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from  post-autistic economics newsletter : issue no. 5, March, 2001


Humility in Economics
André Orléan  (Director of Research, CNRS, Paris)

Is economics a science? Are there laws in economics as there are in physics? The answers
to these questions, which divide economists as well as epistemologists, have important
consequences not only for economics itself, but also for the role of economists in society.
Take the following example: is it right to say that "An increase in the minimum wage
necessarily leads to less employment for the least qualified workers"?  The answer is
straightforward: no.

The so-called "law of the minimum wage" is an excellent starting point, not only because
it has been at the centre of the recent [French] debate on low wages, but also because it
is one of the very few proposals that can legitimately claim to be an "economic law".
According to a survey, 90% of the economists believe in it. After all, isn't it enough to remark
that when the price of a given good rises, its demand diminishes? One could not find a more
elementary economic truth. Unfortunately, David Card and Alan Krueger have observed
through various North-American experiences of increasing the minimum wage that the
employment level of the least qualified either remained the same or increased. They did not
manage to find the negative effect predicted by the "law". Besides, those who have a bit of
memory know that as early as in the late 1970s, Malinvaud had proposed a macroeconomic
configuration which he baptised "Keynesian unemployment", in which "when wages rise,
so does employment". How is this possible? The reason is that the economy is a complex
web of interdependencies that does not allow us to predict the final outcome of a change in
a single variable. A rise in interest rates may well lead to an appreciation of the national
currency, but the contrary is just as possible. There are no universal laws in economics.
Instead there is only a set of highly various mechanisms, such that when analysing a given
situation it is necessary that we take into account economic conditions, institutions and
specific histories. "Well, even so," one could say. "Don't we simply have to be more precise
about the initial conditions in order to predict the final outcome?"

Here, we face a second obstacle, even worse than the first one. Among the conditions that
affect economic fluctuations, one must include the knowledge of persons, their beliefs, and
the way they understand their surroundings and justify their actions. As it happens, these
beliefs, interpretations and justifications evolve and transform themselves continuously,
because they are social objects. And this is because human beings learn and innovate -
the future is never a repetition of the past. In the human world, what happened yesterday
does not tell us what will happen tomorrow. Which model of the American elections could
have predicted that the failure of some machines to punch little holes in ballots would be
relevant? Similarly, economic competition constantly creates new and unpredicted situations.

So what conclusion follows for the economist? Humility. In teaching, humility is called
pluralism, confrontation with facts and other social sciences, and recognizing the three
demands that one finds in the very interesting petition written by the economics students.
In political terms, this means that no argument from authority is legitimate. This does not
imply that the economist ought to remain outside the public debate. It simply means that
the economist must engage him or herself as a citizen with convictions regarding the public
good and ways of treating it, rather than as the holder of universal truth that he or she
substitutes for discussion in order to impose it on us all. 


André Orléan (2001) “Humility in Economics”, post-autistic economics newsletter : issue no. 5, March, article 2.