Category: Paths for Economic Philosophy

Economic philosophy and complexity

Abstract

Economic philosophy explores the conditions and limits of economic theory, the development of which implies an accelerated increase in complexity (which is the very definition of ’complexity’). Its first manifestations were the second theorem on general equilibrium, and the impossibility theorems on collective choice, as well as the public goods dilemma. For sure, it is possible to use certain factors of complexity, such as random mutations, to define, for example, evolutionary equilibria, but these factors are also a source of instability. Experimental economics had brought to light the dependence of our choices on our previous evolutions and references and expectations, which is another source of complexity. A rational exploration of these dependencies itself brings into play the complexity of their processes and involves continual revisions. It seems inevitable, since one cannot reduce the complexities which are inherent in these readjustments- which involve a generalized and multi-levels Bayesianism, -to admit that these revisions have only a limited scope (“minimizing free energy”). We can reinterpret in this way the experiences on temporal inconsistencies in our choices, once taken into account the application of this minimization to the very processes of evaluation of the situations of choice. Other limitations could be defined by combining neurological, psychological and economic constraints. Here again, such a combination is also a source of complexity. But in another way, developing these complex relationships can help overcome the circularities of inverse inference (from neurological to experimental economics and vice-versa). Finally, computational simulations reveal to us that evolutions which one believed to be asymptotic are capable of more remote divergences. Complicating computational models can limit their generality. Conversely, simplifying them is only useful if it also reveals which simplifications make us miss which complexity of economic interactions. The exploration of these relationships between this accelerated growth of complexity linked not only to these interactions but to the very enterprise of rationalizing them is first of all the task of economics in its various fields, but the philosophy of economy can have a role in elucidating the relationships between these different sources of complexity and their most reasonable modalities of limitations.

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Economic Methodology in the Twenty-First Century (So Far): Some Post-Reflection Reflections

Article

This essay contains my reflections on the developments that have taken place within the field of economic methodology since the beginning of the twenty-first century as well as some of the background relevant to these developments. It is motivated in part by the fact that after fifteen years of editing the Journal of Economic Methodology (JEM), John Davis and I stepped down at the end of 2019. There have been many changes in the field during our years as editors and this seems to be a very good time to reflect on those developments. The subtitle « Post-Reflection Reflections » alludes to the fact that my Reflection Without Rules was written during the last years of the twentieth century and was published in 2001. Not only was Reflection my attempt to « write an interpretive survey of recent work in economic methodology and the various developments within contemporary science theory that are relevant to it » (ix), it was, unlike much methodological writing, less an attempt to persuade the reader about how scientific economics ought to be done, than an historical investigation of the various forces that had helped move economic methodology to where it was at the time. Since I argued that the field was in the midst of a significant, but generally unrecognized, change, this also seems like a good time to assess my argument in light of recent developments.
This paper can be read as a companion piece to Daniel Hausman’s recent retrospective reflection on the philosophy of economics published in this journal (Hausman 2018a)…

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Outline

  • 1 -Introduction
  • 2 -What’s in a Name ?
  • 3 -A Little Historical Stage-Setting
  • 4 -The Changing Face of Economic Methodology
  • 5 -Some Topics of Current Methodological Interest
    • 5.1 -The Normative Turn in Rational Choice Theory
    • 5.2 -Behavioral Welfare Economics (Particularly Libertarian Paternalism)
    • 5.3 -The Problem of Idealized Models in Economics
  • 6 -Some Brief Closing Thoughts