On 5/18/2011 9:17 AM, Colander, David C. wrote:
>
> I really don't care whether people are called scientists or not.  But I do care when what I consider an inappropriate methodology is used, when ideology gets masked as science, and when somehow one thinks that a pure scientist has something relevant to say about policy simply by the fact that they are a pure scientist, and generalists who have a sense of the institutions and history are not turned to for policy advice because they don't do science.  That is what I think the current state of affairs is in economics, and I think the Classical distinction which kept pure science out of policy, and made clear that its goal was not policy was useful.  As I said in an earlier post, it that goal could be achieved by some other way--say using Pigou's distinction between realistic science (applied) and pure science, I would be happy with that. But, given what happened with Pigou's realistic science welfare economics, I don't see it as likely that it will. I've toyed with defining an engineering or applied policy (political economy--Robbins' solution in his Ely lecture to this problem) classification to distinguish the two, but my suggestions haven't been taken up by the profession, which considers all of economics science. It is that "scientific" mindset that rules out the study of the history of thought or even economic history as economics--it's not science.  Other sciences don't teach history of thought--why should we. If you accept that economics is a science, then you can't answer them that you need history of thought and economic history to do good policy analysis.

Those who wish a clarification of what David means by his references to 
Pigou might refer to:

http://www.econlib.org/library/NPDBooks/Pigou/pgEW1.html

In paragraph #2, one finds the distinction between positive economics 
(economics science, realistic science) of which we are all familiar from 
the textbooks -- statements about what is -- and normative economics -- 
statements about what ought to be. This was probably the genesis of what 
would later become the precepts promoted by theoretical welfare 
economics. Unfortunately, Pigou following Marshall neglected to observe 
the trend in early neoclassical economics in the direction of a science 
of action based on the classical observation that a division of labor 
expands productivity.

The practitioners of what Pigou called normative economics -- or, more 
accurately, the science of economic policy -- neglected two important 
characteristics of the "normative economics" of some of their cohorts. 
The first is that the evaluation of a government policy requires a 
method of determining the benefits and costs of the intervention. The 
only benchmark that exists is the consumer role's willingness and 
ability to pay. To define this benchmark in a way that is meaningful, 
one must conceive of a functional economy in which the function of the 
entrepreneur role is to satisfy the wants of individuals in the consumer 
role. In other words, in order to identify the benefits and costs of an 
intervention, the economist must compare two economies: one that 
contains the intervention and one that does not contain it. And he must 
compare them on the basis of a determination of how the entrepreneur 
role will act and its effects on the consumer role. Pigou and his 
followers did not do this. They merely assumed that the readers would 
agree with them about benefits and costs. In the bulk of the cases, they 
adopted a partial equilibrium approach following Marshall. In other 
cases, they assumed a robot economy that contains no entrepreneur role.
The means of making such a comparison were in the process of being 
invented by Herbert Davenport (Economics of Enterprise: 1913), Phillip 
Wicksteed (“The Scope and Method of Political Economy in the Light of 
the `Marginal’ Theory of Value and Distribution”: 1914) and Frank Knight 
(Risk, Uncertainty and Profit: 1921). But the task was not completed 
until the writings of W. H. Hutt (“The Concept of Consumers’ 
Sovereignty”: 1940) and Ludwig von Mises (Human Action: 1949). The 
normative economists proceeded under the assumption that agreement 
regarding benefits and costs could be reached. Since they could not 
articulate a reasonable argument to the effect that benefits and costs 
could be determined, they were susceptible to the criticisms made by 
theoretical welfare economists who formalized Pigou but in the process 
neglected the fact that without a market economy and its accompanying 
entrepreneur role, the division of labor would have to be limited to 
that achievable in a command society.
The division between positive and normative economics became the 
standard for all of the economics textbooks of which I am aware that 
were written after Samuelson's Economics. They are the basis for modern 
professional economics, and for David's effort to distinguish between 
Art and Science. And they have been largely responsible for the 
widespread belief that a market economy is not necessary to achieve a 
division of labor that is sufficiently expansive to feed the populations 
of the world today, let alone to provide them with ipads and gas.
Much of what David regards a biased Art consist of policy 
recommendations that use a definition of benefits and cost that cannot 
be justified by the appeal to the consumer role in relation to the 
entrepreneur role. It neglects the requirements necessary to achieve the 
kind of world that what David would call economic artists write about. 
The classical economists and the early neoclassical economists mentioned 
in the last paragraph did not neglect these requirements. Nor did they 
ignore reality. Reality for them is that, so far as we know, only the 
conditions of private property rights, free enterprise, and the use of a 
reasonably stable money are capable of enabling human actors to achieve 
the potential expansive division of labor that we associate with the 
modern world. The modern economist who study "what is" are often not led 
to this reality because they try to define reality without references to 
the means and ends that real human beings possess. They follow the 
mathematical theoretical welfare economists and ignore the later 
developments in economic theory that started with the marginal 
productivity theory of distribution.

The second characteristic that was disregarded by the "normative 
economists" who followed Pigou is that nothing in the writings of 
economics warranted the belief that the enforcer of an intervention and, 
more generally, the enforcer of the market economy itself -- the state 
-- could put into effect the policies that the "normative economist" 
might recommend. Economics does not deal with this subject. As Coase and 
a host of Public Choicers and other pointed out, there is a prospect of 
government failure. Pigou's pure economic science had no theorems to 
deal with that. Much of the remainder of what David regards as biased 
Art is merely a reflection of the ignorance of the fact that economics 
lacks a means of predicting how agents of the state will act when they 
are entrusted to carry out a policy.

As I suggested before, I believe that David's history of economics 
leaves out a large chunk of economics. His recommendations regarding how 
to use the phrase "economic science" reflect a gap in his treatment of 
the history of economics. It is not ideological to take account of the 
classical observation that the division of labor tends to expand 
productivity or of the early neoclassical transformation of that 
observation into the view that the action of the entrepreneur role tends 
to be in the interest of the consumer role. It is an acknowledge of the 
reality discovered by our predecessors. The choice is not between 
ideology and science but between ignorance and knowledge.


Wicksteed, P. (1914) “The Scope and Method of Political Economy in the 
Light of the `Marginal’ Theory of Value and Distribution.” Economic 
Journal 24 (March): 3-26.

-- 
Pat Gunning
Professor of Economics
Melbourne, Florida
http://www.nomadpress.com/gunning/welcome.htm