Economics as philosophy replacement

Posted by – May 13, 2010

I’ve found myself getting more and more interested in economics recently, and defending this interest somewhat sheepishly. Why is that? Up till recently I rather looked down on economics, mainly because it can’t really predict anything, and when it can its predictions seem very obvious (involving supply and demand curves of a maximum of two goods at once). And besides, it has to do with money, and everyone knows talking about money is boring and low status.

When I was young and even more stupid than now I was most of all interested in philosophy. The way I saw it, everything else came out of logic, which came out of philosophy, so I should certainly cover philosophy before getting to anything else. I did get a big kick out of some things, like the question of free will, utilitarianism, Mill’s concept of liberty, Kant’s ethics, Rawls’ justice, the recognition of some important fallacies and reasoning principles (no ought from is, no is from ought, Occam’s razor) and most of all, Wittgenstein’s linguistic solutions to philosophical problems (my term). And of course I’m still very interested in what you might call practical epistemology (thinking about the best way to get an accurate understanding of reality). Also, the craziness of what some people think about metaphysics has great entertainment value.

But none of those things have a great revelatory effect on most people, perhaps because they sound like opinions. They also don’t have much predictive power (except the reasoning guidelines, occasionally). Sounds like another discipline I know…

By the way, my interest in philosophy was finally quenched by being acquainted with contemporary writings in the field of environmental aesthetics (I believe the rest of philosophy is similar). Partly it’s a self-generating field: essays rebut other essays which claim that philosopher X believed Y, and once you’ve written enough, you can become philosopher Z whose opinions will be the topic of further “study”. Partly it’s a craft: an essay might consist of the careful application of someone’s theory to some practical issue or piece of art, some “surprising” result comes out and overall the essay is a pleasant thing to read, but it’s difficult to say what exactly has been discovered. There’s value in it, but there are seldom any actual discoveries. I don’t reject it, but I wanted (at that time in my life at least) something else.

So in short, I think I’m willing to give economics a break on the grounds that I gave one to philosophy. Economics deals with some difficult questions and comes up with numerous different but plausible solutions – and to be fair, some of it is already fairly well settled (which is not to say that politicians accept even the settled part, for some reason). I think it will be a lot of fun to learn.

5 Comments on Economics as philosophy replacement

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  1. there are still reasonable questions in philosophy I guess… As whether the continuum hypothesis has a truth value. (the answers is not obvious for many people.)


  2. Juha says:

    Just to set things straight, I’d like to correct two common misconceptions about economics:
    First, the standard microeconomic framework can be used to analyze any finite number of goods. The two dimensional case generalizes easily but drawing things in R^{n} is a bit tricky and that’s why the general case is rarely presented in introductory text books. In other words, economists do consider the supply and demand of more than 2 goods. Whether their model is a good one, especially when ucertainty and information are added to the picture, is a completely different question.

    Second, the predictive power of economic models is obviously quite modest when compared to, say, pysics. However, the medium- to short-term macroeconomic predictions in normal times are quite accurate. One way to look at this is to observe the inflation targeting by central banks which has been quite successful during the last thirty years – apart from the IT bubble in the beginning of the millenium and the current credit crisis. This also points to one of the major deficiencies in modern economics – the lack of understanding of economic crises. Behavioral economics might yield some ways to remedy the old models in the coming years. However, adding psychological features to current economic models has been surprisingly difficult and proposed models tend to have a very strong ad hoc flavor, solving some particular behavioral problem of the current model but not improving the predictive power of the model notably in any general situation.


  3. sam says:

    Yeah, ok, I did suggest that analysis of more than two goods doesn’t happen – that was stupid. But I promise I’d have responded correctly if you’d asked me whether I supposed such a thing were possible! The reason I wrote “maximum of two goods” is that that’s the most you ever see in mainstream newspapers, but admittedly that’s an extremely unfair standard to judge anything by.

    Inflation targeting is only a half-good example. The regulators have a very large degree of monetary control AND a significant amount of control over public spending, so they’re targeting something that can be forced fairly well. If control were total, targeting would be trivial. Admittedly, that suggests that economists have a fairly good understanding of inflation, but I’d be more impressed if their predictions were accurate either in the absence of that type of control or when maintaining control becomes (unpredicably!) difficult or expensive. As you say, the understanding of crisises is lacking, and if practically every generation has a crisis, is there anything left that we really do understand? Something tells me the next thirty years will be more demanding than the previous thirty…

    But fundamentally you’re right, economics has produced results, it’s just that the open questions are so fundamental and difficult that it seems to have gotten nowhere in perspective.


  4. anon says:

    > Wittgenstein’s linguistic solutions to philosophical problems (my term)

    Oh crap, I hope you never do linguistics… Oh crap…


  5. sam says:

    anon:Oh crap, I hope you never do linguistics… Oh crap…

    “Linguistic” doesn’t necessarily have anything to do with “linguistics”. It’s just something that has to do with language.