OSR and Economics

  1. Ontic Structural Realism and Economics
    1. Aims of Economics

Ross rejects the Kuhnian view of scientific progress as a series of paradigm shifts driven by scientific consensus. He argues that progress in the field of economics comes from developments in our understanding of abstract structures. Furthermore, Ross conceptualizes two distinct ideals of economics:

  1. Debrivan economics, also referred to as neoclassical or Walrasian economics, identifies economics as “the body or application of theory that generalizes over the behavior of some specified class of people or their aggregates when they take actions to optimize or improve their well-being with respect to recruitment of scarce assets.” This is seen as the established view of economics taught at American, Western European, and Indian universities in the mid to late 1900’s. This perspective of economics often held the assumptions of a favorable view of the free market, perfect information among suppliers and demanders, and rational actors in the economy. 
  2. Anti-neoclassical: Anti-neoclassical economists often associates themselves with ideals of economics from before the dominance of neoclassical economics. In particular, Adam Smith is seen as a key figure in the anti-neoclassical ideal of economics for his social-psychological emphasis. Keynes is another figure held in high regard by anti-neoclassical economists. Keynesian economics challenged the traditional view of free markets and argued for monetary and fiscal policy to stimulate the economy in times of recessions and depressions. Anti-neoclassical economists, such as Sen, argue that neoclassical economics is needlessly atomistic and that the view of economics as an interlocking system of markets wherein selfishly rational entities are acting to maximize their utility is not reflective of the real world. 

* It should be noted that these two distinctions are not as clearly defined as Ross initially states. Subfields of economics, such as game theory, are seen by some as an extension of the traditional neoclassical tradition and by others as a fundamental shift in the study of economics. 

Ross then describes the history of economics through the description of key figures in refining our idea of field. Ross describes two perspectives on this development:

  1. Whiggish: The whiggish perspective of history that views history as a story of progress. Under the Whiggish framework, economics progresses through a series of technical advances that build upon one another. In time, this leads to an increasingly accurate and unified science whose scope has also improved and increased.
  2. Kuhnian: The Kuhnian perspective would identify two distinct paradigms within economics: one that accounts for psychology utility and one that does not. In Ross’ conception of the history of economics, psychological hypotheses are gradually fazed out. 

Ross argues against the criticism levied by anti-neoclassical economists that economics assumes inherently selfish actors. By his lights, the individual in economics is comprised of a constant, in a situation to interact with commodities that would improve their state, and an end state that can be achieved through exchanges of limited resources. This individual doesn’t have any normative obligation to be selfish or rational. In fact, if economics was viewed as simply a mathematical equation, there is no obligation to do anything at all. Ross argues that economics, properly understood, is not rooted in selfishness despite popular conceptions. He identifies two main factors that drive this misconception of economics: the structure of economic education and an association with the Chicago School. In particular, Freidman, Stigler, Coase, and other economics hailing from the Chicago School held a libertarian ideology that at least partially motivated their policy prescriptions. Ross holds that libertarianism is a political philosophy, not an assumption of economics and generally supports the dissociation of the Chicago brand with economics/ neoclassical brands as a whole. He views Chicago economics as economic engineers while he views his domain as economic science. The core distinction between the two is that economic science describes the “revealed preferences” of firms of countries as opposed to the traditional conception of individual actors. Though not explicitly stated, I understood economic engineering to be policy recommendations or normative statements about what one ought to do given economic science. 

Objection/ Comments: In page 4 of the reading, Ross claims that “Adam Smith had a deeper understanding of human behavior than many modern psychologists, but he did not know much economics by contemporary standards”. This seems like an overreach by Ross in making a controversial comparison without much evidence or support. 

Objection/ Comments: The summary above encapsulates Ross’s perspective of economics. However, given that economists would actually group Keynes into the neoclassical tradition (sometimes referred to as neoclassical synthesis or Neo-Keynesian Economics), it seems to me that the distinction of anti-neoclassical and neoclassical economists is blurry at best and inaccurate at worse. Furthermore, in terms of the characterization of a decrease in psychological utility, it seems that Ross ignores developments in behavioral economics, which challenge the idea of perfectly rational actors with complete information. What are your thoughts?  How accurate do you think Ross’ characterizations are?

  1. OSR as the Ontology for Economics

Ross views the basic questions asked in economics as optimization problems. Given a state of affairs with scarcity, a hierarchy of favorable outcomes, a goal to maximize utility, and other assumptions, these “games” seek to create the best possible buddle of results. These games are a series of relationships whose relata are mathematical representations that do not reflect real life individuals. Thus, the discussion of individual behavior and motive are simply useful shorthand as reference points. This is in line with what OSR would predict as the ontology for economics- relationships without entities. A comparison made by Ross is that economics treats humans in a similar way to how physics treats rocks or tables. Modern physics doesn’t deny the existence of rocks but rather denies that fundamental reality bottoms out at existences like rocks or tables. Instead, modern physics seems to argue that reality bottoms out at a collection of smaller existences. 

Question: I had some initial thoughts and objections to this section linking OSR to economics. In particular, I found that the comparison between humans in economics and rocks or tables in physics to be suspect. In economics, the issues that arise from modeling individual behavior come from the irrationality of human behavior and of fundamental assumptions such as consistent never-changing preferences and distinctive properties. In physics, it seems that rocks and tables are composed of properties which when understood accurately predicts and describes phenomena in the real world. The difference, in my eyes, is that it seems individuals in economics are in need of additive properties as the current model does not include key characteristics of the human experience. 

5 thoughts on “OSR and Economics

  1. Phin Choukas

    Thanks for your post Nam! I am pretty persuaded by this application of OSR to economics, particularly the neoclassical model that seems most prevalent today. Reflecting on my experience in microeconomics, I recall that the professor briefly mentioned the caveat that people do not act perfectly rational at the beginning of the course, and that was that. It seemed odd to me at the time that everything we learned rested on a demonstrably false presupposition. Applying OSR to economics in the sense that “people” are viewed not as biological homo sapiens, but rather as “normatively regulated virtual constructs” or structures that reflect patterns of optimization and maximization, makes a lot of sense to me and seems to address this issue. Furthermore, the analogy that humans are to economic theory roughly as tables and rocks are to physical theory sheds light on the concept of entities as “bookkeeping devices” that, while not accurate models of fundamental reality, shed light on the nature of their behavior. With all this I’m left with a similar question to Farhan, which is, why does Ross restrict OSR simply to economics? I share the intuition that while the structures which sociologists study may not be mathematically formulated, they still nevertheless exist. Should we expect OSR to be applicable to many different disciplines if it does so much work for us in economic theory? Or is OSR itself a kind of bookkeeping device that sheds light into the nature of physics and economics but is not an accurate reflection or reality itself? For my fellow philosophy of language classmates, I’m wondering could it be that any theory that is put into words is thereby ultimately incapable of describing reality?

  2. Rebecca Amen

    After reading this article, I am convinced that OSR does have great utility. That utility at least partly results from the fact that OSR rightfully leads to an investigation of the simplifying terminology we employ, which presupposes incorrectly that we are talking about discrete entities. Just as subatomic particles behave unlike extended entities, and their spatial positioning is predicted according to the functions of quantum mechanics, “people” and their behaviors under the best projections of economic science are mapped more like products of overlapping, interacting structures and functions. In this way, I see that OSR performs what it sets out to do, which is to demonstrate that structures are what really compose the units we discuss across the array of scientific disciplines. I’d be interested to see how it operates at the level of what fundamentally exists, though, and not just in the domain of utility for various disciplines. For example, it seems—at least intuitively—that the word “people” would shift in its definition and understanding across disciplines under OSR. As in, the structures that constitute “people” vary across scientific disciplines (or maybe, as Farhan mentioned, this is handled by economics being the only “science” that discusses “people” as its main unit), such that the definition of “people” doesn’t ever get completely nailed down… Relatedly, it also feels like we are defining “people” as constructed, theoretical amalgams of structures (which seem to generate a sort of entity) in this view of economics. In reality, people do exist as real, discrete, and unique entities or seeming entities, which leads to my main grapple with OSR: that it seems to abandon the ontological project of specifying what really exists, beyond the disciplines in which it operates. And then, how can an ontology only apply in particular disciplines, when all those disciplines are operating in the same world?

  3. Farhan Islam

    There were a couple things that really stuck out to me with this reading.
    With regard to if OSR can only apply to physics, Ross says “If all of science reduced to physics, this wouldn’t matter. But it would be a dark day for naturalism if it were hostage to across-the-board ontological reductionism, which current trends in science don’t support.” This seems like it needs a bit more unpacking. I can understand why it seems weird to say that all of of science can be reduced to physics, but that seems to only be the case because the level of explanation that we seek is not always at the physical level, not because physical phenomena do not ultimately underlie other scientific objects. More importantly, why would OSR have to apply to all things scientific? If OSR claims that fundamental entities are not literally real, why would that matter for the economist? Isn’t physics the only field that concerns itself with fundamental entities?
    This is also strange to me since he says that OSR can apply to economics but not sociology. His reasoning for that claim is that sociology lacks a “distinctive canonical formal theory for interpreting quantitatively parameterized models”. Why is that the metric? It seems like even if the structures studied by sociologists are not formalized mathematically, they are still structures nonetheless. Why must the structures be quantitatively parameterized models for OSR to apply?

  4. Peter Huggins

    Thanks Nam! Like Kenzo, this isn’t something that I had ever considered prior to reading this.

    Regarding your question that concerns Ross’ not addressing behavioral economics, I thought of the difference between economic scientists and economic engineers, and I think that the the importance of the accuracy of Ross’ characterizations depends on whether the person is a scientist or an engineer. It seems to me that economic scientists operate in theory. In that case, assumptions can be made that might not apply to the real world. Due to that allowance, an inaccurate characterization is alright. However, if you’re an engineer, and you’re producing policy recommendations, your characterizations need to align with how things actually are, which would mean that Ross’ characterizations could create problems.

    Looking at Ross’ characterizations specifically, I think that classifying everybody as an informed, rational actor is not an accurate characterization of the average person. I’m not an Econ guy, so I’m not sure how to go about fixing this problem, but I do think that there is an issue if that’s an assumption for people who study this discipline.

  5. Kenzo Okazaki

    Thanks Nam!
    In response to your last comment on applying OSR to economics, I am not sure I understand what you mean by additive properties. It seems that economic models are, perhaps, just not advanced enough at the moment to account for all of the, perhaps, more predictable properties of particles (given experimental conditions). I was fairly convinced by this application of OSR to econ, but it’s possible this stems from my vague understanding of how economic models work. It seems like humans can also have dispositions to act in certain ways under certain circumstances and that there are predictable powers (if we accept that) that result in these dispositions. Maybe these could be something like character traits.

    I am also interested to see if people have thoughts on what might be a more appropriate ontology for economics. It wasn’t something I had ever considered before.

    On the objection you pose with regard to Smith on page 4, are you thinking that Smith merely adopted a different stance(?) that did not focus on abstract structures as contemporary economics does?

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