Mechanistic Analogies in Economics

29 November 2006 at 10:59 am Peter G. Klein Leave a comment

| Peter Klein |

Paul Ormerod, in “The Fading of Friedman” (American Prospect, December 2006), compares the macroeconomic views of Friedman, Keynes, and Hayek and prefers the latter:

Both [Friedman and Keynes] believed that suitably empowered clever chaps could work out rules of behaviour that would smooth the fluctuations of the business cycle. Friedman came up with the rule of an independent central bank controlling the expansion of money at a fixed rate. Keynes essentially thought that if he and other old Etonians were put in charge, everything would be fine. . . . But Hayek sharply disagreed. He believed that there are inherent limits to knowledge in human social and economic systems which no amount of intellect can overcome.

Developments in economics are taking the subject in the direction of Hayek rather than Friedman and Keynes.

These remarks came to mind when I read Monday’s EH.Net review of Harro Maas, William Stanley Jevons and the Making of Modern Economics (Cambridge University Press, 2005). Jevons, in this regard, was the anti-Hayek.

Reviewer Michael V. White begins by noting Jevons’s great admiration for Charles Babbage and Babbage’s designs for a “calculating machine.” Maas’s book, writes White,

argues that Jevons’ “theoretical” and “statistical” publications in political economy, often treated as analytically quite separate, were actually closely linked. They were underpinned by a mechanical representation of the human mind that was symbolized by Jevons’ own logical machine. . . .

[Jevons] followed and contributed to a British “style of reasoning” which, by the mid-nineteenth century, had blurred the distinction between mind and matter to represent the mind and behavior in mechanical terms. This dissolved the distinction between the “moral” and the “natural” sciences so that the methods of the latter could be used to rework political economy.

The mechanistic analogy, of course, was absent from Carl Menger’s formulation of marginal utility theory, also published in 1871, the year of Jevons’s Theory of Political Economy.

For more on mechanistic analogies see my review of Philip Mirowski’s 1988 book Against Mechanism: Protecting Economics from Science.