Philosophy of mind and ideas in economics


All theories and models generated by the human mind and brain are simplifications of reality. They of necessity leave out information in order to make analysis manageable and useful.

This is true of all human thinking, not just in economics. Beliefs, values,  theories and models are all products of human consciousness and are apparently accepted and used when they prove useful, at least to some people!

All schools of economics, whether they emphasise mathematical methods or simply the written word, must necessarily simplify reality. As Alfred Korzybski (pictured above) proclaimed: ‘the map is not the territory’. A map to the scale of 1:1 would be impractical, so mapmakers simplify in order to provide a useful product.

John Maynard Keynes employed the method of abstraction in his General Theory. Although highly technically proficient in mathematics, he largely avoided using it in this, his magnum opus, and was sceptical of the then emerging field of econometrics.

Abstraction is a method of focusing on what are considered to be the key aspects of some organic whole. This whole represents a conception of a holistic reality. In abstracting from this reality, the thinker keeps in the back of his or her mind other aspects of the whole which influence those held in thought. These can be introduced later, so introducing greater complexity to the theory when this becomes appropriate.

Marx also employed abstraction in his own magnum opus, Capital, alongside the use of history as evidence for his theories. He started with the most simple and most abstract concept, value, before proceeding to introduce increasingly complex ideas which were closer to what he claimed was the reality that we observe.

Apart from some basic algebra, Marx’s writing contained no mathematical models. Nevertheless, and despite the apparently strong methodological differences between mainstream and heterodox schools of thought, they all make simplifications and leave out information in order to reach particular conclusions about the economy.

Both Keynes and Marx abstracted from reality in their thinking, as do all economic theorists. However, the reality that they started from in their mind must also be seen as a simplification, a model generated by their observation of the world.

This sort of thinking leads us into an infinite regress, as we can only perceive the world through our mind and brain, rather than directly. Our perception of our own thinking is also a model simpler than reality, as is our perception of our perception of our thinking. All we can do is find a model which serves us best in explaining and influencing reality, and try to make progress from there.

Beyond theorising in economics, we are, all of us, modellers. The models we learn to use in life are influenced by our genes, and the learning environment we experience throughout our life, particularly when we are growing up and becoming ‘socialised’.

In my view (or model), the world can be perceived as increasingly becoming awash with information, with the potential for the latter to raise humanity’s collective intelligence and be used to solve new problems that arise in life. Social and economic change seems to be becoming more rapid. Some claim that we live in an ever more complex and chaotic world. If this is a helpful idea, then new ways of thinking (new models) are required for us to make progress, such as chaos and complexity theory.

Change can be seen as, paradoxically, a constant in life. If we accept this, both progressive (change to benefit the majority) and conservative (holding on to what is historically unchanging) ideas are inevitable in our thinking. We need to draw on the best of both visions to make our way through the social realm. This is as true for economists as for the rest of us.

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