There’s an interesting piece in Aeon magazine this week about mainstream economics, the title of which gives a fairly broad hint about what’s coming: The New Astrology. Both systems of knowledge, Alan Jay Levinovitz argues, are actually pseudoscience; they adopt the trappings of genuine empirical science (astrology’s elaborate calculations and specialised terminology, economics’ “mathiness” and formal models) but ultimate represent failed intellectual models which are incapable of producing reliable predictions – which is their main claim to authority, and the main justification for the substantial rewards enjoyed by those practitioners who receive official blessing. Some (well-established, tenured) economists will admit that the empirical basis of their claims is sometimes problematic, and that the failure to anticipate the 2008 crash was indeed troubling – but the basic model of what is considered valid economic analysis persists.
This links neatly to some of the issues that ancient economic historians have been discussing over the last couple of months in response to the Ober v. Vlassopoulos debate, and which came up in the impromptu round table discussion we had at the European Social Science History Conference in Valencia last week: for example, the continuing validity of Ian Morris’ distinction between ‘soft’ humanities (“yes, but it’s more complicated than that”, always emphasising difference and context) and ‘hard’ social sciences, in terms of the kinds of knowledge they (claim to) produce, the inclination of different individuals to one approach or the other on the basis of their temperament and/or aspirations, the relative authority and perceived relevance of the different approaches in the wider world (i.e. why economists get paid a lot more than historians).
The article did bring to my mind one aspect that perhaps hasn’t been emphasised so much: the nature of the object of analysis. One of the points that Levinovitz makes about astrology and about ‘calendrics’ – the mathematical study of the realm of divinity in early Imperial China – is that they produced elaborate, sophisticated systems for charting the movement of heavenly bodies (despite assuming heliocentrism) that were perfectly capable of producing accurate predictions of future astronomical events. The problem was the assumption that these movements had a direct effect on human affairs, and hence that astrological calculations could predict important events and should determine the choice and timing of actions. Levinovitz wants to draw an analogy with the attempts of economists at analysing and predicting the market – reasonably reliable short-term predictions, very bad at anticipating big unexpected events – but manifestly these are quite different kinds of system. The astrologers were observing a relatively simple system with a small number of interacting variables – which was not in the least bit affected by their observation of it; the economists are attempting to treat a highly complex system with countless millions of interacting variables (even if we assume that individuals are basically self-interested utility maximisers immune to Keynes’ ‘animal spirits’, which is dubious except for model-building purposes) as if it is a Newtonian model of the solar system – and ignoring the extent to which their observations and theory-building then affect the behaviour of the system.
This is of course where the other social sciences, and the humanities, can make their claim to contribute constructively to the discussion: the macroeconomic models are bright, shiny and streamlined, but if they’re constructed on the basis of faulty or unrealistic microeconomic assumptions they will fall apart and fail to do their job – so our ability to understand and appreciate complexity, variability, uncertainty, the whole messy ‘human thing’, needs to come into play. True – but, as the Levinovitz article led me to think this morning, perhaps absurdly optimistic.
In the first place, the ability of economists to influence the object of their analysis could, from their perspective, be seen not as a bug but as a feature; astrologers can’t change the course of heavenly bodies to suit their needs better, but economists can aspire to altering the workings of the market through its institutions so that it better conforms to their models – in which case, there will be no need for the softer social sciences and humanities to complicate everything unnecessarily. And secondly, there is the political imperative (at least in the West) to believe (or profess to believe) in a regular, predictable market mechanism and in the authority of its interpreters, as an alibi for both action and inaction: There Is No Alternative. Events like the threatened closure of the Port Talbot steelworks are placed in the same conceptual category as solar eclipses – in terms of their fateful inexorability, at any rate, if not necessarily their predictability. You can’t fight against a mechanistic universe; you can only try to make yourself more flexible and resilient, to conform to the workings of the system rather than resisting.
Calendrics offered the sort of knowledge that Chinese rulers wanted; it bolstered their authority by ensuring that their rule was in accordance with the workings of the heavens. The modern political class seeks the same legitimation, and so continues to keep economists at its right hand and reward them lavishly. To blame the economists for their pseudoscientific claims is to pick the wrong target.
[Update: by coincidence, I’ve just come across the latest issue of the Bulletin of the Independent Social Research Foundation, which discusses different aspects of the current state of economics and the hope for a revival of a broader idea of political economy, including a very neat little piece by Christopher Brooke on some of the less persuasive criticisms made of economics, including why the label ‘the dismal science’ is actually a badge of pride…]