Professor Wilson’s essay articulates why he believes today’s dominant economic paradigm needs replacing. He proposes connecting ideas from complexity and evolutionary theory to create a new, improved paradigm. There is much to support this view. Yet there is something important missing from this nakedly positivist approach. Professor Wilson never stops to ask ‘why’ orthodox economics is the way it is. It is not as though many very thoughtful orthodox economists are unaware of the limitations of their paradigm. But only by asking ‘why’ can we understand why we accept such a high opportunity cost and begin to move forward.
Some renowned physicists have been attributed with saying, “Imagine how difficult physics would be if atoms had emotions?” Quite. And yet many disciplines have to deal with their atoms having some degree of intentionality. Social scientists have a great advantage. We have introspection to understand our emotions and our motives. We have the chance of a first-hand answer to why. If we introspect, recognise the differences and depths of interactions between us, we soon realise the impossibility of our task.
There is an irony in Professor Wilson’s account. The founder of economics, Adam Smith (not Ricardo), was indeed a great admirer of Sir Isaac Newton, in the magnificent The Principles which Lead and Direct Philosophical Enquiries; Illustrated by the History of Astronomy. Smith describes Newton’s law of gravity as the greatest discovery ever made by man. But the point of Smith’s essay is to recognise that this discovery, however great, is also an invention of the mind, cannot be verified as the truth, and may even be supplanted over time. Smith gave an account of scientific revolutions well before Thomas Kuhn.
The importance of returning to Smith is not to correct a historical account, but to discover what this might reveal as a practical approach to the way out of our predicament. Smith believed we have a deep psychological need for comfort or quietude. This is disturbed when confronted with observations that contradict our beliefs. We respond by imagining new patterns or “connecting principles” to restore comprehension and quietude. These psychologically inspired connections are how we create knowledge. They need to be coherent enough to restore comfort for us to act purposefully, and not necessarily tell the truth.
A number of points are relevant to Professor Wilson’s quest. First, the importance of psychological quietude is why knowledge tends to gather in clusters, which today we call paradigms. Research is celebrated precisely because it buttresses the scientific core. It need not be the truth. The weight of General Equilibrium or Rational Expectations has nothing to do with realism and little to do with predictive power. They are coherent solution mechanisms that deliver the harmony of equilibrium and restore psychological comfort, which is imperative in an impossible task.
Second, a psychological explanation of paradigms explains why they are so vigorously defended even in the face of contradictory evidence. This protects the core of our knowledge from being undermined, creating discord. Witness the vigour with which the establishments rejected each progression in astronomy. Scientific revolutions happen very slowly, then all at once. In hindsight, they are obvious, but they are built on the back of many smaller battles and defeats.
Third, when the existing economic paradigm is eventually replaced, it will explain the current anomalies and restore psychological comfort. This takes us onto the territory of Professor Wilson’s own suggested connecting principles. He sees complexity science as a means of combining our two solution mechanisms of equilibrium theory and evolution theory. This would balance social coordination by harmony and change. It was Alfred Marshall, the great expositor of marginal theory, who first tried to bring these connecting principles together a century ago. He is unjustly remembered today for partial equilibrium analysis and not his ‘continuity principle’ linking successive partial equilibria into a biological system of change. His idea of organization is to assign knowledge points to the importance of social structures.
My final and fourth point is to remember Adam Smith and return economics to a discipline with human beings rather than machines, arbitrary agents, or some other species at its core. We might make connecting principles from physics, biology, or other disciplines, but we are dealing with an absurdly creative species called human beings. It need not be that we start with the individual, however rational or bounded. Rather, to paraphrase Elinor Ostrom, one of Professor Wilson’s co-authors, we have a realist agenda and look for forms of organisation that allow all humans be the best versions of themselves.
References:
Brian J. Loasby, 1991. Equilibrium and evolution: An exploration of connecting principles in economics, Manchester University Press.
Alfred Marshall, 1997. Principles of economics, Prometheus Books
Elinor Ostrom, 2010, Beyond markets and states: Polycentric governance of complex economic systems, American Economic Review, 100(3), pp. 641–672
Adam Smith, c.1795, The principles which lead and direct philosophical enquiries; Illustrated by the history of astronomy, Liberty Fund.
