Saturday, April 28, 2012

Ideas and Society

The upcoming series of blog posts (assuming I actually do this) will be me trying to figure out a number of issues related to my dissertation. I'm hoping that the blog can become a complement, not a substitute, for actual research. If anyone has any sources I might find useful, please share them!


 There are two economics. In Buchanan's conception, which can be seen in either his Cost and Choice or in "The Domain of Subjective Economics," Buchanan distinguishes between two realms that economists speak to: the predictive, scientific, positive realm, and the subjective, choice-oriented realm. In the first realm we conceive of humans as rats - we try to predict action in a way that is subject to testing. In the second realm prediction is impossible: "The objects for analysis are the choices of persons, which cannot be genuine choices and at the same time subject to prediction." The first realm is science and useful for prediction, the second realm is closer to philosophy, and is useful for understanding (verstehen) choice.* Tyler Cowen, quoting Plato, speaks of the "quarrel between poetry and philosophy." Philosophy is the 'Walrasian box,' or the tight prior of efficiency that the Chicago school types insist in their models (with great success, I note!), and Poetry is Israel Kirzner's attempt to carve out a theory of entrepreneurship that cannot be reducible to search. Tyler, and others, argue that Kirzner fails to break out of the Walrasian box. Mises succeeds, perhaps, by arguing that there are aspects of human contributions to the world beyond that subsumed by 'human action,' of which he includes genius. Cowen quotes Shackle as best articulating the 'poetry' of economics: “The business of choice, I am maintaining, is the business of imagination. The business of historiography, therefore, is the effort to penetrate one man’s imagination by another’s. Evidently, such art of historiography will be precarious and unsure, it will be ’poetry’. The Greeks believed it was the poet who could get nearest the truth.”

 The distinction between the two economics is somewhat mirrored in Kuhn's distinction between 'normal science' and 'extraordinary science.' Normal science is puzzle solving, or search. We have some idea about what we are going to find, we just do not know the exact values we will find. What is the elasticity of demand for economists? This question can be answered to some believable degree for relatively small changes in wages. Extraordinary science is different - this involves questions like "What is the object of our study?" "What counts as facts?" "What answers count as scientific?" These cannot be answered by normal science, because these questions define what normal science is. These questions are answered by rhetoric, by whether the community of scientists finds different answers to these questions persuasive.

 Now, I do not mean that the distinction between normal and extraordinary science is seen in the practice of economics, though certainly economics has grappled with these sorts of questions; but rather the distinction exists for the economic actor. People choose means to attain given ends - i.e., they optimize (given cognitive constraints). When optimizing, people are solving a puzzle. But people also deal with another level - the choice over ends. What is a good life? What is good? Who should I care about? If love is including someone's utility in your own utility function (with a positive derivative), the level of 'extraordinary choice' is the decision to put someone in your utility function (if this is even a matter of choice?) It's a matter of persuasion, not calculation.

So, what does this have to do with my dissertation project? Why do I have to work this out? Well, I'm trying to puzzle out the effect that ideology has on society, because I'm looking at how ideology spreads through society. According to Denzau and North, ideology is a "shared framework of mental models that groups of individuals possess that provide both an interpretation of the environment and a prescription as to how that environment should be structured." This is an annoying definition, because it contains within it both poetry and philosophy, optimizing and choice over what to optimize, a combination of extraordinary and normal science.

To unpack it: ideology contains within it an ideal view of society (or at least the subset of society that the ideology subsumes, perhaps a nation, or a state). This includes things like: what goals should be pursued by the collective? How should individuals live their lives? What is the connection between the two (for instance, how can the collective interfere with individuals who deviate from the ideal)? This ideal does not come about through puzzling, it is more like aesthetics. We adopt ideals because we find them beautiful, not because we have engaged in a search for our ideals. Now, aesthetics aren't 'exogenous,' we are all embedded in social reality, and the fiction we are exposed to, the beliefs of those we trust or admire, etc, all inform these ideals.

Given any ideal, there exists some hypothetical 'optimal' organization of society to bring about this ideal. This is 'normal science,' or optimization. Public and private organizations, policy instruments, formal and informal, etc. And, finally, ideology includes the interpretation of reality in light of the ideals. Of course, given the dispersed nature of knowledge, individuals with the same ideology in the same social world can interpret reality in a different way.

 Peter Hall talks about policy as involving three levels - the first level is, *given* policy instruments, individuals in the system have some discretion. This is the first level of policy - it can change simply through trial and error or social learning. The second level is the choice over policy instruments. *given* any set of policy goals, or ideals, there is any number of instruments people can use to achieve those goals. If a given ideology gives the government the goal of providing full employment, monetary policy could be an instrument, fiscal policy, and so on. A change in the second level of policy necessitates a change in the first level. The third, and highest level is the choice over ideals, or policy goals. While the first two levels can change largely within the organization of the state, the third level requires a change in public discourse, of what people view as legitimate and illegitimate. Here is the realm of poetry, again. A change in the third level of policy necessitates change in the lower levels.

With a new ideology, certain policy instruments become unintelligible, and other previous unimaginable ones become possible. My research goals involve change in the third level of policy, though not only with respect to the state. What effect does the entrenched interests from one ideology have on potential changes in ideology? More on that later.

 * Buchanan's words: "There is a legitimate domain for predictive economic theory. Or, to put my point differently but somewhat more dramatically, in some aspects of their economic behavior, with appropriate qualifications, men are indeed like rats. They are essentially passive responders to economic stimuli; they react; they do not choose. They are programmed, whether genetically or culturally, to behave in potentially predictable ways to specific modifications in the constraints that they face. The scope for this predictive theory of economic behavior is enormously extended when it is acknowledged that it is the behavior of some average or representative member of a group that is to be predicted here, not the particularized behavior of an individual."

and... "There are also aspects of human action that cannot be subjected to explanation in an operationally meaningful theory of economics. Any attempt to derive even conceptually refutable hypotheses about such action would amount to epistemological confusion. I have labeled this domain that of subjective economics or subjective economic theory. The objects for analysis are the choices of persons, which cannot be genuine choices and at the same time subject to prediction. Theory or analysis can be of explanatory value in this domain without the attribute of operationality in the standard sense. Theory can add to our understanding (verstehen) of the process through which the economic world of values is created and transformed. Subjective economics offers a way of thinking about economic process, a means of imposing an intellectual order on apparent chaos without inferentially reducing the status of man, as a scientific object, to something that is not, in kind, different from that of animals."

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