The title of chapter 2 of M’s text is “Thinking Like an Economist”. M’s stated goal in this chapter is to introduce the student to the language and overall philosophy of the mainstream economist. He also aims to convey a basic understanding of how, within that philosophy, economists may end up disagreeing. Using examples of basic economic models, as well as popular economics pieces which highlight how economics is used outside the classroom to improve people’s lives, M attempts to show us how “thinking like an economist” can be thought of as a kind of life lesson.
The idea of a methodology chapter -- where before embarking on a study of supply and demand the author first turns to issues of methodology and economics as a science -- is nothing new. Most of the successful economics texts prior to Mankiw use this formula. Samuelson, for example, spent pages discussing different argumentative fallacies in economics and musing on why economists disagree, while McConnell addressed these same issues while also warning of the weaknesses of the deductivist method. As we will see, M borrows some parts of the older formula, but innovates on others. The result, however, leaves much to be desired.
I argue that M’s attempt to convey the language and philosophy of modern economic methodology ultimately fails due to problems in the method of argument used and the basic logic of his claims. In order to support my thesis I will give some examples of the widespread but faulty use of analogies used in the first half of chapter 2 to explain economic methodology. As we will see, analogies can be an effective method of illustrating an idea after it has been defined and presented in a rigorous way; otherwise, analogical reasoning can be superficial and distracting for the student.
Explaining how economists think: analogies and economic examples.
In the first part of chapter 2, M intends to convey two central ideas. The first point is that economics has evolved through time similar to a science. While there are some key differences between most sciences and economics -- for example, in the lack of controlled experiments -- the core of the “observation, theory, observation” interplay, M argues, is preserved in economics. Second, M emphasizes the importance of models in economics as the primary vehicle of inquiry. The ideal economist, therefore, is someone who adjusts his theories according to new observations, updating his data set in order to make new generalizations which are then tested against the new data.
M primarily on analogical reasoning for the main concepts of chapter 2, in spite of the fact that analogies give something far from an air-tight method of argument. They are more suited to colloquial settings or an end-of-chapter comparison, after a thorough discussion of the principle themes of the argument. In this first section I will first briefly discuss the general form of an analogical argument, then take up its use in chapter 2 of M's text.
Suppose we have two concepts, A and B. To make an analogical argument, we start by supposing that x is a concept within A and y is a concept within B. We then argue that x is like y because of a similar connection that they each share to their “parent” concept (A or B respectively). In order for an argument by analogy to be most effective, there must be a very close resemblance of x's and y's “connection” to A and B. But even if there is a close connection, analogies to a concept x are not reliable assessments of x because analogies of x are not definitions of x. Analogies made in order to explain x do not rely on evidence for x, or a logical argument which leads to x, and they are therefore weak as a core tool for understanding. They are most effective as colloquial methods of argument to facilitate understanding once the main evidence or logic for the case has been presented.
Analogies are often not clear cut explanations of an idea because they only work by association with another concept and are therefore not assessed on their own terms. For example, problems with using analogies in an argument, or in pedagogy, begin when students start questioning the likeness of A and B. This either leads to: 1. distraction from understanding the idea or argument in question; or 2. to an unraveling of the analogy, if an important difference between A and B is found which leads to a violation of the legitimacy of the argument in question. As we will see, both 1 and 2 are likely to occur in M’s discussion of the likenesses of economics to physics or biology.
Early in chapter 2 M explains the idea that economics evolves through time similar to a science, using the analogy of Isaac Newton and his apple. As the story goes, Newton got hit on the head with an apple one day while lost in thought, inspiring him to develop his theory of gravity. Similarly, the science of economics has evolved over time as economists have been hit, time after time, on the head with various apples which have forced them to adjust their priors and alter their theories of how the world works accordingly. In other words, Newton's apple is to the progress of physics as significant economic phenomena are to the progress of economics. While M does not go into the specifics of how this occurs in economics, he does supply a fictional example of an economist who walks into a city, observing how when the quantity of money goes up so do prices, and makes the inference that the quantity of money in an economy is related to inflation.
There is no doubt that someone Adam Smith or John Maynard Keynes revolutionized economics similar to how Newton and Einstein changed physics. But the fact that economics is related closely to politics means that there is no clear historical formula for understanding when one theory gets dumped in favor of a newer and “more complete” view. And the fact that economists cannot run controlled experiments also hurts the credibility of the analogy. It suggests that instead of following an “observation, theory, observation” method, economics actually follows a deductivist method in which one’s political beliefs shape his or her understanding of reality.
Not only do the analogies to physics hide important political aspects of economics, but the “looseness” of M’s analogies may also distract the reader from the concept in question. For example, M emphasizes the importance of models using a series of analogies borrowed from the physical and natural sciences. On the importance of assumptions as first approximations, he observes how the physicist, when confronted with the question of how quickly a marble will fall from a 10-floor building, will begin by assuming a vacuum and argue that air is a “negligent force”. In other words, assumptions of zero friction are to physics as assumptions of perfect competition or economic rationality are to economics. On the question of appropriateness of assumptions, he observes how air may not be negligent if we’re talking about the path of a volleyball. Finally, when talking about the importance and use of models overall, he observes how useful they are for simplifying relationships in biology (e.g., a skeleton), physics, and other sciences.
M’s physics and natural sciences analogies are insufficient for a deep understanding of economic methodology. His use of them begs several crucial questions: while marbles have certain “laws of motion” which we’re able to observe in practice, marbles are not able to think. If we were to take M’s physics analogy seriously, then we must assume that the marble's path has no mind of its own – no social priors with which they may choose one path or another. Of course, we know that when economists assume a trajectory of the path of an individual (so to speak), they usually make an extra assumption about how or why that individual is acting in a particular way -- such as, “assume the individual is behaving in a market”, or “assume the individual is acting so as to maximize his or her utility”, etc. Immediately once this has been done, we are no longer in a vacuum because we have had to make a conscious choice about how we believe individuals act in society.
Thus, not only does the analogical mode of reasoning cover up crucial political factors which go into the formation of economic models, but the uncertain character of the analogy leads us off the path of understanding the concept in question. By failing to provide a rigorous account of the use of the deductivist method in orthodox economics M is compromising the intellectual integrity of his text. Analogical reasoning may help to improve on a basic understanding of economic methodology, but one can never actually prove anything using analogy -- nor can one give a deep analysis of a concept by relying on analogy. At best, M's analogical reasoning approach to economic methodology perpetuates an incomplete understanding of the role of methodology in economics. At worst, the (poor and insufficient) analogies lead to pure intellectual brainwashing by failing to provide a rigorous account of the core (crucial, politically contingent) ideas.
In summary, the goal of chapter 2 was to introduce the economist’s worldview to the student, and to convince him or her of the explanatory power, or universality, of that perspective. While on a superficial level that goal might have been achieved by the references to physics, as well as the “in the news section” football coach who used economics research to go for it on fourth down, it is clear that there are substantive weaknesses in how the argument is conveyed. First of all, reasoning by analogy is not an equal substitute for a rigorous treatment informed by philosophy and past economics work on methodolgoy. Second, obfuscating the value-ridden nature of economics leads to an incomplete understanding of why economists disagree and therefore to an incomplete understanding of the economist’s political position in society.