In Defense of Herbert Spencer

by Mario Rizzo

This my letter as it appears in today’s Financial Times (July 10, 2013):

Sir, John Kay (“Darwin’s  humbling lesson for business”, July 3) makes good points about evolutionary  theory and the social sciences. But he is wrong about Herbert Spencer, the noted  English philosopher and evolutionist. Spencer was not a Darwinist of any kind  nor an advocate of eugenics. He had his own theory of evolution that predates  Charles Darwin’s publication of Origin of Species by a few years.  Spencer was broadly speaking a Lamarckian.

In other words, he believed in the heritability of acquired characteristics.  He further believed that a free market would produce a discipline on individual  actions that would, at once, make them more efficient and more moral. Since  these traits could be passed on to future generations, there was no need for  eugenics.

http://www.ft.com/cms/s/0/dfd7b330-e33d-11e2-bd87-00144feabdc0.html#ixzz2Ye9CZ9PH

The Great Ideas of the Social Sciences

by Gene Callahan

Let’s take social science broadly, in the sense of German wissenschaft, so that The Republic and Politics and The Social Contract are social science. (I would contend that they are, in fact, often much more scientific than the latest regression study of how detergent use correlates with the suicide rate.)

So what, then, are the most important ideas ever put forward in social science? I’m not asking what are the best ideas, so the truth of them is only obliquely relevant: a very important idea may be largely false. (I think it still must contain some germ of truth, or it would have no plausibility.) Think of it this way: if you were teaching a course called “The Great Ideas of the Social Sciences,” what would you want to make sure you included?

Here’s my preliminary list. What have I left off? What have I mistakenly included?

The Limits of Bayesian Inference

by Gene Callahan

Dan Klein’s Knowledge and Coordination has something interesting to say about Bayesian inference, although he never explicitly addresses that topic. Consider the following:

Here, we have the distinction between responding to the realization of events within a framework of recognized variables and relationships and the discovery of a fresh opportunity to embrace a new and better framework or interpretation. This element of epiphany, of finding fortune by interpreting the world differently, is the subtle and vital element in human decision making. Yet, it is absent from equilibrium model building. In equilibrium stories, agents never have a “light bulb” moment… (p. 13)

Kirzner’s alertness is the individual’s re-interpretation of that world [of a world of already-interpreted “facts”]. (p. 14)

“Equilibrium” is meaningful only in reference to a specified model… (p. 28)

Bayesian inference, similar to equilibrium theorizing, works within a fixed frame of interpretation: it “is meaningful only in reference to a specified model.” It cannot extend across instances when a new interpretive framework takes the place of the old.

“Rationality” isn’t always Rational

by Mario Rizzo

Over the past two years I have been reading more than I ever dreamed about rationality in economics, especially in the standard neoclassical theory of choice. I have done this because I want to get at the root of the controversies concerning whether people’s behavior is, in particular contexts, rational or not.  Claims about the rationality of individual behavior are very closely linked to important policy questions about state paternalism. The highly abstract is working its way down the line to practical policy issues.

In all of this I am well-aware of the argument that “rationality” is the result of market processes and of decisionmaking institutions. I have nothing per se against this line of reasoning. Nevertheless, I want to approach the issue on the terms espoused by many choice theorists and behavioral economists themselves. This is the idea that the axioms of rational choice have a normative importance in and of themselves. By and large, behavioral economists accept the normativity of standard rational choice even as they reject the descriptive reality of rational choice.

The funny thing about all of this is that, initially, the axioms of rational choice were supposed to shed light on how people actually made choices. Then a sleight of hand occurred. It was claimed that they shed light on how rational individuals would choose – without addressing the issue of whether people were in fact rational in the sense of the axioms. Finally, it was alleged – in the face of empirical evidence that people often did not choose rationally – that the axioms defined the norms of choice. They told us how rational individuals should choose. More than that. Since being rational is taken as “good,” they show us how people should behave – full stop.

Generalizations in the Social Sciences

by Gene Callahan

On his blog, Daniel Kuehn notes that “relations in economies are not stable.” In fact, we can go further:  Relations in the social sciences are not stable. As an illustration, consider Zipf’s Law as applied to city size.

In 1700, London had about 575,000 people. According to Zipf’s Law, the next-sized city should have had about 280,000 or 290,000 thousand. What was the actual size of the second largest city? As far as I can determine, it was Norwich, with a population of about 30,000. (My source for the population figures is 1688: The First Modern Revolution.) Zipf’s “Law” is off by a factor of about ten in this instance.

What I suspect is that there is some historical circumstance that leads to Zipf’s Law applying to city size in recent centuries, which was not present in 1700. As political scientist Terry Nardin put it: “Generalizations about how people usually behave are not scientific generalizations about a truly time-independent class of phenomena; they are more or less well-disguised descriptions of customs specific to a particular historical situation.”

Risky Behavior at Wittenberg

by Chidem Kurdas

Watching Wittenberg at the Pearl Theater in New York took a group of us back to our graduate school days. This is a surprisingly entertaining comedy, creating merriment out of a mash of classical characters, modern themes and serious philosophy.

The year is 1517.  Two academics at Wittenberg University, Martin Luther and John Faustus, are more or less cordial colleagues but intellectual antagonists.

Both are dissatisfied. Dr. Faustus holds four graduate degrees – in medicine, law, philosophy and theology – but has found all this knowledge lacking. On top of that, the woman he loves leaves him.  Father Luther detests the Church’s selling of indulgences but feels he can’t do anything about it. Their star pupil, a Danish prince named Hamlet, is confused.

Further Thoughts on The Sensory Order

by Roger Koppl

Over at Austrian Addiction, Dan D’Amico responds to my recent post on The Sensory Order.  Dan wants to know “what Hayek’s theory of neuorscience is really adding here that a more basic understanding of subjective preferences does not already imply?”  Dan is not the only one with this question.  I think enthusiasts for The Sensory Order have given pretty good answers to Dan’s question, but it seems clear that we need to do a better job.

When Good Historians Go Bad

by Gene Callahan

I had posted about something that Thomas Sowell wrote on the history of economic thought over at my other blog, and received a comment to the effect that, “You can’t trust Sowell on history: he thinks that England conquered Scotland!” (Rather than the two nations having joined together in a union.)

This comment both illustrates an important misconception as well as highlights an important distinction. The misconception is that someone is a good historian if they know lots of “facts” about history, and rarely get anything wrong.

The Method of History

by Gene Callahan

I’m currently reading Bryan Sykes excellent book, The Seven Daughters of Eve. Well, excellently written, and, I have to assume, excellent on the genetics. But there are a couple of fundamental misunderstandings of history present in the book, that I think are worth noting, because of the frequency with which people believe them.

The first such error is that Sykes keeps referring to “prehistory,” “recorded history,” “the beginnings of history,” and so forth. These phrases are symptomatic of the error, exploded decades ago by Collingwood, that there is something especially “historical” about written records, that they represent the “recording” of history by those “witnessing” it, and that, in their absence, we only have some fuzzy “prehistory” with which to deal.

Just the “Basic Facts,” Mam

by Gene Callahan

I was recently in a conversation with a very bright economist who declared “We are in agreement about the basic historical facts here; we are just interpreting them differently.”

This is a common but very damaging misunderstanding of historical knowledge: that there are a set of “basic facts” that historians are “given” to start with, and what historians then do is apply a “theory” to fit an interpretive scheme over those facts. That this view cannot be correct becomes obvious once one realizes that no such thing as the “basic facts” this views relies upon can exist in history.

Calling All Cartesians

by Gene Callahan

Or at least all students of Descartes works. My situation:

I am trying to write a review of Vernon Smith’s Rationality in Economics. (No easy task: I think I’m going to have to read a book on auctions in the process.) In any case, I came across him quoting Hayek saying: “Descartes contended that all the useful human institutions were and ought to be deliberate creation(s) of conscious reason…” (p. 26). This is sourced to Hayek (1967: 85). And there, indeed, Hayek says that — but with no reference to where Descartes claimed this. Now, I happened to be researching The Discourse on Method recently, and I said:

“Descartes was cautious enough to add caveats to his programme, such as declaring, for instance, ‘Thus my purpose here is not to teach the method that everyone ought to follow in order to conduct his reason correctly, but merely to show how I have tried to conduct mine’ (1993: 2). But Descartes’s modesty here was not embraced by his epigones;

The Amazing Brad DeLong

by Mario Rizzo  

I don’t know where Brad DeLong acquired his philosophy of economics. DeLong responded to an article by Jean-Claude Trichet, president of the European Central Bank, on “austerity.” The following is part of what the Financial Times edited out of the published version. DeLong posted it on his blog. He says there are two types of economists:  

“One type chooses, for non-economic and non-scientific reasons, a political stance and a political set of allies, and twiddles and tunes their assumptions until they come out with conclusions that please their allies and their stance. The other type takes the carcass of history, throws it into the pot, turns up the heat, and boils it down, hoping that the bones and the skeleton that emerge will teach lessons and suggest principles that will be useful to voters, bureaucrats, and politicians as they try to guide our civilization as it slouches toward utopia. (You will not be surprised to learn that I think that only this second kind of economist has any use at all.)”  

An Austrian in Rome

by Mario Rizzo

I am not sure how the following fits into the broader scheme of ThinkMarkets. However, it does reflect more or less what I have felt in visiting Rome.

…[Sigmund] Freud actually entered the Eternal City in 1901, nearly five years after his father’s death, not “to take vengeance on the Romans,” but as intellectual pilgrim and psycho-archeologist, in the footsteps of Wickelmann. He wrote, “It was an overwhelming experience for me, and, as you know, the fulfillment of a long-cherished wish. It was [also] slightly disappointing.” Freud described his varied reactions to three Romes: the third, modern, was “hopeful and likeable”; the second, Catholic Rome, with its “lie of salvation,” was “disturbing,” making him “incapable of putting out of my mind my own misery and all the other misery which I know to exist.” Onlyn the Rome of antiquity moved him to deep enthusiasm: “I could have worshipped the humble and mutilated remnant of the Temple of Minerva.”

(Note: The temple is to Minerva, Medica [the Doctor]. She was the virgin goddess of poetry, medicine, wisdom, commerce, weaving, crafts, magic, and the inventor of music.)

From: Carl E. Schorske, Fin-De-Siecle Vienna: Politics and Culture (New York: Vantage Books, 1961), p. 202

On Bentham and Utilitarianism

by Mario Rizzo

An interesting discussion has begun at Marginal Revolution on “Benthamite utilitarianism.” It started with a small comment I made on Tyler Cowen’s remark regarding the discussion of Robert Frank’s position goods idea. Then Tyler responded in a post. And then I made a comment. It is all here.

Discussions of this subject can be interminable. So perhaps just a little is best.

The Abstract and the Concrete Part II

by Gene Callahan

I fear I was insufficiently clear in expressing my view of the relationship between abstract and concrete thought in my previous post on the topic; although I intended, right at the outset, to make obvious that my intention was not to dismiss the value of the abstractions offered to us by science, it is apparent that some commentators, nevertheless, read my post as just such a dismissal. Therefore, it might prove worthwhile for me to explicate further the view expressed in that earlier post, as well as to offer an example of the sort of concrete thought I suggested to be superior to its more abstract brethren.

In regards to the first matter, let me assure readers that I regard abstract thought as being of tremendous value, and that I recognize the monumental achievements of those abstract realms of theory, mathematics and science, in the last several centuries.

The Abstract and the Concrete

by Gene Callahan

Abstraction can be an entertaining and useful activity. But every abstraction falsifies reality simply because it is an abstraction – it is a one-sided emphasis on certain aspects of the real at the expense of neglecting or even denying others. That is not necessarily harmful as long as we remember what we have done. But the abstraction, being simpler and more manageable than the real world, is a seductive fantasy, and the temptation to ignore messy reality and attempt to replace it with a clean and neat dreamworld.

Let me offer a few examples to illustrate what I am on about. For instance, Jared Diamond, in Guns, Germs, and Steel, wants to replace the history of the individual with what he seems to think he has founded, namely, “scientific” history. The end result is that he often winds up botching his history.

Methodological Individualism Reconsidered

by Gene Callahan

Many Austrian economists embrace the doctrine of ‘methodological individualism,’ as I myself did, for instance, in my book Economics for Real People. But subsequent study on my part, most significantly of the work of Tony Lawson in his philosophy of economics project he calls ‘Critical Realism,’ as well as my readings of the social theories of the British Idealists, has led me to question the soundness of that position.

I will begin by noting that I think the adoption, by Mises, Hayek, and other Austrians of their era, of methodological individualism is understandable, given that the chief alternatives available when they wrote were some sort of ‘social holism,’ a la Durkheim, or Marxist historical and class determinism. If one’s choice is restricted to those three options, I believe methodological individualism is indeed the preferable stance to take.

Facts and Theories

by Gene Callahan

“The theorist who drops anchor here or there and puts out his equipment of theoretic hooks and nets in order to catch the fish of the locality, interrupts but does not betray his calling. And indeed, the unconditional engagement of understanding must be arrested and inquiry must be focused upon a this if any identity is to become intelligible in terms of its postulates. An investigation which denies or questions its own conditions surrenders its opportunity of achieving its own conditional perfection; the theorist who interrogates instead of using his theoretic equipment catches no fish.” – Michael Oakeshott, On Human Conduct

We often hear controversy today over whether something is a “fact” or a “theory.” This arises both in the debate over anthropogenic global warming and in the disputes between creationists and Darwinists: Is global warming a “proven fact” or a “speculative theory”? Is evolution a “scientific fact” or “just a theory”? For instance, at globalwarming.com, I find the statement: “While some would call global warming a theory, others would call it a proven set of facts.”

How Mathematical Economists Overreach

by Mario Rizzo

In recent months there has been a discussion both in the traditional media and in the blogosphere about why orthodox macroeconomics failed to predict or explain the financial crisis and the subsequent Great Recession. Some of that discussion focused around Paul Krugman’s criticism that economics mistook  (mathematical) beauty for truth. Subsequently, there was a further discussion about the role of mathematics in economics.

Of course, this is a big topic. My task here is only to investigate, by means of a simple example, three claims made for the superiority of mathematics over ordinary (natural) language.

The Limits of Bayesian Reasoning

by Gene Callahan

In a seminar I’ve been attending at NYU this semester, David Chalmers contended that “resetting priors” is irrational in a Bayesian framework. (If you’re not familiar with Bayesian inference, the Wikipedia article just linked to does a good job of introducing the topic, so I will refer you to that, rather than lengthening an already long post with my own introduction to the subject.) This seemed wrong to me and seemed wrong to me long before Chalmers raised the issue for me again. But his remarks renewed my interest in the subject, and resulted in this post.

Economics as a Philosophical Science

by Gene Callahan

I happened to be reading R. G. Collingwood’s famous essay (at least famous in my circles!) with the above title. While similar in some ways to Mises’s philosophical analysis of the concept of action, there are some quite significant differences present as well, and I thought that Think Markets readers might enjoy a brief discussion of one of them.

Perhaps the most notable difference between Mises and Collingwood is that the latter denies the possibility of interpersonal exchange!

What is Science?

by Jerry O’Driscoll  

Some recent controversies move me to take up the topic within the limitations of a blog post.  Many years ago (1956), Fritz Machlup ably addressed the issue in an essay titled “The Inferiority Complex of the Social Sciences.”  He rejected limiting the term science to particular subject matters or methods.  He concluded that “there is no epistemologically defensible borderline short of the widest meaning of scientific method, defined in the Encyclopedia Brittanica as ‘any mode of investigations by which impartial and systematic knowledge is acquired.’”  

I endorse Machlup’s broad definition of science as any systematic study of a subject.  As he observed in a footnote, the German Wissenschaft is more inclusive: “the historians of literature, the philologists, the philosophers, the mathematicians, the sociologists, they are all scientists (Wissenschaftler).” In French, science is knowledge and one can speak of la science infuse, intuitive knowledge. La science de l’art is simply the systematic study of art.  

Against Magical Thinking

by Roger Koppl

The term “magical thinking” has different meanings, most of them involving something like extrasensory perception or the efficacy of spells.  Here I define it as an argument, one of whose steps requires something impossible.  (Larry White helped me with this definition, but gets no blame for it or anything I say here.)  It is not magic thinking if your argument has an unexplained piece.  Darwin knew didn’t have anything like Mendelevian genetics as a mechanism.  That was a hole in his theory, eventually filled by others.  No magic there.  Magical thinking exists when one fills the gap with something that is logically or physically impossible.

If you can show I have engaged in magical thinking, you have overturned my argument.  

Evolutionary Psychology

by Gene Callahan

I’ve just been re-reading John Dupre’s wonderful take-down of evolutionary psychology, Human Nature and the Limits of Science. Now, Dupre never disputes the obvious truism that, say, human ethics or religion evolved. But he notes that this is remarkably uninformative, since everything humans do so evolved, including their ability to write papers on evolutionary psychology! As Dupre convincingly demonstrates, ‘evolutionary psychology… offers us mainly simplifications and banalities about human behaviour with little convincing illumination of how they came to be banal… In relation to the illumination of the real complexities of human nature, the [research] programme may be declared bankrupt.’

All very true and worth noting, but what I really loved is how hard Dupre made me laugh at times. For instance, in considering the often bizarre animal analogies to human behaviour employed by evolutionary psychologists, Dupre notes that Buss claims that human strategies for keeping a mate are very similar to those of insects, and then Buss offers, amongst his examples, what ‘sounds to [Dupre] distinctly unlikely as a human strategy, shedding their broken-off genitalia after copulation to seal off the reproductive opening of the female.’

Aaargh! If only I had thought of that one earlier!

Mises Was A Scientist

by Roger Koppl

Over at Division of Labor, Noel Campbell picks a fight with Austrian fans of Mises.  “I always conceived of Mises’ efforts as attempting to build a logically correct and (therefore) irrefutable description of human behavior. As such, I always viewed Human Action as a work of philosophy, not science.”   Noel hints that he doesn’t want to be answered with a lot of philosophy of science.  I might whine about how unfair it is to contrast Mises’ “philosophy” with “science” and then expect a response that doesn’t get into the philosophy of science.  But Noel seems to be a nice guy with a sincere question, so I’ll take a stab at it anyway.