Against Economic Imperialism
posted by Frank Pasquale
Economics is becoming the “it” social science discipline for generalist readers seeking to understand themselves and society. Just as the modish may have turned to Freudian psychology or Parsonian sociology or sociobiology in the 20th century, they now lap up economics popularizers. This latest incarnation of social science svengalis has one great advantage over its predecessors: extraordinary facility with data and its mathematical manipulation. But as Alan Wolfe notes in his insightful review of recent books by Bruno Frey and Dan Ariely, we do well to examine closely the nature of that data, the philosophical commitments of its analysts, and the limits of its extrapolability.
Wolfe starts by examining happiness research (which I’ve also criticized here and here). His basic conclusion is that Frey’s results break into two categories: hopelessly contestable or blindingly obvious. Against Frey’s attempts to objectively analyze a “science of happiness,” Wolfe notes the illusory quality of value-freedom in social science:
The social sciences are not just empirical; they are normative, too. It was precisely the insistent normative preference for market-based social arrangements that turned me against Chicago School economics. Governmental regulation is always sub-optimal, they inevitably maintained. Individual freedom is worth more than social equality. If market logic works for firms, surely it can work for recruiting an army, fighting poverty, or providing kidneys.
Non-Chicago economists were subtler about these matters, and at times questioned the reliance on markets; but for the many sons and daughters of Milton Friedman, we are hard-wired to be rational choosers, and any efforts we make to direct the course of our actions collectively are bound to fail. . . . [D]emocratic debate is not well served by pretending that the empirical findings of a single controversial approach in a single academic discipline contain definitive answers to these questions.
Beyond these observations on the political side of economic fundamentalism, Wolfe illuminates the crude utilitarianism that appears to animate so much research in the “new science of happiness.”
In 1999, the Russell Sage Foundation published Well-Being: The Foundations of Hedonic Psychology, edited by Daniel Kahneman, Ed Diener, and Norbert Schwarz. Intended as a major statement of the new field’s potential, the volume included Kahneman’s seminal essay “Objective Happiness,” in which he tells the following story. Someone tells us that Helen had been happy in March. How do we know? If the issue is how sick Helen had been, we would know how to answer the question. Suppose Helen’s temperature had been taken every ten minutes for every day of the month. With that data we could plot the results and come up with an answer that any objective observer could accept: if Helen had never registered a fever during that time, we could conclude incontrovertibly that she had been well. We need not even have monitored her so carefully. If her temperature readings had been sampled at random intervals, we could still decide, with a statistically ascertainable degree of certainty, that her health had been fine.
Is happiness any different? No, according to Kahneman, at least not in theory. The Victorian economist Francis Edgeworth, a disciple of Bentham, understood as much: he anticipated using a “hedonimeter” to measure the goodness or the badness of the things that we encounter in daily life. Edgeworth, Kahneman believes, was on the right track. It is true that the mind is a complex thing and we are unlikely ever to have perfect measures of what the neo-utilitarian Kahneman calls “instant utility,” or the immediate good sensations or bad sensations that register in our minds every time we encounter something in the world. Still, weaker measures of instant utility are available to us. Why not sample Helen’s feelings just as we sample her temperature?
“Helen might be probed at irregular intervals by a beeper mounted in a special watch, which also displays a scale on which she can select a value that describes the GB [good-bad] value of the moment,” Kahneman suggests. It still might be difficult for her to compare the pleasure of eating a slice of key lime pie with, say, the pleasure of an orgy with six of her friends. (This is my example, not Kahneman’s.) Still, all is not lost. Helen can simply be instructed about the scales appropriate for different kinds of experiences. “Fantastic” can have one meaning in the context of a dessert and another in the context of group sex, and any subject can learn which attributes best go with which experiences.
At this point, objective “measurement” has clearly gone out the window, and a certain set of presuppositions (about, say, the relative value of pushpin and poetry) have replaced it. As Elizabeth Anderson argued in Value in Ethics and Economics, “To value or care about something in a particular way involves a complex of standards for perception, emotion, deliberation, desire, and conduct that express and thereby communicate one’s regard for the object’s importance” (11). Kahneman and Frey’s drive to commensurate runs up against many of our deepest commitments to pluralism in value.
Wolfe is just as hard on Ariely as he is on Frey, leaving me to feel a bit abashed about my earlier enthusiasm for aspects of his work. Wolfe is thoroughgoing in his attack on methodological individualism, and fortunately has some allies within the economics profession. Consider these comments of Klaus Nielsen, as reported by Matthew Riesz:
Nielsen, professor of institutional economics at Birkbeck, University of London . . . has suggested [that] technical economic arguments were often a smoke screen used to disguise quite different reasons for making decisions [as Ackerman and Heinzerling note in their book, Priceless]. [He] also worried that the subject had become “autistic”. “Mainstream economics”, he has written elsewhere, “has developed too much in the direction of an excessively specialised and formalised state of de facto withdrawal from the study of the economy in favour of exercises in applied mathematics”. While its language “makes dialogue with other disciplines impossible … the self-image of the discipline makes it unnecessary”.
Part of the problem, Nielsen continued, is that economics is now “based on an expansive research programme with a strong core and a flexible protection belt”. All the claims of the “belt” were up for discussion, provided the core remained intact. But it was the core, unfortunately, that incorporated a lot of basic assumptions about human nature and behaviour that disciplines such as anthropology, psychology and sociology had long called into question.
As Nielsen and Wolfe’s insights suggest, “strictly economic approaches” to policy problems may be less a guarantee against than an assurance of an ideological agenda. As Rieff critiqued Freud, and Mills mocked Parsons, Nielsen and Wolfe show the all-too-human side of today’s social science idols.
July 2, 2008 at 9:49 am
Posted in: Economic Analysis of Law
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Responses (4)
Jason Kilborn - July 2, 2008 at 12:41 pm
So how do we most effectively reorient our non-economic (or economic, for that matter) research and find a more “open and notorious” evaluative metric? Is there a social scientific literature describing the array of metrics by which “happiness” or other social goals might be measured? Is this hopelessly unfocused research? I’ve been plagued by these questions as I try to answer the simple question of whether (and to what extent, under what conditions, etc.) a discharge of consumer debt is good or bad. I’m still flustered. At least this post makes me feel better about being flustered, but I would really prize some nice advice about where else to look for an evaluative metric that would be more convincing–or at least more honest and forthright–than economics.
Anonymous - July 2, 2008 at 1:43 pm
How is economics not “honest and forthright?” At its root, the study of economics basically says “compare benefits to costs” and provides a means of calculating social welfare under various choices. What is not honest about that?
If you mean that certain groups of economists ignore costs that you find important (e.g. the cost to our pysche of being unfair or something of that nature), then you should say so. But there’s nothing inherently wrong with using economics to measure welfare.
And even if you think particular economists omit value judgments that you find important, how can you characterize their work as dishonest? If anything, economics is the most honest of social sciences. An economist that decides to make a normative judgment must say: “Option A is better than Option B because Option A’s social welfare exceeds that of Option B. I know this because I calculated social welfare as follows.”
A.J. Sutter - July 3, 2008 at 1:33 pm
Sorry, I was not as enthusiastic about Wolfe’s review; he isn’t as critical as he should be or even as you suggest in your post.
For one thing, he is too kind to Thaler & Sunstein’s “Nudge,” which is devoid of any notion of democracy; I’ve commented in more depth on that book in an Amazon review, so I won’t expand here. For another, Wolfe’s comment that “The social sciences are not just empirical; they are normative, too” is a bit Pollyanna; often they are normative without being empirical at all (e.g. neoclassical economics). Rather than Wolfe being thoroughgoing or getting support from Nielsen, he fails to see one of Nielsen’s points in the excerpt you quote.
A more significant issue is when he says “[P]rice is measured ordinally: $100 is one hundred times greater than $1. But life satisfaction, by contrast, is measured cardinally: the extent to which ‘very satisfied’ is better than ‘satisfied’ has to be established arbitrarily.” First of all, intransitive preferences (e.g., A>B, B>C and C>A) occur in real life, but violate cardinality. But the deeper criticism is, why be chained to a quantitative view of life satisfaction? There is an excellent critique of “arithromorphism” in economics, the fallacy of cardinality of individual utility, and economics’s neglect of qualities and dialectical concepts in the first four chapters of “The Entropy Law and the Economic Process” by Nicholas Georgescu-Roegen (Harvard U Press 1979).
You seem to allude to the notion of qualities too, if I correctly understand your comment about Elizabeth Anderson. But rather than echoing your lament of Kahneman’s pro-measurement attitude, Wolfe regrets that Frey has abandoned it. Right after the discussion of Helen he says, “Kahneman’s essay was published almost a decade ago. Where are we now? If Frey’s book is any indication, the revolution in economics has taken a giant step backward. Happiness, Frey tells us, need not be established objectively at all.” Wolfe’s concluding skepticism about whether behavioral economics really lives up to the claims of its enthusiasts is nice, but seems to be a kind of a bland, let’s-be-reasonable compromise rather than a forceful position maintained throughout his piece.
Daniel S. Goldberg - July 3, 2008 at 1:51 pm
Great post. A.J., your comments are insightful, as usual. FWIW, my thoughts:
http://www.medhumanities.org/2008/07/on-normative-co.html
Ironically, “economic imperalism” seems to have the odd effect of masking the normativity of the enterprise from its practitioners, such that the need to proffer normative justifications for positions taken is often, in my experience, either absent or simply assumed. Sometimes we have moral obligations to act inefficiently. The mere fact that an arrangement is in and of itself efficient says little, absent context, about whether we ought to pursue policy on that basis.
One wonders whether a deeper understanding of the value-laden nature of economics among practitioners would promote wider comprehension of the dangers of the naturalistic fallacy.
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