The previous post discussed the problems of measurement and the very problematic assumption that “people are like rocks,” i.e. that individuals share a fixed and observable nature in the same way that rocks have common simple properties. I also stretched the discussion to cover the ever present tension between the Weberian concepts of erklären and verstehen.
The former kind of science strictly emphasizes explaining facts and establishing simple causal relationships that can be derived from the observable properties of the entity. The latter stresses the subjective understanding of what is going on, and finding a way of rationally establishing a way to “see” how things work and are related. Weber explicitly states that erklären is the purpose and method unique for the natural sciences whereas the social sciences need to have a verstehen-based perspective. Predictions, hence, are possible only in sciences based on the erklären methodology and this is the conflict in economics: a fundamentally social science attempting to make use of primarily (only?) the methods and methodology of the natural sciences.
But predictions are problematic in and of themselves even if we ignore the tension arising from using erklären methodology studying verstehen phenomena. The very nature of predictions imply the usage of historic data to say something about the future. As we know, and have known at least since the days of the Ancient Greeks, it does not follow from the fact that the sun has risen every morning for centuries that it will continue to do so. History and future are not the same and may even be very different. What makes the future so troublesome is that it is fundamentally uncertain and we cannot use the certain facts of history to create knowledge about it.
As was stressed in the previous post, extrapolating doesn’t necessarily make sense. Doing the same maneuver for predictions about the future from data about historical events makes even less sense. Tomorrow will not be exactly like yesterday, which is a fact everybody knows and should know. This fact is true for details as well. That a rock falls to the ground if dropped today does not mean it will do so tomorrow.
However, we can conclude that a rock will fall to the ground if dropped tomorrow if we can show what makes it drop and we can rely on the properties of these causes being the same tomorrow. A rock has a fixed nature with certain properties and these do not change. We have been able to establish that a rock is dead matter that responds to exogenous forces in a very reliable and predictable way – we know that a rock is a rock is a rock and that this means something in terms of its nature.
It may be the case that tomorrow does not have gravity or that all rocks have turned into lollipops, but that doesn’t change the fact that rocks, according to our defintion, are rocks and that they respond to different forces in certain ways. We cannot with complete certainty say that everything will be the same tomorrow, but we can make general statements that will hold true for the things, forces, and properties we have specified (if we have done a good job specifying them).
Now try the same thing with a human being. An individual is an individual is an individual. If this is true in the same sense as a rock is a rock, then we should be able to establish if one and every individual likes ice cream, responds the same way to stimuli like heat and cold, reacts to a certain situation the same way with a high level of certainty.
Try the latter and compare a rock with an individual. Expose the rock to exogenous forces and observe its “behavior” and what happens to it. Then expose an individual to some stimuli and observe the behavior. Repeat it and observe the behavior – is it exactly the same? You will find that different individuals react in different ways to stimuli – and that one individual’s reactions will change over time as he or she learns. The rock never learns.
So even if the way a rock is affected by certain experiments is not purely certain for the future, it is very much predictable. The way John Doe reacts to, e.g., a speeding car about to hit him is different every time – and may not [ever] be the same as how Jane Doe reacts. It is not predictable; we cannot know what will happen (i.e. how the individual will react).
So how will people react to lower prices in a certain good? We can attempt to predict that tomorrow, if the price for widgets is 10% lower, people will purchase 500,000 more widgets. But that doesn’t make sense. If the price is indeed lower it does not follow that the people who bought a widget yesterday at the higher price are more likely to buy a widget again. It also doesn’t follow that people in general value the widget in the same way.
The only thing we can say is that ceteris paribus people will tend to purchase more of the cheaper good, at least for as long as they subjectively expect to be better off through purchasing one [more]. People want to be better off (which follows from the definition of better) and therefore make choices to improve their situation – to the best of their ability. But their preferences change and their ranking of those preferences change – as do their needs, perspectives, experience, knowledge, etc. An individual is not an individual is not an individual, at least not the same way a rock is a rock is a rock.
The problem of induction is problematic in natural science where dead matter is studied, even though the deathness of matter makes its properties reliable and effects predictable. Add life to the equation and the problem of induction becomes insurmountable and obviously so.
Some things do seem to be repeated over time and the saying that “history repeats itself” may be thought to disprove the point I am making. But it doesn’t. It may be true that history tends to repeat itself if we do not learn from it, but the problem is that there is no “we” in the sense that there is a “rocks.” Individuals are different from each other and they change over time; humankind may not learn from the lessons of history, but it is equally true that situations do not repeat themselves – only man-made abstractions of them do. It is rational to learn from the essence of a situation not to repeat it or its negative consequences, but it is equally rational to say that things have changed and therefore the outcomes may do so too.
The lesson to be learned is that collectivism doesn’t work when we speak of human behavior simply because human behavior is not as tightly bound to the properties of “human” as the effects on a rock are to its properties. The reason is that human consciousness is not necessarily the same as the human body – one could possibly predict the effects of stimuli in medicine, but not in economics. Medicine works with the properties of the human body, i.e. its constitution and chemical and biological relationships (however complex); economics studies human behavior, where one individual’s choice to act is not based on the same facts as another’s, and a specific individual tends to learn – and change – from experience.
On Not Getting It
Friday, October 24th, 2008What I am referring to is the scientific world view. This is not the scientific drive, i.e. the motivation to find the truth and to learn about the world, but the overly scientific anti-identification of that which is studied. It is as prevalent in the social sciences as it is in politics and buesiness management. There are no people around anymore, there’s only statistics and faceless aggregates.
In economics this is very obvious – the study of human action is almost completely reduced to discussions on how to mitigate biases and avoid multicollinearity in econometric functions. Now, in what sense would you gain understanding of why people act in certain ways through tweaking regression models? The obvious answer – and it is so obvious most economists simply don’t see it – is that you don’t. You don’t gain any knowledge whatsoever of why people acted a certain way through running tests of heteroskedasticity and deciding whether or not to use “White’s estimator.”
Economics is the most obvious victim of what I would like to call scientism, the belief that anything that uses aggregates and that is seemingly universal – through (at any price) avoiding to acknowledge the identity or personality of the individuals studied – is more valuable as a science. Actually, the common view is that as long as you can hide the fact that there are individuals in “the data” any conclusions you might draw are generally applicable.
In a recent discussion with a fellow student, I claimed that the empirical study of people is totally worthless unless your aim is to understand why exactly those individuals acted in that exact way in that exact situation. My point was that if the “experiment” would be repeated with the same people (as “data”) the outcome would be completely different because people learn. And if it would be repeated, and the situation could be set up exactly the same way, but the “data” (the people) would be different individuals the outcome would still be different – simply because they are different people and therefore react differently in a number of ways.
And on top of it all, these examples are still ridiculous – it simply isn’t possible to create the exact same situation again and expose people to it. Even if the setting (or framework) would be the same, the people would have different subjective experiences (no matter if they are “the same” or “others”), which would affect the results.
One could argue that this is why we have confidence intervals and standard deviations. But that implies that people act in such a way that the outcome of everybody’s actions are nicely distributed in a bell-shaped curve. How often would you say that happens? That would depend on what kind of people you happen to have in your sample, wouldn’t it? The point is that one cannot study people the way one studies dead matter, simply because people are people, i.e. thinking creatures that learn from experience and that aren’t reducible to a “nature” the same way a rock would be.
This “scientism” is not only prevalent in the [social] sciences – it is a cornerstone of modern politics as well as business management. In politics there is no such thing as an individual; it simply doesn’t happen that politicians discuss a certain individual. And if they happen to use the word “individual” they use it as a stereotypical “nature” of the items in the population they rule. In my ten years in party politics, I haven’t heard one politician discuss how decisions or policies affect individuals – the best I’ve heard is the use of stereotypical examples of “the average family” or “the single mom.” But never did anyone care to add flesh and blood to their dead skeletons.
There is a reason for this, even though politicians are usually too stupid to understand it. It simply isn’t possible to propose or support policies that affect people’s lives unless you make sure to forget that they are real people. Even cold-hearted, ignorant, and self-centered politicians wouldn’t have the guts nor morality to put hundreds or thousands of people in misery through pushing a button. Most people simply don’t have it in them to coldly calculate plusses and minuses while radically and forcefully change the lives of a great number of people with the stroke of a pen.
The lesson to learn is this: would there really be wars if those waging wars would see each and every person they would have to send to their deaths? It is unlikely, even though there are some really, really disturbed people out there.
The same is the case in large corporations, where the CEO or president usually has no clue about the people working for him (or her). Of course, the nature of a corporation is distinctly different from that of a state – the corporation gives, and any punishment from a corporation is to “not give”; a state takes, and any punishment is to “take more” or “kill” whereas every “reward” consists of “taking less” away from that person. Corporations can no doubt be horrible, but they are not a state.
The problem we have here is the “scientific” way of approaching one’s work: scientists who have no idea that the statistics they’re using are really people, won’t mind drawing horrible conclusions; politicians not understanding there are individuals and individual suffering as a result of every decision they make, don’t have a problem with “redistributing” from some to some or killing off some for the benefit of others; and business managers can take irresponsible risks when they can “simply”, if something goes wrong, cut the corporation’s employment with “10%” rather than, which is equally true, throw hundreds of families into unemployment and misery.
Scientism is the problem, and it arises as an effect of centralization. Centralization calls for stereotypes and grouping, for one-policy-fits-all kind of decisions, and cold-hearted leadership for some unidentified aim. What this world so desperately needs is radical decentralization. The problem with our society is not only that there is a huge parasitic cancer tumor feeding off our lives and liberties (i.e., the State), but that it is too large-scale and too centralized. Not only must the State go, but we need to get back to seeing people as people.
Seeing people as people is what so many individuals in our world have forgotten. Be they scientists, politicians or corporate managers – they all share the same fallacy in thinking that scale is a good thing, that personal ties are “in the way” and a problem for efficiency or whatever.
I am a person and I intend to continue being one. You better start seeing me as one.
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