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Desmond (Zi Liang, Wee)

Professor Ellen Kennedy

T.A.: Andrew Barnard

Political Science 186-201 Money and Markets

Final Essay

16 December 2014

Economics as a Science

“Is economics a science?” - Robert Shiller attempted to clarify the answer to this question

three weeks after sharing the 2013 Nobel Memorial Prize in Economic Sciences with two other

economists. It is striking that Shiller would respond so urgently to criticisms that “economics –

unlike chemistry, physics, or medicine, for which Nobel prizes are also awarded – is not a

science.” While conceding that economics faces similar methodological challenges as other

fields, Shiller reasoned that since physicists were also accused of disguising “charlatanism under

the weight of equations” (Taleb 115), economics is no less a science than are the physical

sciences. Despite the vision of Shiller and many of his colleagues that economics shares equal

footing with the hard sciences, contemporary economic theory is, for the most part, the anomaly

when compared to the history of political economic thought. Economics is a science – both then

and now – but classical political economists, if alive today, will be dumbstruck to learn how

much the conception of the “science” has changed.

WILL THE POLITICAL ECONOMISTS PLEASE STAND UP?

The question of what constitutes the study of political economy has been controversial in

the history of economic thought. Nevertheless, for the purposes of this essay, classical political

economy is defined to include thinkers from Adam Smith until John Stuart Mill. This essay will

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compare the main representatives of classical political economy: Adam Smith, David Ricardo,

Thomas Robert Malthus and J.S. Mill. Karl Marx who thoroughly studied the classical tradition,

broke with it in many respects. Since more space is warranted to explicate this divergence, Marx

will be the focus of another essay. Yet for most classical writers, particularly Smith, Mill and

Marx, political economy was seen as a unified social science, rather than simply the science of

the economy. Indeed, as argued so persuasively by Professors Dimitris Milonakis and Ben Fine,

classical political economy is a historically specific social science: “the science of the capitalist

economy” and its concomitant classes, rather than the “science of the economy or the economic

in the abstract” (15).

THE FATHER OF CLASSICAL POLITICAL ECONOMY: ADAM SMITH

Adam Smith (1723-1790) has been considered a scientist of human nature. Smith’s

erudition, which spans many fields such as the natural science of astronomy, is noteworthy

(Berry 116). However, as a political economist and moral scientist, Smith is famous for his

Theory of Moral Sentiments (TMS) and his magnum opus The Wealth of Nations (WN). In the

precursor to the Wealth of Nations, Smith declared “the abstract science of human nature” to be

in its “infancy” (TMS VII.iii.12). Although Hume does not see eye to eye with Smith’s idea of

an impartial spectator, Smith’s theodicy in the Theory of Moral Sentiments has been interpreted

as reflecting the subtitle of Hume’s treatise, as “an attempt to introduce the experimental method

of reasoning into moral subjects” (Broadie 187).

In the Wealth of Nations, Smith adopts the Lockean model of cognitive development,

which can be mislabeled as “scientific” (Berry 2006, 129-30). Smith’s contrast between the

“miserably poor” savages and the “universal opulence” of a well-governed commercial society

(WN I.ii.10) is reminiscent of Locke’s argument that the ability to think abstractly is a

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developmental capacity that “children, idiots, savages and illiterate people” have to attain (20).

However, to insist on the strong causality of the differential extent of the division of labor

(limited by the extent of the market) on the material wealth of a society is to deny that the

relations may be accidental, unlike the natural law of gravity. Instead, Smith scholar Christopher

J. Berry advocates for the social scientific understanding of Smith’s “soft determinist” position.

To Berry, Smith is an advocate of moral causes which are a “species of soft determinism because

they operate through habituation and socialization” (130). Moreover, moral causes are

accommodative to change or variation.

THE POLITICAL ECONOMIST WHO MADE ECON101/102 MISERABLE: DAVID RICARDO

David Ricardo (1772-1823) is considered the first champion of the abstract/deductive method in

economics, whose writings set against the inductive methods, caused the first schism in

economic thought. Ricardo is the sole classical economist without any training in philosophy. He

was a broker by profession. The irony is that while he has never attended university, his

methodological approach is widely practiced in the economics departments of most universities

today, at nonetheless, higher levels of abstraction. Ricardo’s silo mentality has been partly

attributed to his professional shortsightedness (Redman 288-89):

His working on the London stock exchange required the ability to make quick decisions

and assess the situation by reducing the problem to simple analytical relations…For a

political economist, however, his method can only lead to what might be termed …

“brokers” myopia.

Thus, his analysis – whilst substantively similar to Smith’s – is mostly devoid of any historical or

empirical references.

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Ricardo’s modus operandi is to establish the “laws” that govern economic behavior,

based on abstract “principles.” This is most evident in his derivation of an “invariable standard”

to measure the value of commodities (ch. 1, pp. 22-25) and his theoretical calculation to establish

the “natural tendency of profits” (120-22). Ricardo’s attempt to give economic science a status

equivalent to that enjoyed by natural sciences is mirrored in contemporary mainstream economic

thought, represented by economists such as Shiller, who is cited in this essay’s opening

paragraph (Milonakis and Fine 22). However, “it was not simply that Ricardo and the Ricardian

constructed abstract models but that they applied the conclusions from the highly restrictive

models directly to the complexities of the real world” (Sowell 122). This “habit of applying

results of this character to the solution of practical problems,” Joseph Schumpeter dubbed “the

Ricardian vice” (473).

THE SCIENTIST OF POPULATION: MALTHUS

Thomas Robert Malthus (1766-1834), as a demographer, gained notoriety for his An Essay on

the Principles of Population. Malthus and Ricardo were what today are popularly known as

“frenemies” - they disagreed with each other’s point of view yet they maintained correspondence

(15). Despite that, Ricardo in his Principles of Political Economy and Taxation paid homage

(483):

Of Mr. Malthus’ Essay on Population, I am happy in the opportunity here afforded me of

expressing my admiration. The assaults of the opponents of this great work have only

served to prove it strength; and I am persuaded that its just reputation will spread with the

cultivation of that science of which it is so eminent an adornment [Emphasis added in

italics].

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Although Malthus showed great admiration for Newtonian physics (1983, 32n46), he also

declared that: “The science of political economy bears a nearer resemblance to the science of

morals and politics than to that of mathematics” (1951, 10). To him, “the laws which regulate the

movements of human society are continually modified by human interference” (10). Therefore,

the validity of a theory has to be empirically checked against “the state of society as it actually

exists in every country” (8). Furthermore, in contrast to Ricardo’s abstract/deductive political

economy, for Malthus, “The science of political economy is essentially practical, and applicable

to the common business of life” (1951, 9).

JOHN STUART MILL AND HIS HYBRIDIZATION OF RICARDIANISM AND ANTI-RICARDIANISM

J.S. Mill (1806-1873) wrote his Principles of Political Economy in the Ricardian tradition, but he

tried to include “ethical utilitarianism,” as opposed to Jeremy Bentham’s “hedonistic

utilitarianism.” His moral science can be classified as the science of human nature and the

science of society (Milonakis and Fine 28). Ethical utilitarianism consists of not just hedonistic

factors, but culturally-derived moral and ethical factors (Ibid).

Even though Mill went through “several changes of mind” (Redman 321), he elucidates

political economy in classic Ricardian parlance, as “essentially an abstract science, and its

method as the method a priori” or from an assumed hypothesis (143-44). One of the most

prominent abstract hypotheses is the “economic man” or the “homo economicus.” Mill defines

homo economicus as “a being who desires to possess wealth” while abstracting from “every

other human passion or motive” (137). Hence, it recalls Smith’s oft-quoted passage in the

Wealth of Nations: “It is not from the benevolence of the butcher, the brewer, or the baker that

we expect our dinner, but from their regard to their own interest” (WNI.i.2). However, Mill also

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takes into account “disturbing causes” in his analysis (150). Thus, he softens Ricardianism in his

political economy as a partial and approximate science.

In addition, Mill demonstrates his preference for a purely scientific political economy,

albeit one that is also practically relevant. He distinguishes between the science and the art of

economics (Deane 88):

Science is a collection of truths: art, a body of rules, or directions for conduct… Science

takes cognizance of a phenomenon, and endeavors to discover its law; art proposes to

itself an end and looks out for means to effect it. If, therefore, Political Economy be a

science, it cannot be a collection of practical rules; though, unless it be altogether a

useless science, practical rules must be capable of being founded on it.

Mill attempts to connect theory and practice, which “requires consideration of a broader range of

social and ethical matters than most economists are accustomed to examine” (Gordon 205).

Thus, Mill produces far more material of a “historical and descriptive or institutional nature”

than Ricardo (Ibid).

CONCLUDING DISCUSSION: RECONSIDERING POLITICAL ECONOMY AND RETHINKING ECONOMICS

By surveying and comparing the four classical thinkers (Smith, Ricardo, Malthus and

Mill), it is virtually impossible not to be struck by the divergence between them and economists

today on the conceptual question of what constitutes the “science” of political economy or

economics. Both groups claim to practice some sort of “science.” Yet, the sciences they are

practicing are fundamentally, and disturbingly different. If anything, the modern day science of

economics has a much narrower view than its founding counterpart, jettisoning quintessential

human elements such as ethics and morality; the historical and the social.

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This author – like so many others who had attended the Rethinking Economics

conference in New York in September 2014 – has been disillusioned by the study of economics

for far too long.

“Is economics a science?”

To Shiller and other economists: Yes, but it is not a positive science. Because economics

is a social science, the delusion that it is a positive science must stop (Davis 363-64). We should

return to the wisdom of the classical political economists, rather than getting ourselves mired in

abstract models. We need to rethink economics. This essay is both an intellectual exercise and a

modest contribution in that direction.

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Works Cited

Berry, Christopher J. “Smith and Science.” The Cambridge Companion to Adam Smith. Ed. Knud

Haakonssen. Cambridge University Press, 2006. Print.

Broadie, Alexander. “Sympathy and the Impartial Spectator.” The Cambridge Companion to Adam

Smith. Ed. Knud Haakonssen. Cambridge University Press, 2006. Print.

Davis, William L. “Preference Falsification in the Economics Profession.” Econ Journal Watch 1.2

(2004): 359–368. Print.

Deane, Phyllis. The Evolution of Economic Ideas. Cambridge University Press, 1978. Print.

Gordon, H. Scott. The History and Philosophy of Social Science. Routledge, 2002. Print.

Locke, John. An Essay Concerning Human Understanding. T. Tegg and Son, 1836. Print.

Malthus, Thomas K. An Essay on the Principle of Population. Ed. Antony Flew. Penguin Classics,

1983. Print.

Malthus, T. R. Principles of Political Economy. Reprint edition. Augustus M. Kelley, 1951. Print.

Mill, John Stuart. Essays on Some Unsettled Questions of Political Economy. Longmans, Green,

1877. Print.

Milonakis, Dimitris, and Ben Fine. From Political Economy to Economics: Method, the Social and

the Historical in the Evolution of Economic Theory. Taylor & Francis, 2009. Print.

Redman. The Rise of Political Economy as a Science: Methodology and the Classical Economists.

MIT Press. Print.

Ricardo, David. On the Principles of Political Economy, and Taxation. John Murray, 1821. Print.

Schumpeter, Joseph A. History of Economic Analysis. Routledge, 2006. Print.

Shiller, Robert J. “Is Economics a Science?” Project Syndicate. N.p., 6 Nov. 2013. Web. 12 Dec.

2014.

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Smith, Adam. An Inquiry Into the Nature and Causes of the Wealth of Nations, Volume 1. Vol. 1

edition. Indianapolis, Ind.: Liberty Fund, 1982. Print.

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Sowell, Thomas. Classical Economics Reconsidered. Princeton University Press, 1994. Print.

Taleb, Nassim Nicholas. Fooled by Randomness: The Hidden Role of Chance in Life and in the

Markets. Random House Publishing Group, 2008. Print.