Economics and the Sociobiology of the Social Sciences

Last week, the Wall Street Journal published an article by Vernon Smith on Bush's financial bailout plan. At one point, he wrote:

"During a bubble buyers are everywhere. Then suddenly, they disappear, waiting, watching, delaying, reluctant to buy assets that others might not. That buyers will disappear in a bubble is predictable, what is never predictable is the timing. In his 1933 Inaugural Address, President Franklin Roosevelt said 'the only thing we have to fear is fear itself.' Yes, but the return of fearful buyers is just as unpredictable as the timing of their disappearance. And only the most arrogant will pretend to know what public policies will restore buyer 'confidence.'"

Vernon Smith is a Nobel-Prize-winning economist. And yet he says that his science of economics has little predictive power. It can predict only broad patterns of human behavior, such as the disappearance of buyers when a housing price bubble bursts. It cannot predict the precise movement of economic events, and it cannot predict which public policies will work best in times of crisis.

This is not what I was told in graduate school. In my first graduate course in political science at the University of Chicago, I was told by my professor (David Easton) that economics was the "Queen of the Social Sciences," and that our job as political scientists was to make political science as much like economics as possible. The reason for this, the professor told us, was that economics was becoming a rigorous and predictive science comparable to physics and chemistry. And, after all, economics was the only social science to have its own Nobel Prize.

But a few years after I heard that, Friedrich Hayek received the Nobel Prize in economics, and his Nobel lecture was entitled "The Pretence of Knowledge." Hayek pointed out that the econometric models so prized by mathematical economists were not working well in predicting economic behavior. In fact, he argued, economic science has very little predictive power, because while we can predict general patterns of human social behavior, we cannot predict the events of human history in any precise way.

Hayek saw economics as a historical and evolutionary science that studied unique and contingent events, in contrast to the ahistorical sciences of physics and chemistry. Hayek--and the other Austrian School Economists--rejected the tendency of neoclassical economics to seek the mathematical precision of the physical sciences. Historical sciences like economics can formulate probabilistic regularities of human behavior, but not deterministic laws.

That's why I believe that economics and all the other social sciences need to be understood as branches of biology. As Ernst Mayr argued, biology can be divided into mechanistic biology and historical biology. Mechanistic biology deals with the physiology of living organisms, and much of this can be understood mechanistically in terms of physics and chemistry. But historical biology--including animal behavior and evolutionary biology--depends on historical narratives and probabilistic regularities that cannot be reduced to physics and chemistry.

Historical biology is much closer to the social sciences than anything in physics and chemistry. Social sciences rooted in the historical biology of human nature would generalize about natural propensities of human social behavior as shaped by genetic evolution. But they would also study the highly variable behavior of human beings as shaped by cultural traditions and individual judgments.

Vernon Smith is one of my favorite economists because he recognizes the potential contribution that human biology can make to economics and the social sciences. In particular, he sees the importance of evolutionary game theory in confirming Adam Smith's account of morality and economics. Like the work of Smith, an evolutionary social science would allow us to understand and predict the generic patterns of human behavior while recognizing the inescapable contingency and uncertainty of that behavior as it evolves in history.