On socially influenced preferences — Chris Dillow

So much for rational agency based on autonomous preferences as viable assumption for a realistic economics. The world in which we live is socially constructed, which is hardly surprising since humans are social animals (homo socialis) more than economic animals (homo economicus). Most are crowd-followers behaving endogenously within the social system they inhabit rather than exogenous agents acting independently of the social system.

Stumbling and Mumbling
On socially influenced preferences
Chris Dillow, Investors Chronicle

See also

Statistical Modeling, Causal Inference, and Social Science
The fallacy of the excluded rationality
Andrew Gelman | Professor of Statistics and Political Science and Director of the Applied Statistics Center, Columbia University

ABC News (AU)
Could the science of kindness make the world a better place?

David Sloan Wilson | SUNY Distinguished Professor of Biology and Anthropology at Binghamton University and Arne Næss Chair in Global Justice and the Environment at the University of Oslo

Why we are wrong — Chris Dillow

Cognitive-affective bias. Short post but really a long one considering the links, which are useful in gaining understanding as well as justifying claims.

Stumbling and Mumbling
Why we are wrong
Chris Dillow | Investors Chronicle

Chris Dillow — Choice in economics

Are rational choice theory and utility maximization unwarranted assumptions in that they contradict evidence?

Stumbling and Mumbling
Choice in economics
Chris Dillow | Investors Chronicle

Daniel Little — What is the role of character in action?

I've been seriously interested in the question of character since being invited to contribute to a volume on the subject a few years ago. That volume, Questions of Character, has now appeared in print, and it is an excellent and engaging contribution. Iskra Fileva was the director of the project and is the editor of the volume, and she did an excellent job in selecting topics and authors. She also wrote an introduction to the volume and introductions to all five parts of the collection. It would be possible to look at Fileva's introductions collectively as a very short book on character by themselves.

So what is "character"? To start, it is a concept of the actor that draws our attention to enduring characteristics of moral and practical propensities, rather than focusing on the moment of choice and the criteria recommended by the ethicist on the basis of which to make choices. Second, it is an idea largely associated with the "virtue" ethics of Aristotle. The other large traditions in the history of ethics -- utilitarianism and Kantian ethics, or consequentialist and deontological theories -- have relatively little to say about character, focusing instead on action, rules, and moral reasoning. And third, it is distinguished from other moral ideas by its close affinity to psychology as well as philosophy. It has to do with the explanation of the behavior of ordinary people, not just philosophical ideas about how people ought to behave.

This is a fundamentally important question for anyone interested in formulating a theory of the actor. To hold that human beings sometimes have "character" is to say that they have enduring features of agency that sometimes drive their actions in ways that override the immediate calculation of costs and benefits, or the immediate satisfaction of preferences. For example, a person might have the virtues of honesty, courage, or fidelity -- leading him or her to tell the truth, resist adversity, or keep commitments and promises, even when there is an advantage to be gained by doing the contrary. Or conceivably a person might have vices -- dishonesty, cruelty, egotism -- that lead him or her to act accordingly -- sometimes against personal advantage....

Understanding Society
What is the role of character in action?
Daniel Little | Chancellor of the University of Michigan-Dearborn, Professor of Philosophy at UM-Dearborn and Professor of Sociology at UM-Ann Arbor

Jason Smith — Noah is stealing my material

More on econ as science.

Noah says to prove the assumptions are wrong. Lars says show that they are correct. Who has the better case?

The issue is how well a theoretical model works. Assumptions are always simplifications for economy and tractability of explanation. 

There is nothing inherently wrong about assumptions not being precise. They only need to be precise enough to yield results within an acceptable degree of tolerance.

The proof of the pudding is though hypothesis testing more than verifying assumptions, although if assumptions are not reasonably correct, then the model is questionable as an explanation that is generalizable. 

It is possible that a dodgy model can sometime yield positive results (pace Friedman's instrumentalism), as broken clock is correct twice a day. The test of theory is how well the model performs as an explanation of how things stand over time, that is, taking change into account. Theoretical models that don't reliably predict as not generalizable explanations. They are only generalizable in terms of restrictive assumptions that may or not hold in specific cases. That is to say they are models of special cases. 

I would say that scientific method is applicable in econ as it is in other social sciences and also in philosophy, since even speculation must take established truths into account. The question really is whether econ is a natural science like physics, a hybrid science positioned between natural science and life and social sciences, a narrative explanation of occurrences like history, or speculation based on principles grounded in intuition, like speculative philosophy. 

I would say that econ as practiced is some of each, and all approaches make their own contributions to the field. Defenders of econ as science can cite examples to make their case, and opponents can do likewise.

Jason Smith has written on this previously, to which I have linked here at MNE.

Is human agency Noah's big unchallenged assumption?

Falsifiabilité, simplicité, succès ... ou la mort

On the use of hypotheses: or, what do you get when you assume non-ergodicity?

Prescott and Lucas aren't Romer's problem

What does the AD-AS model mean?

There are more posts there, but these are representative.

The title,  Is human agency Noah's big unchallenged assumption?,  hits the nail on the head. The social sciences are about human agency, and so are behavioral psychology and motivational psychology and some other branches of psychology. So is theory of history. And in philosophy, so are theory of man, ethics, theory of action, and social and political philosophy.

Economics is based on a theory of man and theory of action. The theory of man and of human action are not subjects of study in the field of economics, or at least not exclusively so (pace Ludwig von Mises).

There is no agreed upon general theory of man or of human action in either the sciences or philosophy. Why? Foundational disagreement is often due to lack of criteria that are agreed upon, or failure of agreed upon criteria to determine a definitive result. It is also possible that data or method are insufficient. 

As a result, general agreement is usually limited to quite specific cases under particular conditions that are not generalizable, that is, special cases. As a result, the case method is generally used in business schools, for instance, that than theoretical economics.

Information Transfer Economics
Noah is stealing my material
Jason Smith

Chris Dillow — Building Character

The fact that we are discussing this itself shows the depth of the problem. Aristotle decided this issue in the Nichomachean Ethics, summarizing the classical education of Aristotle's day. It's the staple of virtue ethics based on the progressive unfolding of excellence (Ancient Greek: ἀρετή). 

Virtue ethics was not only the key classical teaching about development in the West but also in China and India, and judging from what we know of tribal cultures, there as well. 

In tribal cultures the hero is the great distributor rather than the great accumulator. Recall the scene in Lawrence of Arabia where the shaykh says to Lawrence, "I am a river unto my people," and the tribe cheers wildly.

Virtue ethics and deontological (rule-based) ethics overlap in many cases, since cultural institutions make arrangements though rules, customs, and conventions for education based on building character. 

Since the Golden Rule (reciprocity) is the most predominant deontological principle historically, the overlap with virtue ethics should be evident. Human beings are social animals. Hence, reciprocity, fairness and justice are key elements in character. All parents — or almost all parents anyway — teach their children sharing as part of the socialization process.

Consequentialism was considered to follow from developing excellence since a person of character would act in accord with the good of all and not chiefly out of self-interest. However, some versions of consequentialism are based on pursuit of self-interest. Classical authors like Aristotle addressed and rejected such arguments, showing why the pursuit of fame, fortune, power or pleasure cannot be considered the summum bonum.

BTW, without understanding this debate over approaches to ethics it is difficult to critique the contemporary assumption of utility maximization based on so-called rationality fully. It has been dismissed by the wise for ages as puerile and leading to bad character.

“It is better to be a human being dissatisfied than a pig satisfied; better to be Socrates dissatisfied than a fool satisfied. And if the fool, or the pig, are of a different opinion, it is because they only know their own side of the question.”
― John Stuart Mill, Utilitarianism

Stumbling and Mumbling
Building Character
Chris Dillow | Investors Chronicle

Philip Pilkington: The Ideology to End Ideologies – A Response to Corey Robin on Nietzsche, Hayek, Mises, and Marginalism

The political philosopher Corey Robin recently published an interesting essay on what he thinks to be the connection between the late German philosopher Friedrich Nietzsche and the economic theory of marginalism which Robin associates with the Austrian school (but which, of course, is also a mainstay of mainstream neoclassical economics). I should start by saying that I respect Robin’s work a great deal; I respect it to the extent that I did an interview with him for this very site when his last book appeared. However, his latest piece is grossly misguided and reflective of the fact that, when it comes to theoretical economics, academic critics on the left simply do not know their enemy at all.

The reason for this, I think, is because Robin does not quite grasp the essence of either modern neoclassical or Austrian economics or, consequently, how these twin doctrines establish an absurd and abstruse metaphysical system of morals that poisons the minds of everyone from academics to laymen and lawmakers. It would also appear that, lying in the background somewhere, Robin assumes that the only antidote to the scourge of marginalism is the dusty old labour theory of value – as problematic and discredited as it is. This is something of a guess on my part but if I’m correct it is but another indication that the left are fighting battles that have long since been thoroughly and completely lost. In actual fact, the questions and the answers lie elsewhere – and they lie precisely in the work of the very philosopher that Robin equates with degenerate marginalism.

It is Nietzsche’s critique of all theories of value and, by implication, all systems of morality that lay the ground for the most effective critique of the marginalist toxin – a critique that I have laid out in detail on this site before. These may seem like dusty academic issues – the realm of the literary critic than of the practical minded person – but this is not so. Because the left do not know their academic enemy he escapes with impunity and lives on, zombie-like, day after day – in our classrooms and, more importantly, in our everyday moral and political discourse.

Naked Capitalism
Philip Pilkington: The Ideology to End Ideologies – A Response to Corey Robin on Nietzsche, Hayek, Mises, and Marginalism

This is an important debate for framing contemporary economics and policy. It begins with philosophy, or contending ideologies,  and it also has to get the history and economics right. To frame MMT effectively, one needs to know the opposition, see it's advantages and disadvantages, and frame the debate in terms of trade-offs, showing how one position is morally superior, as well as more effective at meeting objectives efficiently.

The take away: "However, the goal is always the same; namely, to trick the student into thinking they are learning something objective when really they are being taught how to organise their minds in a very particular way."

See also some Libertarian and conservative responses to Corey Robin

 Bleeding Heart Libertarian
On Robin’s Tenuous Connection between Nietzsche and Hayek
Kevin Vallier

Reason

Hayek and Nietzsche: Perhaps Not Partners in a Cross-Century Anti-Equality Plot
Brian Doherty

The American Conservative

Corey Robin’s Dubious Nietzsche-Hayek Connection

Jordan Bloom

I would come back to the basic distinction between liberalism and conservatism. Liberalism holds that all persons are equal. Conservatism holds that some are better than others. (Hat tip to George Orwell in Animal Farm.) 

Certainly, Neitzsche takes the conservative position, which was imitated, poorly one could argue, but Ayn Rand, who was a Nietzsche wannabe. See Corey Robin's Garbage and Gravitas.

The question, then, is are neoclassical and Austrian economics inherently conservative in this sense, which is to say, is laissez-faire capitalism based on market fundamentalism inherently conservative in this sense? I think it is difficult to argue that it is not, given that the hero is the successful entrepreneur as modern version of the victorious warrior, the feudal lord, or a Hegelian world historical figure. In contemporary capitalism the entrepreneur shares the stage increasingly with top management as large corporations dominate.

According to conservatism this inequality of person results in meritocracy based on some standard of excellence such as the might of the warrior, the blood of the aristocrat, or the "hard work," discipline, thrift, and morality of the Protestant ethic to which Weber attributed the spirit of capitalism. In turn, this result in unequal distribution of wealth and power that underlies "trickle down."