Noah Smith — Sociology vs.the Empire

Noah Smith responds to a couple of the critics of his Bloomberg post. Here is the most salient point in my view.

Also, I'd like to take the opportunity to rant about the concept of "power". This has always struck me as just another form of economic phlogiston - just another labeled residual, like "technology" or "culture" or "confidence", whose behavior we are expected to take for granted. The reasoning always seems to be something like "Economic outcomes happen because of power. How do you know who has power? Just look at who does better in the economic outcomes!" Some people have actual theories of specific kinds of power, just like some people have actual theories of how technology works instead of just using it as a label for a production-function residual. But I often see people waving their hands at a phenomenon and saying "It's power, of course!" Which doesn't seem very explanatory at all.

According to conventional economists, by homo economicus. According to socio-economists, society is socially determined by homo socialis. Each type of explanation provides a different construction of human behavior and interaction.

According to conventional "orthodox" economics, homo economicus acts "rationally" in the sense of pursuing self-interest in maximizing satisfaction based on the ability to consume scarce resources and to produce the optimal balance of scarce resources. This results in a tendency to general equilibrium in the sense that no one can make oneself better off by altering ones choices with respect to what is already given or can be developed economically. Modeling this requires very tightly constrained assumptions, so tight as to make the model non-representational other than in simple (special) cases. Therefore, this is not a general theory of human action in the scientific sense, or if it claimed to be one, it has been amply disconfirmed by events.

Many economists would admit that this is not what they are aiming at anyway, and they would be correct. But there are a few economists that do what to extend the model generally. Gary Becker comes to mind, and his theory of rational choice extends far beyond economics now and reaches deeply into the social sciences. Some hold that social science that is not based on this theory is obsolete.

Moreover, homo economicus and conventional economics are based on non-economic assumptions that are questionable if not disconfirmed. To a philosopher, this appears to be very similar to scholastic philosophy in its quest for systematization based on first principles that are asserted as self-evident. The difference is in the level of formalization but the projects are similar, as is the dogmatism.

Does this mean that such a approach is useless? I would say only if it is taken to be comprehensive. It gives insight into a particular type of human action that is highly significant in life. But the assumptions are too limited to provide a comprehensive general theory of the causality involved in human action in terms of time-independent invariance that can be quantified and expressed in a formal model, as general theory in the natural sciences requires.

The reason for this is evident and explains why economics is a social science. Social science deals with human behavior, which is both more complicated (lots of moving parts) and complex (emergent) than objects and their interaction in the natural sciences. Human action is time-dependent, that is, historically determined, in that human action and interaction are determined socially by changing contexts. Cultural rituals, institutional arrangements, class structure, power structure, and other influences on individuals through their relationships with others exerts strong effects on their choices, decisions, and behavior both individually and socially.

In addition, there are also the constraints imposed by ontological and epistemological uncertainty that inhibit projecting the past onto the future with any great degree of predictability other than in rather trivial cases. Much of what is significant about the future remains unknown and to a great extent unknowable. And then there is the distinction between known unknowns and unknown unknowns. There is a reason that humans are said to be at the mercy of fate, and why "luck" has meaning for us. There is some wisdom in the saying that one makes one's own luck, but that is only partially true in view of uncertainty and the inability to control affairs.

According to sociologists homo socialis is far less knowable and predictable  a creature than economists hold homo economicus to be. Consequently, sociologists tend to be more humble about their discipline than conventional economists armed with ceteris paribus and modeling assumptions designed to stake out a position, for example, general equilibrium. Some economists interpret this as weakness and deference.

A significant difference between conventional economics and sociology lies in the subjective versus objective, positive versus normative, quantity versus quality distinctions. These distinctions are not significant in the natural sciences, which emphasize objectivity and seeks to reduce subjectivity, prize positivity over normatively, and ignore what cannot be quantified as being irrelevant or even nonexistent. Economists self-identify as similar to natural scientists rather than social scientists or even life scientists.

Conversely, sociologists view human beings as characterized by such dichotomies, and they regard studying human action without taking them into account as truncating the study. Ignoring or minimizing these factors misses what is most significant about homo socialis — social interaction based on similarity and difference in subjectivity, normatively, and quality. Whereas economists view homo economicus as inhabiting a world along with others more similar than not, sociologists see individuals and groups constructing different worldviews and meshing them — or not. Conflict is central to sociology, for example, precisely because it is socially endemic, for example, owing to different ideologies with norms perceived to be incompatible.

Power is a central category in sociology and political science. In fact, just as economics is concerned with distribution of scarce resources among individuals and units like firms and households, so too political science is concerned with the distribution of power among individuals and institutions in societies, and also among societies.

Perhaps power relationships cannot be quantified but that does not mean that power is not a factor socially, politically and economically so that it can be dispensed with in economic reasoning.  Neither are there "utiles" of satisfaction (Jeremy Bentham), or "leets" of capital (Joan Robinson). There is ambiguity underlying conventional economics also.

It seems that human beings are both socially determined and also economically determined. The question is whether economic factors determine social factors or vice versa. Does rational pursuit of maximum utility result in meritocracy and just deserts based on marginalism, as neoclassical economists claim? Or do social factors like cultural convention and institutional arrangement involving matters like power determine economic outcomes?

This reruns us to the dichotomy that I proposed above between the conception of homo socialis and homo economicus, and whether human action is more socially determined or economically determined? How could this be shown based on relevant criteria. What are those criteria? What method is called for. What counts as a more satisfactory explanation? These are questions that go beyond both sociology and economics. They are "philosophical" issues in the sense elf being foundational.