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Tony Lawson, Essays on The Nature and State of Modern Economics

Jamie Morgan
p. 315-323
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Tony Lawson, Essays on The Nature and State of Modern Economics, London: Routledge, 2015, 261 pages, ISBN 978-113885102-3

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1A proper appreciation of Essays on the Nature and State of Modern Economics requires context. Tony Lawson is the most prominent member of the Cambridge Social Ontology Group and the longstanding convenor of the Cambridge Realist Workshop (see Pratten, ed., 2015). He is closely associated with a general shift in orientation of philosophical and methodological critique within economics over the last twenty years (Lawson, 1997; 2003). Previously that work could be categorised in three distinguishable, though often mutually related, ways (see Morgan, ed., 2015). First, it took as its point of departure key works and issues in philosophy of science. That is, the use and significance of Deductive-Nomological and Inductive-Probabilistic models, the relevance of positivism, empiricism, paradigms and research programmes, as well as test criteria such as verification, falsifiability, and confirmation. The core of this discourse focused on the appropriateness of natural science conceptualisations for social science (Blaug, Backhouse etc). Second, it explored the work of prominent mainstream economists who both provided archetypal forms of mainstream economics (influential frameworks for models and theory) and some concomitant comment on methodology (focusing on Debreu, Friedman, Lucas etc.). Third, it sought to revive or promote key thinkers whose work provides critique of what the mainstream has now become, based on methodological tenets and theoretical orientations (Keynes, Kaldor etc.).

2Social ontology has engaged with work undertaken along these lines and shifted the framework of discussion by asking a deceptively simple question - what characteristics of reality would be required in order for a given approach to economics to then be pursued? The question is predicated on the claims that all knowledge has an implicit or explicit ontology and these can be categorised, explored and critiqued. As such, the approach opened up a new domain of argument in terms of which prior ways of approaching philosophy and methodology in economics could be reconsidered. Overtime, the result has been a differentiation between closed and open system approaches to economics, which has distinguished much of the current mainstream from a range of alternatives.

3A closed system approach focuses on atomistic relations of the form whenever α then β (or stochastic range of β), which endures overtime and provides law-like constituents for economic activity (within social reality). Deviations from regular or constant conjunction outcomes are conceived as distortions, shocks, etc. where the ultimate grounds of the whole remains the regularity as a point of reference (and so theory expresses an essence of systems, such as equilibrium, or of behaviour, such as loss aversion, or of information types and calculative context qua rationality). According to Lawson, closed systems are overwhelmingly expressed and explored in deductive mathematical ways (though deductive expression of a regularity need not take such a form).

4An open system approach, by contrast, recognizes that economic activity involves many different complex entities (and these may be conceived as relational and emergent) with powers or capacities to act. As interaction occurs there is the potential for reproduction but also change in many different ways. There are then cumulative consequences for parts and wholes through time—an economy as an aspect of social reality is in process. It is intrinsically historical qua temporal, and so cannot adequately be expressed or explored in ways that fail to orient on the powers of things, and their relations and interactions through time.

5Non-mainstream economists have broadly welcomed social ontology as a significant domain of argument, in so far as it has helped reinvigorate philosophy and methodology in and for economics. They have done so without necessarily committing themselves to realism as a philosophical position (preferring any of a range of others). Many more have welcomed the open and closed systems distinction, since it has provided a (though not the only) way to differentiate mainstream and (collectively) non-mainstream economics. This has contributed to more assertive articulations of heterodox economics (Lee, 2009, 2012), as well as arguments for greater pluralism within economics (see Fullbrook, ed., 2008) and within the curriculum (see Morgan, 2015c). At the same time, many of the particular claims made by Lawson (and others, such as Fleetwood, Lewis, Latsis, and Martins, again see Pratten, ed., 2015) remain controversial (see Fullbrook, ed., 2009; Mohun and Veneziani, 2012; Morgan 2015a, 2015b).

6Critique of social ontology, much of it constructive and sympathetic, and of realism and of Lawson’s work has developed over the last decade and more (associated with Robert Boyer, Ben Fine, Geoff Hodgson and many others). Particular critique has reasserted differences in the face of some commonality—arguing for variants on open systems, tied to particular schools of thought (Marxism, original institutionalism etc). It has argued that there is more to the mainstream than closed systems per se, and that Lawson’s particular claims about such systems—that they are in economics typically deductive, atomistic and mathematically expressed - is overly restrictive. And it has argued that one can over-emphasise the significance of ontology, and so neglect critique at the level of theory; a problem which may also misrepresent the social reproduction of knowledge and the role of ideology.

7 So, Lawson is an unusual figure in heterodox and pluralist economics. His work is broadly appreciated but simultaneously controversial. His most recent work Essays on the Nature and State of Modern Economics confirms this odd position. The book comprises a set of 11 collected essays, all but one previously published over the preceding decade. The first chapter is a synthesis of Lawson’s current thinking on general problematic constituents of economics, whilst the others explore different issues: responses to events, reiteration and development of particular positional arguments regarding aspects of ontology and economics, and concomitantly, clarifications and (implicitly at least) responses to critique. The whole then has great interest for anyone working on or interested in ontology and economics. In reading that whole one should also consider just how basic or fundamental Lawson’s critique is. If one claims that closed system frameworks of thought, theory, method and methodology are inappropriate means to represent, explain and investigate the social world, then several inferences follow:

  1. Addressing the social world based on closed systems leads to deficient knowledge and ultimately to explanatory failure; acknowledging this can perhaps be deferred and possibly disguised, since knowledge can develop based on many criteria (modelling forms, mathematical novelty, new objects of inquiry, new methods and so forth) without ever grasping that all of these can be deformed by a failure to address the fundamental problem of closed systems. However, addressing the fundamental problem is deeply problematic because knowledge is a social product, tied to careers, skills, intellectual capital, etc., all expressible in a commitment to and socialisation through, theoretical frames, facility with given methods and so forth­—and these create resistance to recognition of the fundamental problem (by virtue of the instantiation of the forms of that problem). This need not be conscious rejection of an inconvenient truth, merely marginalisation of a form of argument that can seem awkward but also beside the point (and responses can be multiple: this is not economics, this is not science, we are economists, we are scientists, if not this then what, etc.). For many mainstream economists confronted by Lawson’s critique there is a profound cognitive dissonance that seems insurmountable (without a road to Damascus revelation and without severe consequences for career and reputation).

  2. Challenging the deficiencies of the social world as currently conceived by mainstream economists (as conceived by Lawson) and creating alternatives to that work confronts multiple problems. Non-mainstream economists also develop and interpret, construct and apply, theoretical frames, methods, methodologies and so forth. They do so within traditions that are not reducible purely to an appreciation of open systems theory and they may contest exactly what an open system is and how it can be investigated. Moreover, they must speak the language of their interlocutors and be published. As such, from the point of view of Lawson’s work there is a permanent possibility that potentially more adequate approaches (identified beyond the core of the mainstream and extending to many schools of thought) will be undermined or deformed as they are pursued or develop—closed system thinking or approaches undermine the commitment to open systems. So, Lawson’s work can ultimately be as problematic for non-mainstream economists as it is for mainstream ones; the main difference is that non-mainstream economists are more likely to be aware of it, and also selectively sympathetic to the broader argument in so far as it has positional purpose (school, theory or claim x is superior because it is open system based). Beyond that selective sympathetic hearing, his work is inconvenient.

8To be clear, recognizing that Lawson’s work is inconvenient does not require one to accept that it is also correct. But it is a significant contextual issue when considering how it has been received over the years and how this seems to have influenced his responses. One must at the very least admire his persistence and also the way he is prepared to challenge both fellow travellers as well as those with whom there seems likely to be no possibility of affinity.

9 If we turn to the substance of Essays on the Nature and State of Modern Economics, Chapter 1 provides a useful summary of Lawson’s current position. He states that economists in general have been, when considering the contemporary state of the field,

unwilling to do the philosophical legwork necessary to get to the nub of the issues involved [and so] discussions remain largely superficial, criticism is mostly misdirected and overly tame, and supposed alternative approaches or projects (some of which receive significant financial backing) end up, in the main, being essentially more of the same (2).

10He then sets out twenty common myths and fallacies of modern economics. Strictly speaking, many of these are not fallacies of modern economics as substantive theory but rather of normative claims and beliefs regarding ways to effectively critique and transform the discipline. They presuppose the efficacy of Lawson’s position on social ontology and economics.

11So, for example, Lawson states that criticising the mainstream for failing to predict the global financial crisis is mainly beside the point, since prediction (in the specific sense of modelled entailment, distinguished perhaps from a possible futures approach to scenario building based on processes) does not seem to be possible within social reality. Those who counter-pose their own success for any given instance of prediction—such as the last crisis—neglect that on many other occasions they made similar claims that were not realised. For Lawson it follows that it is the ontology built into the methods that fails, and this remains the case whether one claims to be some specific branch of the mainstream or some alternative position, such as post-Keynesian. Whilst Lawson makes it clear he is not anti-mathematical, he argues one should not conflate science and mathematics, nor should one assert that if one is aware of the limits of a mathematical approach one can apply it constructively to the social world. The latter must be demonstrated and must also address the alternative argument that if other means of investigation exist why devote overwhelming resources to an approach that has inherent ontological problems that must then be addressed—do the alternatives have equivalent problems? For Lawson, many economists are consistently failing to confront the issues here. The mainstream is designated as neoclassical, as though solving problems of theory for neoclassical economics is sufficient to solve problems of the field, or is designated as overly ideological (right wing neoliberal), as though resolving ideational problems of policy influence would likewise be sufficient to solve the problems of the field. Though neoclassical characteristics and neoliberal policy may be problematic, transforming neoclassical theory or neoliberal policy would not necessarily transform the field. For Lawson many economists do not even have an adequate sense of what that field is because they do not actually interrogate its basic constituents—they do not address what an economy may be nor do they explore the nature of its parts (money, corporations, markets and so forth). These remain received concepts as components in theory rather than subjects for theorisation.

12 Chapter 1, as the only entirely new contribution within the collection is thought provoking, though in a certain sense unoriginal—by which I mean easily anticipated. I don’t mean this in a derogatory sense, rather it is a set of responses one would expect Lawson to make if one were familiar with his work. That it is worthwhile making the kinds of statements encapsulated in his 20 myths and fallacies says more about the lack of change within the field than it does about Lawson’s thinking. If Keynes was correct to suggest one changes one’s mind when the world changes, Lawson seems still be waiting. At the same time, and as the collection in toto indicates, his way of thinking is not the common sense of our time. Moreover, he specifically questions in Chapter 1 whether economics can be mere common sense (a claim often made when economists criticise pure theory, formalism, etc.). One should not conflate a focus on the non-quantified quotidian with the obvious, the trivial or the truistic.

13 One might say then that Chapter 1 is both unoriginal by virtue of the world but important by virtue of the continued relevance of critique. In this broader sense it highlights the originality of Lawson’s thought (a point I made in a quote that appears on the back of the original book). Thereafter, it is useful as an orienting summary for those unfamiliar with Lawson’s work, not least because it provides a synthesis of aspects of claims and arguments made in the essays in the rest of the collection. Highlights include Chapter 3, which sets out Lawson’s argument for heterodox economics as a unity in difference united by an (often implicit) open systems ontology. Chapter 3 juxtaposes well with Chapter 4, which explores the meaning and significance of neoclassical economics. Here, Lawson makes the claim that (in Veblen’s original sense) to be neoclassical is essentially a metaphysical mismatch between open systems commitments and closed systems methods, one which Veblen anticipated would be transcended, but Lawson argues has not been because of the continuing influence of mathematical methods within economics. For Lawson, many self-identified non-mainstream economists are inadvertently neoclassical in Veblen’s original sense.

14Chapters 5 and 6 place Lawson’s position in terms of the recent financial crisis, which for Lawson highlights longstanding problems in the field, rather than immediate and specific ones only. From a social ontology point of view much of economics simply fails to understand the nature of economy rather than merely model it. Seeking to solve a problem of models or a problem of mathematics with ‘better’ (as different) models and mathematics simply assumes that the solution to a model problem or a maths problem is more models and maths, rather than alternatives to both. This is a claim that post-Keynesians in particular do not like (and to which many have responses and defences—Mark Setterfield, Steve Keen, Malcolm Sawyer, etc.). Lawson’s response is twofold. Keynes was critical of the foundations of some of the responses subsequently pursued by post-Keynesians (econometrics in particular). Also, where is the evidence of genuine insight specifically from the models and maths (rather than from the attendant descriptive statistics, raw data and prior insights)? Claim and counter claim (institutions as periodic sources of relative regularity, dynamic modelling using non-linear techniques, etc.) remains a basic dividing line here.

15Chapter 7 sets out Lawson’s idiosyncratic approach to ideology. Here he distinguishes two types, ideology1 and ideology2. Ideology1 is defined as a background and typically unchallenged set of ideas, which may in some sense be false but still part of the reproduction of society as it is, and ideology2 is defined as intentionally deployed sets of ideas that justify or reinforce the status quo. The difference between the two seems blurred, since it seems to hinge on conscious activity, apprehension and intentionality, whilst the actual definitions are both stated as conditional (phrased using ‘relatively’, ‘to large degree’, etc.). Lawson’s main point, however, is that when applied to economics advocates use the former to critique mainstream theory for unquestioning conceptual commitments (market efficiency, etc.), and the latter to critique the purposive use of economics to reproduce a social reality not reducible to that form of economics (power and interests in the world). Lawson does not dispute that ideologies can and do reinforce a status quo—a political economy—rather he argues that neither ideology1 nor ideology2 adequately captures the full array of self-understandings, motives and activity of mainstream economists. For Lawson, their most significant contribution is through their collective commitment to mathematical modelling, which transcends other differences (few have an interest in ideology or a direct attachment to power and interests or even a commitment to specific concepts only). Again, for many Marxists and political economists Lawson’s specific position remains unsatisfactory (Brian O’Boyle and many others). A system is a source of socialisation and the degree of understanding and commitment of participants within it can be highly variable without that indicating ideology has no underlying commonality. It is not clear to many who are interested in this that ontology has a distinguishable status that is not itself also ideologically referenced. As with the issue of mismatch for post-Keynesians, there is a lot more to be said on this subject (see for example, Zuidhof, 2014).

16That there is more to say, however, should not be considered a defect of the collected essays. Rather it suggests that Lawson is always interesting. The greatest strength of Lawson’s work is that it demands a reply. Reading it is not a passive experience—it requires one to think about the fundamentals of positions and to rethink and justify them. This is an extremely important function within any discipline, much as dissent is necessary to genuine consent within a functioning democracy. It is not always a question of whether one agrees with Lawson, but rather of what is required to plausibly dispute and disagree. Every field needs its fool—at least in the King Lear sense of the character given license to speak what would otherwise be silenced. Fools are not always welcomed, because they are inconvenient, awkward, irritating and sources of discomfort. But they are necessary. It is foolish to think otherwise.

17Moreover, one need not be restricted by the role. One notable feature of Lawson’s work over the years is that it has shifted increasingly towards the development of a coherent meta-theory of the social world, of which an economy (and economics) is just one part (see Martins, 2014; Morgan, 2016). Lawson is quite clear that there is no realist school of economics, no specific realist theory—merely a domain of argument and an under-labouring function. At the same time, his own work has also increasingly explored (in social ontological terms) substantive issues of the nature of things—processes and institutions in general, corporations and money in particular (e.g. Lawson, 2016a, 2016b). As such, it has also accumulated to a form of social theory with recognizable features (social positioning, emergence, relationality, rights, obligations etc). It now bears comparison with other similarly developed meta-social theory, deriving from Archer, Bauman, Bourdieu, Little, Searle and many others (see also Runde, 2002). This is a status that few within economics can claim, and provides one more reason to read Lawson.

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