Author Archives: Nam Nguyen

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.