Sunday, February 18, 2007

An Ideological and Intellectual Wallace Line

A while back I jotted down what bugged me about neo-classical economics.

The first point I made was the fairly standard one about assumptions of rational self-interested decision making economic agents (that's you and me).

There's two points I'd like to add to this. First, just to be clear, (most) neoclassical economists don't actually believe that humans really are wholly rational or self-interested, what they argue is that humans display these tendencies to a significant enough extent that if you assume them you can create models that relatively accurately reflect human behaviour (or, at least, models which do so better than any alternative models you can construct)*. This - as I wrote - strikes me as not only wrong, but also as a way of tailoring assumptions to produce outcomes that, ever so conveniently, reflect political beliefs.

There is, I think, something else that I should have added when making this original point though. That is that, above and beyond the actual assumptions of human behaviour that neoclassical economists use, there appears to be a further problem in that human behavior is also taken as being inevitable and unchanging. In other words, we don't behave differently in different social models or in societies with different mores. Human nature is, according to neoclassicals, static.

Compare this with Marx, to whom the possibilities of social change were closely tied to the potential for human interactions to change in a fundamental way.

Even if you're no way as radical as Marx I'd say that, if you're a progressive, you probably still hope for a world where we treat each other slightly better. I know I do. And I also think that this isn't a vain hope.

So I'd like to suggest that we have a Wallace line here: a clear division between most neoclassical economists and most progressives. All to do with whether human nature can change over time and in different circumstances (or, to be more accurate, whether different social structures might enhance different aspects of human nature).

*Joseph Stiglitz has a funny little coda to this:

Among the more amusing results that have come out of experimental economics are those concerning altruism and selfishness. It appears (at least in experimental situations) that experimental subjects are not as selfish as economists have hypothesised, except for one group - the economists themselves.

Is it because economics as a discipline attracts individuals who are, by nature, more selfish, or is it because economics helps shape individu als, making them more selfish? The answer, almost certainly, is a little bit of both. Presumably, future experimental research will help resolve the question of the relative importance of these two hypotheses.

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