1934. Humanities: missing feedback to economics.

The problem with pushing the humanities out of economics is that political science anthropology, novels, philosophy sociology are all loops of feedback about how the economy is doing. Getting rid of humanities means breaking the feed-back loops that would help economics meet its midlife crisis with meaningful changes.A t one or more points in our lives we were all moved to pathos by the writings of novels. I cannot imagine my understanding of economics without having read Dickens, Stendahl, Balzac, Tolstoy, Steinbeck, and many more. Remember Great Expectations, The Red and the Black, Lost Illusions,, War and Peace, Grapes of Wrath.

Economics took the path of newtonian science and later a bit of chaos theory, statistics, game theory. Economics never fully embraced thermodynamics though there are references to entropy and hysteresis, so it has remained basically 19th century look alike to physics. Not just 20th century physics is avoided but all the rest: Stravinsky, Picasso, Joyce.

The issue is feedback – missing. Well, not entirely. The way economics works it actually fits into the institutional mainstream and its analyses reinforces that structure by making it look good. So economics is a feedback that supports the existing tendency of economics to work for those who already have wealth.

Good journalists get involved with the human story, novelists enter in to the lives of people in visceral ways. Historians see the sweep of bureaucracies and tragedies in the rise and fall of larger units of society, , anthropologists understand that things can be different – they have been there, philosophers (a few) know that there is a deeper story about man and cosmos, and man with himself.

But these are missing in economics. And as a result economics has avoided the feedback about its own enterprise, feedback that would have forced economics to be about how to create a more humane economy.

The humanities were pushed aide. The language of economics was shifted from Plato’s Economia as broad-based estate management, with its concern for the lives of the owner, family, slaves, animals, grain, land crafts, to narrower concerns. Writers like Jevons explicitly wanted to keep social issues out of economics. . Adam Smiths observations of society were closer in spirit to the enlightenment view of the intelligibility of all things, and a journalists eye for the unfolding dynamics of society. But he certainly preferred abstraction to observation.

This happened because early economics was written by large land owners or financiers, or inheritors of wealth to preserve. It start as a science of wealth; how to get it, how to amplify it. It was only reluctantly a science of distribution and broad participation . The problem was that the social sciences and literature drew attention to the impact of the economy and economic analysis on the rather brutalized lives of the poor or even an anxious middle class. The fear by elites was that such awareness would lead to discontent. Well, the French Revolution happened. One law for capital and another law for labor.

The loss is terrible because nobody speaks for the no entrepreneurial people. Even the democrats will speak of “needing to appeal to the broad middle class” but few speak for the poor. (“They have tv and iPhones and iPads’ so they are not so poor” ignores that these are not consumer items but these are needed for work, demanded by employers)

A new book The Wizard and the Prophet, by Charles C. Mann (The author of the amazing books 1491 and 1493 about the impact of Columbus) about the divergent ecological visions of Vogt the communitarian and Bourlaug (Green Revolution) the technocrat, fascinates because of the author’s ability to move criss-crossing boundaries between science history, anthropology and much more, such as biography and personal journals. It is impossible to imagine the analytic power of this book if it did not include this criss-crossing, often within the same paragraph.Economics needs and does not have well established feedback loops from broad social thinking.

There was a time when literature and economics were not yet differentiated. All the early novels used economic events as key elements of plot and the aim was to enlighten the reader about the way things like credit and bank notes worked. By the time we get to James Steuart’s Principles of Political Economy the differentiation was not complete, and economists used novelistic techniques as much as novelists wrote largerly about the economic context of inheritance, bankruptcy, corruption. Steuart “. This from Steuart, (in what follows I am following Mary Poovey’s Genres of the Credit Economy) in his Principles of Political Economy, creating a character to express a point of view readers can identify with:

..the statesman is not motivated by self-interest; and he is, by nature, reliable because consistent: I suppose him to be constantly awake, attentive to his employment, able and uncorrupted, tender in his love for the society he governs, impartially just in his indulgence for every class of inhabitants, and disregarded of the interest of individuals, when that regard is inconsistent with the general welfare”.

Defoe was in his early writings doing economic journalism by traveling throughout England and writing about what he saw, He turned to what we now call novels but he was writing at a time when things like bank notes requires long supporting documents to help establish the credit and character of the principle parties. This writing was not at first different from the novels. Robinson Crusoe is political and economic. First it is a story of domesticating the island making it into an economy. But there is much more.

“Robinson leaves the island in 1686 and arrives back in England in 1687. Within this chronology, Robinson’s private confinement closely corresponds to the period of the Restoration, when dissenters like Defoe suffered the public confinement of Stuart absolutism. Is Robinson Crusoe a political allegory? “How like a King I look’d,” he remarks shortly before he leaves the island. “First of all, the whole Country was my own meer Property; so that I had an undoubted Right of Dominion. 2dly, My People were perfectly subjected: I was absolute Lord and Law- giver; . . . However, I allow’d Liberty of Conscience throughout my Dominions” (241). Is the key that unlocks Robinson’s actual particularity Defoe’s imagination of a sort of king in exile, an anti-Stuart monarch, his island the sort of toleration that Charles II had banished from the British Isles until it can return with the Glorious Revolution?”
Also from her,

The watershed event that separated Defoe’s early writings from his late productions was the rise, then fall, of the infamous South Sea Bubble in 1720. Numerous historians, literary scholars, and imaginative writers have chronicled the vertiginous events of this momentous year and contemporaries’ reactions to them, the collapse of the Bubble cruelly exposed all the fictions inherent in the credit economy, and, for a time at least, the government teetered on the brink as the public’s outrage and despair threatened to render the country ungovernable.

Writers like Richardson counteracted the debilitating effects of the Bubble by cultivating a distinctive realm of fiction, in which writers and readers might explore uncomfortable cultural anxieties without suffering their consequences. Through the medium of fiction, a writer might teach a reader to believe once more in possibilities that could not be proved; in so doing, a writer could encourage readers to accept the deferral that was essential to credit, both private and public, without feeling imperiled by risk. Even in the decades before Richardson began to feminize virtue, writers like Defoe were experimenting again with the relationship between print and belief as they gradually began to identify the special, healing virtues that might be associated with the distinctive form of representation we call fiction.

My point is that, in one sense at least, Roxana constituted a primer in the kind of evaluation that everyday credit transactions required in the eighteenth century and whose importance was magnified by the speculative possibilities-and fiasco-of the Bubble year. Before extending credit to a stranger or investing money in a speculative venture, an individual had to decide, by a complex process of evaluation and prediction, whether what the debtor or company promoter said about himself or the company was true, whether the assets he described were real, whether he was likely to be able (or willing) to repay the debt when it fell due, and whether the predicted profits were likely to materialize. If the tradesman (or tradeswoman) or investor knew at the beginning of the transaction that the stranger was a liar, then the decisionmaking process was unnecessary; if the tradesman or investor knew that the assets, willingness to repay, and productive potential were real, then the decision was easily made. It was only in a situation of undecidability, like that created by Roxana, that evaluation had to take the form of deliberation-a self- conscious consideration of evidence, probability, and generalization. (From Poovey.)


To show how abstraction works in much of economics, Brad DeLong posted on his blog this morning (sunday)

Tools: Analyzing Growth¶
• Economics gives us numbers: prices and quantities over time
• Proportional growth—compound interest
• The time over which some growth process takes place
• The rate at which growth (or shrinkage) takes place
• The amount that the variable grows to
• T, g, y… with little t standing in for any potential moment
• Don’t get snowed! Accurately assess how important or consequential things are!



Humanities: missing feedback to economics.

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