Schabas on Economics and the Engineering Mentality June 15, 2011Posted by Will Thomas in EWP Book Club.
Tags: David Ricardo, John Maynard Keynes, Leon Walras, Margaret Schabas, Max Weber, Milton Friedman, Richard M. Goodwin, William Stanley Jevons
The central argument of Margaret Schabas’s The Natural Origins of Economics (2005) is that, over the course of the 19th century, economic thought abandoned links to natural science and began to concentrate on the object of “the economy” which was perceived as being purely social in character. In a previous post, I observed that Schabas makes the argument well, but that it remained unclear that nature was ever central to economic thought, and thus it was unclear why a shift away from nature should be a key concern in assembling a history of economics.
I think the best case to be made is that Enlightenment-era political economy attempted to establish explanations for a diverse set of perceived phenomena, which would attribute them to the interplay of basic processes. As Chris’s posts on this blog illustrate so nicely, this project continued through the 19th century in literatures spanning political economy, history, ethnography, and biology. However, the analysis of constrained but precisely defined economic phenomena as products of patterns of human thought and choice branched off from this project in a process playing out from David Ricardo (1772-1823), to the analyses of Léon Walras (1834-1910) and William Stanley Jevons* (1842-1924), to the revolt of the social science of Max Weber and others (1864-1920) against the German “Historical School”. What Schabas calls the “denaturalization of the economic order” is certainly a part of that process, but it is far from its defining characteristic.
Schabas does not go into great depth about her reasons for placing the question of nature at the center of her story, but she does offer some brief hints. She argues that economists’ portraits of the economy as social rather than natural corresponds to their belief in its artificiality, and thus the prospects of engineering it (158):
A concept of the economy that is severed from nature also lends itself to human control. A central motif of postwar economics is the ability to stabilize the economy via manipulations of the interest rate and the money supply. In short, many economists under the sway of Keynes believed that they could engineer the economy. A quick perusal of most macroeconomics textbooks of the 1970s and 1980s makes evident the strong commitment to ‘stabilization policy.’ Which ‘tools’ to use are disputed, but not the overriding goal of stability…. The rhetoric is very much like that of civil engineers…. Macroeconomists convey a similar degree of confidence in achieving a national economy that couples low inflation and low unemployment with a healthy degree of economic growth. The laissez-faire stance of the Enlightenment has given way to one of engineering. Only with time will we be able to judge who had a deeper command of the path to human flourishing. [End of Book]
There is no question that there are important links between engineering and economics. In a paper I published in 2009†, which compares Jay Forrester’s work in what he called “Industrial Dynamics” to work in business cycle economics and operations research, I note the Harvard Keynesian Richard Goodwin’s (1913-1996) eagerness in 1951 to show a compatibility between the normativity of Keynesian economics and the descriptive language of servo engineering, which actually portrays the trained economist as a part of the economic mechanism:
The Council of [Economic] Advisers is an ‘error-detecting device’ and reports on the deviation between desired course and actual course. The Congress amplifies this signal into some large-scale input of the creation or destruction of purchasing power.
Cyborgs! But what of them?
By linking nature-grounded Enlightenment economics with specifically laissez-faire policies — going so far as to lump monetarism with Keynesian economics as part of the post-natural engineering mentality — Schabas appears to draw a surprisingly stark line between all the normative recommendations of modern economics and a radical liberatarian alternative, which would suppose the futility of any such recommendations.
It’s a really strange way to end a book. The problem of economic governance and the futility thereof — what exactly cannot be engineered, and what can, to what extent, and how — is a deep concern of twentieth-century economic thought. In the 1930s and ’40s, Marxist advocates of economic planning were often criticized for having an engineering mindset, which subordinated human individuality to the rationalized economic plan. Monetarists like Milton Friedman would portray Keynesian fiscal policy as subject to similar intellectual flaws, channeling money away from the open markets that could make more productive use of it. Though the literature is famously divisive, I would still argue that even the contemplation of what kinds of governance can be productive to be one of the great accomplishments of twentieth-century economic thought.
Schabas doesn’t actually suggest there is any reason to believe that all the thought associated with denaturalization and the engineering mentality is, in fact, futile (though words like “confidence” hint at a certain wariness). But, in any event, this twist at the end does put “nature” in a strange place as something that renders economic phenomena as unamenable to intervention, which doesn’t seem to follow from the historical analysis.
I would be hesitant to suppose that the presence or absence of “nature” in economic thought was any sort of crucial determinant in any era of whether or not “the economy” or particular economic and political phenomena were viewed as politically tractable. We need to be careful about these things, not least because this is a particularly opportune time to think deeply about the history of what has been viewed as tractable and intractable, and why.
Much as political, intellectual, and cultural historians are doing much to illuminate how cultural resentment became a voting issue, historians could do a great deal of work to illuminate, for example, how unemployment ceased to be an issue in political discourse, despite the extraordinarily high levels of it with which we now live. Under the Keynesian consensus, state pursuit of full employment was, at mid-century, at the heart of politics. We know that inflation and dissatisfaction with state-run industries helped undermine this view. But there is still a great deal of work to be done in political and cultural history, in business history and the history of technology, as well as the history of economics as a science, before we can have anything other than facile explanations relating to the hypnotic power of “neoliberal” ideology to tell us how state intervention came to be seen, even by many on the left, and even in times of enormous economic lethargy, as a dangerously unnatural way of addressing shortfalls in business investment and the plight of the unemployed.
*Jevons was the subject of Schabas’ 1990 book, A World Ruled by Number: William Stanley Jevons and the Rise of Mathematical Economics.
†William Thomas and Lambert Williams, “Epistemologies of Non-Forecasting Simulations, Part I: Industrial Dynamics and Management Pedagogy at MIT” Science in Context 22 (2009): 245-270.