History and Economics

In the ongoing debate about the relevance or otherwise of history as it pertains to economics allow me to add:

Within the enormous pile of instances of history, most of which we have collectively forgotten, there are multitudes of experiences that illuminate any particular view we have of an economy, but none by themselves ‘explain’ economics. This is because they are reflections of relationships between people and the economy extant at the instance of experience. They are more context than subject. But that line blurs to make economics difficult.

Are these instances irrelevant? No. Are they economics? No. They shed light on a phenomenon. They are not the phenomenon itself.

Perhaps.

But this is not being inclusive. I have spoken only of human history. What about a more general history? How about that of the earth? There the instances of history are more relevant because the experience of the earth conforms more closely with the predictions of generalizations. It excludes the overlay of human activity and speak to things like geology and physics which are both less complex because they exclude the exigencies of life.

Am I contradicting myself?

No.

I am differentiating between human history which is more particularly the effects of human agency on both the environment and on other humans, and the deeper history of the environment itself. This latter is amenable to generalization in the mode of scientific theorizing, whereas the former is less tractable because of its inherent complexity. And I mean less tractable, not intractable.

The problem with economics is that it has forgotten that its raw material sits within the set of instances aggregated under the heading of human history. It is not explaining deeper timeless or physical laws, but those that sit halfway up the tree. Some aspects appear to be ‘laws’, others are simply the experiences of people at different points in time and space that may or may not be sufficiently similar for us to generalize.

Cultural, political, institutional, geographic, and many other constraints impinge on how people experience an economy. And since those people accumulate into the population that actually is the economy – it is their collective behavior that is the subject matter of economics – these constraints are vital to our theorizing.

Abstracting from all that muddle and then simply focusing on what rational, or near rational, people might do under certain conditions of scarcity – which is not on its face an unreasonable goal – is just one part of the subject. One part, not the whole.

Which allows historians and other who observe and interpret that muddle as it unfolds to add color to the subject of economics.

Take, for example Wendy Brown’s excellent interrogation of the relationship between neoliberalism and liberal democracy. She is pessimistic about the future for liberal democracy – I must add that she frequently almost sneers at the concept for being a mere anemic representation of the real thing – precisely because in our recent era we have allowed economic thinking to invade spaces where it does not belong.

Setting aside her biases, Brown’s critique is thus an attempt to understand the proper place for economics, with economics being defined narrowly in its neoclassical or Chicago School incarnation.

I have a lot of issues with the details of Brown’s analysis, but as an application of non-economic thinking to economics it is highly illuminating. It helps throw cold water onto the notion that the rational choice collection of ideas is of any relevance to a broader and richer social interpretation of what democracy actually is. Put conversely, Brown’s point is that the application of rational choice theory to social and political questions beyond that of allocation under conditions of scarcity within the realm of economic life is an error that has undermined the validity and potency of liberal democracy.

And, more to the point, that the undermining she refers to has been purposeful. In short economics has been used to invalidate democracy. Economics is a politically potent weapon. Which is a point I have made a few times myself.

Brown is not a historian but a political theorist, yet this example lends weight to the legitimacy of applying non-economic critiques to economics. It sets up, at the very least, a proper contest on the field of ideas that allows us to delimit those areas within which economic theory applies. And it allows us to test whether there are examples from within that muddle I referred to that are sufficiently regular and robust that they demand to be imported into the constructs of economics itself.

Alternatively it warns us against exporting economic theories, especially in their hyper-rational form, and applying them in the midst of the muddle that non-economists are far more adept at traversing, armed as they are with a more plural set of investigative tools.

All of which we know. Or rather we once knew. Forgetting is human, the trick is forget the right stuff, and not to remember that which we prefer to recall because it sits more comfortably with what we currently believe.

Sorting all that out is what historians do well. Rediscovering the past is hard work. It is a lot more difficult than developing rational choice theory for instance. The one has to deal with ambiguities or uncertainties and tease them apart. The other simply assumes them away.

A richer economics has room for both. It is after all about the behavior of human beings.