I welcome the attention that Noah Smith has drawn to two “big think” pieces, one by Nick Hanauer and Eric Liu and the other by myself, which are both cut from the same broad cloth of evolutionary and complexity theory. Smith comes across as an open-minded skeptic. He likes some aspects and is unimpressed by others. Most of all, he insists on empiricism. Here is how he ends his critique.
“But I think that more important than any of these theoretical changes – or the evolutionary theory suggested by Wilson – is the empirical revolution in econ. Ten million cool theories are of little use beyond the “gee whiz” factor if you can’t pick between them. Until recently, econ was fairly bad about agreeing on rigorous ways to test theories against reality, so paradigms came and went like fashions and fads. Now that’s changing. To me, that seems like a much bigger deal than any new theory fad, because it offers us a chance to find enduringly reliable theories that won’t simply disappear when people get bored or political ideologies change.
So the shift to empiricism away from philosophy supersedes all other real and potential shifts in economic theory. Would-be econ revolutionaries absolutely need to get on board with the new empiricism, or else risk being left behind.”
I can’t help but remark on the irony of this stance. By Smith’s own account, the field of economics is experiencing an empirical revolution. Unlike the past, it has become necessary to test theories against reality. That places the field of economics many decades behind the field of evolution and numerous fields in the human social sciences that have been rigorously evidence-based all along. Earth to the economics profession: Welcome to Science 101!
But there is more to Science 101 than the need to test theories. Let’s imagine that there were ten million cool theories out there. How long would it take to test them? Hundreds of millions of years. Does it really need explaining that the choice of the theory to test is important? Does Smith really believe that any old idea that comes into the head of an economist is equally worthy of attention?
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The main reason that the so-called orthodox school of economics achieved its dominance is because it seemed to offer a grand unifying theoretical framework. Too bad that its assumptions were absurd and little effort was made to test its empirical predictions. Its failure does not change the fact that some unifying theoretical framework is required to prevent the “ten million cool theories” problem. What Nick Hanauer, Eric Liu, and I are saying (Smith misses that our arguments are cut from the same cloth) is that a combination of evolutionary theory and complexity theory offers the best prospect for a unifying theoretical framework. We are not alone in this assessment. A volume titled “Complexity and Evolution: A New Synthesis for Economics” based on a conference organized by Germany’s Ernst Strungmann Forum last year, will be published by MIT Press later this year.
It’s easy to get bogged down in the semantics of whether something counts as a new synthesis or not. This was a major discussion point at the conference, with some of the participants arguing for a “continuous with the past” view and others arguing for a “break with the past” view. Interestingly, a similar conversation is taking place over the phrase “Extended Evolutionary Synthesis” in my field of evolutionary biology, which I will be reporting upon in the Evolution Institute’s online magazine This View of Life. These conversations are not just word splitting. They bear critically upon the hypothesis formation half of the scientific process, which is just as important as the hypothesis testing half.
I end with a concrete example of an empirical research program in economics informed by evolutionary theory. Elinor Ostrom was awarded the Nobel Prize in economics in 2009 for her work on how groups successfully manage common-pool resources. Her achievement was primarily empirical. Based on a worldwide database that she compiled, she derived eight core design principles that were required for common-pool resource groups to successfully avoid the tragedy of the commons. The theory that informed her research was a blend of New Institutional Economics, game theory, and evolutionary theory. The influence of the latter grew throughout her career, including our own collaboration that led to our article titled Generalizing the Core Design Principles for the Efficacy of Groups, part of the 2013 special issue of JEBO to which Smith alludes in his critique. This article places Ostrom’s “core design principles” approach on the foundation of multilevel selection theory and predicts that most groups whose members need to work together to achieve common goals require the core design principles. The theory also predicts that the need for the core design principles should be scale-independent, although the mechanisms required to implement them at a large scale (e.g., a nation) can be very different than at a small scale (e.g., a neighborhood). These predictions are eminently testable on groups as diverse as schools, businesses, and even the cultural evolution of large-scale societies over the broad sweep of human history. Testing the predictions can go hand-in-hand with helping to implement the core design principles in real-world settings, thereby improving the quality of life in a practical sense.
To conclude: I thank Smith for his open-minded skepticism and wholeheartedly agree with the need for empiricism in economics, along with all other branches of science. I hope that he can agree with the need to go beyond “ten million cool theories” for the hypothesis formation half of the scientific process.
2016 March 20