DeLong on Introspection

25 January 2008 at 4:29 pm 11 comments

| Peter Klein |

Brad DeLong sounds almost Misesian in this call for economics PhD students to study economic history:

[Mainstream] Economics is the hyper-positivist of social science disciplines: believing that everything of interest can be reduced to law-like theoretical and empirical propositions modeled after classical mechanics; that what cannot be reliably, repeatedly, quantitatively, and empirically demonstrated does not really exist as knowledge; that the only good social science is a deductive, analytical, model-based, general, experimental science.

But this misses a lot. Because we are people like those whom we study, we have psychological access to our subjects’ internal decision-making processes and motivations at a level that we cannot obtain from market price-quantity data. There is lots of interest that happens once and only once. Natural experiments are rare, and so if we restrict ourselves to positivist tools alone much is underidentified. The individuals’ preferences — the “tastes” part of “tastes and technologies” are not primitive but are themselves the result of long and complex historical, sociological, psychological, and — yes — economic processes. You need thickly-described case studies and anecdotes looking out from people’s insides before you can tell if your statistical results mean what you assert they mean.

Mises argues in Theory and History (1957) that the basic economic categories of means and ends, of preference, contraint, and choice, cannot be understood in purely positivist terms: “Being himself a valuing and acting ego, every man knows the meaning of valuing and acting. He is aware that he is not neutral with regard to the various states of his environment, that he prefers certain states to others, and that he consciously tries, provided the conditions for such interference on his part are given, to substitute a state that he likes better for one he likes less.” In other words, we understand economic activity in a causal, realistic sense, a sense denied to us in our study of the natural world. Moreover, like Brad, Mises argued that the historian must use not only the tools of deductive theory, but a deep understanding or Verstehen, to grasp the meaning of particular historical events.

I like Kirzner’s example of the buses:

Suppose a man from Mars is doing research for his doctorate and, after focusing his telescope on a particular location on Earth, discovers a certain regularity. Through his telescope he observes a set of boxes lined up in a row. He further discovers that a smaller box moves past these boxes every day at 7:30 A.M., comes to a stop at one of the boxes, and then, after a short stay, moves on. Moreover the investigator discovers something else; out of one of these boxes a body emerges every morning, and when the moving box makes its daily stop, the body is swallowed up by the moving box. Discovering this regularity, the researcher postulates a definite law, the law of moving boxes and bodies. As he goes on with the research, however, he discovers that sometimes the box moves away before the body has entered it, leaving the body behind altogether; while sometimes the body moves at an unusually rapid speed, arriving at the daily moving-box stop just in time to be swallowed up before the box moves on. Now this Martian researcher may be able to predict just when the person is going to miss the box and when he is going to catch it. He may even be able to explain the movements of the body and the box entirely without reference to the fact that someone is trying to catch the bus because he wants to get to work on time. But if he does so, he has not told us everything there is to be learned about this situation. A theory of moving bodies and boxes that does not draw attention to the dimension of purpose gives a truncated picture of the real world. This is what economics, in the Austrian view, is all about. Economics has to make the world intelligible in terms of human motives. It is more than simply moving boxes or changing economic quantities. This is the task to which Lachmann drew our attention when he insisted that we must make the world intelligible in terms of human purpose.

That’s people catching buses, for those of you unfamiliar with public transportation (“commie public transportation,” as Nicolai calls it). For a deeper treatment see also François Facchini’s recent “Apriorism, Introspection, and the Axiom of Action: A Realist Solution” (2007).

Entry filed under: - Klein -, Methods/Methodology/Theory of Science. Tags: .

Law of Unintended Consequences This Week’s Sign of the Apocalypse: Naming-Rights Edition

11 Comments Add your own

  • 1. Rafe Champion  |  25 January 2008 at 5:31 pm

    Without wanting to be polemical, it is possible to get carried away by demands for deep understanding in history and verstehen and hermeneutics etc. Taken to an extreme these demands imply that you can’t understand anything about a situation until you know the full history, also you need to read Dilthey and Weber (in German), and you need to read thick books by Gadamer and maybe Habermas as well.

    To keep it simple, you need a framework that identifies the relevant elements and that can be found in the praxeology of Mises, the action frame of reference of Parsons (1937) and Poppper’s situational analysis. Simple-minded positivism can be refuted by analysis of any ball game, or indeed any human activity that involves thinking. There is even a role for models and regression analysis, provided you are asking the right questions and the data have some degree of credibility.

  • 2. Fred Thompson  |  25 January 2008 at 5:47 pm

    While there is much to be learned from German various hermeneuts, Giambattista Vico in the “The New Science” (1725) probably deserves priority of authorship, if anyone does.

  • 3. Peter  |  25 January 2008 at 6:59 pm

    This is certainly not dissimilar to the project I would lay out for economic sociology, agreeing strongly that there is a difference between knowing enough history not to do violence to one’s subjects’ worldviews, and having to ‘do history’ while doing economics (or sociology for that matter).

    Tricksier, I think, is finding the sweet spot between getting enough history to make relevant one’s economics, without losing the primacy of economics. After all, I’m guessing you (and DeLong) are calling on more people to become historians, or sociologists, but better economists, yes?

  • 4. Brad DeLong  |  25 January 2008 at 9:04 pm

    It is possible to get carried away…. But almost no American economists are in danger of such. Von Mises may have been mad–insane–but he was very smart…

    Brad DeLong

  • 5. Rafe Champion  |  25 January 2008 at 11:23 pm

    So it was insane to write a definitive economic and sociological critique of Socialism circa 1920?

    And in German too, that is incredible, I mean, most of us don’t even read German! That is inspired by a joke about an Aboriginal stockman (an indigene) who was listening to a cricket match in England that was broadcast in the middle of the night our time. When Don Bradman reached 100 he said, “That Bradman! What a player, think of the runs he would make playing in the daytime!”

    That would not go over well in some circles here today. It is Australia Day, celebrating the arrival of the First Fleet of white settlers in Sydney Cove. Someone put up a plane to write SORRY in the sky.

  • 6. Rafe Champion  |  26 January 2008 at 7:06 am

    A student in a course run by Mises complained that he did not have time to become conversant with mathematics, physics, biology, history and jurisprudence and some philosophy as well. To which Mises replied that nobody was forcing him to become an economist.

  • 7. Jacob  |  27 January 2008 at 6:17 pm

    Mises was beyond a doubt a genius- but insane? He certaintly held many controversial historical views (at least according to history taught in American public schools) but thats no reason to call him insane.

  • 8. Rafe Champion  |  28 January 2008 at 3:41 pm

    Peter Boettke has linked to this post from his site.

    Taking up the idea of the framework that is required to identify the key factors, the foundation is a sound set of economic principles/laws including the subjective theory of value, marginal utility, opportunity cost, comparative advantage etc, then the implications of these laws need to be unpacked in the specific situation. Dani Rodrik has sketched this process in the context of third world development. I think this is acceptable situational analysis and not a retreat to historicism as some critics have suggested.

    On the topic of regression models, this is a nice one from some of the George Mason people. Rodrik is also good on the misuse of regression models for development studies but this one looks robust.

  • 9. BionicTulip  |  29 January 2008 at 9:57 am

    This is one of several areas of overlap with Michael Polanyi’s arguments about scientific discovery and tacit knowing. Mises, Hayek and Polanyi compliment each other here: Mises and Hayek argue that the positivist view is a conceit, and Polanyi offers a deep explanation of how our humanity introduces unavoidable bias into the discovery process without negating the existence of universal truth.

    None of them argue that empirical data are useless, but they do lead readers to the conclusion that misunderstanding of and over-reliance on an empirical approach to understanding leads to tyranny.

  • 10. Rafe Champion  |  29 January 2008 at 3:31 pm

    Polanyi anticipated some of the conservative views of Kuhn, which is not a compliment. If tacit knowledge is false or misleading then it needs to become explicit so it can be subjected to criticism, like Mises and Popper on historicism and Hayek on constructivist rationalism. That should be a task of the sociology of knowledge but it has not been done very well on account of the ideological leanings of the people in the field.

    It is interesting to see how Popper produced a linked critique of the impulse for central planning AND the sociology of knowledge (as it later appeared in the work of Kuhn and the strong program) in chapter 23 of The Open Society.

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