On Economic Traditions and the Sociology of the Knowledge

Marx & Smith vs Weber & Bentham 

I often use Randall Collins’ book Four Sociological Traditions in my class discussions and in my own work on the history of economic ideas. Collins’ discussion of economics as the first social science is instructive about how disciplines become autonomous from other fields. Economics emerged earlier than the other social sciences as an independent discipline, in his account, because states had practical reasons to collect information about taxation, trade, population, and public finance. Mercantilism created a body of empirical and administrative knowledge, and later writers, starting with William Petty (he cites François Quesnay and then Adam Smith rather than Petty), transformed these concerns into a more systematic intellectual discipline. Economics was able to establish itself institutionally before sociology because it had both practical applications and a relatively clear object of study.

Collins then shows how economics became increasingly professionalized during the nineteenth century. There is an extensive literature on that (on the American case see Coats, 1988). Classical political economy initially developed partly outside the universities, especially in Britain. In Germany, however, economics became more firmly tied to state administration and university training (on the German Historical School see Kurz, 2016). Later, marginalism and neoclassical economics helped turn economics into a more abstract and specialized academic discipline. Collins’s broader point is that the content of economic theory cannot be separated entirely from the institutional settings in which economists worked.

For Collins, ideas are produced inside social networks and institutions. Intellectual change occurs when institutional spaces open up, when new professional roles become available, and when communities of scholars compete over problems, methods, and prestige. In that sense, the rise of the social sciences – economics and, more interestingly, sociology itself – is a sociological phenomenon. The community makes the discipline.

Read rest here.

Lars Syll On Methodological Critique of Austrian Economics

By Lars Syll [h/t] Jan Milch

This is a fair presentation and critique of Austrian methodology. But beware! In theoretical and methodological questions it’s not always either-or. We have to be open-minded and pluralistic enough not to throw out the baby with the bath water — and fail to secure insights like this:

What is the problem we wish to solve when we try to construct a rational economic order?… If we possess all the relevant information, if we can start out from a given system of preferences, and if we command complete knowledge of available means, the problem which remains is purely one of logic…

This, however, is emphatically not the economic problem which society faces…The peculiar character of the problem of a rational economic order is determined precisely by the fact that the knowledge of the circumstances of which we must make use never exists in concentrated or integrated form but solely as the dispersed bits of incomplete and frequently contradictory knowledge which all the separate individuals possess. The economic problem of society is…a problem of the utilization of knowledge which is not given to anyone in its totality.

This character of the fundamental problem has, I am afraid, been obscured rather than illuminated by many of the recent refinements of economic theory…Many of the current disputes with regard to both economic theory and economic policy have their common origin in a misconception about the nature of the economic problem of society. This misconception in turn is due to an erroneous transfer to social phenomena of the habits of thought we have developed in dealing with the phenomena of nature…

Read rest here (and be sure to check out the comments made by Paul Davidson!).

Lars P. Syll On How to Get Away With Scientific Fraud With Economics Textbooks

By Lars P. Syll

As is well-known, Keynes used to criticize the more traditional economics for making the fallacy of composition, which basically consists of the false belief that the whole is nothing but the sum of its parts. Keynes argued that in the society and in the economy this was not the case, and that a fortiori an adequate analysis of society and economy couldn’t proceed by just adding up the acts and decisions of individuals. The whole is more than a sum of parts. This fact shows up already when orthodox – neoclassical – economics tries to argue for the existence of The Law of Demand – when the price of a commodity falls, the demand for it will increase – on the aggregate. Although it may be said that one succeeds in establishing The Law for single individuals it soon turned out – in the Sonnenschein-Mantel-Debreu theorem firmly established already in 1976 – that it wasn’t possible to extend The Law of Demand to apply on the market level, unless one made ridiculously unrealistic assumptions such as individuals all having homothetic preferences – which actually implies that all individuals have identical preferences.

This could only be conceivable if there was in essence only one actor – the (in)famous representative actor. So, yes, it was possible to generalize The Law of Demand – as long as we assumed that on the aggregate level there was only one commodity and one actor. What generalization! Does this sound reasonable? Of course not. This is pure nonsense!

Read rest here.