Economics

My Opinion of Noahpinion: A Response to Noah Smith’s Critique About the Future of Economics

Debating the future of economics

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By David Sloan Wilson

It’s a pleasure to be critiqued by Noah Smith in his widely read blog Noahpinion. I have no cause to complain, since his critique is good natured and he agrees with at least some of my points. Still, I feel misunderstood in a way that is consequential for the future of economics.

First, some context. My life’s work is to expand evolutionary theory beyond the biological sciences to include all human-related subjects—including but not restricted to economics. Also, I function in the capacity of a reporter and coordinator, in addition to my personal contributions. The piece that Noah critiqued is excerpted (with small changes) from my book The Neighborhood Project, which was published in 2011 and reflects my experience organizing a conference on economics from an evolutionary perspective, which was also the beginning of my economics education. That conference was followed by four workshops leading to a 2013 special issue the Journal of Economic and Behavior Organization, which in turn was followed by an Ernst Strungmann Forum leading to a 2016 edited volume published by MIT Press titled Complexity and Evolution: Toward a New Synthesis for Economics.

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In my role of reporter covering the beat of economics, I wish that Noah had critiqued my recent interview with Eric Beinhocker or my interview with Alan Kirman (my co-editor for the MIT volume) that was conducted shortly after the Ernst Strungman Forum (see also his own recent article in Evonomics.com). Then my outsider status would be less of a factor. But the piece that he critiqued is good enough, because there is a certain monotony to critiques of economics, whether from the outside or the inside. I am reminded of the movie Groundhog Day, where the weatherman played by Bill Murray is forced to repeat the same day again and again until he gets it right. Compare Paul Romer’s recent scorched earth critique of Macroeconomics with Maurice Allais’ critique in 1987, which I quote in my piece that Noah read. Twenty-nine years have gone by and nothing has changed.

What stands out in Noah’s critique of my piece is its complacency. It’s like he’s discussing the arrangement of deck chairs aboard the Titanic. There is no sense of urgency about the failure of orthodox economics theory and the need to place it on a new foundation.

As someone who witnessed the discussions that took place during the Ernst Strungmann Forum, I know how much work is required to place economics on a new foundation based on a combination of complexity theory and evolutionary theory. I have also been a critic of the self-described discipline of Evolutionary Psychology from its inception. In my role as reporter, I organized a Special Edition of This View of Life, a magazine that covers all topic areas in the same way that Evonomics.com covers economics, titled What’s Wrong (and Right) About Evolutionary Psychology? But Noah misses the point when he observes that evolutionary psychology, the study of cultural evolution, and their applications to economics are nascent enterprises. He seems to think that they can be ignored until they have reached some undefined state of maturity. He doesn’t get that when your ship is sinking, you need to build a new ship and move onto it as soon as you possibly can.

My life’s work gives me a panoramic view of the human-related disciplines such as religion, sociology, the humanities, and the philosophical tradition of pragmatism, to list a small sample. The very fact that I and like-minded colleagues can do this (it is a perspective, not an individual talent) suggests that evolutionary theory has a generality that orthodox economics aspired to and failed to achieve. From my vantage, I can attest that while all human-related disciplines have complex histories that often limit their capacity to change, the economics profession is an outlier in this regard. Don’t take my word for it. Pavan Sukhdev is the latest in a long parade of insiders and outsiders who call for economists to start behaving like scientists.

So thanks to Noah for checking me out in a good natured way, but no thanks for his conclusion that I’m welcome to stick around as some kind of town heretic. That conclusion deeply misunderstands the need for the economics profession to change.

2016 October 18


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  • William Ellis

    As a long time reader of Noah Smith…who agrees with him way more than not…”i’m calling this round…
    you win…

    I would love to see you and Noah develop a mutually beneficial…friendly but antagonistic,… relationship on the internet…

    i’d be revealing…

  • Dargon

    “There is no sense of urgency about the failure of orthodox economics theory and the need to place it on a new foundation.”

    Maybe it’s just your excessive ‘urgency’ because your entire role here is built upon us thinking that we need to tear down economics? It’s amazing how people accuse economists of bad faith motivations for not embracing every new alternative some random outsider proposes, rather than note that maybe people like you have strong incentives to misrepresent the field and its supposed failures to laymen. Which this website does on a daily basis.

  • Bill S

    Wow. The notion that your life’s work gives you “a panoramic view of the human-related disciplines such as religion, sociology, the humanities, and the philosophical tradition of pragmatism,
    to list a small sample”, and that “evolutionary theory has a generality that orthodox economics
    aspired to and failed to achieve” is almost Trumpian in its Socratic ignorance, ie., thinking you know things that you do not know — and by extension, thinking that your chosen discipline stands above all others and can be simply applied to all others to get “the true answer”.

  • Dan

    Why the urgency? Even if we woke up tomorrow and there were no economists, we’d still have an economy.

    Globally the economy is producing better outcomes for more people on numerous measures each and every year, and the progress experienced during the 29 year period you cite as being subject to identical critiques has witnessed one of the most stunning advancements in economic outcome for more people than any time in history – fewer in poverty, better health, better education and so on.

    I think Noah is right to be skeptical that your ideas about evolution will be more than one of many contributions to our ongoing understanding of the economy.

    dan

    • The numeric gains are all coming from early stage capitalism as practiced in places like India, while late stage capitalism is crushing the middle class in industrialized nations like the U.S. and the U.K.

      • Dan

        Life expectancy in the US hit a record high
        The US had the highest HS graduation rate ever this past year
        The number of uninsured in the US is the lowest its ever been

        Developed world inequality is diverging between countries like the nordic countries and the ‘anglo saxon’ countries.

        I don’t think the you can readily say that ‘late stage’ capitalism is the explanatory driver in the ‘crushing’ of the middle class. which I think is better described as ‘stagnation’ and is likely a policy choice as wages have simply lagged productivity.

        I do agree naturally that China explains the significant share of improvement the past 30 years however.

        • All excellent points Dan. I personally feel like macroeconomics in general is mostly useless as a science as the bell curve of income is being squashed in the middle. The interesting picture to me is looking at individual outcomes, or perhaps 10% or 20% slices. The rich are getting richer, the poor are getting poorer, and yes, the middle class has been stagnating since the late 70s or early 80s. I do find it frustrating that productivity is up and real wages have been flat for 30 years.

          edit: perhaps the poor are staying as poor as they were more than getting poorer, but, as you state, at least more of them have health care.

  • Having read both this, and Noah’s work and Noah’s response, I can see aspects of real concern in both, and neither seems to me to go deep enough.

    If one looks at the evolution of understanding, there has been something of a duality present, with an evolving relationship between the notion of truth, and some sort of practical acceptance of the many aspects of reality that seem to be fundamentally unpredictable in various ways, leading to many different traditions.

    If one looks from a systems perspective, one can interpret such an evolutionary sequence as an exploration of sets of possibility spaces starting from the simplest binary distinction sets (like true/false, right/wrong, hot/cold, light/dark, etc) and moving out to what appear to be useful approximations to infinite sets of often Bayesian distributions. A journey from simple Truth to profoundly complex uncertainty that also retains some aspects that display very high probabilities within certain domains, that allow us to make things like computers, atomic clocks, jet engines etc.

    The journey from the notion of eternal Truth, to the acceptance of notions like Wolfram’s maximal computational complexity, chaos theory, complexity theory, general computational theory, and quantum uncertainty has been in parallel with the development of an understanding of evolution.

    When one come to grips with the depths of the halting problem, then one can start to appreciate the way in which evolution has incorporated heuristics that have worked in practice into every different level of the systems that make us what we are (which included all of our culture and science).

    And when one looks at those systems of complexity, and the recursive nature of the expansion into new levels of complexity that new levels of cooperation have made possible over the last 4 billion years of life on this planet, and one looks at the exponential nature of such systems, the view is something very different from anything in traditional economics, though it does show the usefulness of such approximations within certain constraints – just as Euclidian geometry can be seen as one case of the more general space of all possible geometries, and Newton mechanics is a special case of general relativity, and Boolean logic is a special case of probability theory, all of those special cases can be useful to certain levels of accuracy in certain classes of situations.

    Once individuals accept that their personal self interest can extend out thousands of years.
    Once individuals accept that exponential technologies can deliver exponentially expanding benefits in the future that swamp any discount rate one cares to apply to future benefits.
    Once individuals see the power of cooperation, provided that effective classes of tools are present to give a reasonable probability of detecting cheating strategies, and provided also that the sanction sets applied to cheats are such that it is always in the interests of the cheats to rejoin the cooperative (thank you Elinor Ostrom for providing a dataset that proves that particular point), then there is an entirely new level of organisation possible, beyond anything in classical economics.

    An understanding of the evolution of understanding is essential.
    An understanding of the nature of complexity space and computational/algorithm space is essential.
    And understanding of the profound influence of, and the necessity of, and the dangers of, the many levels of heuristic hacks that evolution has encoded within us is essential (and Eleizer Yudkowski’s Rationality A-Z is a reasonable catalogue of many of those hacks).

    Automation of computation, leading to fully automated systems, really does change everything.
    It really does change the fundamental nature of the incentive sets that made money and markets such a useful set of tools.

    Having near instantaneous, reliable information shared across real-time networks, with effective modern tools to making reliable assessments of the probabilities involved, and sharing updated priors within trust networks, really does offer a profoundly different approach to human relationship that offers benefits far beyond anything any scarcity based values system (money and markets) can deliver.

  • Haynes Goddard

    For years I debated with a close relative, a prominent political scientist at a major university, whether the economist’s utility maximization hypothesis was empty or not — specifically, a tautology. Tautology because economists take as axiomatic that we seek to maximize utility. The framework readily yields downward sloping demand curves or an inverse relationship between price and quantity, a relationship widely confirmed empirically. But I never really had a convincing reply to his taunts, at least not convincing to him.

    At the time, I was looking for an accessible statement of the basic ideas of neoclassical micro theory to give to my intermediate micro theory students, as the text, really all texts, really said little. I happened upon a nice little essay by the mathematical economist Roy Weintraub. He was also associate editor of History of Political Economy at Duke. He published it in an encyclopedia, but now it is has been moved tohttp://www.econlib.org/library/Enc1/NeoclassicalEconomics.html.

    It gave me an eureka moment, and so I got ready for the next time my relative raised the topic, which was shortly thereafter. I said to him: “tell me, when you make decisions, do you try to do the best you can under the circumstances?”, and he immediately became silent — he has never been one to say that I am right – and has never raised the issue again. So I knew I was on to something.

    “Doing the best under the circumstances” for a personal choice is just the informal equivalent of maximizing utility subject to a constraint or set of constraints, and that is the essence of the neoclassical rationality model. So at this level of abstraction, it is a pretty good description of our basic decision making process.

    The sentence in Weintraub’s essay that set off the light was this: “The neoclassical vision thus involves economic “agents,” be they households or firms, optimizing (doing as well as they can), subject to all relevant constraints”.

    It is clear that I had simply rephrased this. Now Weintraub was not really saying anything original, but his clarifying turn of phrase was just what I wanted. The rephrasing seems to work quite well in getting the point across when other scientists denigrate the economist’ srationality assumption, which is often.

    Prof. Wilson does not appear to be familiar with the findings in neuroscience that document that rationality also appears in animals and in particular is demonstrated in animal experiments. That is an important evolutionary result that he apparently ignores.

    The neuroscientist Paul Glimcher discussed the rationality assumption in neoclassical economics in his first book “Decisions, Uncertainty, and the Brain: The Science of Neuroeconomics”, and indicates that it is basically correct.

    His later book “Foundations of Neuroeconomic Analysis” points out how the basic economic paradigm needs to be revised in the light of new biological findings, but it does not reject the basic maximization hypothesis, both for humans and other animals.

    Further, this utility assessing capability is an evolutionary result, and it would seem to fit squarely into Prof. Wilson’s favorite framework.