The Politics of Economics and the Biology of Sociology
The latest financial crisis sparked public interest in economics and rekindled the debate concerning the proper role the dismal science should play in our lives: books by and about dead economists such as Keynes, Hayek, and Schumpeter are in high demand; economic blogs are more popular than ever; and the public is bombarded with introspective monologues by contemporary economists, all the way from Paul Krugman to John Chochrane. The latest contribution is a Wall Street Journal article by Prof. Russ Roberts. Unlike the opposing so-called scientific explanations for the crisis suggested by various economists, Roberts is questioning whether economic science is at all a science and suggests that more than anything, economics might be suffering from a crisis of identity.
Roberts points out that unlike most sciences - in which progress is steady and concrete - in Economics 'theories that were once discredited surge back into favor' and since it is impossible to control for all the relevant factors in an economic experiment, each effect can be explained by a variety of causes, or a combination of causes. This, in turn, means that the explanations for economic phenomena change in line with the political climate.
The debate concerning the nature of economics can be traced back to the Battle of the Methods at the end of the 19th century. Back then, the German "Historical School", led by Gustav Schmoller, thought that economics should focus on the empirical study of history and opposed what came to be known as the "Austrian School", which was led by Carl Menger and focused on abstract theory based on analytical deductions. As Richard Swedberg points out, following the split of economics into 'two sciences', Max Weber, one of the forefathers of sociology suggested the idea of Socioeconomics, an academic synthesis of neoclassical economics and the social sciences (mostly sociology and politics). Joseph Schumpeter, arguably the greatest economist of the 20th century, also suggested that the split within economics is 'harmful' and argued for a combination of methodologies.
Still, the divergence of economics continued and today each of its original constituents is considered an independent discipline, divided in turn to a plethora of sub-fields and specializations. If more than 100 years ago it was clear that treating economics as a purely empirical science is not a good idea, one might wonder how come this view became prevalent? It seems that the divergence of economics and the social sciences is best explained by insights from another field - politics.
Let me explain: The 20th century saw the rise of the nanny state as the ultimate 'paternal' authority - both in socialist, fascist, and other authoritarian countries and in liberal democracies, in which government has been growing steadily over the past 100-odd years. The legitimacy of the nanny state is based on the idea that economic actions can be centrally-planned and managed by a team of skillful experts (or an enlightened despot). This, in turn, rests on on the assumption that, regardless of motivation, it is at all possible to plan and manage an economy; it rests on confidence in the fact that the consequences of each action in the field of economics are as predictable and as measurable as in the fields of physics or chemistry.
Going back to Roberts' article from this week - the latest suggestion was that economics is indeed not similar to physics, but is more like biology, in which '[b]iologists try to understand the relationships in a complex system... But they can't tell you what will happen with any precision...'.
But even the comparison of the social sciences to biology is not new. In 1930, Zigmund Freud suggested in his Civilization and its Discontents that 'our relatives...the bees, the ants, the termites - struggled for thousands of years until they evolved the state institutions, the distribution of functions, the restrictions on individuals for which we admire them today'. Freud suggested that the process of socialization (and civilization) should be studied like any other biological process.
Even earlier than that, in the middle of the 19th century, Karl Marx and Friedrich Engels debated the possible impact of Charles Darwin's biological discoveries on the social sciences, an impact that was summed up in Herbert Spencer's ideas of "Social Darwinism". Here too, one must wonder why the analogy between biology and the social sciences did not take root. Strangely enough, the responsibility in this case might be with religion: It is difficult for humans to come to terms with the idea that they are no different from all other living organisms and that their fate is a result of deterministic biological processes.
In summary, economics, history, and sociology split because of politics, and none of them was acknowledged as a subset of biology due to the influence of theology. Facing pressures from two of the most powerful institutions of our time - religion and the state - there's little wonder that the majority of economists gave up trying to make sense and ended up spending most of their time apologizing for the status quo.