HISTORY OF ECONOMIC THOUGHT
Lecture Notes
Harry Hillman Chartrand © 2006
Economics 380, USASK, 2005-6
So let’s begin: What is the history of economic thought? Mark Blaug, in his 1996 classic Economic theory in retrospect, recognizes a wider view but effectively restricts his history of thought to development of contemporary techniques of analysis (Blaug, 1996, Introduction: Has economic theory progressed?). In this sense the present stands in judgement over the past; contemporary techniques are superior descendents of inferior and flawed past instruments of analysis. For him, there has been, is and will be further ‘progress’ at least in this sense. Blaug identifies the development pathway as consistent with Thomas Kuhn's The Structure of Scientific Revolutions (1962, 1970, 1996) which he references with respect to both the Marginalist Revolution (p. 289) and the Keynsian Revolution (p. 642). To my reading he also relies upon Kuhn for his own middle ground ‘paradigm’ of economic methodology while stick handling the falsifiability criterion of science proposed by the Positivists beginning with the Vienna Circle through Karl Popper to Milton Friedman, concluding, as an economist is want to do - yes & no (Blaug 1996, Chapter 17: Methodological Postscript, Sections 1-4). Essentially, this positivist philosophy of science claimed that the only statement (knowledge) that was valid was a statement that could be tested, i.e., articulated in such a way as to be falsified by testing.
There is, however, much more to Kuhn's revolutions than ‘techniques of analysis’ which seem in Blaug's hands to blend what Kuhn calls ‘instruments’ and ‘theory’. For example, Blaug traces progressive refinement of marginal productivity and factor price analysis. Are these theories or techniques of analysis? It is not clear to me. In the natural & engineering sciences the instrument is materially distinct from the theory. An instrument is tooled knowledge; a theory is codified knowledge. In the social sciences including economics, however, instrument and theory are both intellectual constructs; they are both codified knowledge carrying semiotic meaning not physical function.
In the 17th century, the experimental or natural philosopher changed the way we see the world and each other. The simple household thermostat is an example. Prior to its invention what was hot for me but cold for you was determined hierarchically. With the thermostat, however, whether king, pope, priest or philosopher, it is 20 degrees Celsius. Evidence is not mediated by a human subject but rather by a machine. In this sense, if during the Renaissance ‘man was the measure of all things’ then after the Scientific Revolution of the 17th century, ‘the machine became the measure of all things physical’. This metaphysical success led the poet Coleridge, two hundred years later, to ask the philosopher of science, William Whewell, to rename natural or ‘experimental’ philosophers. In 1833, he did so, coining the term ‘scientist’ (Snyder 2000).
Blaug does not press further into one of the most influential texts of the 20th century (Fuller 2000) ignoring the ideological origins and epistemological impact of Kuhn's thesis which Idhe claims gave birth to ‘the new philosophy of science’ (Idhe 1990) and which Feyerabend, a noted philosopher of science of the day, in a letter written to Kuhn after reading the final draft described as “ideology covered up as history” (Fuller 2000, 71, 90n). Blaug also does not consider other components of Kuhn's paradigm including language and practice which Kuhn argues leads to incommensurability nor does he note that for Kuhn a scientific revolution is consummated when new talent moves into a new paradigm while the old guard stays on to defend the old and slowly dies off (see Fuller, S., Being There with Thomas Kuhn: A Parable for Postmodern Times, 1992; Chartrand H.H., Thomas Kuhn's Pelican Brief, 2002).
More generally, the American Economics Association categorizes the history of economic thought under subject descriptor: B - Schools of Economic Thought and Methodology. As for Joseph Schumpeter in his seminal History of Economic Analysis, the history of economic thought includes: (i) the economic history of a given epoch and/or nation; (ii) the statistics and methods available to measure economic cause and effect at that time or place; (iii) contemporary theory which literally means ‘a god’s eye view’; (iv) its economic sociology including manners, morals and life ways; and, (v) its political economy (Schumpeter [1954]: see 1: Introduction and Plan; 2: Interlude I: The Techniques of Economic Analysis). As noted by Screpanti & Zamagni, it is arguable that Schumpeter too reflects, ahead of its time, the Kuhnian paradigm of scientific revolutions. Thus,
One of the most interesting and controversial of the arguments put forward by Schumpeter in The History of Economic Analysis is that the evolution of economic ideas does not proceed smoothly, but in jumps, through a succession of epochs of revolution and consolidation; of language confusion and ‘classical’ periods. (Screpanti & Zamagni 2005, 1)
For my part, I will simply consider each constituent term in turn – history, economic, thought. Before doing so, however, it is important to note that the history of economic thought has no real parallel in the other humanities & social sciences such as sociology. Rather there is epistemology, i.e., the theory of knowledge and the philosophy of science, i.e., what constitutes scientific knowledge, accepted methods for its accumulation and its verification in a particular field or discipline.
First, history is a story told so far. It may be the story of Canada or of language or of a quark or of economic thought. It no longer exists; it is not the present; it is past except for documentary and physical evidence marking its passage and the living memories of its survivors. History (and its remnants) is the foundation stone upon which we build, in the present, a future that does not yet exist. Time’s Arrow is, to us, linear – out of the past into the present and, by way of prediction, into the future. This is a unique intellectual artifact of Western culture beginning with the ancient Greeks and then Christians. Most human cultures, e.g., Hindu and Chinese, see Time as a circle, ever repeating the same stories over and over again with a mythical Golden Age at its beginning, not in some distant progressive future where our children’s children’s children live. These we call myths (see Eliade, Mircea, The Myth of the Eternal Return or, Cosmos and History - Four: The Terror of History, 1954).
One economist who has considered the evolutionary nature of our concept of Time and its effects on human thought is Fred Pollack in his 1971 book Prognostics: A Science in the Making Surveys and Creates the Future, e.g., 3: Theological models of the future. Arguably knowledge exists in overlapping “temporal gestalten” (Emery & Trist 1972, 24) made up of past ‘epistemes’ (Foucault 1973) or ‘epochs of economic theory’ (Screpanti & Zamagni 2005, 1). In effect, the Present is woven out of uneven temporal strands, e.g., out of religion, politics, language, etc., each stretching ontologically back into its own Past in its own land. In this sense Time’s Arrow runs backwards and forwards. The backward motion is captured by the Latin word re-ligio, i.e., linking back. Such a view contradicts the concept of ‘modernity’ as the homogenous co-temporality of all sectors of society.
Time’s Arrow, expressed as a linear function, is also the foundation of the Scientific Revolution of the 17th century especially in physics where ‘when-then’ or ‘billiard ball’ causality rules with Aristotelian material and efficient causes at play. In this view, cause is always in the past leading to effect in the present and predictable (or testable) into the future. To set the stage for further discussion of causality consider that Aristotle identified four causes of things to be the way they are. Using economic examples, these are:
material cause: that out of which a thing is made, e.g., economic inputs;
formal cause: the form or shape of the final thing, e.g., economic outputs designed to satisfy consumer needs;
efficient cause: the initiating agent, e.g., the entrepreneur or firm; and,
final cause: end purpose or teleos, e.g., profit from satisfying consumer wants, needs and desires.
Since the time of Immanuel Kant in the late 18th century, however, it has been generally recognized that something more than billiard ball causality is at work in the biological sciences invoking formal and especially final or teleological self-fulfilling causes. Kant (1724-1804) was a contemporary of Adam Smith (1723-1790) with whom he shared the concept of faculties of knowing including, in Smith's case, ‘moral sentiments’ as well as reason and a transcendent function which, in Smith’s case, has come to be known as ‘the invisible hand’ (see Rothschild, E., Economic Sentiments: Adam Smith, Condorcet, and the Enlightenment - Chapter 5: The Bloody and Invisible Hand, 2001).
Among his many contributions, Kant in fact established, as a law of nature, that the formal notion of the if-then relationship corresponds to the concept of cause and effect and that there is a single direction of causality, i.e., Time’s Arrow only moves from cause to effect, from past to present to future (Grene & Depew 2004, 93-4). This law, however, was limited by Kant to matter defined as lifeless stuff (objects) pushed or pulled by measurable forces through space/time, i.e., mechanics. This limitation was required because it was apparent to Kant that material and efficient causes (cause and effect) were insufficient to explain living things, i.e., biology. Through his questioning he at least partially liberated the study of biology from religious ideology just as Robert Boyle had liberated physics a century before (see my Ideological Evolution, 5.2/ Design, para. 1-5).
Kant addressed the question of biology in his Critique of Judgement (1790) which is divided into two parts. The first is the “Critique of Aesthetic Judgment”; the second, the “Critique of Teleological Judgment”. The ordering is important. While works of technological intelligence, or artifacts, have purpose, works of aesthetic intelligence have purposiveness or meaningfulness but no purpose, i.e., no utilitarian function.
In aesthetic judgments, and especially in judgments of the beautiful, purposiveness is ascribed without reference to purposes, and indeed in their complete absence. This prepares the way for Kant’s ascription of purposiveness to living things, where purposes and purposiveness do not appear quite as separable. (Grene & Depew 2004, 101)
There were three aspects of living things that demonstrated to Kant that teleological or final causes were at play. I will call these: ecology, metabolism and ontogeny.
First, Kant could see that the web of mutually supportive relationships between various species of plants and animals constituting an ecology or ecological community was so complex that linear ‘when-then’ causality was simply insufficient to explain its existence. Second, in the metabolism of living things “each part is reciprocally means and end to every other. This involves a mutual dependence and simultaneity that is difficult to reconcile with ordinary causality” (Grene & Depew 2004, 94). Third, in ontogeny, or development of the individual, the future mature end-state seems to guide successive stages of development. This appears a clear case of formal and final cause at work.
Having found teleological processes in living things, Kant was concerned to distinguish between Design and designer. To do so he contrasted machines (works of technological intelligence) from living things. Quite simply, parts of a machine are put together by people and parts do not bring other parts into existence, i.e., a machine is not a self-organizing entity. By contrast:
the parts of an organism are so mutually dependent and so tightly connected with the whole that it is difficult to say what, if anything, should come first and what should come later, as we must do when we design, build, and analyze (“reverse engineer”) artefacts. In this respect, Kant says that organisms are - or at least must be grasped by us as - self-formative, bootstrapping operations, in which each part appears to be the joint product of all the other parts. This is what Kant means when he says that an organism is “a product of nature in which everything is both an end and also a means” and in which the parts are “reciprocally cause and effect of [one another’sl form.” (Grene & Depew 2004, 98-99)
For Kant, artifacts such as machines and all other works of technological intelligence are finally caused by human purpose. Living things, however, do not require human or divine purpose but rather reflect a ‘natural purpose’. Kant called this form of causality purposiveness. He was so convinced of the inherent complexity of living things that he claimed:
it is absurd for human beings even to attempt it, or to hope that perhaps some day another Newton might arise who would explain to us, in terms of natural laws [cause and effect] unordered by any intention, how even a mere blade of grass is produced. (quoted in Grene & Depew, 2004, 94).
It should be noted, however, that Kant priorized these two forms of causality - mechanistic and purposive – always allowing mechanistic explanations, when available, to trump purposive causation. Thus he restricted the term “explanation” exclusively to mechanistic causality (Grene & Depew 2004, 107).
Kant wrote, however, just as the Scientific Revolution was gaining momentum. Since his time, the experimental method has revealed much more about the nature of life. For example, Kauffman can now argue that Kant’s natural purpose is inherent in the chemical nature of matter itself. Given a sufficiently rich chemical broth, coevolution and coconstruction of ever more complex organic molecules will culminate in life (Kauffman 2000). In evolutionary terms, natural selection is thus complimented by the tendency of chemically active matter to assume increasingly complex form. We also now have technology to directly affect (or infect) living things with human purpose, i.e., biotechnology. In effect, the new science of genomics combines human and natural purpose. One implication is that “it has become possible to think that biology can, for the first time, join physics and chemistry as a ‘technoscience’” (Grene & Depew 2004, 345).
Why matter is inclined to increasing complexity remains to be explained. Nonetheless, that matter forms increasingly complex patterns culminating in life cannot be denied, nor that living things have teleological purpose which, at a minimum, is survival and reproduction.
Formal and final causes are simply not apparent or observable at the inorganic level. And, as will be seen, they are inadmissible in what is known as the ‘Positivist’ paradigm. Recent work by Stuart Kauffman in genomics and biochemistry, however, suggests that the properties of chemical matter itself inevitably lead to life and that the economy, or what he calls the ‘econosphere’, is simply an extension of the fundamental autocatalytic system that we call ‘life’ (Kauffman S.A., Investigations, 9: The Persistently Innovative Econosphere, 2000, 211-241). This conclusion, interestingly enough, was arguably reached by Marshall: “‘The Mecca of the economist,’ says Marshall, lies not in comparative statics, nor even in dynamic analysis, but rather in ‘economic biology’” (Blaug 1996, 404). One, among other reasons, that this Mecca has never been reached is the use of teleology by Marx. In his case, it was not Smith's invisible hand but rather the technological imperative that drove the development of the economy and economic thought as well.
While I will have more to say about ‘causality’ below, for now it is sufficient to note that contemporary economic understanding of Time can be expressed in Keynesian terms as ‘expectations’ (see Keynes, J.M., The General Theory of Employment, Interest and Money [1936], Chapter 12 The State of Long-Term Expectations, 147-164) and in Institutionalist terms as ‘futurity’ (see Commons, J.R., The Economics of Collective Action: Chapter viii. Futurity, [1950], 104-109) which can be summed up as 'People live in the future but act in the present'. Nonetheless, it is important to remember, for example, that the Judeo-Christian-Islamic concept of ‘the end times’ still colours the lives of billions potentially leading to a very different pattern of economic behaviour than that which we observe today. For example, at the end of the first millennium of the Common Era, many of the rich in Western Europe simply gave away their possessions in the hope and expectation of entering Paradise with the return of the Messiah. Arguably, this was one of the greatest examples of income redistribution in Western history! The point is that our ‘scientific’ concept of Time is not the only one affecting real life contemporary economic behaviour, especially in a global economy, unless, of course, we simply assume it to be so.
And in this regard it is important to note that your author, Mark Blaug, also references sociologist Robert Merton (pp. 287, 288 & 289) about the 'multiple discovery' of the Marginalist Revolution. Merton, however, among other things, pioneered the focus group as a sociological technique now applied in every sector of the economy. He was primarily a sociologist of science and the history of science and highlighted another problem associated with the linear theory of Time's Arrow, at least in the humanities and social sciences including economics - the fallacy of the latest word (see Merton, R.K., The Fallacy of the Latest Word: The Case of “Pietism and Science” 1984). The point being that, unlike the natural & engineering sciences, old knowledge is not necessarily replaced by new knowledge in the humanities & social sciences. Intellectual archaeology in these disciplines is arguably a potentially profitable endeavour.
Second, what is economic? The word 'economy' derives from the ancient Greek oikos meaning 'house' and nemo meaning 'manage', i.e. managing the house. In this sense, economics shares a common root with 'ecology' which derives from oikogie or modes of life and relations within the house. It also shares this root with Ekistics - the science of human settlement. This term also derives form oikos but in the sense of the founder of an ancient Greek colony like Syracuse in Sicily or the numerous city states established by Alexander the Great in India at the end of the 4th century before the common era. A global society where there is virtually contiguous urban development separated only by natural barriers is called the ‘Ecumenopolis’ by urban designer and founder of Ekistics, Constantinos Doxiadis (1976, 327). This global reality is strikingly portrayed in a composite photograph of “The World at Night” published by the NASA (November 27, 2000).
The fact is that the OED defines economy, economist and econometrician but not economics. Economy is defined as management of the household and an economist as the manager of that household. Econometrics is defined as application of mathematics to economic data or theories. While economics is not formally defined, political economy is: “originally the art or practical science of managing the resources of a nation so as to increase its material prosperity; in more recent use, the theoretical science dealing with the laws that regulate the production and distribution of wealth” (OED, economy, 3). Arguably, the term 'political economy' survived for so very long in order to differentiate it from what today is called 'home economics'. The change in terminology really began, as we will see, with the Marginalist Revolution with its focus first on consumption and then on production and the theory of the firm.
The question remains, however, what is the appropriate ‘house’ needing management? Its original sense was the self-sufficient ancient estate. Its management, however, ascended to progressively higher orders of human settlement as the village, town and city or polis (Steiner 1976). The term 'estate' however, may in fact catch the meaning better than 'house'. An estate can be viewed as a self-contained and self-sufficient economic unit inclusive of what today we would call production and consumption. Thus the first use of the term 'economist' was to describe the Physiocrats of pre-Revolutionary France who saw France as one giant agricultural estate.
Arguably the Physiocrats were the first modern school of economics and behind the Gallic façade of laissez faire and laissez passer, there were deeper policy implications, implications never realized because of the French Revolution. Beyond making agriculture the engine of economic surplus rather than manufacturing and unlike classical economists such as Smith and Ricardo, the Physiocrats accepted government as an active and productive agent in the economy. Like Karl Polanyi’s self-regulating market (see Block, F., “Introduction” to The Great Transformation), Smith’s market was spontaneous and autonomous; that of the Physiocrats became so, however, only after having been carefully and institutionally designed by government to direct resources towards attainment of national objectives (Samuels 1962, 159).
The nature of Physiocratic public intervention is radically different from Marxist ownership of the means of production and Keynesian management of aggregate demand. Accepting that private property and self-interest were the drivers of economic growth and development, the Physiocrats reached beneath the surface of the laissez faire, laissez passer marketplace. They reached down to the legal foundations of capitalism (Commons 1924) to manipulate the nature of property rights themselves. For the Physiocrats, “the public interest is manifest in the continuing modification or reconstitution of the bundle of rights that comprise private property at any given time (Samuels 1962, 161).
In effect, the Physiocrats wanted to load the dice to raise the commanding heights of the national economy. They wanted to consciously manipulate capitalist self-interest – accumulation of marketable property – to foster and promote the economic growth and development of the nation. The Physiocrats thus viewed property rights as instruments of economic policy. They also saw them as providing the foundation of the economy itself defining what is bought and sold, how and where. Accordingly, the Physiocrats:
implicitly recognize that the basic economic institutions (the organization of economy) are legal in character; that law is an instrument for the attainment of economic objectives and that economy is an object of legal control (Samuels 1962, 162).
While the Physiocrats and Adam Smith moved management up to the level of the State, arguably a detour occurred during the Market/Marx Wars. Mainstream market economics turned away from questions about management of the State and towards management of the firm. Microeconomics was born. It was not until John Maynard Keynes’ General Theory in 1936 that macroeconomics returned and the modern system of national income accounting was born. Nonetheless, mainstream resistance to overt economic management of the Nation-State continues, witness the dominant policy role played by the school of rational expectations and the monetarists.
As I have argued elsewhere (Ideological Evolution 2005), however, in a global knowledge-based economy such resistance is futile. Such an economy can only exist because of the Nation-State, not in spite of it. It defines the rules of the game, its tokens and talismans – intellectual property rights. And it enjoys more degrees of freedom to foster comparative advantage in IPRs than in any other industrial sector covered by the WTO.
And so seventy years after Keynes’ General Theory economics now confronts a global knowledge-based economy with the visible and global consequences of human technology progressively, and in my opinion inevitably, enframing the geosphere and biosphere enabling it, making it ready at hand to serve human purpose. This is the way of life. In effect, the globe - one planet, one biosphere, one human race - has become the house in need of management. And arguably 'knowledge' has displaced agriculture in what I call the ‘Neo-Physiocratic Policy Paradigm’.
Third, what is thought? The noun ‘thought’ derives from the Old English meaning “formation and arrangement of ideas in the mind” (OED, thought, n, 1a). In turn, an ‘idea’, among other things, means “a picture or notion of anything conceived by the mind” or “any product of mental apprehension or activity, existing in the mind as an object of knowledge or thought; an item of knowledge or belief; a thought, conception, notion; a way of thinking” (OED, idea, n, 8b & 9a).
In this definition reside two terms whose meaning must be made clear. The first is mind'; the other, 'picture'. In English, the verb 'to know' has absorbed and obscures four distinct ways of knowing: by the sense, the mind, the experience and the doing (see my Ideological Evolution, 8.0 Etymology, 2005). These different meanings are represented in German by separate verbs. Thus much contemporary discussion of a ‘knowledge-based economy’ revolves around ‘knowing by doing’ or a ‘can-do’ economy’ because the verbs ‘to know’ and ‘can’ share the same Anglo-Saxon root cnáw (OED, know, v, Etymology).
To know by the mind, or to think, derives from the now obsolete English verb ‘to wit’ corresponding to the German wissen. For example, wissenschaft means learning, science or scholarship as in Schumpeter’s wissensoziologie, i.e., the sociology of science ([1954] 1260). Similarly, in German ‘can-do’ or ‘know-how’ is represented by a separate verb kennen for which there exists a separate, distinct yet parallel system of ‘technical’ as well as ‘academic’ universities. This separation has not effectively been achieved in the Anglosphere or English-speaking world. Arguably, much of current debate about the future of the university is rooted in the conflict between its role in the education of an informed citizenry and the training of a workforce to enhance national competitiveness, i.e., ‘can-do’.
Accordingly when we speak of ‘economic thought’ we speak of knowing the economy by the mind. And when we know by the mind we know using ideas that usually appear to us as pictures or representations. Thus Heidegger argues that the essence of the contemporary world is objectivity resulting from the triumph of ‘representation’ in the arts since the Renaissance and in the sciences since Descartes in the 17th century. In effect, it is our ability to model or imitate nature, especially using mathematics or in the case of the visual arts of the Renaissance, geometry, that brings certainty of knowledge and perspective. Through representation everything in and of the world is brought before us from the perspective of object. The result, according to Heidegger, is that we live in “The Age of the World Picture” (Heidegger 1938). This iconic conclusion is also found in the natural & engineering sciences where confirmation through picture or graph literally means ‘seeing is believing’ constituting what Idhe calls “instrumental realism” (Idhe 1991).
Heidegger also argues that human thought (and therefore knowledge) operates only in Time, not in Space: “It is only with objects that space re-enters the picture” (Grene 1957, 66). Movement along and across timelines is alternatively called memory, planning, intentionality or imagination of spaces, places and times without leaving the comfort of one’s own head. The uni-dimensionality of thought with Space folded up into Time produces, perhaps, what Descartes called ‘the ghost in the machine’ or our sense of the ethereal, spiritual or transcendental.
Arguably, the ascendancy of economics, and especially of its Standard Model, among the social sciences is its ability to provide geometric, or in today’s terms, graphic representation of its ‘thought’. This may explain Blaug's confusion, in Kuhnian terms, between an instrument or technique of analysis and a theory. As we will see in more detail below, the Standard Model was developed during the last quarter of the 19th and first quarter of the 20th centuries particularly in the hands of Alfred Lord Marshall (1842-1924) at Cambridge University (Marshall 1920). Alternatively known as the Marshallian, Neoclassical or Perfect Competition Model, it fulfils Descartes’ requirement of a science in that it uses deductive logic based on a set of key assumptions whose conclusions are subject to geometric and mathematical proof. In this model, ‘X’ literally marks the spot where human happiness meets profit maximization. The resulting ‘paradigm’ led, I infer, Thomas Kuhn to single out economics among the other social sciences as best approximating puzzle-solving or ‘normal science’ (Kuhn 1996, 161).
Arguably, the success of the NES in generating new knowledge can be attributed to three factors. First is the Pythagorean Effect, i.e., exploitation of the cognate relationship between mathematics and the world of matter and energy. Second is the Instrumentation Effect, i.e., scientific instruments generate evidence not requiring intermediation by a human subject and providing readings at, above and below the threshold of native human sensibilities. In effect, this lends metaphysical legitimacy to the NES. Scientific instruments realize the Platonic “belief in a realm of entities, access to which requires mental powers that transcend sense perception” (Fuller 2000, 69). Furthermore, the language of scientific sensors realizes another ancient Greek ideal, that of Pythagoras, by reporting nature by the numbers. Third is the Puzzle-Solving Effect of ‘normal science’ (Kuhn 1996) which permits vertically deep insight into increasingly narrow questions, i.e., depth at the cost of breadth of vision.
The limited success of the HSS in generating new knowledge compared to the NES can be attributed to the absence of the Pythagorean, Instrumentation and Puzzle-Solving Effects noted above. First, while there may be some relationship, there is no apparent cognate relationship between mathematics and human behaviour. Second, HSS evidence – in its collection, compilation and analysis - is subject to intermediation by human subjects all along the evidence trail, limiting objectivity. Third, with the pedagogic exception of economics and its Standard Model, there is no generally accepted paradigm in any HSS discipline corresponding to ‘normal science’ that, according to Kuhn, is required for efficient puzzle-solving.
With respect to scientific revolutions, Kuhn claims these occur due to ‘gestalt switch’ (Kuhn 1996, vi, 63, 85, 111-14, 150). Before considering what Kuhn considers ‘the switch’, the question must be asked: what is a gestalt?
The compositional unity identified by aesthetics in the 18th century arguably led to the formation of a new school of psychology in the 20th. Gestalt psychology was founded by Max Wertheimer, Kurt Koffka and Wolfgang Köhler in Germany in the early 20th century (Köhler 1959). The word gestalt derives from the German meaning “a ‘shape’, ‘configuration’, or ‘structure’ which as an object of perception forms a specific whole or unity incapable of expression simply in terms of its parts (e.g. a melody in distinction from the notes that make it up)” (OED, gestalt). If one looks at a tree one sees a whole, an entity, not a composite of leaves, branches, trunk and root. If one shifts attention to a part, the whole is lost from view. In effect, it is perception (knowledge) without reflection or projection. By reflection I mean interpretation or ‘thinking about’ the meaning of the image. By projection I mean ‘reading into’ the image an ex poste interpreted meaning. Or, as Jung says: “image and meaning are identical; and as the first takes shape, so the latter becomes clear. Actually, the pattern needs no interpretation: it portrays its own meaning” (quoted in Hillman 1980, 37). Here is knowledge without reason. Any attempt to analyze it, i.e., to reduce a work to its component elements, sacrifices knowledge of the whole. Analysis is reductionism, not composition.
As to ‘the switch’ that changes the gestalt or paradigm causing a scientific revolution, Thomas Kuhn describes it as “scales falling from the eyes”, “lightning flash” and “illumination” (Kuhn 1996, 123). Of scientific revolutions he writes:
a new paradigm, or a sufficient hint to permit later articulation, emerges all at once, sometimes in the middle of the night, in the mind of a man deeply immersed in crisis. What the nature of that final stage is - how an individual invents (or finds he has invented) a new way of giving order to data now all assembled - must here remain inscrutable and may be permanently so. (Kuhn 1996, 89-90)
This ‘gestalt’ way of knowing is found in the philosophies of aesthetics, biology, science and technology. It is also arguably applicable in economics. Before explaining its possible applicability in economics, consider that following gestalt aesthetics, we see a picture as figure and ground. Following Grene & Depew (2004) in the philosophy of biology, every organism lives in an active environment enframed by invariants and filled with affordances. It takes the invariants for granted (unless they suddenly change, e.g., climate change) and concentrates on affordances in its environment. All knowledge is orientation relative to environmental constants a.k.a. invariants, and to opportunities and threats, a.k.a. affordances. Following Polanyi (Oct. 1962) in the philosophy of science, knowing is achieved by each organism through the tacit conjunction of subsidiary knowledge of invariants and focal knowledge of affordances. Following Heidegger (1955) in the philosophy of technology, adaptation of an organism includes adaptation to and adaptation of the environment by introducing ‘artificial’ invariants to enframe and enable parts of the environment as a standing reserve, ready at hand to serve the organism’s purposes. This, in the case of humanity, he calls ‘technology’.
Deductive logic in economics is, in a way, similar to what I call ‘gestalt knowing’. Assumptions serve the role of invariants framing an economic model while changes in these invariants or introduction of affordances set the model in motion. And, again, the graphic or geometric nature of economics, specifically expressed in the Standard Model, consists of axis of reference which in analytic geometry means: “Each of the two intersecting straight lines, by reference to which the position of a certain point, the locus, is determined” (OED, axis 1, 16). It is this graphic enframing of thought that creates what Kuhn calls paradigms or, in economics, we call schools of thought together with their constituent models. It is the shift to a new paradigm that constitutes a scientific revolution. I cannot at this time go into Kuhn’s mechanics of how this shift occurs (see my Thomas Kuhn's Pelican Brief, November 2002).
I end this Introduction with two thoughts. The first is about the causal hierarchy of nature. The second is about the role of values and beliefs rather than empirical, observable fact in economics, i.e., its roots in moral philosophy.
First, in theoretical biology the world consists of three spheres in contrast to the usual ‘sectors’ of economics. These are: (i) the geosphere, the world of physics and mechanics; (ii) the biosphere, the world of biology and life; and, (iii) the noösphere, the world of human thought and ideology. Ideology is, however, like technology on a higher plane. It enframes and enables us but instead of matter and energy it enframes human thought – scientific, religious, economic, political, et al. It makes ready at hand pathways of communication between minds.
Arguably, one can therefore identify a causal hierarchy in Nature. In the geosphere, material & efficient cause or mechanical causation remains primary at the mesoscopic or Newtonian plane of existence. In the biosphere, formal & final cause or causality by purpose still dominates but is rapidly being complimented by an emerging genetic mathematics simulating material and efficient cause. In the noösphere, all four – material, efficient, formal & final – causes are at play in varying combinations and permutations, only some of which, however, can be expressed in mathematical language.
Second, [to be continued including Boulding, Kenneth, E., Economics as a Moral Sciences, American Economic Review, 59 (1), March 1969, 1-12.] i.e., the inescapable role of values in economics...
In conclusion, I ask again: “What is the history of economic thought as a sub-discipline? What is special about its techniques and perspective? Blaug's opens his work stating: “This is a critical study of the theories of the past: it concentrates on the theoretical analysis of leading economists, neglecting their lives, their own intellectual development, their precursors, and their propagators. Criticism implies standards of judgement, and my standards are those of modern economic theory” (Blaug 1996, 1). In this sense Blaug is, in his own terms, an Absolutist rather than a Relativist. Similarly, he seemingly favours the ‘rational’ over the ‘historical’ reconstruction of history.
“We may sharpen the contrast we are making with the aid of a distinction, borrowed from the history of philosophy, between ‘historical reconstructions’ and ‘rational reconstructions’, a distinction that is almost the same as that between relativism and absolutism. ‘Historical reconstructions’ attempt to give an account of the ideas of past thinkers in terms that these thinkers, or their disciples, would have recognised as a faithful description of what they had set out to do. ‘Rational reconstructions’, on the other hand, treat the great thinkers of the past as if they are contemporaries with whom we are exchanging views; we analyse their ideas in our terms in order to locate their mistakes and to verify our fond belief that there has been progress in the course of intellectual history.” (Blaug 1996, 7)
His subtle references to Kuhn’s Structure of Scientific Revolutions require, however, something more than “a little training in German philosophy” (Blaug 1996, 1-2). According to Idhe (1991), among others, Kuhn initiated a new ‘philosophy of science’. Unlike the many ‘new’ outgrowths of economics such as the ‘new’ economic geography of Krugman, the ‘new’ growth theory of Romer, the ‘new’ economic history of North and the ‘new’ institutionalism of Coase, this ‘new’ philosophy of science breaks with the positivist past. As I will subsequently argue below, the ‘new’ in economics amounts to the admission of qualitative data by proxy into untestable mathematical models explicitly denying the ‘falisifiabilty’ condition of Positivism (Romer 1994, 19-20).
For Kuhn, a defining characteristic of ‘normal science’ is its non-historical nature. And, arguably, Blaug wants economics to be recognized as such. Blaug accents the a-historicity of economics by focusing on the analytic technique of today as evolving and progressing from past efforts.
According to Kuhn, knowledge in the natural & engineering ‘puzzle-solving’ sciences takes the form of new articles and increasingly e-articles. Books are not what a scientist does. By the time it is written the frontier of knowledge has moved far along the paradigm. Keeping up with the ‘invisible college’ (Price 1965) of forty or fifty people in the world who understand what a leading-edge experimental scientist ‘knows’ leaves little time for reflection. The instruments, language and techniques of specialized ‘normal science’ make the resulting knowledge incommensurable or incomprehensible to all but those inside the college.
So what is the ‘history’ of a ‘normal science’ for Kuhn? Inductees to ‘normal science’, i.e., first and second year students are feed textbooks in physics, according to Kuhn, that rationally relates modern knowledge as the technical evolution of the past. History is seamless; progress from past to present is what the history of science is all about. This is achieved through a revisionism of which Stalin would have been proud:
Textbooks, however, being pedagogic vehicles for the perpetuation of normal science, have to be rewritten in whole or in part whenever the language, problem-structure, or standards of normal science change. In short, they have to be rewritten in the aftermath of each scientific revolution, and, once rewritten, they inevitably disguise not only the role but the very existence of the revolutions that produced them. Unless he has personally experienced a revolution in his own lifetime, the historical sense either of the working scientist or of the lay reader of textbook literature extends only to the outcome of the most recent revolutions in the field. (Kuhn 1996, 137)
Such revisionism is, however, accompanied by a Kuhnian loss (Fuller 1992). In the case of economics, a focus on contemporary techniques of analysis as the benchmark allows the non-marginalist techniques to be forgotten. Thus excepting his treatment of the American Institutionalism (Chapter 17) and the inevitable (and fortunately frequent) slips to which he claims all Absolutists and Relativists are heir, Blaug’s history is about techniques of analysis, not about economic thought nor about economic theory. We must remember, however, as Boulding said about arithmetic, techniques of analysis are compliments to thought, they are not thought itself (Boulding 1966, 10).
It is to the .... that I now turn......
