Symposium on Reorienting Economics
Jack Vromen (Erasmas University Rotterdam, Netherlands)
© Copyright 2004-Jack Vromen
Mainstream economists also aim at identifying underlying mechanisms
Tony Lawson (1997, 2003) has both been cherished and chastised for his characterization of mainstream economics as being positivist in methodological orientation, as dealing with closed instead of open systems, as aiming to represent event regularities (of the form “whenever event x then event y”) instead of underlying causal structures and mechanisms and as exemplifying a mathematical-deductivist style of theorizing and modelling.2 Lately, in a reply to Reiss (2004), however, Lawson states that he never held that mainstream economists are only interested in event regularities. Nor did he ever assert that neoclassical economists ignore or deny the existence of underlying causal mechanisms. Lawson asserts that he never questioned that mainstream economists entertain broader visions of economic reality consistent with the causalist ontology that he himself accepts. What he rather always held, Lawson argues, is that their preferred mathematical-deductivist style of theorizing cannot possibly do justice to such broader visions: “ … the prior attachment to certain sorts of mathematical methods imposes an (often unnoticed) ontology mostly inconsistent with those visions” (Lawson 2004, 337).
What I like about this argument is that it gets a possible misunderstanding that mainstream economics denies the existence of underlying causal mechanisms out of the way. What I disagree with, however, is the presumption that adherence to a mathematical-deductivist style of modelling imposes a ‘flat’, non-layered empiricist ontology. I think this presumption is simply wrong. Of course, if one accepts Lawson’s understanding of deductivism as a type of explanation in which regularities of the form ‘whenever event x then event y’ are a necessary condition (Lawson 2003, 5), the rightness of the presumption follows by definition. But if by ‘deductivism’ is meant (as I think it often is) a strong preference for a particular type of inferences from axioms and assumptions, then the presumption seems unwarranted. One can insist that a theory should be axiomatized, that axioms (or postulates, or first principles) should be at the basis of any theory and that all of its hypotheses should be deducible from them, for example, and yet maintain that what the axioms and theorems are (or should be) about are underlying causal mechanisms rather than observable regularities.
As far as I can see there is nothing in the Bourbaki-type, set-theoretic ethos that long dominated economics that prevents theorists from trying to represent underlying causal mechanisms and from exploring their consequences. What is more, many mainstream economists arguably aimed at doing precisely this. A case can even be made that Friedman, taken by many to be the spokesman of a non-realist orientation in economics par excellence, professed his belief in a layered ontology: “A fundamental hypothesis of science is that appearances are deceptive and that there is a way of looking at or interpreting or organizing the evidence that will reveal superficially disconnected and diverse phenomena to be manifestations of a more fundamental and relatively simple structure” (Friedman 1953, 33). Elsewhere Friedman argues that economic theory should concentrate on such an underlying fundamental structure, on “common and crucial elements”, and abstract from other elements and factors in “explaining” phenomena (ibid., 14). Precisely because economists in their theories abstract from non-common and non-crucial, but nonetheless actually occurring disturbing factors should the regularities or tendencies that their theories predict not be expected to be empirically observable event regularities. Yet if the elements that their theories do concentrate on are really crucial, the regularities predicted should somehow be discernable in observed empirical data.3 This depiction of Friedman of what economic theory does and does not do and what it can and cannot aspire to is not some credo of “Official Methodology” that is alien to what practising mainstream economists actually do. It seems that in his own contributions to economic theory Friedman set out to do exactly this: to identify and specify crucial underlying structures and mechanisms.
This is not to say that what underlying structures and mechanisms economists believe to be actually working in ‘the real world’ can be readily read off from their theories and models. Sometimes the structures and mechanisms that they believe in are explicitly theorized and modelled. But at other times their assumptions and hypotheses do not reveal their ontological beliefs. Again Friedman (1953) is exemplary. Friedman famously argued that assumptions of economic theory should not be taken too literally. In particular, economic theory is not committed to the belief that economic agents actually go through the deliberations and calculations that economic theory’s behavioural assumptions seem to ascribe to them. Economic theory is only committed to the belief that economic agents behave as if they actually went through these deliberations and calculations. For example, business men need not actually base their decisions on a comparison of marginal costs and revenues, as is assumed in neoclassical theory of the firm. As long as their actual behaviour is consistent with this assumption, is the theory applicable. At this juncture one might rightly wonder what then are the actually operating underlying mechanisms that make economic agents behave the way they do, if they are not the deliberations and calculations ascribed to them that make them do so. At some point in his essay Friedman suggests that it is something like ‘natural selection’ in competitive markets that leads business men to behave as if they increase production until the point where marginal costs equal marginal revenues (see Vromen 1995 for a more detailed discussion).
What this shows, to repeat, is that the particular beliefs that economists entertain about underlying mechanisms in the real world need not be readily discernable from the assumptions and hypotheses in their theories. Even theorists such as Friedman who argue that the actual determinants of behaviour are irrelevant (as long as the behaviour actually displayed is consistent with the assumptions made) happen to entertain particular beliefs about underlying mechanisms in the real world. This raises the question why such economists do not see a need to model their beliefs explicitly. Why does Friedman not model competitive ‘market selection’, for example, if he believes that that provides the key to understanding industry behaviour? As I take it, here we come across one of the main differences between how mainstream economists and how Lawson think how a multi-layered real world should be tackled theoretically. The real difference is not that their adherence to mathematical-deductivism forecloses mainstream economics to focus on underlying mechanisms, whereas Lawson insists that focusing on underlying mechanisms is exactly what a satisfactory economic theory should do. Both camps hold that a satisfactory economic theory should identify underlying mechanisms. A real difference is rather that Lawson urges economists to model real underlying mechanisms explicitly, whereas many mainstream economists seem to think that this is not necessary.
The reason why these mainstream economists do not think this is necessary, I submit, is that they weigh various theoretical virtues that a theory might have differently from how Lawson weighs them. If some assumption is not believed to identify and specify an actually working underlying mechanism in the real world, then Lawson most probably would reject such an assumption as being deficient. By contrast, as we have just seen, at least some economists do not see a need to reject it. Following the dictum “If it ain’t broke, don’t fix it”, they apparently do not believe the assumption to be deficient. Why not? It seems that one of the reasons that they cling to this assumption is that it allows them to retain models that they cherish for their elegance, simplicity, parsimony, tractability, unifying power and the like. It seems that Lawson wants to assign greater weight to other theoretical virtues such as truth, realism (or realisticness), credibility and plausibility. Elegance, simplicity, parsimony and the like cannot compensate for the deficiency of theories lacking in these respects. Theories and models that have greater plausibility in identifying real and important underlying mechanisms should be preferred over theories and models having less credibility in this respect, even if that would go at the expense of parsimony and tractability. Lawson’s plea to bring about an ontological turn, to bring in ontology, can thus be understood as an attempt to redress the balance in theoretical virtues in economics.
A second significant and more straightforward difference between mainstream economics’ and Lawson’s preferred take on underlying mechanisms is that each camp has a different view on what are the important underlying causal mechanisms. Lawson presents his own theory of social ontology that self-consciously differs from the mostly implicit social ontology that mainstream economists have in the back of their minds. In Lawson’s theory of ontology, social structure is an emergent property that has an existence and that has causal powers of its own (i.e., that irreducible to the individuals involved in its emergence and persistence), for example. Social rules and social positions are allotted a prominent place in Lawson’s ontology. In mainstream economics’ social ontology all this is denied. That is to say, many mainstream economists subscribe to some sort of ontological individualism, according to which only individuals and their properties really exist. Social phenomena are seen as intended or unintended consequences of actions and interactions of individuals. As it is denied that social phenomena have an existence of their own, they cannot causally affect properties and behaviour of individuals.
Ontology as a final arbiter in assessing economic theories
Taken together, the two significant differences between mainstream economics and Lawson’s plea to reorient economics identified here seem to suggest that the thing to do next for Lawson is to work out his own social ontology in a full-fledged alternative economic theory. Such an alternative economic theory should not necessarily be as elegant, simple, parsimonious and the like as mainstream economic theory. Losses in these theoretical virtues would be more than compensated for by the alleged gain in terms of truth, realism and the like. I would be all in favour of this. But this is not the direction in which Lawson takes his social ontology. Lawson puts his social ontology and his realist transformational model of social activity to a different task. These he uses to assess the merits and demerits of economic theories and models put forward by others. Lawson adds all kinds of qualifications and disclaimers to his realist transformational model of social activity. He argues that his own social ontology is “… practically conditioned, historical and fallible” (Lawson 2003, 61). But this does not prevent him from endowing it with quite some authority in assessments of economic theories and models. It is his transformational model of social activity that he uses as some sort of template to accuse mainstream economics of misplaced universalising. It is on the basis of his transformational model that Lawson argues that whereas mainstream economics pretends to provide a universally applicable theory, it is applicable to special cases only. Similarly, although Lawson is much more sympathetic to evolutionary economics, evolutionary economics is also argued to cover only some of the possible sources of economic change. It is his own transformational model that is said to offer a fuller story (Lawson 2003, 131). Evolutionary psychology and memetics are criticised on the same basis (ibid., 134). Lawson argues that memetics entails the proposal to reduce economic and social study to evolutionary psychology and/or biology (ibid., 139). Lawson objects to this on the ground that such attempts ignore emergent properties at levels of organisation higher than that of biology and psychology. In sum, what we see here is that Lawson’s own social ontology, the transformational model of social activity, serves as a benchmark for assessing whether or not some particular economic theory suffers from attempts at misplaced universalising or reductionism.
Unlike Lawson I think that ‘borrowing from evolutionary biology’, in the sense of assuming that the abstract structure of evolutionary theory in biology is a useful starting-point for studying ongoing processes of economic evolution, does neither entail a denial of agency nor a commitment to reductionism. But arguing for this position is not my concern here (for an argument, see Vromen 2004). For now I want to examine more closely what makes Lawson so confident that any economic theory that is inconsistent with his social ontology cannot possibly be on the right track. This examination is meant to temper overdrawn hopes fostered by Lawson as to what ontology in general (not just Lawson’s own ontology) can do for us. What grounds does Lawson have for believing that his ontology provides some sort of impeccable neutral ground for assessing whether there is for example misplaced universalisation or misplaced reductionism going on in specific economic theories? The issue at stake here can be unpacked into the following two questions. First, where does Lawson get his own specific ontology from (and how does he derive it)? Second, to what does Lawson’s ontology owe its authority in matters of assessing the merits and demerits of specific economic theories?
Lawson claims that his transformational model of social activity is a social ontology that is derived a posteriori (Lawson 2003, 34, 42, 132-133), in a transcendental deduction (or inference), from some uncontested generalised observations about social reality. Given this claim, one would expect that Lawson explicitly states the bases of his transcendental deductions, the alleged uncontested observations about social reality, and that Lawson shows us how the transcendental deductions from them proceed. Unfortunately, neither is the case. Only now and then does Lawson report an uncontested observation about social reality from which he proceeds. And transcendental deductions are rarely if ever carried out (or presented) in any detail. Most of the time, only the (alleged) results of the (alleged) deductions are presented. Lawson ends up presenting a vast list of elements or items that together are supposed to make for the transformational model of social activity.
So the route via which Lawson arrives at his social ontology is far from transparent. This is a serious omission, I think, for it is questionable that there are many uncontested generalised observations about social reality. One such (alleged) observation is that people tend to be successful in their actions and in their attempts to find their ways in a complex society (35-36). It remains to be seen whether this is something everyone would readily agree on. It seems that among other things this depends on what criteria of ‘being successful’ and ‘getting along quite well’ we invoke. On sufficiently demanding (and perhaps even conventional) criteria we could perhaps as well agree that many people are not successful (and many firms go bankrupt, for example), that there are many ‘outcasts’ in society and that contemporary societies are plagued by social conflicts, coordination failures and mutual misunderstandings. Why not take these observations as the appropriate basis for our quest for a suitable social ontology? Without further arguments why we should start with Lawson’s own generalised observations about social reality, Lawson’s observations, which are the basis for his transcendental deductions, appear to be somewhat arbitrary.
What is more, the status and exact workings of transcendental deductions are not uncontested either. Sometimes it seems that Lawson follows Kant in a search for conditions without which the alleged general facts observed could not possibly exist (Lawson 2003, 44-45). Thus understood the social ontology uncovered consists of necessary conditions for the (alleged) existence of general patterns in social reality. The idea is that the nature of social reality must be as identified in Lawson’s social ontology. For otherwise the general patterns that we observe in social reality could not have existed. The problem is that attempts at making transcendental deductions in this sense are either trivial or questionable. As an example of the former possibility, consider: “We walk, talk, read, write, sing, interact, imitate, etc. In order to do these things we must possess the capacities to do these things” (Lawson 2003, 45). Well, in order to write this paper I must have the capacity to do so. This is certainly and trivially true. But in and by itself this is not very informative. For the transcendental deduction to deliver substantive results more is required. What does the capacity consist of, what exactly is the capacity, what is the quality of the behaviour if the capacity is exercised, when does exercising the capacity yield good results, are among the things we might want to know about the capacity. It is highly questionable, however, and here I come at the latter possibility, that any answer to one of the questions could possibly be the result of a transcendental deduction. For note what an argument backing up the claim that a transcendental deduction could produce such a substantive answer would imply. It would imply the claim that the social activities or phenomena observed could not possibly have been produced otherwise. It is impossible, it seems, to live up to the burden of proof that this claim implies.
Thus it seems that transcendental deductions either border on vacuity or on invalidity.4 Either they do not produce interesting new insights, but merely paraphrase what is assumed. Or the transcendental deductions do not stand up to serious scrutiny. If capacities are not understood in such a way that they are presupposed by definition, then it is hard if not impossible to demonstrate that without certain capacities in place, social reality could not possibly have existed. The situation here with Lawson’s social ontology is similar to that with Searle’s social ontology (Searle 1995). Searle argues that collective intentionality is a necessary precondition for social reality. He furthermore argues that a pre-intentional sense of us (or of community) is in turn a necessary precondition for collective intentionality. Now it is possible to understand ‘social reality’, ‘collective intentionality’ and ‘a pre-intentional sense of us’ in a way that makes ‘a pre-intentional sense of us’ a necessary precondition for collective intentionality and collective intentionality in turn a necessary precondition for social reality by definition. But on such a reading Searle’s claims are not very interesting. If on the other hand ‘social reality’, ‘collective intentionality’ and ‘a pre-intentional sense of us’ are defined independently of each other, Searle’s claims seem to be untenable. There clearly seem to parts of social reality for which collective intentionality is not required. And there seem to be avenues leading to collective intentionality that do not involve a ‘pre-intentional sense of us’ (see Vromen 2003 for a more elaborate argument).
Given all the obscurities and problems that surround Lawson’s transcendental deduction of his social ontology, I conclude that it cannot play the adjudicating role that Lawson imputes to it. One of the reasons for Lawson to argue for the primacy of ontology is that “… all methods, frameworks and points of view carry ontological presuppositions.” This arguably is true. But what follows from it? Lawson seems to infer from this that in assessing existing theories and in constructing new ones we’d better start with ontology, rather than with methodology and epistemology, for example. But with what ontology should we start then? What ontology has sufficient credentials to play this role? Lawson’s assertion that all methods, frameworks and points of view have ontological presuppositions can also be turned upside down here. Any attempt to formulate an appropriate ontology presupposes a point of view and has epistemic presuppositions. Where do we get an appropriate ontology from? How credible is a proposal for an appropriate ontology? What evidence and support can the proposal draw on? It is hard to avoid the impression that Lawson’s social ontology is a renewed attempt at prima philosophia. It is an attempt to identify the basic and essential building blocks of social reality without taking recourse to, and even without being informed by empirical science and empirical research. Apparently, Lawson believes that his attempt succeeded. But what reasons or evidence does he give those who do not already have the same persuasion to come to share this belief? Not many, I submit. To put it bluntly, why would or should we believe that Lawson’s social ontology is more credible than the specific economic theories that he assesses on the basis of it?
An alternative: conjectural revisionay ontology
History is replete of examples with situations in which new insights and new findings in science proved firmly held ontological convictions about the nature and constituents of reality wrong. This raises questions not just about the credibility and reliability of Lawson’s ontological convictions, but also, more generally, about the proper role of ontological views in scientific theorizing. The lesson to be learnt from the historical examples is not, I think, that ontological views can only stand in the way of the breakthrough of new scientific insights that threaten to undermine those ontological views. New, revisionary ontological views can also inspire and guide the development of new scientific insights. And this, I submit, is the role that Lawson’s realist transformational model of social activity in principle and ideally could play. Rather than acting as some supposedly self-evidently correct template of the totality of social reality (which, I argued, it in fact isn’t) for the unmasking of existing theories and models as being non-universal and reductionist, as it now does in Lawson’s work, the realist transformational model of social activity could serve more constructively as a first sketch or outline of a yet to be worked out new theory. Lawson’s realist transformational model of social activity could act as a conjectural revisionary economic ontology (Vromen 2004). It would be revisionary in that it is different from the ontological views that mainstream economists entertain and it would be conjectural in that it does not and cannot pretend to be more than a first guess about how social reality in fact is constituted. The merits of this first guess can only be ascertained after it has been worked out into a new full-fledged theory and after this new theory is assessed properly. The standards or criteria to be invoked in this assessment are fairly standard ones, I think. As Kincaid (1996) argues, they fall within three broad categories: evidential, explanatory and formal. The theory should be supported by empirical and theoretical evidence, it should display explanatory power and it should meet certain formal requirements such as parsimony, internal consistency and tractability.
Unlike in mainstream economics, formal standards (or theoretical virtues) should not outweigh evidential and explanatory ones. Considerations pertaining to elegance, parsimony, tractability and the like should not be called upon to defend a theory, for example, that is obviously at odds with available theoretical evidence. Such considerations should not be abused in particular to ignore relevant findings and insights obtained in other disciplines. Of the other standards critical realists such as Lawson are likely to find that of empirical adequacy most suspicious. After all, one of the key insights of critical realists is that we should not expect the functioning of underlying mechanisms to result in event regularities. This seems to disqualify empirical adequacy as an appropriate standard. But one does not need to be a fan of Friedman to appreciate that if some allegedly crucial or essential mechanism really is crucial or essential, it must be possible to somehow trace its workings and its effects in empirical data.
To sum up, I think that Lawson’s plea to bring in considerations of an ontological kind in attempts to reorient economics is to be welcomed. Such considerations deserve more attention and deserve to carry more weight in economics than they currently have. In particular, if specific beliefs about real underlying mechanisms are strongly held, then this should result in attempts to theorize and model these mechanisms explicitly, even if this would go at the expense of parsimony, simplicity, theoretical elegance, tractability and the like. But such ontological considerations should not and cannot play the ‘final arbiter’ kind of role, adjudicating once and for all the shortcomings of existing economic theories and models, that Lawson attributes to them. Instead of playing this negative and critical role, ontological considerations such as the ones that went into Lawson’s realist transformational model of social activity should rather play a more constructive role. They should function as heuristic principles, guiding the development of a new economic theory (or of new economic theories). Only after such a new theory is developed and assessed in a fairly standard way can the fruitfulness of Lawson’s realist transformational model of social activity for economic theorizing be evaluated.
1. This is an extended and revised version of section 2 of Vromen (2004).
2. For the sake of convenience I comply with Lawson’s practice to refer to mainstream or modern economics (as if it were a monolithic bloc), but only reluctantly, because I believe that it is increasingly difficult to identify a distinguishing set of features that widely accepted or respected economic theories have in common with each other.
3. If this is a fair representation of a typical mainstream economist’s position, then mainstream economics does not believe that the real world is a closed system. What’s more, mainstream economics then does not display a preference for closed system theorizing either. If closed systems really are systems in which event regularities occur, as Lawson argues, then on my representation theories in mainstream economics do not present closed systems.
4. For a more elaborate discussion of Lawson’s use of transcendental deductions, see Guala (2003). Guala tries to do more justice to Lawson’s assertion that his transcendental deductions are fallible. But in the end he reaches a conclusion that is similar to mine: transcendental arguments cannot possibly deliver the kind of substantive non-trivial insights that Lawson want to derive from them.
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