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Winehole23
11-18-2009, 10:57 AM
Homo Economicus (http://www.frontporchrepublic.com/?p=7159)

By Patrick J. Deneen (http://www.frontporchrepublic.com/?author=4) 17 November 2009

http://www.frontporchrepublic.com/wp-content/uploads/2009/11/sixmilliondollarman-224x300.jpg



On today’s campuses, the reigning principle on most academic matters is to avoid meddling in the affairs of others. Beyond very broad curricular requirements, we are to allow respective experts to patrol the boundaries and content of their own disciplines. It is considered to be bad form to snoop around in others’ business. But, this doesn’t seem to be a very good example of “critical thinking,” and one area in which I think we need more critical thought is the reigning approach to the study of economics.


Economics is today regarded as the model of the social sciences, the one “human science” that approaches the status of the natural sciences. Increasingly technical and mathematic, modern economics has developed powerful analytical tools that provide extensive data on which to base contemporary policy and even some impressive predictive models. According to the canons of the natural sciences, economics is the reigning example for the rest of the social sciences.


However, much of the explanatory strength of economics rests on a narrow and even unrealistic understanding of human behavior, particularly an understanding of the human creature as a utility-maximizing rational actor. Stripped of conflicting devotions, shorn of history and culture, reduced to a few basic motives (especially fear and greed), economic man became highly analyzable data point, but arguably only insofar as he has ceased to be truly human. As Paul Krugman has recently written (http://www.nytimes.com/2009/09/06/magazine/06Economic-t.html), the economics field largely failed to predict our current economic crisis due to a basic disconnection from reality: “The economics profession went astray because economists, as a group, mistook beauty – clad in impressive-looking mathematics – for truth.”


Yet, even as economic assumptions can be questioned on the basis of whether they meet the standard of good science, there is a deeper problem with the modern study of economics: those very “unreal” assumptions have tended to be imperialistic in shaping much of modern humanity’s self-understanding. Far from being merely “descriptive,” the basic assumptions of economics – that human beings are acquisitive individual utility-maximizers living in a world of scarcity – deeply shape modern humanity’s view of itself. And, more than anything else, it is this view that lies at the heart of our current economic crisis – itself a spiritual crisis. A false anthropology – one in which humans are defined above all by their fears and appetites – undergirds a system that encourages materialism, short-term thinking and a utilitarian relationship to the natural world and fellow humans. It discounts bonds born in self-sacrifice and love, and the attendant social structures that foster and perpetuate those motivations. The root of our economic crisis was not narrowly technical – and not solvable by mere economic or regulatory reform – but fundamentally anthropological, denigrating an alternative understanding of human nature that places a priority upon the personal over the impersonal; on the sacrificial over the acquisitive; on love over lust; and premised upon a view of creation as a bountiful gift of a loving God rather than a condition of miserly scarcity demanding the conquest of nature.


Based on typical course offerings (http://econ.georgetown.edu/courses/) in most Departments of Economics, one would hardly suspect that there are other economic approaches that start with a fundamentally different set of anthropological assumptions. Especially relevant at an institution like Georgetown is a rich tradition of Catholic economic theory, from the tradition of Church Doctors to papal encyclicals (http://www.vatican.va/holy_father/leo_xiii/encyclicals/documents/hf_l-xiii_enc_15051891_rerum-novarum_en.html) to alternative economic approaches that include the Distributism of Chesterton and Belloc. In its orbit one would count the economists E.F. Schumacher and Wilhelm Roepke, authors respectively of Small is Beautiful (http://www.amazon.com/Small-Beautiful-Economics-People-Mattered/dp/0060916303/ref=sr_1_2?ie=UTF8&s=books&qid=1258432428&sr=1-2) and A Humane Economy (http://www.amazon.com/Humane-Economy-Social-Framework-Market/dp/1882926242). These authors stress the role of economics in sustaining good and stable communities and families, where the activities of economics are understood to be subordinated to a more comprehensive understanding of the human good. This was the theme of Pope Benedict XVI’s most recent encyclical, Charity in Truth (http://www.vatican.va/holy_father/benedict_xvi/encyclicals/documents/hf_ben-xvi_enc_20090629_caritas-in-veritate_en.html), a text that has received little official attention on campus.


Eschewing modern assumptions, this approach is equally critical of both big business and big government – arguing that any economy that permits organizations “too big to fail” will require a massive government that assists in their creation and maintenance. It was thinkers in this tradition who were generally more accurate in predicting the recent economic crisis. Basing their judgment less on sophisticated models than on the insight that human institutions that grow too large ultimately weaken our attachments and encourage narrow self-interest and irresponsibility, such thinkers warned of the likelihood of an economic (and ultimately, social) unraveling.


Recent events have shown that the modern study of economics not only misinterprets the world, but that it changes it in ways for the worse. It is time for a better economics, and – not limited to that end – time for a truer and reality-based understanding of human nature.

Winehole23
11-18-2009, 11:03 AM
http://www.frontporchrepublic.com/?p=5070

Winehole23
11-18-2009, 11:08 AM
http://en.wikipedia.org/wiki/E._F._Schumacher

Winehole23
11-18-2009, 11:09 AM
http://mises.org/about/3241

mogrovejo
11-18-2009, 11:13 AM
The utility maximization problem and the optimal decision theory are small parts of the economics research. The idea that the entire economic corpus is based on those assumptions is a strawman used frequently used by those who've never read a single economics book.

Winehole23
11-18-2009, 11:32 AM
Another strawman.

I'm just throwing stuff out there for people to consider. I would think you'd encourage posters to jump in and start swimming wherever they happen to be, however minor their focus may be. Instead you seem to heap scorn on whoever isn't on the same page as you, or lacks your familiarity with the breadth of the discipline.

C'est la guerre. You could be a teacher. Instead, you're a mock those who know less. Your choice, mogro.

mogrovejo
11-18-2009, 11:35 AM
Another strawman.

I'm just throwing stuff out there for people to consider. I would think you'd encourage posters to jump in and start swimming wherever they happen to be, however minor their focus may be. Instead you seem to heap scorn on whoever isn't on the same page as you, or lacks your familiarity with the breadth of the discipline.

C'est la guerre. You could be a teacher. Instead, you're a mock those who know less. Your choice, mogro.

Ad hominen.

If you post flawed articles, I'm going to point out the flaws. The theme of the article is no more than a gigantic fallacy - and I say this as one who's generally inclined to heterodox school of economics.

Winehole23
11-18-2009, 11:37 AM
Another thing: it does little good to protest that neoclassical economics or any other kind of economics has been popularized and misunderstood. Particularly in America, the popularizations and misunderstandings have probably been more influential than the economists themselves.

The whole idea of homo economicus is bad at the basic level of description, but it undergirds much of economic orthodoxy; perhaps Mr. Dineen has overdrawn the artificiality of the discipline, but IMO he does not lie about it.

mogrovejo
11-18-2009, 11:39 AM
Yes, neoclassical economics have been generally misunderstood and over-simplified.

With this article, Mr. Dineen makes another contribution to that cause.

Winehole23
11-18-2009, 11:40 AM
If you post flawed articles, I'm going to point out the flaws. Fair enough.

Winehole23
11-18-2009, 11:41 AM
Yes, neoclassical economics have been generally misunderstood and over-simplified.

With this article, Mr. Dineen makes another contribution to that cause.What would you recommend as a corrective?

Ignignokt
11-18-2009, 11:48 AM
srsly winhole, why did you post the article if it can't be criticized in a *gasp* discussion forum? LOL x1000000

Winehole23
11-18-2009, 11:53 AM
mogrovejo sometimes fails to makes his objections clear. I have no problems with his criticism; only with his abrupt dismissiveness. It sorts ill with discussing things.

mogrovejo
11-18-2009, 04:48 PM
What would you recommend as a corrective?


I'm all in favour of the dissemination of alternative schools of thought. However, I don't think that portraying misleading pictures of neoclassic economics is an acceptable or productive way of doing that. Good for Mr. Dineen to mention the 16th century Iberian Catholic Scholastics - those whom Mr. Hayek called "the precursors of modern economics" in his Nobel Prize Acceptance Lecture. But it's counter-productive to misrepresent the building blocks of neoclassic economics to argue in favour of other schools. Unfortunately, this is very frequent. To name situations I'm more familiar with, the Austrian objection to the use of utility functions to describe individual preferences because of their cardinal nature. This could make sense in Mises days, but after Arrow and Debreu? Or the assumption of continuity: Rothbard and many other heterodox economists reject it in epistemological grounds, but then his (and theirs) work is filled with constructions that demand the assumption, like the simple interjection of supply and demand. Or the rejection of the theory of externalities and public goods sustained in the possibility that consumers may not want to purchase the said public good - this was a good critic until Coase, Colson and others solved the problem. To sum it up, the fact that some individuals misuse an economic theory doesn't make it wrong.

When an economist builds a model from the assumption that everybody prefers lemons to apples he doesn't actually believe that in the real world everybody prefers lemons to apples. Many of the economics done today is conceptual or positive and does not intend to have normative purposes; it's supposed to be value-free. The dominance of the neoclassical thought this days is not due to some dark conspiracy but to its success explaining reality. Also, it's funny that Mr. Dineen complains about "our current problems" linking them to the prevalence of the neoclassical doctrine seemingly forgetting that he's living in the richest and most affluent civilization and times in the history of human kind. One wonders what would he write if he was living in societies where the influence of the neoclassics is negligible, like Cuba or North Korea. Chesterton's distributism sounds great until one realizes than the only way to implement it is by forcing the individual liberty of not owning property or accumulating property by legitimate and moral means.

Maybe Mr. Dineen is right and other economic theories, lying in different assumptions, are better. For example, Marxism Economics lies in a completely different understanding of the human nature - the new man, a being without vices and selfishness. We all know what the result was. Mr. Dieneen ethical and moral prescriptions may be excellent. But they are either the realm of normative economics or he needs to show they are viable assumptions to build positive doctrine.

The corrective? People should read more. Professor Mankiw's Principle of Economics (http://www.amazon.com/Principles-Economics-N-Gregory-Mankiw/dp/0324589972/ref=sr_1_1?ie=UTF8&s=books&qid=1223748926&sr=1-1) is generally regarded as the best introduction book in the English language. Personally, I don't plan to do anything about this issue.

Winehole23
11-18-2009, 05:00 PM
Personally, I don't plan to do anything about this issue.The post you just made looks to be a pretty good key for anyone wishing to read further.

I appreciate the in detail reply, mogrovejo. :tu