What I am reading right now. And why.

I have long been interested in the work of Geoffrey Hodgson, who has researched and written extensively on institutional and evolutionary economics. For reasons which I will outline in this post, I have started on his book How Economics Forgot History. It was published back in 2001, but retains a strong relevance to those dissatisfied with the narrowness of much mainstream economics, and its neglect of history, both in terms of its own theory and of the economy more generally.

Beyond economics, now and again I like to dip into the work of what one might call ‘alternative’ or subversive thinkers, particularly the late social philosopher and author Robert Anton Wilson. His newly issued book The New Inquisition, originally published in 1986, like many of Wilson’s works, is a rollicking good read, and aims to shake up and indeed open up one’s belief system. He styled himself as aiming to achieve ‘model agnosticism’ in his learning about and understanding of the world. That is, given that all that we sense and perceive of the world around us is filtered through our nervous system, we can never experience ‘reality’ directly and fully. This a kind of philosophical realism: the world beyond our senses exists apart from those senses, and would continue to exist even if all humans perished. But our ways of perceiving the world are structured and filtered by a nervous system which emerges from a combination of our genetics and our lifelong learning, informing our beliefs and our models or maps of that world.

Wilson works hard in much of his writing to shake us free from any kind of fundamentalist belief system, whether scientific, political, religious or otherwise, noting that all beliefs, truths, etc have the potential to be provisional, partial and subject to change given the introduction of new information, or learning, throughout our lives. Wilson himself makes a strong case that the models on which we base our beliefs and understanding, which are necessarily simpler than the world ‘out there’, should be chosen to be useful to our life as we move through that world. Our perceptions and thinking are necessarily fallible, and we should be humble and recognise them as such.

The case for pluralism

What has this got do with economics and with Hodgson’s book? Well, when reading Wilson, I was reminded of what I feel to be the importance of pluralism or multiple viewpoints in social science, including economics. Since the Great Financial Crisis of 2008, which no mainstream thinker predicted, there has been a growing movement among student bodies, particularly in the form of Rethinking Economics, supported and encouraged by many heterodox or non-mainstream economists and others, to change the way economics is taught in universities and to democratise it as a subject. This is because many students and researchers recognise that economics has tremendous power in our modern societies, and shapes many of the goals of our political and policymaking elite. At the same time, as an apparently demanding and technical subject, its basics are clearly understood by too few of us. By democratising the understanding of economics in society, and by making more of us aware of its contested and pluralist nature, this movement aims to improve democratic processes, from accountability to the decisions made by our leaders which affect all our lives.

Pluralism in economics education means making students aware of and introducing them to different schools of thought, beyond the neoclassical mainstream. These might include post-Keynesian, Marxist, institutionalist, ecological, feminist, complexity and so on. Some thinkers have argued that the selection of any particular theory by economists and its application in the making of public policy is inevitably political since any policy will have distributional impacts, benefitting some interest groups more than others. This rather denies the existence of the common good in any society, but the political nature of economics is important to recognise. However, one could just as easily argue that economics is also social in that it impacts the society in which the economy is embedded, or ecological in that it interacts with or is even more deeply embedded within the ecosystem on which all life depends. Could economics be cosmic? Possibly, but over a rather longer time frame than most of us would consider useful.

So economics, and indeed any school of economic thought, like any body of theory, and as emphasised above, leaves out information in its creation. This is necessary in all of science, not least in the social sciences, and is required to enable tractability. Each school of economic thought can be distinguished by its objects of analysis, what its theories include and what they leave out. Thus different historical times and geographic spaces, or different contexts, may require different theories to provide explanatory power. As socioeconomic systems evolve and change, say from feudalism to capitalism, new and different theories may need to arise for our use.

A pluralist education in economics may thus be important if one thinks (as I do) that it is helpful for students and future decision makers to be aware of alternative explanations of social and economic outcomes. This kind of liberal education should encourage critical, free and independent thinking, which would surely benefit everything from science and politics to business.

A pluralist education in economics will also necessarily take more study time than one that teaches one kind of economic theory. Either that or it would require leaving out some course modules which currently dominate curricula. So there may be trade-offs to be made.

When it comes to academic research, pluralism retains a role, in that different schools of thought in economics can provide new insights for their members to draw on, stimulating innovative thinking and new approaches. There is a strong case to be made for interdisciplinarity, so that economics involves social, historical, political and philosophical aspects, among others. Cross-fertilisation of ideas, even between seemingly disparate subjects, potentially yielding intellectual advancements, is more likely to occur within more open academic environments.

History matters

Considering all of the above has led me back to Hodgson’s How Economics Forgot History. The book aims to address “the problem of historical specificity in social science”, arguing that after being a major topic of debate during the 19th century among social scientists, particularly in Germany, this problem was neglected as the 20th century progressed. It is little known among economists today, despite its importance to the development of both economics and sociology.

The lure of general theories, of theories of everything, not least in social science, is attractive but, argues Hodgson, has proven to be a false lead. Theories can be too general in that they end up neglecting the role of historical context. Of course, in any science, generalising and simplifying is essential in the construction of theories designed to explain a complex reality and identify causal mechanisms. However, ‘general’ concepts, statements and theories need to be combined with ‘particular’ concepts, statements and theories in the making of scientific understanding. If the former is predominant and the latter neglected, then in trying to explain everything, a theory can end up explaining very little for the purposes of scientific advancement.

All theories and models which attempt to explain some object, some aspect of reality, require simplification. In this sense, they are all in a way ‘unrealistic’. Many heterodox economists argue that the assumptions of neoclassical economics are patently unrealistic, while the assumptions of the theories of their own favoured school of thought are more realistic. Perhaps realism is a matter of degrees. Indeed I continue to believe that the pluralism and interdisciplinarity pushed by many heterodox thinkers in economics enable it to provide richer explanations of socioeconomic phenomena. But realism in this sense may be a bit of a red herring if any model is a necessary simplification.

I aim to share more on aspects of Hodgson’s book as I make progress through its 355 fairly dense pages. I found the introductory chapters to be clear and compelling. With that in mind: onward!