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11 April 2011

Economic Paradigms and the Direction of the Social Sciences

Paulie has a great blog post today that cuts straight to the heart of all that is wrong with economics today and all that might be rescued in the social sciences. Writing about economics:
You try to think about what people will do in certain circumstances, and you try to understand how individual behavior adds up to an overall result.
...[U]nder some circumstances seemingly reasonable individual behavior adds up to very unreasonable macro outcomes.
I would say, as a sociologist, that unreasonable individual behavior often adds up to very reasonable macro outcomes.
...[M]aximization isn’t a fact about human behavior, it’s a gadget — an assumption we use to cut through the complexities of psychology and all that, one that can be very useful if it clarifies your thought, but by no means an axiom or a law of nature.
...[W]hat happened was that the drive to base everything on maximizing behavior narrowed the profession’s thinking.... We created an economics profession which believed that [previous theoretical perspectives] had been “proved wrong”; whereas all that had really happened was that those things proved hard to model in terms of perfectly rational maximizing agents.
I've written this before, but it's worth repeating: Paul Krugman is a sociologist in an economist skin. Molt on, my friend; molt on!

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