Economics versus sociology: economic imperialism again

The BBC, or at least Alan Connor in the Magazine, is of the opinion that economics is thieving turf from sociology:

There’s actually nothing new in explaining how people decide or why people believe – it’s called sociology. But if your boss wouldn’t want to be caught with a sociology book in their luggage, there is now a range of delicious bite-sized chunks in books with titles like The Undercover Economist, The Rogue Economist and The Hidden Side Of Everything. Economics – once academia’s dry “dismal science” – has decided to get tough.

The article’s talking about some of the hot books, books from that sublimely irritating ‘big idea’ genre, that might be making waves among whoever reads them. At very least we know that they haven’t learned the true history of the phrase ‘dismal science‘; more importantly, is the economics/sociology charge justified?

The question of economic imperialism is a familiar one, and I think one that comes from the supreme flexibility of economic modeling to be applied – for better or worse – to things that are pretty far away from what ‘economics’ is perceived to be. The gulf separating what economics is ‘supposed’ to be about from what its method can be used for is wide, and in it we can find the charge that economics is stealing from all over the place.

I wonder if the Connor quotation couldn’t equally well read “it’s called psychology”, anyway. The kind of back-to-basics positivist modeling economists do these days naturally blurs the boundaries between disciplines that, maybe, were only ever separated by their topic of interest rather than their idealized toolbox for investigating those topics.

One of the titles specifically mentioned in the article is “Nudge” by Richard Thaler and Cass Sunstein; I haven’t read the book, but I am irked by the Magazine article’s summary of it. See if you can guess why:

The Buzzwords:

Econs (people that are perfectly rational but sadly imaginary)

The libertarian paternalism ideas are sometimes quite neat, the idea being that freedom of choice can be maintained but the framework of the choice changed – the famous example being requiring opt-out instead of opt-in to increase enrollment in pension funds – but, of course, even the brains behind something like that shouldn’t be claiming to have proved irrationality. Just use a different word! Please! Mechanical or something, maybe?

Economic Imperialism

Is it true that economics is invading the space of other social sciences? The idea of economic imperialism is only admissible if we believe that economics equals money. If we don’t believe that, economic reasoning is one of many ways of answering questions: a map, not a country.

The old textbook definition of economics as the social science of the allocation of scarce resources doesn’t really limit us at all. Gary Becker is perhaps the economist most associated with the idea of economic imperialism; his position is that “the horizons of economics need to be expanded”, but, without being too dramatic, those horizons aren’t as close as they look.

When we see economists pop up in the press, they’re usually talking about unemployment, inflation, growth, all the old ones. Sometimes, when we see an economist talking from over the “horizon”, he looks fully as foolish as possible.

The famous one about Joel Waldfogel’s “deadweight loss of Christmas” is a good example. Let me try to paraphrase: “if people only care about money, Christmas gifts are a big waste of resources because their cash value to the recipient is less than their cost to the giver. Give money instead!”. Logical people subsequently point out that gift giving and gift receiving are two of life’s great pleasures, and economists should go back to the cesspool they crawled from.

A microcosm, if you will, of the “economics as money” problem. The story’s no fun if we actually talk about the “if people only care about money” part; with it, it’s just a fun, throwaway logic game, but without it, it’s a nice excuse to print some combination of “humbug” and “economist”. Who’ll print my story that says “if people care about money, being nice to their relatives, not looking like someone who can’t think of a good gift, and a bunch of other stuff, Christmas gifts are an excellent use of scarce resources to spread satisfaction in our cold, crazy world. Happy Christmas!”.

No-one will print it, of course. At least, not if they want to show me as a stereotypical economist. The trick is that both my story and the one about the deadweight loss of Christmas are equally acceptable applications of positive economic reasoning on the topic “what happens to people’s satisfaction when they give or receive gifts?”. I think my assumptions on the desires of the giver are more realistic, and I think Waldfogel’s story lends itself better to measurement. It’s the same rock and the same hard place: how can we be realistic and accurate at the same time? Not, perhaps, a life or death matter in the Christmas story, but pretty important when we’re making policy-relevant models.

My interpretation of Becker’s ambition is to apply the rational choice paradigm of economics to decisions that are decidedly not financial. I also believe that this doesn’t require us to expand the horizons of the discipline: the horizons of economics are not financial, because applying economic reasoning doesn’t require us to think only about money.