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Published by EH.NET (December 2002)
Geoffrey M. Hodgson, _How Economics Forgot History: The Problem of
Historical Specificity in Social Science_. London and New York: Routledge,
2001. xix + 422 pp. $120 (hardcover), ISBN: 0-415-25716-6; $36.95
(paperback), ISBN: 0-415-25717-4.
Reviewed for EH.NET by Julian Reiss, Centre for Philosophy of Natural and
Social Science, London School of Economics. <[log in to unmask]>
I tremendously enjoyed reading this book. Geoffrey Hodgson (Research
Professor in Business Studies at the University of Hertfordshire) tells a
fascinating tale of how economics and social science more generally became
abstract and formalistic sciences with little interest in historical and
institutional particularities and he develops the beginnings of an account
of how the perceived shortcomings may be ameliorated. Throughout, Hodgson's
aim is twofold -- which is apparent already in the title. _How Economics
Forgot History_ refers to a historical narrative about how economics has
been transformed from a science of concrete historical and institutional
fact to a science of universal and abstract truths about human choice. _The
Problem of Historical Specificity_, by contrast, is a methodological
concern. Its question is the range of applicability of economic
generalizations, or how "universal" the laws of economics really are.
The historical narrative traces the development of economics (and, in part,
of sociology) from Karl Marx to contemporary neoclassical theory along the
stages of the older German Historical School and their British counterpart,
Alfred Marshall and his debate with British historicists, Carl Menger and
the _Methodenstreit_, the younger Historical School of Gustav Schmoller,
Werner Sombart and Max Weber, institutionalism in America, Talcott
Parsons's sociology, Lionel Robbins's methodological ideas and Keynes's
_General Theory_. But the history is a very focused one. It highlights only
events, ideas and theories relevant to Hodgson's methodological concern:
the problem of historical specificity.
So what exactly is that problem? Hodgson does not quite define it but
rather tells us that
[i]t first acknowledges that there are different types of socio-economic
system, in historical time and geographic space. The problem of historical
specificity addresses the limits of explanatory unification in social
science: substantially different socio-economic phenomena may require
theories that are in some respects different (p. 23).
In other words, the concern is whether theories in the social sciences can
be general theories of human nature (or indeed even encompassing non-human
animals and inanimate complex systems) or whether they have to pay
attention to the details of concrete circumstances such as history,
geography, culture, institutional set up and so on. In Hodgson's view, a
satisfactory economic methodology must imply an answer to that question.
Hodgson's own methodology attempts to strike a balance between a strict
empiricism and a strict rationalism. He criticizes empiricism for its
failure to realize the need for a prior conceptual framework and something
like a principle of the uniformity of nature in order to make sense of
observational data. On the other hand, methodologists who incline toward
what we might call economic rationalism (my term, not Hodgson's) fail to
realize that economic laws are valid often only in specific circumstances
or for specific socio-economic systems because they base their theories on
_a priori_ considerations about human nature. What we need instead is a
methodology that (against empiricism) uses _some_ ahistorical (i.e. truly
universal) and transhistorical (i.e. pertaining to more than one
socio-economic system) concepts and principles and combines this (against
rationalism) with a quest for concepts and principles whose domain of
applicability differs from case to case and may comprise only a single
socio-economic system.
Hodgson's narrative, as a consequence, is a search for answers to the issue
of which concepts and principles can be regarded as a- or transhistorical
and which are more closely tied to a particular system. Marx, for example,
regarded history as a sequence of stages that are constituted by their
characteristic production relations. He thus noted the problem but also
failed to solve it in a satisfactory way: "The problem is not that Marx
uses transhistorical or ahistorical categories but that he gave no
methodological guidance on their importance, or on the means of choosing or
establishing them" (p. 51). The older Historical School made the mistake of
laying too much stress on fact gathering at the expense of general concepts
and principles while Carl Menger neglected specific fact. Schmoller got
many things right but even he "did not show in detail how [institutional
and cultural] factors affected the outcomes. For all his concern with
causal explanation, Schmoller did not paint an adequate picture of how an
explanatory theory could be built, or of how its core concepts could be
right" (p. 115). Similarly Veblen's historical and institutional framework
is commended but "[a]lthough he developed some key ideas that would have
helped to open a richer theoretical approach, he failed to deploy them in
the service of such a sustained project" (p. 150). Finally, Talcott Parsons
and Lionel Robbins are presented as the gravediggers of the interest in the
problem of historical specificity and creators of the ahistorical vision of
social science that formed the consensus of much of the twentieth century.
In the methodological part of the book, Hodgson attempts to develop a
response to the challenge that Marx, historicism and institutionalism left
with us, and which has been ignored by more recent work in social science.
His response consists essentially in relegating concepts and principles to
the right level of abstraction, five of which he distinguishes (Table 21.2,
pp. 326-27). Certain concepts and principles pertain to _all_ "open,
evolving and complex systems." At this level, theorizing is informed by
evolutionary theory, general systems theory and complexity theory. At the
second level, concerning all human societies, human instincts and
psychology as well as general anthropological principles govern theorizing.
The usual laws of supply and demand come into play at the third level
concerning only "civilized and complex human societies" while the fourth
and fifth levels differentiate between kinds of socio-economic system. This
very general framework can be applied to concrete cases using the various
principles that Hodgson introduces, such as the Principle of Dominance
(concerning what kind of institution _dominates_ a specific system), the
Principle of Prominence (concerning whether a certain institution is _very
common_ in a system) and the Principle of Impurity, which says that any
system will host more institutions than the dominant one (e.g. though
market relations are dominant in capitalist systems, non-market
institutions such as the family persist).
Hodgson's view of what is the fundamental methodological problem in social
science and his response are highly original and insightful. But in my
view, he himself falls prey to a number of methodological flaws and
omissions. To begin with, I think Hodgson is right when he says that a pure
empiricism is an incoherent position. We do not learn much from sense data
alone. But this does not imply that there are any concepts or principles
that are _a priori_ in the strict sense, i.e. prior to all experience. A
tenable form of empiricism can hold that while any particular inquiry may
require some sort of background knowledge, this background knowledge is
itself neither infallible nor innate. While we surely need a conceptual
framework in order to make sense of observations, the conceptual framework
itself can, at a different stage of the inquiry, be subject to revision in
the light of new experience. Similarly, while we need some kind of
inductive principle to learn from experience, the exact formulation of that
principle can itself be extracted from what has been successful in the
past.
Therefore, I think that Hodgson concedes too much to the rationalist (or
theorist). This concession is relevant to his own theoretical framework.
Much of it is informed by very general theory-schemes such as general
systems theory, complexity theory and, in particular, evolutionary theory.
There is of course nothing wrong with borrowing analogies from these
schemas. But Hodgson seems to treat these as givens rather than hypotheses.
Maybe the analogue of natural selection is an important causal factor in
economic phenomena, too. But maybe it is not. Hodgson's methodology has no
built-in mechanism which weeds out false hypotheses of this kind.
A related but different criticism is that Hodgson is a realist (or
essentialist) about concepts. Concepts, according to him, "carve reality at
its joints" (p. 315) and represent "what is essential to, and enduring in,
an entity -- ignoring the accidental and superficial" (p. 287). On the
basis of this theory, for instance, Gary Becker's neoclassical analysis of
family relations is criticized. Since it is in the _nature_ of market
phenomena (the kind of phenomena to which neoclassical analysis was
tailored) that property rights are exchanged, and no such exchange takes
place in the family, Becker's analysis must fail. But whereas I grant that
Becker's theory is untenable, this is not because he gets the nature of
market phenomena or the nature of the family wrong. Indeed, it is possible
that certain cases of marriage and certain cases of prostitution are
sufficiently alike that for certain kinds of inquiry we may treat them as
the same. We use concepts to classify phenomena. It is now more or less
generally accepted that there is no one unique way of doing so. Each
classification is more or less suitable for the particular inquiry at hand.
Thus, concepts have no real essence.
Finally, we may ask how useful Hodgson's own response to the problem of
historical specificity is. Imagine, I am a monetary economist and concerned
with the quantity theory of money. Reading the present book, I learn from
him that institutions and historical and geographical circumstances matter
-- sometimes at least. So I set out to test the theory for US post-war
data. Are my findings projectable to other countries or times? In Hodgson's
schema, "effects of supply and demand on prices" are at the third level of
abstraction, that is, applicable to all civilized human societies. But
surely one will want to say that certain institutional facts about the
monetary constitution will affect the money-prices relation. But which
ones? Is whether or not the gold standard prevails relevant? Is the
presence of e-banking? Do cultural differences play a role? The point is
that while Hodgson rightly alerts us that economic laws hold only on
account of a particular socio-economic structure, he does not solve the
problem of historical specificity. He does not tell us to which degree and
in what respects two socio-economic systems must resemble each other for
some economic law to hold in both systems. And I think there is a good
reason for this failure: there is no solution at the general level. All we
can say at the general level is that differences may matter but which ones
really do matter is an empirical question.
To summarize, Hodgson has done a great job in drawing attention to the fact
that economic laws are true only on account of particular arrangements of
institutional and cultural facts. He has written an exciting history of how
this matter has been treated in the economic literature from Marx to the
present day. Furthermore, he has presented us with elements of an
analytical framework that helps us to determine which kinds of institutions
and cultural facts may matter for which kinds of inquiry. In my view, his
own methodological framework cannot solve his original problem and it
suffers from a slight bias towards apriorism. Nonetheless, this book is
greatly stimulating and I can highly recommend it to anyone interested in
economic history and methodology.
Julian Reiss is a Senior Researcher at the Centre for Philosophy of Natural
and Social Science, London School of Economics. Recent works include
"Causal Inference in the Abstract or Seven Myths About Thought
Experiments," _Causality: Metaphysics and Methods Technical Reports CTR
03/02_, London School of Economics and "Natural Economic Quantities and
their Measurement," (2001) _Journal of Economic Methodology_ 8:2, 287-311.
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Published by EH.Net (December 2002). All EH.Net reviews are archived at
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