Because the great controversies of the past often reach into modern science, many current arguments cannot be fully understood unless one understands their history.

— ERNST MAYR 1982, 1, in McCloskey, Deirdre Nansen; Ziliak, Steve. The Cult of Statistical Significance (Economics, Cognition, And Society)

Too large a proportion of recent ‘mathematical’ economics are mere 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 or pretentious and unhelpful symbols.

— John Maynard Keynes

One of its central tenets is that the “real” nature of the social world imposes restrictions on individuals’ knowledge. (Marqués 2016, 2)

(….) If theoretical practice in economics is going to have authentic epistemic relevance, it is necessary to shift the attention from standard models developed within the current bookish tradition to the solution of those concrete problems which result from open ended, intervenible and conflictive economic processes, dominated by radical uncertainty. (Marqués 2016, 3)

A processes oriented economics would have to provide a different kind of theoretical practice adequate for examining sequences of feasible economic events (i.e., the main developments that those processes could plausibly adopt). This kind of practice offers points of intervention to those skills, qualifications, common sense and political abilities that are needed to manage these processes. (Marqués 2016, 3)

Science and economics

Let me advance a brief comment about the relation between science and economics. This book does not take an irrational or anti-scientific stance. On the contrary, in the domain of natural phenomena modern science has shown extraordinary successful results. But the same cannot be said when social processes are at stake, and I have tried to offer some of the reasons (ultimately, ontological) for this failure. So, I do not share the idea of those authors who think that economics can be scientific (as much as natural sciences), and that such an economic theory, once found, would solve those economic problems that the best theoretical tradition assigned to economics a long time ago (growth, employment and development with fairness and equality). (Marqués 2016, 5)

Particularly, I think that the dream of having a successful theory of expectation formation is largely a chimera, and indeed I dismiss the necessity of having such a theory. Neither governmental authorities nor any other economic actor may count on being able in a sure (scientific) way to intervene and make people entertain “correct” expectations. But as we try to show in this book economic actors (including the state) do not need a scientific theory able to guarantee their goals in order to intervene systematically upon the economy. Instead they can apply feasible sequences as well as direct (practical) knowledge and skills to cope with the situation and push the process in the desired direction. (Marqués 2016, 5)

It is also important to examine the relation between science and economics from another perspective. Theoretical physics has been successfully applied to a wide range of circumstances of our world. This could be done thanks to the development of associated technologies (different kinds of engineering founded on physical theory). Some may think that nowadays economics is at a pre-technological stage (like physics was sometime ago), and that what is needed is more time (and more knowledge, mainly mathematical knowledge) to develop a sort of economic engineering. Popper was confident in the benefits of fragmentary social engineering. The call to elaborate an alternative economics oriented to solve practical problems of our world could be interpreted this way. (Marqués 2016, 6)

Our analysis of deliberate mechanisms like Prospect Theory and Decision Making Models gives testimony of the kind of practical results that can be obtained by this road. But I suspect that in reference to more traditional economic problems like those mentioned at the beginning of this section, a similar expectation is unfounded and doomed to failure. As far as economic phenomena result from open ended processes as we have described them there is no possibility of shaping and controlling them by means of social engineering similar to what happens in the case of natural sciences. The specific domains where neither uncertainty nor conflicts between lobbyists that defend different and opposite interests exist. These technologies are designed for “leading” in a scientific way the economic processes. And I suspect that it is not possible to hope that we may count on similar tools in the near future. (Marqués 2016, 6)

— Gustavo Marqués (2016) A Philosophical Framework for Rethinking Theoretical Economics and Philosophy of Economics

This book is set against the assumption that humans’ unique feature is their infinite creativity, their ability to reflect on their deeds and to control their actions. These skills give rise to genuine uncertainty in society and hence in the economy. Here, the author sets out that uncertainty must take centre stage in all analyses of human decision making and therefore in economics. (2019, i)

Economic cycles and economic crises belong to the defining moments in economic history because they affect our sense of economic security and level of welfare at large. They also serve, at least implicitly, as tests of our understanding of the economy as well as our ability to draw the right policy conclusions from our economic theories. No wonder, therefore, that economists have long sought to understand severe economic fluctuations with the ultimate goal of steering the economy clear of their troubled waters. (Müller-Kademann 2019, 1)

To that aim, economists, not least due to John Stuart Mill’s ingenious work, have long ago boarded a particular ontological train with the ambitious goal of keeping up with the natural scientists’ positive-deductive race to uncovering the truth about the world around us. If we only had sufficient knowledge of the machinery we would know how to stop crises from recurring, or so the logic goes. Alas, the financial crisis that started to unfold in 2007 once again reminded us that economists are still a long way from safeguarding the economy from severe difficulties. (Müller-Kademann 2019, 1)

[G]enuine randomness also exists. This genuine randomness occurs at the micro scale, for example, when matter seemingly assumes two states at the same time. According to the Heisenberg uncertainty principle, matter’s actual state can only be pinned down by actual observation, with the striking implication that mere observation affects the state of the matter. What might seem very odd and irrelevant for daily life is actually relevant when it comes to secure data transmission or calculating the costs of nuclear waste disposal because random decay determines the time the waste has to be stored in safe (and hence expensive) conditions. (Müller-Kademann 2019, 7, emphasis added)

— Christian Müller-Kademann (2019) Uncertainty and Economics. Routledge. Emphasis added.

You may imagine that your mind — your stream of conscious thoughts, ideals, and feelings — influences your actions. You may believe that what you think affects what you do. You could be right. However, the scientific ideas that prevailed from the time of Isaac Newton to the beginning of the twentieth century proclaimed your physical actions to be completely determined by processes that are describable in physical terms alone. Any notion that your conscious choices make a difference in how you behave was branded an illusion: you were asserted to be causally equivalent to a mindless automaton. (Stapp 2009: vii)

We now know that that earlier form of science is fundamentally incorrect. During the first part of the twentieth century, that classically-based conception of nature was replaced by a new theory that reproduces all of the successful predictions of its predecessor, while providing also valid predictions about a host of phenomena that are strictly incompatible with the precepts of eighteenth and nineteenth century physics. No prediction of the new theory has been shown to be false. (Stapp 2009: vii)

The new theory departs from the old in many important ways, but none is more significant in the realm of human affairs than the role it assigns to your conscious choices. These choices are not fixed by the laws of the new physics, yet these choices are asserted by those laws to have important causal effects in the physical world. Thus contemporary physical theory annuls the claim of mechanical determinism. In a profound reversal of the classical physical principles, its laws make your conscious choices causally effective in the physical world, while failing to determine, even statistically, what those choices will be. (Stapp 2009: vii)

More than three quarters of a century have passed since the overturning of the classical laws, yet the notion of mechanical determinism still dominates the general intellectual milieu. The inertia of that superceded physical theory continues to affect your life in important ways. It still drives the decisions of governments, schools, courts, and medical institutions, and even your own choices, to the extent that you are influenced by what you are told by pundits who expound as scientific truth a mechanical idea of the universe that contravenes the precepts of contemporary physics. (Stapp 2009: viii)

The aim of this book is to explain to educated lay readers these twentieth century developments in science, and to touch upon the social consequences of the misrepresentations of contemporary scientific knowledge that continue to hold sway, particularly in the minds of our highly educated and influential thinkers. (Stapp 2009: vii)

— Henry P. Stapp (2007) Mindful Universe: Quantum Mechanics and the Participating Observer. Springer.

~ ~ ~

DETERMINISM AND FREE WILL IN ECONOMICS

Most people do not really want freedom, because freedom invovles responsibility, and most people are frightened of responsibility.

— Sigmund Freud

Most of the really fundamental debates in economics today are very old debates indeed. But economists—and not just the economists of the post-war period—have been scrupulous in avoiding many of them. Other social sciences do not suffer the same defect, and one wonders why this might be the case in economics. The key philosophical difference between the view of economics put forward by the marginalists and the one championed in this book is that the former believe that all human action is pre-determined while the author of the present book believes in a large amount of freedom in human affair. (Pilkington 2016, 341)

(….) Economists today instinctively sign on to a sort of vulgar Newtonian view of the world. That is, they instinctively think in terms of a space in which a variety of forces play themselves out—often, in the case of the marginalists, at a given instant in time. But this sort of philosophy was long dead in the humanities at the time Keynes was writing. Rather, the philosophies of Moore and Keynes start from the seat of consciousness. We do not start from the vulgar assumption that reality ‘is’ in some sense a space with deterministic forces playing themselves out. This schema, thought construction or model is fully recognized in Keynes to be something cooked up by consciousness. (Pilkington 2016, 345)

This, I think, accounts for why many economists find Keynes’ writings so obscure. It also accounts for why those with training in philosophy or psychology will find them far more accessible than those with training in mainstream economics, physics or engineering. Keynes’ works are written from the point-of-view of the reasoning subject. This is the natural starting point for Keynes. Consciousness comes first; models and metaphors are adopted later. This is why in Keynes’ work we are from time to time put in the shoes of the investor trying to make decisions about the future. In mainstream economics, agents making investment and consumption decisions are reduced to little objects that reason in a pre-determined manner. In Keynes, by contrast, economic agents making investment and consumption decisions are full subjects endowed with a consciousness that is identically structured to the one that we ourselves possess. Thus in order to understand the choices made by these agents, we do not simply reduce them to little puppets that behave how we assume them to behave but rather we must try to get ‘inside their heads’. (Pilkington 2016, 345)

ECONOMIC MODELING: A PSYCHOLOGISTIC EXPLAINATION

Can anything be imagined so ridiculous, that this miserable and wretched creature, who is not so much as master of himself, but subject to the injuries of all things, should call himself master and emperor of the world, of which he has not power to know the least part, much less to command the whole?

— Michel de Montaigne

Throughout this book, we have been rather harsh on economists. We have accused them of engaging in all sorts of silly behaviour, of constructing irrelevant theories and of being a key force darkening the doorway of knowledge and spreading ideology. But so far we have not really sought out motivation. Are we to assume that most economists working today are nefarious crooks and scoundrels? I should think not. Most economists working today are well-meaning people who genuinely want to make the world a better place. They are men and women who truly believe that they are constructing useful knowledge that will help humanity progress as a species in the future. That they typically make the world a worse place and cloud the judgments of people is not altogether their fault. (Pilkington 2016, 353)

What is it then that drives these people to Bedlam and back? This is something that the present writer has thought about quite a lot. I have come to this conclusion: these men and women are chasing after a Holy Grail, one that has been sought since time immemorial. At first it was sought in the sphere of religion, but after this it was sought in the field of philosophy and, finally, science. Today the sphere in which this Holy Grail is most aggressively sought is in the field of economics. What then characterises this Holy Grail? Well, it is the Holy Grail of perfect knowledge. It is the drive that exists in many intellectually minded men and women to find a sort of perfection, a total and pristine knowledge that would make them, in a very real sense, omnipotent or, at least, omniscient. This Holy Grail was first formulated in the modern age by the French mathematician and astronomer Pierre-Simon Laplace: (Pilkington 2016, 353-354)

We ought then to regard the present state of the universe as the effect of its anterior state and the cause of the one which is to follow. Given for one instant an intelligence which could comprehend all the forces by which nature is animated and the respective situation of the beings who compose it — an intelligence sufficiently vast to submit this data to analysis — it would embrace in the same formula the movements of the greatest bodies of the universe and those of the lightest atom; for it, nothing would be uncertain and the future, as the past, would be present in its eyes. (Laplace 1902, p. 4)

For some rather odd reason, this thought experiment has become known as ‘Laplace’s Demon’ today. In fact, readers of older philosophers will recognise that this is identical to how many philosophers conceived of an image of God. For many writers, God is an omniscient being that has total knowledge of all causes and effects and has a sort of ‘single formula’ in His immediate consciousness that explains everything across time and space. He is, in this conception, outside of time and space and thus merely observes everything happening at once in the form of this timeless, perfect formula. (Pilkington 2016, 354)

When economists try to build totalizing models, they are doing something similar. They are trying to figure out all the mechanisms — the causes and effects — that pertain in the economy at all times, and then they are trying to reduce these to a single model. If they could ever find their Holy Grail, they would then, in the words of Laplace, have ‘the future, as the past, present in their eyes’. They are reaching for perfection. In a strange psychological sense, they are seeking to become like the old conceptions of God that many philosophers and theologians held. Again, they are not the only ones that do this. Many physicists reach for the same Holy Grail and try to generate ‘theories of everything’. But it is in economics, which is not only a far more inexact discipline but also a far more ambitious one, that this fantasy has done the most damage. (Pilkington 2016, 354)

The psychological roots of this tendency are inherently narcissistic. By that, I do not mean that economists are all pathologically narcissistic. No, psychologists have long recognised that all of us have narcissistic tendencies buried within our minds. Somewhere buried within our minds, we all have an image of perfection that haunts us…. On occasion, such a narcissistic image can become an obsession and do serious psychological and physical damage to a person [and society]…. There is no such thing as true perfection just as there is no such thing as a unified theory of how the economy works that will be valid across time and space. These are fantasies and illusions that, if we do not understand them to be illusions, can lead us down wayward paths. (Pilkington 2016, 354-355)

We have argued throughout the book that economics today is predominantly ideology. But just as certain forms of religious discourses were the key ideologies of the past, economics too activates these deep psychological structures within its practitioners to ensure that they remain stuck on the treadmill, chasing ghosts rather than engaging with the real world. Certain religious discourses offered its adherents a sort of union with God if they studied sacred texts hard enough. This kept these conduits of ideology away from the real world and ensured that they engaged in largely useless activity in their fruitless search for omniscience by connecting with God. Economics today does something similar in that it encourages its adherents to build models that are supposed to be true across time and space. The adherents are then encouraged to test these models against data using highly problematic econometric techniques, after which the whole discipline starts to ruminate if they stop yielding accurate results. (Pilkington 2016, 355)

The result is a stagnant discipline. Every few years, economic theory will go into crisis as some real world event calls into question the predominant models. Economists will then go back and reconstruct the doctrines in light of recent events only to have them fall apart once more when something changes in the economic world. It is a bit like watching an unfortunate though well-meaning man build and rebuild his house along an earthquake fault line always insisting that this time the house will survive. Or a cult devotee that continuously says that the end of the world is coming on a given date only to push this date back every time the end of the world does not arrive. (Pilkington 2016, 355-356)

It is in the tendency to model itself — which has deep psychological roots — that leads economics down this dead end and makes it a sort of clown science. If economists would just drop the silly image of timeless truths and recognise that in economics we deal with contingent historical events, we would all be better off. But his cannot happen unless the economics profession as a whole reorients its narcissistic image away from trying to search out Holy Grails and towards trying to manage as best they can in a highly complex and changing world. If this were ever achieved the manner in which argument and debate take place within the discipline would completely and utterly change. This would be wonderful but it would also mean that economics would have to stop being an ideology. This would, in turn, mean that economists would have to stop projecting the image that they hold crystal balls and can see the future. That might not only be a blow to their egos but it might, in a strong sense, also diminish the standing that they hold as ideologues in the political and social arena. Whether economics can ever exist as a non-ideology is an open question. Personally, I believe that it can. But, given I do not pretend to have a crystal ball, only posterity can pass absolute judgement on the matter. (Pilkington 2016, 356)