There are two books that deal with what I call "Critical Thinking" as applied to the field of economics. Both are broad in scope. One book by Thomas Sedlacek and Vaclav Havel deals with economics throughout human written history - in our cultural, spiritual and economic life on this planet.
In The Economics of Good and Evil, authors Sedlacek and Havel state that the reason for the book is "to look for economic thought in ancient myths and, vice versa, to look for myths in today's economics." The book does a fascinating job of accomplishing both objectives.
They start with the four thousand year old epic of the Sumerian King Gilgamesh, the oldest work of literature available to humankind which comes from ancient Mesopotamia. They then move through Greek philosophy - Aristotle and Plato among others, Hebrew and Christian Biblical sources, through Christian theologians - St. Augustine and Thomas Aquinas, to philosophers of the Enlightenment and up to modern times. This includes discussion of John Stuart Mill and Adam Smith and even Samuelson's contemporary textbook on economics.
In What Then Must We do?: Straight Talk about the Next American Revolution, author Gar Alperovitz also helps us take a wider view in order to look at critical thinking on a societal level. He quotes Antonio Gramsci who was a "famous Italian Marxist revolutionary" in discussing the idea of cultural and ideological hegemony. By hegemony Gramsci means "that certain critical ideas, favorable to the dominant (capitalist) class, were often so deeply ingrained in social and economic processes that it was hard for most people (especially "the working class") to penetrate the idea fog, and even to think about a new direction - to say nothing of contemplating whether another system was (is?) possible."
As a prime example of hegemony, Gramsci cites that "the deepest form of ideological hegemony is the kind reflected in Margaret Thatcher's TINA idea - the notion, powerfully held and embraced by assumption (taken in with your mother's milk, as it were), that quite simply There Is No Alternative to corporate capitalism. Period."
It is this "idea fog" that critical thinking is most helpful in piercing. In terms of the Sedlacek and Havel book, the fog is represented by the myths that we live by often quite unconsciously. The goal is not to do away with myths that are a major way that we humans make meaning of our existence, but to be conscious of what the myths are and how they are used.
Language and mathematics are also ways that we humans attempt to make meaning of our existence and in so doing both help to create in reality what exists in the human mind. Without naming, reality does not exist; it is created together with language. The limits of our language are the limits of our world. By this projection of our thoughts through language and mathematics, we act to both create our surrounding reality and also to limit it. When we find a new linguistic framework or analytical model, or stop using the old one, we mold or remold reality.
Sedlacek says "the human mind is built to think in terms of narratives...in turn, much of human motivation comes from living through a story of our lives, a story that we tell to ourselves and that creates a framework of our motivation."
His perspective is that our modern economic theories based on rigorous modeling are nothing more than these metanarratives retold in different (mathematical?) language. Even the most sophisticated mathematical model is, de facto, a story, a parable, our effort to (rationally) grasp the world around us.
The world is chaotic, until our ability for model thinking or models within us enable us to view the world reasonably. The construct (mathematical equation, principle, law) according to which the world "behaves" does not rest in the world itself, but rather within us. It is our thinking, our imagination, that organizes the world into theories and models. Every theory, therefore, is a more or less useful fiction- a story, a myth.
The story most often told through economic mechanisms is essentially about a "good life," a story we have borne from the ancient Greek and Hebrew traditions. In some ways we are endeavoring to return to the paradise in the Garden of Eden before Adam and Eve ate the apple. In that story, Adam and Eve driven by an inherent human motivation of curiosity, opt to consume something which was unnecessary for their existence (the Apple from the forbidden tree). As a result, they are banished from their pre-existing harmony with nature.
Economics not only describes the world but is frequently about how the world should be. It should be effective. We have an ideal of perfect competition, of high-GDP growth in low inflation. To this end, we create models, modern parables, but these unrealistic models have little to do with the real world. The role that normative myths and parables had in ancient times is now played by scientific models. That is fine, but as Sedlacek says, we should openly admit it.
Disputes in economics then become a battle of stories and various metanarratives rather than anything else.
The Sedlacek, Havel book poses the question: how much of economics is mythmaking; how many myths does it need or draw from? He says that economics draws from myth in its assumptions - its unconscious use of myth. It also creates myths and stories.
The model of homo-economicus is such a myth-model. He says, "a story ... told by clouding it in mathematical fleece changes nothing about its mysticism."
Other myths and stories that he cites are those about "complete rationality," "assumptions like perfect information," "the invisible hand of the market," as well as "human freedom and self-determination," or the myths of "eternal progress" or "self-balancing markets."
He points out that nobody ever saw any of these though they are stories, faiths or myths that strongly resonate and not only in economics. He says that there is nothing shameful about myths. We cannot exist without faith in the unproven but we must admit it and work with it as such. He mentions that "the Greeks did not take their myths 'literally;' they were acknowledged as myths."
Though we know a myth not to be true, we still believe the myth or theory to say something true about us and the world.
Sedlacek focuses on the problematic issue inherent in this. The real castle, real water and/or the entire physical world is not influenced by the models of physical science since physical science is describing real phenomena in the external world that will exist with or without us. However, the real economy is influenced by economic science. For example, economy theory influences the expectations of individuals as well as their behavior. That is one more reason why the choice of economic theory matters.
Sedlacek asks, do we truly believe our models? Do we believe that human beings are truly rational, narrowly egoistic, that markets regulate themselves and that the invisible hand of the market exists or are these just myths? If our models are admitted fictions (useful or not), then are we in the captivity of an undeclared myth even more than our archaic predecessors.
He cites an interesting example: "The Middle Ages overflowed with the numbers of dancing angels on the head of a pin...and our era is possessed by the idea of counting marginal optimization. In this light, however, the medieval discussion on how many angels could fit on the head of a pin appears more realistic only because, as opposed to the secret terminology of theoretical economics, the head of a pin is real and the concept of an angel is accessible to everyone."
One consequence is that economics has overemphasized the mathematical and neglected the non-mathematical humanity in us. It makes us see value judgments or ethics as non-existent or unimportant, and it can by itself lead into blind and dangerous alleys. What is worse, it neglects important parts of life, the parts that do not lend themselves readily to mathematical inquiry. If it is believed, it will inevitably lead us to view the world through its own prism.
He points out that economics is still a social science, not, as it sometimes pretends to be, a natural science. Just because we use a lot of mathematics doesn't mean it is an exact science.
Economics is also a faith - in axioms that are unproven, we must only believe. In an extreme approach, economics becomes a religion.
Economic models, therefore, are not accepted on the basis of greater or lesser truthfulness, but rather on the basis of greater or lesser believability, suitability, persuasive force or correspondence with our internalized faith in the workings of the world, (i.e. our prejudices).
A model is nothing more than a story and through errors in current (otherwise well-functioning) models and abstractions, we find ways to new stories.
Ger Alperovitz says, that it is time that we start looking for new stories.
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