>Sydney Morning Herald
>June 7 2003
>Why Homo Economicus is a most unlikely creature. Ross Gittins explains.
The problem is not with neoclassical economics per se, - which IMHO is a strain of applied mathematics rather than emprical science. Unlike empirical science, which use falsifiable models of behavior, neoclasscial economics asumes it model to be a priori valid (like mathematical formulae) and it empirical aspect is limited to finding illustriations of it. An empirical scientist, by contrast, would idenfy empirical conditions under which the model holds, and those under which it does not (shameless self promotion: see my article "The Death Knell of the Utilitarianism: A review and Theoretical Implication of _To Profit or Not To Profit_, VOLUNTAS, 2000, 11(4):375-388).
But there is nothing wrong with not being an empirical science: there are pleanty disciplines that are not - theology, philosophy, ethics, aesthetics, literary criticism, the humanities to name a few - which are valid intellectual pursuit, albeit much less boring than the neoclassical genre. The main problem with necoclasscial economics is not belonging to the realm of metaphysics, but that it is used as managerial ideology.
Managerial ideology is an intellectual device that accomplishes two goals: (i) it gives the decision makes an illusion of knowing and controlling the outcomes of their decions and actions in situations whre they neither know nor control the outcomes; and (ii) it gives the decion makes an aura of legitimacy i.e. a percpetion that their social position is based on their uniquely possed skills and knowldges to prodice socially desirable outcomes. The behavioral model used by neoclasscial economics implies that human behavior can be controled by external stimuli (e.g. by changing the cost/benefit structure), and theoutcomes of that control is predictable (by the utility function). If you alter that model, either by adding a cognitive aspect to it (i.e. people's ability to cognitively framing and either altogether ignoring or excessively focusing on certaion aspects of cost/benefit structure), or by assumimg positive feedbacks of external stimuli (instead of negative feedabacks implied in the "law" of diminishing returns), or by positing a non-linear relationship between input and output (in which minimal changes in the input can create disproportionally large changes in the output), its ability to predict associate predictable outcomes with a particular set of stimuli is nil.
It is so, because the ability to cognoitively "filter out" or "filter in" certain determinats of individual behavior may interfere with the effects intended by the managers. The nonlinear relation, while theoretically solvable, suffers from the measurement error problem i.e. the minuscule change needed to produce the large scale outcome may be either launched accidentally or missed altogether due to imperfect measures (the capacity to meausure human behavior is much inferior to tyat of meaasuring physical phenomena).
Therefore, we will likely to see neoclasscial economics being treated as
the ultimate wisdom, because it serves the interests of the managerial
class by creating an illusion that the managerial class is in full
control of the situation, and by legitimating that control by supposedly
having unique skills and powers that ordinary mortals do not possess or
understand (hence the obscure jargon of the neoclassical discourse).
> From that point of view, neo-classical economics is what geo-centric
astronomy and Latin was in the middle ages - it gives the aura of power
and legitimacy to the ruling and priestly classes.
Wojtek