The Case for a Meta-economics 6: Is Economics Necessarily Perspectival (and therefore Political)?

If economics were a science like the natural sciences, it would for the most part uncontroversially describe a world “out there” the general characteristics of which almost all economic scientists would agree upon, i.e. an objective world.  All economists, for instance, would be largely in agreement about what were the salient types of data and even the datasets themselves that need to be accounted for in the decision to either engage in fiscal austerity at this time, or continue to stimulate the economy and run up fiscal deficits; they would then be entertaining a number of alternative hypotheses based on this data and have a means to decide which hypotheses or arguments were most successful in accounting for the data and which were falsified by the data.   This turns out not to be the case, as economists can attach their own personal or group political evaluations to the data without a compulsory “check” on those evaluations as well as tailor the data they present to support preferred hypotheses.

The theory and research program of physics is so successful that billions of dollars are spent on research instruments like the Large Hadron Collider at CERN for which there is no expectation that a useful product will emerge except an incremental increase in human knowledge of the inner workings of matter. Such an endeavor is in part a function of the ability of hundreds of physicists to collaboratively work within the same scientific paradigm (theoretical framework) which accounts for almost all particle physics data as well as the useful and the highly destructive technologies that have been the result of previous physics research. (Photo: CERN)

Though many practitioners of the social sciences strive to claim the status of such “normal” science, no social science has achieved this status completely (with perhaps the exception of physical anthropology, which is in essence a branch of biology).  While “physics envy” abounds in the social sciences, it is understandable that social sciences would want to be like the physical sciences beyond the ego-stoking appeal of their prestige and maybe the sophistication of the associated mathematics:  physics and chemistry are able to progressively build upon foundations laid down by successively more accurate theories and past experimentation.  By contrast the social sciences continue to shift from one fashion or paradigm to the next without necessarily a progressive augmentation in overall human knowledge.  While objectivity has come under fire over the last half century by critics from a wide variety of perspectives, it does enable people to work together across space and time on a common objective (for instance the massive particle physics collaborations) and create the basis for technological achievements that are also themselves massive collaborative ventures.

The social sciences, the domains of study of which are not nearly as amenable to such a disinterested view of their subject matter, have attempted to claim for themselves by approximation or appropriation aspects of physics and the physical sciences.  Neoclassical economics adopted some of the mathematical modeling of electromagnetic field theory from physics to help declare its scientific status.  Academic psychology shuns qualitative description in favor of fairly arid concepts that can be assigned numerical values, studied in a ready population of undergraduate college students, and analyzed with complex statistics.  Methods of argument in these academic discourses tend to either artfully finesse the non-objective aspects of their presentations or, in minority currents that react against orthodoxy, tend to avoid pretensions to describing an objective world “out there”.   For reasons that are not clear, subjectivity and objectivity are treated as an “either/or” rather than, potentially a world that may be some admixture of objective and subjective.

One View of Perspectivism (or Perspectivalism)

One theory of human knowledge and understanding (partially developed in the work of Immanuel Kant) now considered by some to be fairly commonsensical is that of perspectivism, the idea that there is a real, objective reality “out there” upon which different people have different perspectives.  A popularly recognized version of perspectivism is relativism which famously says that no one has worked out a single better or clearer perspective on reality, i.e. “it’s all relative”; despite its fame, relativism is not the only form of perspectivism and also does not account for the value of natural scientific perspectives.  The term perspectivism is also associated with Nietzche whose subjectivist philosophy is not the focus of this presentation.  Most forms of perspectivism can be contrasted with on the one hand naïve realism (we have transparent, undistorted access to reality), and various forms of solipsism (all we know is our own minds).

A far more interesting form of perspectivism than relativism, is that part of social reality is constituted by (made up of) people taking perspectives on the social and natural world that to varying degrees are representative of that world, and these perspectives can at times complement each other (add up to a unified understanding of reality) or compete on grounds of their relative verisimilitude as well as the social or emotional power with which they are communicated.  This type of perspectivism can accommodate both the natural sciences and the social sciences, as well as people’s lived subjective experience of the social world.  Perspectives also can be literally impenetrable or incomprehensible to a subset of other people in the world for a variety of reasons (insufficient information, lack of interest, lack of contextual knowledge, language barriers, different levels of mental acuity and maturity and differing types of mental ability).   Rather than the presumed equality of all perspectives in relativism, some perspectives are better articulated than others and approach a representation of a reality “out there” more closely than others.  If, for instance, we view natural science as a set of perspectives on the world, some of these perspectives complement each other and add up to a greater whole.  Other natural scientific perspectives compete with each other but are either confirmed or eventually dismissed by falsification.  Taken as a group, the modern natural sciences’ success in describing and manipulating the world “out there” needs to be taken account of, in contrast, for instance, to the perspectives of alchemists or phrenologists.

Furthermore we as individual human beings are capable of taking more than one perspective on reality, including a disinterested, what I would call a “third-person” perspective on the world.  Changing one’s mind in a fundamental way with essentially the same set of information could be described as a change in internal perspective. Without the ability of single individuals to change their internal perspective or alternate between perspectives, much of social communication and interaction would be impossible or without purpose.   Also, people share via language, mathematics and images among themselves basic perspectives on the world though it can be assumed that everyone has a personal variant on common themes; in this way perspectivism is not necessarily solipsistic or atomistic and perspectives can be descibed meaningfully as “important,” “persuasive”, or “widely-held”.  The venerable separation between fact and opinion, reproduced in traditional news organizations by separating reporting from editorial, is a nod to a version of perspectivism.

For the purposes of this discussion, I am going to adopt the (to me commonsensical) approach that allows perspectives on the reality of a single unified universe (though there may be other universes) to complement each other or compete with one another in terms of their verisimilitude but also recognizes that all perspectives contribute to and are a part of social reality.  Furthermore distortions in some perspectives may impact social reality as much as those perspectives that are more realistic in their representation of the world.   Soros’s concept of reflexivity, in which ideas about reality contribute to and change social reality, is an example of this type of perspectivism.  Despite the importance of perspectives and their social “weight” there is also a natural and socially-constructed physical world that may escape our notice and certainly contains and underlies our societies, i.e. the world is not all perspectives and subjectivity.  So neither relativism nor solipsism are worth much consideration if you believe in a world out there that may not be immediately or transparently accessible to our senses but nevertheless we are part of it and it effects us critically.

Politics, Political Economy and Perspectivism

Politics, particularly in representative democracies, is almost by definition a perspectivist enterprise:  politicians are elected to represent a perspective or group of perspectives, either those of constituents or, particularly in the US where party platforms are weak, some version of their own supposedly authentic and heartfelt beliefs that have been carefully vetted by the voting public.  In the halls of government, the politicians are supposed to struggle with representatives with other perspectives to come upon some synthesis that represents the general interest.  Even in autocracies and monarchies, the head or heads of government are supposed to represent the perspective of the nation as a whole as against other nations, though, of course as in democracies as well, corruption can also derail these goals.  Even if politicians were somehow able to represent the interests of all humanity, this could still be considered representing a perspective on reality, albeit one that all humanity for some reason would share.  Political economy, the original label for the economics profession, by definition, suggests that this discipline is the arena within which political influence on economics is discussed and or the perspective of a specific constituency is represented.

Perspectivism, Economic Interests, and Adam Smith’s Work

The name-change from political economy to economics in the late 19th century has nominally distanced economics from the perspectival nature of politics.  Nevertheless almost all economists claim a lineage back to political economist Adam Smith, who published his major works in the mid-18th Cenury.  Economists since Adam Smith and before have noted that people’s economic interests influence the way they see the world; an assumption that people make every day, and not without reason, is that people’s personal and economic interests color their perspective on the world.   Social scientists often continue to make this assumption though it remains sometimes unstated.

Smith argued that merchants and manufacturers in the mercantile system, his ideological and economic opponents, were solely interested in their own enrichment and they lobbied for policies that advantaged them over what Smith felt was the common good.  Smith, as well as many other economic commentators after, set himself up as representing the greater, common good, in that with free trade policies, he felt that the wealth of all people was better served than under various mercantile restrictions of trade.  Smith’s economic magnum opus, Wealth of Nations, can be viewed as a political polemic within political economy, though it suggests a complete economic system that has taken on a life beyond its polemical uses.

Against the mercantilist defense of particular national and class interests, Smith’s was an attempt to assert a relative independence from particularistic group interests for political economy, a research program that almost all economists claim for themselves today, i.e. that their approach to economics will yield a maximization of total social welfare rather than enrich or represent the perspective of one particular group or nation.  On the other hand, Smith’s doctrine of the invisible hand suggests that the pursuit of the self-interest of each actor WITHIN his system will yield the optimal results for overall “opulence” of the society.  Smith then attempted to unite a universal good and universal perspective with the narrow self-interests of each economic actor as a trader in goods and services, which is a unique and interesting philosophical proposition.  Critics of the popular interpretation of Smith’s work within economics and politics in the 20th and 21st Centuries have decried how Smith’s emphasis on the need for sympathy between human beings as a foundation for society, discussed in his earlier work Theory of Moral Sentiments, has been left out of discussions that base their economic and political programs on a few passages from the Wealth of Nations.

In Wealth of Nations, the universal good that Smith tended to represent were the interests of and perspective of all consumers and tended to disparage the interests of producers, against which, as mercantilists, he was arguing.  At least in logic this makes sense in that all people need to consume, while only some people produce and even smaller subset of people produce a particular good or service.  Furthermore Smith equated the interests of consumers with, above all, the cheapness of goods.  In his argument for free trade, for instance, he recommends importing certain goods because of their cheapness relative to English/Scottish goods.  Smith’s identification of the greater good with that of consumers and that good being best served by the cheapness of goods is now embedded as a largely unquestioned assumption in contemporary economics.

Perspectivism and Marxian Economics

A perspectivism based on group economic interests openly returned to political economy with Karl Marx’s mid-19th Century critique of Adam Smith that again, like the earlier Physiocrats, reinforced the importance of production in economics.  Marx’s political economy and theory of history was based almost entirely upon the pre-existing labor theory of value and the conflict of economically defined classes which each had distinct economic interests and perspectives on the world that stemmed from their relationship to ownership of capital goods and land, the means of production.  The dynamic of history for Marx was caused primarily by the conflict between the laboring classes against the various ruling classes who owned the means of production, though Marx also chronicled class conflicts that occur historically between other class groups.

Borrowing from Hegel’s dialectic (sometimes summarized as thesis + antithesis => synthesis [or transcendence – Aufhebung]), Marx saw the endpoint of class struggle as the triumph of the working classes that would become the universal class via an economic and political revolution which from what he called socialism to communism.  For Marx, relative to feudalism, capitalism was “progressive” though he clearly underestimated the resilience and creativity of the capitalist system. While Smith identified the universal interest implicitly with the perspective of consumers, Marx identified producers as the universal class, based on a labor theory of value which he shared with other classical economists like Smith, Ricardo, and Locke.

Marx claimed his work was a science (the German Wissenschaft carries somewhat less “scientistic” connotations than does the English “science”) and later commentators called Marxist “science”, historical or dialectical materialism.  “Idealism” was excoriated by Marx and “materialism” was valorized, a philosophy that asserts that all that exists is a material, physical world.   Marx believed that ideas were an outgrowth of material conditions though at the same time a type of false perspective can develop, what he called ideology, that supported the reign of the ruling group. Marxism as it evolved tended to divide knowledge into “bourgeois” and “proletarian” or “Marxist” perspectives, with the former being dismissed and the latter being valorized or praised.  Marx then had contradictory impulses to create a universal science but at the same time, created a categorized view of current knowledge and science that divided it up according to whose interests it ultimately served. A man who spent his life trying to change the world via ideas, Marx was also not self-consistent in allowing for the action of knowledge and the ability to change perspectives on the world as a force in the world itself.

With Marx’s written works and the First, Second and Third Internationals attempting to foment revolution in the name of the working and later the peasant classes rationalized via an economic theory, a very provocative and loudly broadcast “thesis” was advanced that was difficult to overlook within economics and within late 19th and early 20th Century industrial societies.  Marx and his followers have also been avid chroniclers of the weaknesses of capitalist societies, including his observations of capitalism’s tendencies toward economic and political crisis.

While, unlike some, I accept that Marx had humanistic ambitions in his opposition to capitalism (most noticeable in his earlier writing) and that some of his critique has merit, his theory has been insufficient in pointing a way to an alternative that is better than capitalism.  Inspired by his work, social democratic movements and parties have been able to humanize capitalism and, some would say, help save it from itself.  Others however have used his work or the gaps in it, such as a workable political theory, as a means to create various types of revolutionary dictatorship with often disastrous results.  However, all would admit that there is no new and compelling “mode of production” that has emerged from Marx’s work that replaces our current economic system.

Neoclassical Economics and Perspectivism

As a sharp contrast, neoclassical economics or marginalism, the current dominant paradigm, has created a relatively harmonious picture of the (capitalist market) economy, within which perspectives of buyers and sellers (supply and demand) were simply in (rather orderly) conflict about quantities (mostly price) rather than about the destiny of mankind.  Labor figures in neoclassical economics as another seller of a commodity (labor) rather than a transcendental shaper of history or the sole source of value.  Thought by some to be formulated as a response to the rise of Marxist economic theory in the mid-19th Century, neo-classical economics has been for most of the last century economic orthodoxy and much of what is considered “economics” is neoclassical economics.  Adapting Adam Smith’s thesis that competitive markets were the central and most efficient/effective economic institution, neoclassical economics has attempted to portray these markets as tending towards equilibrium, which is diametrically opposed to the conflictual and crisis-prone vision of markets and capitalism that, for instance, Marx as well as heterodox economists like Schumpeter (business cycle theory) have put forward.  While neoclassical economics was formulated during a particularly stormy period of economic development (the late 19th and early 20th centuries) it presents a rather placid picture of the economy.

Perspectivism assumes that we the “knowers” have subjectivity and neoclassical economics offers a generic, uniform subjectivity for all economic actors:  they have rational expectations, perfect information, and are attempting to maximize their utility.  Neoclassical economics assumes that these very simple “subjects” interact with each other and yield models of equilibrium prices and quantities.  The economic actors then view choices as offering then greater or lesser “utility” and that decisions are made “on the margin” about which choices offer greater marginal improvement in utility.  Conflict between perspectives only occurs in aggregate, when sellers, for instance, want to receive higher prices for their output but this contradicts the aggregate wishes of buyers as well as the neutral overall perspective of the economist who is attempting to maximize overall social welfare (utility) by achieving Pareto optimality (that point which gains in welfare will only come at the expense of others).   Each economic actor, in this utilitarian calculus is then simply attending to his or her “utility” and attempting to maximize it via buying and selling choices.

Neoclassical economics and the economics profession has been the object of a rising tide of criticism especially after broad recognition of the inability of the profession to prevent or predict the latest economic crisis. Despite its flaws and omissions that are now becoming more obvious, neoclassical economics does represent an attempt to study economic phenomena, detached from the interests of one social group or another, though maybe this detachment does not serve the general interests of humanity, either.  Neoclassical economics operates at least in theory with a conception of an overall social welfare that serves all, not just one social group or another, premised on the notion that competitive markets might at some point function optimally.  The effort to study economic invariants, objective facts about human economic behavior, is at least the impulse to create a science of economics, however questionable the execution of the project itself.   In this appearance it is like the much the more successful natural sciences but it may be a matter of simply emulating (parts of) these sciences while ignoring its own subject domain or the usefulness of its conclusions.

There are many, many interesting critiques of neoclassical economics to consider but for purposes of this particular discussion what remains is whether economics must be an economics for a particular interest group or can it rather or also be a neutral description of the economy that contains within it some objective observations about economics more generally.  Also is rather than harmony and equilibrium, dynamic conflict and instability caused by differing economic interests and perspectives key parts of the object of study of economics?  Furthermore, does neoclassical economics do a disservice to the domain of its study by imposing upon it a framework that may unthinkingly prescribe an ideal of objectivity rather than capture the most relevant date from economic reality?

The Political Fight Over Economics and the Dream of Economic Science

Despite the best efforts of neoclassical economists of yesterday and of today, economics remains enmeshed in political struggles.   As is readily apparent from most in-depth news accounts or here on this blog and elsewhere, there is considerable dispute about many of the most important economic issues, especially where decision making about economic policy is concerned.  The simple assertion of economics as a science or rhetorical flourishes that assume that economists’ views are objective are overwhelmed by the large scale struggles that rage between political parties and between economists with varying views of the same phenomenon.  If a plausible economic perspective can be formulated to support almost any economic policy position, then either economics (and other social sciences) are either not at all sciences or they are type of science that is completely unlike the natural sciences.

If economics “looks different” depending on one’s economic interests and these different perspectives have points of conflict, it may not be possible to build an economics that is entirely neutral and objective.  Alternatively, it may be possible to sort through economics and find areas where all “reasonable people” would agree and other areas where it is a matter of dispute.  Perhaps disaggregating economics into constituent parts is what is required to enable clarity of understanding by consumers of economic wisdom so that “fact” and “opinion” can be understood as such.

If economics is indelibly perspectival and not taking the perspective of some economic interest group would eviscerate economic understanding, then it would be incumbent upon economists to state which group or groups they are championing as a premise of their analysis or discourse.  They would also need to explain why it is best that they and we adopt the perspective of that economic interest group.  This would open a larger discussion about whose economic interest and economic perspective is best suited to lead the economy or have undue influence in the economy.  To those who claim that it is just this kind of scrutiny that some powerful groups wish to avoid, I would suggest that without that kind of clarity, we shouldn’t then have to lend credence to any political or scientific discourse that premises itself on economic understanding.  Avoiding this scrutiny puts economic discourse on par with innuendo and gossip.  As innuendo and gossip are efforts to mobilize the more primitive aspects of our minds and to shut down our higher capacities, I think this trend should be resisted.

On this blog, I will take a look at how economic speech and speaking about economic policy might be able to evolve beyond both sterile formalisms as well as innuendo and gossip to enable us to engage our individual and combined intelligences to solve some of the world’s grave economic and social problems.

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About Michael Hoexter
I'm a clean energy marketing and policy strategist and consultant based in the San Francisco Bay Area.

2 Responses to The Case for a Meta-economics 6: Is Economics Necessarily Perspectival (and therefore Political)?

  1. Pingback: The Case for a Meta-economics 7: Epistemological Uncertainties in Economics and the Ethics of Truthful Representation « Meta-economics

  2. Pingback: Making Sense of the S&P Downgrade: Semantic, Performative and Reflexive Views of the Economy « Meta-economics

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