93, 197, 229, 231 Industrial Revolution, 159, 185, 189–93 Inflation, 37, 66–8 Institutionalism, 113, 153, 162 Institutions, 34, 37–8, 48, 112, 114, 127, 136, 161, 168, 172–3, 176–7, 186–7, 191, 193

Interdisciplinarity, 19, 93, 112–13, 152, 166–9, 172–3, 177, 187, 232 International economics, 11–12, 29, 37, 47, 55, 127–9, 152, 155–6, 171, 174, 187, 198–9 Investment, 37, 116, 136, 152, 156, 167, 179, 194–5 Jaffé, H., 60, 65, 124, 138, 217, 227 James, W., 140, 145 Jevons, S., 227 Jones, E., 230, 233 Joyce, J., 27 Jung, C., 35 Kaldor, N., 97, 134 Kalecki, M., 21, 33, 208 Kandinsky, W., 60 Kasper, H., 167, 181 Katzner, D., 216 Kendry, A., 32, 208 Kerr, C., 154, 201 Keynes, J.M., 11, 21, 37, 49, 57, 67, 82, 88, 98, 111, 115, 159, 165, 167, 200, 208, 213, 228–9, 232 Keynes, J.N., xiii Kierkegaard, S., 43 Kindleberger, C., xiii, 225 Kirman, A., 219 Kirzner, I., 162 Klamer, A., 32, 40, 56, 83, 85, 101, 146, 164, 203, 209, 216, 219, 221, 226, 233 Klee, R., 13, 32, 142, 173, 180, 205, 208 Klein, P., 113 Klingender, F., 4, 204 Knight, F., 49–50, 166, 171, 229 Koopmans, T., 84 Koppl, R., 40 Krieger, M., 109 Kriesler, P., 208 Krueger, A., 134, 149, 182

INDEX

Krugman, P., 67, 88, 151, 167, 172, 231 Kuhn, T., 14–15, 58, 91–2, 173, 175 Kuiper, E., 168 Kung, H., 2, 19, 36–7, 45, 56, 105 Kydland, F., 64 Labour, 4, 5, 29, 39, 48, 113, 128, 139, 152, 156, 179–80, 188, 191, 194–6, 206, 222–3, 228, 233 Lakatos, I., 92, 94, 164, 230 Lambert, K., 13, 91 Landes, D., 232 Langley, P., 81, 84, 175, 178 Lanham, R., 84 Lawson, T., 220 Leamer, E., 12, 86, 98–9, 137 Leighton, P., 52–3, 77, 80, 103 Leontief, W., 12, 79, 83, 135, 154, 156–7, 182 Lerner, A., 18 Literature, 1, 7, 9, 11, 27, 39, 53–4, 57, 65, 75, 78–9, 81, 102, 109, 119, 133, 180 Lo, A., 151 Lodewijks, J., 230 Lowe, A., 179 Lucas, R. 83–4, 136 Machina, M., 208 Macroeconomics, 18, 43, 94, 97, 111, 114–17, 119, 128–9, 171, 179, 187, 193–6, 198–9, 219, 229, 234 see also Keynes, New Classical, Phillips Curve, Rational expectations, Real Business Cycles Maki, U., 147 Malevich, K., 60 Malthus, R., 58, 229, 232 Margo, R., 117 Marshall, A., 53, 60, 87, 110, 112, 127, 232

253

Marx, K., 22, 26, 36–7, 109, 162, 210, 232 Matthews, J., 36, 135, 154, 225 Maximization, 28–9, 32, 40–1, 48, 113–14, 197 Mayer, T., 14, 35, 56, 64, 69, 72–3, 77, 81, 84–6, 88, 92, 97–100, 121, 124, 127, 157, 168, 183, 196–7, 207, 216, 226, 233 McAfee, R., 224 McCloskey, Dierdre, 9, 11, 34, 43, 86, 128, 152, 154, 163, 165, 171, 198, 205, 210, 214, 220 McCloskey, Donald, 90, 92, 121, 128, 142–3, 146–8, 151, 155, 209, 215, 218, 229 McDonald, L., 231 Meakin, D., 4–6, 106 Medawar, P., 132 Medema, S., 41, 135 Methodology, economic, xii, xiii, xv, 10, 14, 19, 30–1, 34, 46, 69–70, 107, 117, 123, 130–2, 142, 153–60, 169, 178, 184, 198–9, 202 Michaelangelo, 16 Mill, J., 57, 85, 159–60, 163–4 Miro, J., 31 Mirowski, P., 13, 29, 82, 153, 164, 202, 204 Modelling, 7, 32–5, 43, 56, 64–6, 69, 73, 77–9, 82–3, 86–8, 97, 120, 127, 136, 149, 156–8, 165, 173, 186, 191–2, 195, 197, 208, 216, 228 Mondrian, P., 60–2, 65, 76, 122, 124, 138 Morgan, M., 100 Morgan, T., 157 Morgenstern, O., 72, 158, 229 Motion pictures, 55–6, 65, 76–7 Mumford, L., 221

254

ECON-ART

Murray, P., 207 Music, 1, 27, 35, 38, 54, 75, 81, 204, 212–13 Nadeau, M., 47, 57, 76, 123, 209 Nationalism, 10, 47–8, 52, 103 Natural rate of unemployment, 66–8 Nelson, J., 182 Nelson, R., 100, 179, 197 New Classical economics, 63–4, 219, 226 New growth theory, 152, 187 Niehans, J., 156 Nietzsche, F., 46, 210 North, D., 41, 185–6, 219 Pack, S., 58 Painting, 7, 39, 48, 51–2, 54, 65, 78, 81, 102, 119, 151, 204 Papineau, D., 145, 205 Peckham, M., 46 Peirce, C., 217 Pepper, S., 234 Perfect competition, 29, 33 Phelps, E. 66–7, 214 Phelps, R., 220 Phelps-Brown, E., 81 Phillips curve, 66–8 Philosophy of science, xi, xii, 5–6, 13–16, 31–2, 46, 69–70, 74, 83, 92, 97–8, 107–8, 131–2, 139, 141–5, 164, 173, 181, 186, 219–20, 225, 230, 234 Photography, 55–6, 58–9, 212 Physics, 58, 72, 74, 80–2, 84–5, 89–91, 107, 112, 117, 133–5, 138–40, 142, 150, 161, 163, 168, 172, 176, 197, 202 Picabia, F., 51 Picasso, P., 51–2, 57, 62, 76–7, 87, 102, 123, 178 Picon, G., 25, 31–2, 47, 70, 146, 165 Plato, 140–1

Platt, S., 105 Polanyi, M., 10 Policy advice, xiii, 18–19, 58, 67–9, 86, 95, 121–8, 134, 136, 163, 169, 171–2, 187, 196, 198, 201–2, 205, 220, 222, 232 Pollard, S., 191 Pollock, J. 61, 63 Popper, K., 80, 144, 161–2, 165, 217–18, 223, 226–7 Porter, T., 72 Posner, R., 158 Pound, E., 204 Power, 29, 37, 46–50, 58, 103, 108–10, 112–15, 122, 173, 216 Progress, 20, 25, 35–40, 83, 110, 122, 125, 128, 132, 135, 145–6, 148–9, 160–2, 164, 205, 207, 212, 217 Prokofiev, S., 27 Radner, R., 41, 228 Radznicky, G., 227 Rapping, L., 33, 85, 209, 216 Rational expectations, 34–5, 57, 68, 138, 213 Rationality, 10–11, 18, 25, 28–30, 37, 39–41, 66–7, 74, 94–5, 113–14, 133, 144, 168, 172–3, 176, 180, 227, 230 Ravel, M., 27 Read, H., 4–7, 39, 42–3 Real Business Cycle theory, 196, 209, 228, 231 Reality, 10, 15–17, 30–1, 75, 89, 91, 137–8, 147, 150, 173, 204–5 and art, 6–8, 17, 26–8, 30–2, 36, 45–6, 51–3, 55, 59–62, 105, 120, 132–3 and economics, 12, 19, 28–30, 32–5, 38, 46–7, 55, 58–9.63–4, 66–8, 71, 73, 78, 80, 82, 86–92, 94, 96, 107–8, 114–15, 120–2, 126,

INDEX

128–9, 131–9, 150–1, 156, 163, 167, 183–4, 209, 217 Reder, M., 50, 183, 221, 224 Redman, D. 13, 46, 72, 77, 98, 100, 141, 143, 158, 161, 163–4, 166, 171, 177, 182, 200, 205, 215, 222, 227, 230, 233 Refereeing, 72–4, 99, 148, 164–5, 201, 230 Representative agent models, 219 Reskin, B., 139 Rhetoric, xii, 9, 107, 109, 146–9 Ricardo, D., 57–8, 212, 232 Robinson, J., 21, 82 Rodrick, D., 87 Roll, E., 21, 81, 85, 222 Rolland, R., 10 Romer, C., 234 Romer, P., 85 Rosemount, F., 25, 27, 36, 102, 109 Rosen, S., 162 Rosenberg, A., 91, 219 Rosenberg, H., 105 Rosenblum, R., 51, 57, 60, 211 Ross, D., 211 Rostow, W., 22, 136, 177 Rothschild, E., 58 Rowe, J., 109 Roy, S., 49, 70, 97, 147, 158, 160, 218 Rubin, W., 51, 59, 76, 178, 225, 231 Ruccio, D., 180 Ruskin, J., 4, 106 Russell, B., 28 Rutherford, M., 153 Samuels, W., 85, 206 Samuelson, P., 8, 12, 32, 44, 46, 54, 77, 82–3, 90, 142, 208–9, 213, 218 Saul, J., 129 Schabas, M., 234 Scheeler, C., 232 Schelling, T., 179

255

Schiller, F., 197 Schoeffler, S., 205 Schotter, A., 227 Schumpeter, J., 19, 21, 108, 185 Schwartz, A., 155–6 Science, definition of, xi, xii, 13–6, 32 Sculpture, 39, 65, 75, 124 Second World War, 27, 45, 115, 125, 209, 220, 231 Self–reference, 43, 63–5, 134, 213–14 Selz, P., 60 Sen, A., 139, 209, 223 Seuphor, M., 61–2, Simon, Herbert, 18–19, 40–1, 77, 83–4, 124, 139, 160, 176, 212, 222, 226, 228, 234 Simon, Henry, 49–50 Skousen, M., 221 Smith, A., 40, 57–8, 72, 85, 110 Snooks, G., 152–3, 169, 186 Socrates, 43 Solow, R., 43, 154, 159, 209, 213, 219, 227, 233 Spanos, A., 97 Spiegel, H., 9, 21–2, 28, 47–8, 81–2, 85, 107, 110–11, 203, 215 Stanfield, R., 113 Stigler, G., 224 Subconscious, 3–6, 9, 16–18, 22, 25–6, 28–32, 37, 40, 43, 46, 61–3, 68, 76–9, 103–4, 106, 108, 111–12, 133, 146, 168 Summers, L., 156 Surveys, 72, 110, 126, 134, 158, 173, 181, 184, 196–9, 218, 223, 232 Swaney, J., 135 Sylvester, D., 27, 143, 178 Symons, D., 210 Szostak, R., 56, 94, 116–17, 189–96, 223 Teaching economics, 134, 163, 186–8, 201, 232

256

ECON-ART

graduate, 72–3, 96, 110, 134, 149, 167, 181–5, 218, 223 undergraduate, 2, 12, 109, 167, 181, 208, 231 Technology, 4, 12, 20, 29, 48, 55–6, 58–9, 82–3, 85, 129, 135–6, 149, 151–3, 156, 159, 168, 171–3, 177, 186–96, 199, 210, 217 Textbooks, 68, 70, 110, 134, 136, 201, 208, 220 Thurow, L., 29, 33, 71, 161 Tirole, J., 96 Tobin, J., 33, 226 Tolstoy, L., 39 Tooby, J., 167, 169 Toulmin, S., 20 Truth, 6–7, 11–12, 19–21, 35, 47, 51, 61, 70, 72, 112, 133–4, 137–41, 144–8, 153–4, 157, 173–4, 176, 181, 186, 189, 205 Tuchman, B., 112 Unemployment, 28–9, 37, 48, 55, 66–8, 84, 93, 113, 115, 117, 124, 126, 129, 136, 179, 187, 194–6, 198, 233

Vernon, R., 12 Viner, J., 154, 181 Vitz, P., 55, 211 Von Baeyer, H., 10 Von Neumann, J., 48, 75, 158 Walras, L., 131, 176 Weinstein, M., 163 Weintraub, E., 83–4, 92–5, 107, 177 Weisskopf, W., 20 Wendt, P., 203 Whaples, R., 233 Whitaker, J., 92 Whitehead, A., 133 Williams, G., 132 Williamson, O., 168 Wolfe, T., 27, 69, 106 Wordsworth, W., 39 Worswick, D., 79 Wulwich, N., 213 Yeager, L., 162 Young, A., 55 Zeeman, E., 84 Zolberg, V., 169, 178, 228, 231