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Monday, January 28, 2013

The Economic Way of Thinking

I'm teaching Micro I this semester, in a situation where my textbook was chosen before I was the instructor. The book is Heyne, Boettke, and Prychitko's The Economic Way of Thinking. So far I like the book... but not every bit of it. For instance, in the first chapter, the authors claim:

"[The economic way of thinking ] can be best summarized as a set of concepts derived from one fundamental presupposition: All social phenomena emerge from the actions and interactions of individuals who are choosing in response to expected additional benefits and costs to themselves."

That presupposition strikes me as both:

1) Unnecessary; and
2) Clearly false.

Let us take up the second point first. All we need note to conclusively show the presupposition is false is that society itself, the social phenomena par excellence, certainly did not come about through such individual weighing of costs and benefits. The individual of rational choice theory only came to exist historically (to the extent it does) in a pre-existing social setting. And even today each new individual is socialized long before they have any power to choose whether it will benefit them or not. For example, I certainly did not learn to speak English as my native tongue rather than Swahili because I carefully weighed the costs and benefits of so choosing.

But why is it necessary to make such a strong claim anyway? What about this weaker version:

At least some social phenomena emerge from the actions and interactions of individuals who are choosing in response to expected additional benefits and costs to themselves. And for any social phenomenon we certainly may approach it with this framework in mind and see if it proves useful in understanding it.

Doesn't this get us everything we need to do economics? Why is the stronger statement thought to be necessary?


6 comments:

  1. I think your version goes some way in making it more correct, but I think there's also a mistake in assuming that methodological individualism (which is what I'm assuming the authors are advocating)requires one to assume that all social phenomena emerge from choice. Rather, all social phenomena involve choice (including learning a first language — you conceivably have the choice not to learn it at all, or even to partially learn it or learn it in your own way). This allows for reflexivity between the individual and the more complex facets of society (i.e. social institutions restrain human choice w/o the individual necessarily having a choice in deciding the array of choices available to her). In any case, the emphasis on "choice" is probably an economistic one. It really boils down to saying that in some way, shape, or form the individual is involved with everything.

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  2. It's Gary Becker. And I would agree that Gary Becker is entirely wrong.

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  3. Hang on a second Gene. Why stop at society? How about this way of blowing up Boettke et al.?

    "What about money, a social institution par excellence? No individual acted 'rationally' to pick something as money, weighing the marginal costs and benefits of a transition to a common medium of exchange. So clearly these guys are terrible economists."

    That wouldn't work, right?

    I grant you, their position is almost unfalsifiable, so you wonder what purpose it is serving to state it that way. But I don't think you have proven it false, just (possibly) vacuous.

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    Replies
    1. No.

      The cases are not analogous. What I am saying is that society had to exist before individuals COULD weigh costs and benefits. I can see that money possibly could be the unintended outcome of weighing costs and benefits. But unless you believe gorillas can do cost-benefit analysis, human society came before the individuals in it could even perform such analysis.

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    2. And, of course, I said nothing remotely like "They are terrible economists." I said "They are wrong on THIS point."

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    3. On falsification, Hayek came to the conclusion that falsification loses its value as we study more complex relationships.

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