The Dilemma of Economics: Navigating Physics Envy and Objectification
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Chapter 1: Understanding Physics Envy in Economics
Economics has often been critiqued for its so-called "physics envy," particularly following the "Marginal Revolution" of the late 19th century. But what does this envy entail, and what are its effects on the discipline?
The economist's tendency to naturalize societies
Like many sciences, economics originated from the humanities, blending philosophy, sociology, and history to explain economic behavior. This multidisciplinary approach made sense, given that economies are intricate and socially constructed rather than natural phenomena.
One might argue that narratives and less formal approaches are more effective in explaining economic dynamics. While fields like astronomy and biology were once viewed through a theological lens, they have shifted to a more scientific and naturalistic framework. Yet, human nature remains inherently elusive. The brain is remarkably intricate, and social patterns further complicate our understanding.
If we ever fully grasp concepts like consciousness and morality through a purely naturalistic lens, it could lead to a troubling paradigm where we treat ourselves as mere machines, eroding the distinction between moral and mechanical treatment.
To truly understand the nuances of human societies, we often require diverse vocabularies that reflect their complexities. While we can analyze humans as physical entities, the essence of personhood is absent in Newtonian or Einsteinian physics.
It seems odd for economists to approach economies as if they were solving problems in calculus or mechanics. This reductionist approach, termed "greedy reductionism" by philosopher Daniel Dennett, often fails to acknowledge the complexities of social constructs.
Lee Smolin: Physics Envy and Economic Theory
In this video, physicist Lee Smolin discusses the parallels between physics and economics, exploring the implications of viewing economics through a purely scientific lens.
Section 1.1: The Role of Scientism
Physics envy extends beyond the aspiration for rigor; it stems from a positivist movement that emerged in the 19th and early 20th centuries. Scientism embodies a bias against the humanities, asserting that only scientific knowledge is valid.
Despite the benefits of the scientific method, scientism resembles a form of reverence for science rather than a balanced analysis. Knowledge is not merely empirical; it requires understanding through metaphor and familiarity.
Counterintuitive phenomena necessitate a broader perspective. While natural sciences can be counterintuitive, grasping these concepts often demands artistic and existential interpretations rather than purely scientific calculations.
Envy, by nature, signifies a lack. It can motivate individuals to achieve their desires ethically, but often leads to unfair means of acquisition or the façade of possessing what one lacks. This raises the question: is the mathematical framework in economics trivial or profound?
In physics, mathematics is useful because physical entities lack subjective qualities. Economies, however, involve living entities that don't follow rigid patterns. While we can formalize some subjective aspects, such as logic, the depth of this formalism in comprehending societal dynamics remains uncertain.
Subsection 1.1.1: The Limitations of Economic Models
Mainstream economics often represents economies as mechanical systems striving for "equilibrium." In crafting mathematical models, traditional economists overlook the influences of politics, sociology, and psychology, attempting to portray economic interactions through a value-neutral lens.
The predominance of money in economies further encourages this objectification. Money, being quantifiable, fosters the illusion that economic value can be seamlessly translated into mathematical terms. A cup of coffee's price reflects its worth, but this perspective fails to capture the complexities of human desires and values.
However, the reduction of all values to mere prices is simplistic. True, a higher price may indicate greater demand, but such assessments lack depth, akin to evaluating art based solely on binary judgments.
Robert Skidelsky, a historian of economics, points out that as the field has evolved, the moral implications of market prices have diminished. The relationship between value and price has been reduced to mathematical calculations devoid of ethical considerations.
Section 1.2: The Dehumanization of Bureaucracy
Skidelsky further observes that standard economics textbooks lack serious discussions about the moral costs of progress, as analytical language tends to neutralize these inquiries.
This reductive view treats societies as machines, focused solely on optimizing efficiency without questioning underlying principles. The bureaucratic mindset prioritizes techniques for incremental progress, often neglecting broader social implications.
This approach is exemplified by the infamous bureaucrat who claimed to be "just following orders," demonstrating a complete disregard for ethical considerations. Mainstream economists similarly view economic agents as cogs in an optimized machine, often unaware of the damage their views can inflict.
For instance, while climate scientists issue urgent warnings, many economists present overly optimistic forecasts based on flawed models, which can lead to devastating consequences. The push for liberalized trade has enriched corporations while stalling wages, revealing the adverse effects of an "efficient" economic system.
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Chapter 2: The Ethical Implications of Economic Theories
The mathematical frameworks utilized in economics are often celebrated, yet they can lead to detrimental outcomes when divorced from ethical considerations.
The 2008 financial crisis illustrated the perils of treating economic models as infallible. David X. Li's formula, initially hailed for its effectiveness in risk assessment, ultimately failed, revealing the dangers of prioritizing efficiency over ethical considerations in financial practices.
While mathematical approaches can enhance efficiency, they may also obscure the fundamental questions of purpose and morality. In this context, economists often view themselves as mere components of a larger machine, sacrificing individual agency in the process.
As we navigate the complexities of economic systems, it is crucial to acknowledge the distinctions between life and non-life, personhood and mechanization.
The rise of technoscience and capitalistic innovation may lead us to question the reductive tendencies of hyper-mathematical economists. The heterodox economists, who integrate social sciences into their analyses, offer a more nuanced perspective that recognizes the value of human experience in economic discourse.