Prelude: Nine lives of a cat
With Pat Gunning and Anthony Waterman chasing me, I can safely conclude that
I am not safe----- I will be caught if I cannot run away. So it looks like
the chase has begun.
First, thanks to Anthony, let us start with Spinozas dictum [not to
ridicule, not to laugh, not to detest, but to understand]. It is
particularly apt because historical scholarship is like trying to figure
out the inheritance of a house in which live. Our ancestors have left us a
house they built with great care and love, and we certainly have inherited
much that enriches us and guides our lives. No, we are not to ridicule or
lament or curse those who have left us bequests. I am also sure that the
very impulse that takes us to study history of thought is that we have a
sense of respect for the originators of the ideas that shape our lives.
However, we know we have great and shining jewels, but we may also
have inherited certain things that are not as great as the others from our
points of view. I believe that historical scholarship is entitled to sort
the more enduring ideas from the less enduring ones.
Pats caution is taken in good spirit. To avoid being surreal, I have
two reasons not to set up a standard of evaluation. The second is that this
community wants historical studies and may not like to indulge much in
methodology. The first reason was that setting an abstract standard was
self-defeating, say when Menger took to jihad for methods. Clearly, I did
not see an effective method to talk about methods.
Instead, I think we can resort to a sorting process, trying to note
omissions or gaps. Let me illustrate this with Adam Smiths idea of
unintended consequence. With hindsight, we can look forward to see what was
not seen before.
I have great respect for any cat with nine lives. Adam Smith is the
kind of lion who hunted down a big beast (named economics) to make a great
feast. I say this because his notion of unintended consequence can be traced
to later developments in at least nine different tracks. Here is a list:
1- The birth and rebirth of economics as a science (Whately, Robbins);
2- Journey to meaning without data (microeconomics);
3- Journey to data without meaning (macroeconomics);
4- Exchange theory (Menger, Walras) versus trade theory (Ricardo,
Samuelson);
5- Rational choice (Walras-Pareto, Arrow-Debreu);
6- Spontaneous origin of institutions (Menger, Coase, Williamson);
7- The rise of libertarian, Marxian and Keynesian views on the states role;
8- The normative-positive debate (Friedman, Leontief, Debreu); and
9- Says Law and monetary theory (Fisher, Keynes, Friedman, Lucas).
The point of arrival:
The economy existed before Smith, and people talked about it, but they could
not turn their talks into a science, as they were trapped in the discourse
on morality of profiting. Smith forged the nail of unintended consequence to
attach beneficial social consequences to the pursuit of self-interest, even
if not intended. Being selfish became not just harmless, but also beneficial
and hence respectable. With the further notion of a market mechanism, the
study of self-interest became a science. But subsequent developments did
not do full justice to Smiths eminent contribution.
I suspect that three things unhinged Smiths contribution. They are
respectively (1) empirical relevance, and (2) meaningfulness of explanation
and (3) descriptive completeness. Without defining these in the abstract,
let us take an example of exchange to illustrate the simplest way to look at
them.
Let us consider Smiths favorite character, the butcher. He supplies meat,
which contributes to the wellbeing of the customer, even though he does not
intend benevolence. He is after his own profit. Let us acknowledge that we
have two basic elements for <realistic science> here. First, the butcher is
a real character. We can gather data on what and how much he supplies, and
what costs he incurs, and how much profit he makes. To this extent, it is
empirically anchored, and hence is realistic. Secondly, the idea that he
does it for profit is a theory that explains observed behavior, and ascribes
meaning to his observed/observable action.
Further, the idea that he does not intend the benefit makes it meaningful in
another
dimension: he does not dictate the market to make it beneficial. The meaning
makes it scientific. Thus we have data, and we have an analytical concept
that explains the data meaningfully. I submit that this (data endowed with
meaning) is what we wish to get in <realistic science> of the economy. And
we got it here.
However, I see a big omission here. What about the customer? Suppose that
the baker is the customer of the butchers meat. Is the benefit of meat
unintended also by the customer? I will insist that the customer not only
intends to get the benefit, but actually looks for the supplier and pays for
it. That is, the story is only half told. It is intended by one side, but
not by the other side. Most critically, the buyer pays. I want to argue that
Smiths story lacks completeness.
I do not see completeness as an abstract standard, but just a pragmatic
approach in view of the aftermath of incompleteness. The thesis is that an
incomplete story developed into something that either lost the data in its
quest for meaning, or lost the meaning in its hunt for data. I do not wish
to recount the Marshall-Walras debate over partial versus general
equilibrium models as an abstract argument, but just show what happened to
an incomplete story.
I hope I have not set up a suspicious standard of realism that may not be
granted visa by the gatekeepers. I do not wish to talk about any new
standards of empirical relevance (data), and about rational explanation
(meaning), because the literature is rich in this regard and needs no great
help from me. My emphasis is on descriptive completeness of exchange. We can
have some fun trying to tell half a story and see how entertaining and
informative it becomes, in contrast to a full story.
And my point of arrival is the same each time: it is easy to complete the
story by bringing in the baker and his intentions, and we can have a fully
realistic feast (of bread and meat) without eating an imaginary meal. I
suspect that great many of us are hungry for a real meal rather than an
imaginary one. Hunger is the great motivator behind the hunting instincts of
the cat and the mouse. Half a story does not satisfy this hunger, unless the
audience is already sleeping. Luckily, a cat like Pat is awake. I do not
think that being awake is being stray, but those who are sleeping need not
worry about the difference.
I wish to start nine times over from the same point, thus running
without going away. By the way, I think the thread title should henceforth
become: Nine lives of unintended consequences. What is the convention in
this regard?
Now, let us not run out of team: join the chase for the cheese please, and
live nine-times over.
Mohammad Gani
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