Is Economics Losing Its Spine?
| Nicolai Foss |
The critique of economics from sociologists, so-called “heterodox” economists, management scholars, etc. used to be that it was too “rigid,” because of a too heavy commitment to fundamental principles, such as strong interpretations of individual rationality (maximization), equilibrium, and so on. As a result, the critics maintained, the central insights of disciplines such as sociology, psychology and anthropology were not only at variance with economics but also much more realistic, applicable, etc. Attempts to apply maximization, stable preferences and equilibrium to neighbouring disciplines only led to disciplinary bastardization in which the essential ideas of these neighbouring disciplines got lost. And so on.
While this kind of critique continues to be made, of course, I believe that the basis for making it is becoming increasingly weak. Economics is not rigid anymore. It is, on the contrary, arguable that it has become too flexible. The trend probably began with the discovery of the extreme flexibility of game theory and the rise of what is often referred to as “MIT style theory” (the critique of “old Chicago” of this trend in industrial organization will be well known to readers of this blog).
In essence, almost anything now seems to go as long as it can be cast in some game theoretical formalism. Economists are happily building game theoretical model of social norms, throwing all sorts of cognitive biases, modelling envy, altruism, etc., that is, incorporating in a formalized manner the insights of neighbouring disciplines.
Is this sound? Or does it mean that economics is losing its identity, its spine and its bite? That is debatable (and comments are invited). However, I think at least one thing is problematic: Economists paradoxically may have too much respect for the neighbouring disciplines. Thus, some economists use notions of “intrinsic motivation,” seeming unaware that the extrinsic/intrinsic distinction is far from unproblematic and has been hotly debated in psychology over the last three decades (here is one side of the debate). Similarly, behavioural economists happily draw on psychological findings, for example, from the biases and heuristics literature, seemingly unaware of the critique of this literature that has been raised by psychologists themselves (and which is close to the kind of critique one would expect from more old-fashioned economists) (e.g., see this interesting note). Perhaps economics is changing from being the queen of the social sciences to becoming more of a humble servant. I hope not.