----------------- HES POSTING ----------------- 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. Copyright (c) 2002 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator ([log in to unmask]; Telephone: 513-529-2850; Fax: 513-529-3308). 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