Defining Economics

I am delighted that in her post "How much do current debates owe to conflicting definitions of economics?" Beatrice Cherrier engaged the argument I made in "Economics Needs to Tackle All of the Big Questions in the Social Sciences." I recommend Beatrice's post in its entirety, but in this post I'll just react to her quotations from me. 

                                                         Modeling and Quantifying

Beatrice writes:

...another shift has arguably been taking place in the last decades: the replacement of a subject-based definition with a tool-based one. The hallmark of the economist’s approach would not be its subject-matter –any human phenomenon is eligible-, but its use of a set of tools designed to confront theories with quantitative data through models. See for instance this recent post by Miles Kimball: “economics needs to tackle all the big questions in the social sciences,” he titles, adding that “what is needed [for economists to influence policy] is a full-fledged research program that does the hard work of modeling and quantifying.”

I wanted to clarify what I meant. First, although this definition is a tool-based definition, I don't view the set of tools defining economics as fixed. Rather, the set of tools defining economics is whatever set of tools are taught in the curricula of economics PhD programs as those curricula evolve over time. 

Thus, I am characterizing economists in terms of the human capital they have, and saying that economists ought to tackle the full range of problems that human capital gives them a comparative advantage at tackling. In my view, that includes a large share of all the big questions in the social sciences, and may include big questions in other areas (say, non-experimental studies of the effects of nutrition) that call for a level of statistical sophistication in dealing with messy situations that is not easy to obtain outside of economics PhD programs.  

In the nature of comparative advantage, the fact that such tools are especially valuable for traditional economics topics may, by raising opportunity cost, appropriately reduce the allure of some topics traditionally handled by other social sciences (or other sciences), but I argue that many social science questions outside of the traditional purview of economics are so important and have such a high scientific marginal product for the application of skills taught in economics PhD programs that economists should go after them. The purpose of my post "Economics Needs to Tackle All of the Big Questions in the Social Sciences" is to try to improve the chances that academic rewards for economists working on such questions are aligned with what I see as the high scientific and high social marginal product of addressing those questions. I would be honored if people working on important questions outside the traditional purview of economics showed "Economics Needs to Tackle All of the Big Questions in the Social Sciences" to their colleagues to help persuade those colleagues of the appropriateness of such research by economists.  

Second, out of context, the phrase "the hard work of modeling and quantifying" sounded much more narrow and tradition-bound than I meant. What I meant was simply persistently asking "Why?" and "How Much?" In my view, good answers to the questions "Why?" and "How Much?" both within the traditional purview of economics and outside it requires a expansive range of models.

A. Cognitive Economics. Let me give a few examples of what I mean by an expansive range of models. in my paper "Cognitive Economics" I argue for the importance (and discuss the technical difficulties) of models that avoid assuming that all the key actors are either infinitely intelligent or so smart that all the decisions they need to make are easy for them. To some, this permission and encouragement in the appropriate cases to do models in which agents are not all infinitely intelligent might be seen as a betrayal of the spirit of economics.

B. Psychological Production Functions. In my post "John Stuart Mill on Being Offended at Other People's Opinions or Private Conduct" I express my admiration for what some economists might think was an impermissibly ad-hoc psychological production function—a nice example of an approach that can do a lot to extend the effective range of economic modeling. Let me quote at some length from "John Stuart Mill on Being Offended at Other People's Opinions or Private Conduct":

Here I have in mind Ed Glaeser’s “The Political Economy of Hatred.” I liked the working paper version of this paper because of its model of a psychological production function for hatred in the working paper version of this paper. In the published version, that was replaced by a more rational model of hatred induction. The shift can be seen in the difference between the abstract of the working paper and the abstract of the published version. Here is the abstract of the working paper:

What determines the intensity and objects of hatred? Hatred forms when people believe that out-groups are responsible for past and future crimes, but the reality of past crimes has little to do with the level of hatred. Instead, hatred is the result of an equilibrium where politicians supply stories of past atrocities in order to discredit the opposition and consumers listen to them. The supply of hatred is a function of the degree to which minorities gain or lose from particular party platforms, and as such, groups that are particularly poor or rich are likely to be hated. Strong constitutions that limit the policy space and ban specific anti-minority policies will limit hate. The demand for hatred falls if consumers interact regularly with the hated group, unless their interactions are primarily abusive. The power of hatred is so strong that opponents of hatred motivate their supporters by hating the haters.

By contrast, here is the abstract of the published version:

This paper develops a model of the interaction between the supply of hate-creating stories from politicians and the willingness of voters to listen to hatred. Hatred is fostered with stories of an out-group’s crimes, but the impact of these stories comes from repetition not truth. Hate-creating stories are supplied by politicians when such actions help to discredit opponents whose policies benefit an out-group. Egalitarians foment hatred against rich minorities; opponents of re-distribution build hatred against poor minorities. Hatred relies on people accepting, rather than investigating, hate-creating stories. Hatred declines when there is private incentive to learn the truth. Increased economic interactions with a minority group may provide that incentive. This framework is used to illuminate the evolution of anti-Black hatred in the United States South, episodes of anti-Semitism in Europe, and the recent surge of anti-Americanism in the Arab world.

C. Cultural Evolution Tools and Markov Transition Matrices to Study Memetics. In the 1990's I became very interested in evolutionary theory. In the University of Michigan's 2-month May-June semester in 1997 and 1998, I taught a course called "Economics, Life and Philosophy," that focused on evolutionary theory. (Here is a link to my syllabus for that class.) By 1999, I had connected up with folks involved in the University of Michigan's Evolution and Human Adaptation program, including Randolph Nesse and Joseph Henrich among many others. I was struck by how close the thinking of those into evolutionary theory is to economists. But unlike finance and many other branches of business that essentially are economics, evolutionary theory has a distinct set of tools. Many economists have borrowed from the tools of evolutionary theorists, but many other economists are missing out by not knowing about the tools of evolutionary theory. 

One fact worth knowing is that among working anthropologists and evolutionary theorists, memetics  usually goes by the name "cultural evolution." Robert Boyd and Peter Richerson did a lot of work on formal models of cultural evolution that are collected in their book The Origin and Evolution of Cultures. But that is only the tip of the iceberg. Googling or typing into the Amazon searchbox "cultural evolution" reveals a wealth of resources. Searching for "meme," "memes," or "memetics," will lead to more low quality hits, but will also lead to some very interesting things. There is a lot of great inspiration for economists here. (One reaction I have to some of these models is that for certain topics, a simpler approach of using continuous-time Markov transition matrices or simply systems of differential equations might often work.)

                                 The Right Amount of Respect for Other Social Sciences

Beatrice's other quotation from "Economics Needs to Tackle All of the Big Questions in the Social Sciences."

To me, Miles Kimball’s post has clear Marschakian overtones: first, define what your economics identity is. Then, go and engage other social sciences on any question you wish. Writes Kimball:

That doesn’t mean the economists should ignore the work done by other social scientists, but neither should they be overly deferential to that work. Social scientists outside of economics have turned over many stones and know many things. Economists need to absorb the key bits of that knowledge. And the best scholars in any social science field are smarter than mediocre economists. But in many cases, economists who are not dogmatic can learn about social science questions outside their normal purview and see theoretical and statistical angles to studying those questions that others have not. 

I totally reject any claim of turf ownership by other social scientists. It is only to the extent that the training in other disciplines in fact makes non-economists better able to address a question that economists should leave that question to non-economists. (Of course "better able" could include being able to address a question equally well but more cheaply or only a little less well and much more cheaply.)  

Also, I think that for most academics, self-confidence is helpful for one's productivity—even self-confidence somewhat beyond what can be factually justified. So it should not be consider any great crime or faux pas to believe in one's heart of hearts that one is smarter than one's competition in addressing a question. Politeness requires not being too obvious in this belief, and retaining a semblance of wisdom requires not overdosing on such a belief. But believing that one is smarter than one's competition should certainly be permissible if true, and permissible even in some degree beyond what an impartial observer might judge to be true. 

Moreover, I think high average levels of statistical sophistication among economists are a fact. Many, many topics in the social sciences can be better addressed with a high level of statistical sophistication than without. And while how valuable economic theory tools are outside of economics is more of an open question, the perspective of economic theory is likely to lead at least to conjectures worth testing that someone unversed in economic theory would be unlikely to come up with.  

That said, it is good to avoid misplaced arrogance. An approach to a question isn't better because it is more "scientific," as that word is sometimes used polemically. An approach is better only if it is more likely to lead to the truth. The best scholars in every field tend to think deeply about their approaches and tools and what is best suited for different kinds of tasks. Moreover, the best scholars in every field make the case to other scholars for their approach from first principles. That is, the best scholars in every field make the case to other scholars in a way that befits a scientific advocate facing a scientific jury. It is lesser scholars who use methodological dicta they do not question—and therefore do not understand—as cudgels to try to subdue the competition. 

In Beatrice's quotation of me above, I emphasize the respect that should be accorded scholars in other disciplines for their knowledge of relevant facts. I also want to emphasize the respect that should be given to the judgment of scholars in other disciplines for the importance of the issues they study. They may make some mistakes in judgments of the importance of different topics, but are likely to have identified many key issues.

                                                                   Crossing Boundaries

In two articles, Moises Naim rightly urges that economists have overshot the optimal level of arrogance and hence undershot the optimal level of humility. In his Atlantic article, "Economists Still Think Economics Is the Best," he writes: 

Ten years ago, a survey published in the Journal of Economic Perspectives found that 77 percent of the doctoral candidates in the leading American economics programs agreed or strongly agreed with the statement "economics is the most scientific of the social sciences."

In the intervening decade, a massive economic crisis rocked the global economy, and most economists never saw it coming. Nevertheless, little has changed: A new paper from the same publication reveals how economists continue to believe that their science is superior to all other social sciences, such as political science, sociology, anthropology, etc.

The subtitle of his October 20, 2009 Foreign Policy essay has the same message: "Economist Class: Practitioners of the 'dismal science' should stop sneering at their academic cousins in the social sciences -- and start learning from them." But I want to highlight another message from that article. I have argued that economists should invade the territory of other disciplines, with all due respect (but not excessive respect) for the current inhabitants. Moises Naim recommends that those who travel through such now foreign territories should be on the lookout for approaches worth importing (or worth hybridizing) into economics as well:

A science that relies on luck to explain the fate of billions of people is a dismal science indeed. True, other social sciences aren’t in much better shape, but economists would still be well advised to trade in their intellectual haughtiness for a more humble disposition. Albert O. Hirschman, a superbly original economist, borrowed freely from other disciplines and aptly titled one of his books Essays in Trespassing. We need more trespassers. Fortunately, a few of today’s economists are beginning to hurdle professional fences and mine neurology, psychology, sociology, and political science to enrich their analysis.

To be sure, most of these attempts at boundary crossing won’t yield much of value, and they render economists vulnerable to charges of consorting with the methodologically impure. But given the dismal condition of the dismal science, intellectual trespassing is a risk worth taking.

For more on boundary crossing, and more on the need for greater humility on the part of economists, see the storified tweets in "On Bringing the Questions and Concerns of Sociology into Economics." I found the complaints there from various quarters about the arrogance of economists especially revealing. 

Don’t miss these other posts on posts on being human, on being a scientist and on being an economist.