The Expansion of Economics

Toward a More Inclusive Social Science

Shoshana Grossbard-Shechtman, Christopher K. Clague

• Publisher: Routledge
• Year: 2016
• ISBN:
  9781315499758
• Edition: 1
• Topic: Negocios y empresa
• Subtopic: Negocios en general

Economics, like most other social sciences, is not a pure discipline. Indeed, it has been enhanced by the fact that there is so much overlap between it and the related fields of business, industrial relations, political science, social psychology, and sociology. This book is the first attempt to explain how work in economics has influenced and benefited from a merging of economic analysis with the research practices of these related fields of study. With contributions from leading economists from around the world, it demonstrates how economics is leading the way toward a more unified social science.

1

The Expansion and Reorientation of Economics

Shoshana Grossbard-Shechtman and Christopher Clague

Academia can be thought of as a group of neighboring tribes, each occupying a particular territory, which it cultivates with tools that seem appropriate for that terrain and climate. Most of the time, members of tribes remain in their home areas, with amicable but not intimate relations with their neighbors. There is often some cultivation in border areas, with occasional collaboration across tribal lines. However, during some periods, perhaps because of technological developments, tribes invade one another’s territories, and tribal members raised in one territory begin cultivation in another. Relationships may become hostile, but there may also be trade and cooperation. With apologies to Axel Leijonhufvud (1981), we will use this parable to discuss the relationships between economics and other social sciences. Our focus is on the expansion and reorientation of economics in the last forty years. However, to understand better these trends, we start with a brief overview of the first sixty years of the twentieth century. Even though we primarily review the evolution of economics in the United States, we mention some of the differences between social science in the United Kingdom and the United States (the Anglo-Saxon experience) and that of continental Europe.

After this historical overview we describe the expansion of economics into new subject areas, areas that had for many decades been considered the exclusive provinces of political science and sociology. The impact of this expansion on these disciplines is also sketched. Next, we describe what we call the “reorientation of economics”: the modification of some of its basic assumptions and techniques of analysis. This reorientation may be related to the need to modify the neoclassical tools of economics, as the discipline is increasingly researching nonmarket interactions. Subsequently, we explain the organization of the text and present a brief description of each of the chapters. Concluding comments on the future of economics and its relationship to the other social sciences can be found at the end of this book.

Table 1.1

The Social Sciences for Most of the Twentieth Century

	Discipline
	Economics	Political science	Sociology
Principal organization	Firm	Government	Family and voluntary associations
Principal tools of analysis	Market analysis Quantitative	Institutionalist Descriptive Qualitative	Institutionalist Descriptive Qualitative
Principal assumptions about individuals	Rational voluntary choice Selfish, nonaggressive, not altruistic Perfect information	Not necessarily rational Possibly aggressive Various cognitive assumptions Follow orders	Not necessarily rational Possibly altruistic Various cognitive assumptions Follows norms

Economics Before 1960

In Britain and the United States, social science entered the twentieth century as a tribal society, with various tribes or fiefdoms each taking claim over a separate territory. Table 1.1 provides a guide to the three major social sciences in the United States in the first half of the twentieth century. The disciplines were distinguished according to the subject matter on which they focused, their principal tools of analysis, and the principal assumptions they made about individuals. Each discipline was like a tribe responsible for the cultivation of a particular area of research. Research territory was defined primarily according to subject matter: economics studied the economy, defined as the production and consumption of marketed goods and services; political science studied the government and the legal system, and sociology and its sister disciplines (social anthropology and social psychology) studied families and voluntary associations such as religious bodies.

There was some overlap between the subject matters of the various disciplines. Economists studied government to the extent that government affects economic policy. Economics analyzed government actions, such as taxation, government expenditure, and monetary policy, with the goal of maximizing social welfare. Government agencies, like business firms, were treated as black boxes. Economics assumed that businesses knew how to maximize profits, and that government agencies could effectively implement the policies recommended by economists. There was also some overlap among sociology, political science, and economics, leading to the subfields of political sociology and economic sociology. In these subfields, sociologists mostly studied those aspects of the economy and the polity that were not addressed by economics and political science.

In addition to the fields listed in Table 1.1, researchers in business schools studied business organizations and those in schools of public administration studied government agencies. Some of these organizational specialists were trained in psychology and sociology. Psychology, apart from social psychology and the study of organizations, is a discipline focused primarily on understanding individual thinking, emotions, and behavior, rather than social organizations, and in this sense it is not really a social science.

The various social sciences were also clearly distinguished by the tools they applied to the cultivation of their territory, economics standing out from other social sciences in its more mathematical and quantitative tools and its more restrictive assumptions about human behavior. The principal tools underlying economic theory were “rational choice analysis” and “market analysis.” Most economic models assumed that individual households and firms act rationally, voluntarily, and not from coercion. Implicitly or explicitly, economists generally assumed that individuals are selfish, not aggressive, and not altruistic. At the level of cognition, it was assumed that economic agents had no difficulty receiving, processing, and storing information.

As is also summarized in Table 1.1, other social sciences have tended to be less quantitative and less abstract, thus requiring fewer mathematical skills. Relative to economics, the comparative advantage of sociology and political science has been in the identification of factors relevant to their subject matter, in the description of such factors, and in the development of ideas connecting various aspects of human behavior and institutions.

The subject matter of the different disciplines was influenced by the emergence of academic departments in universities and colleges. Political science and economics had no difficulty establishing themselves as separate departments, as each field had a long history of serious inquiry and a well-defined subject matter. In continental Europe, sociology was not clearly distinguished from economics in university studies. Thanks to figures such as Max Weber, Werner Sombart, Emile Durkheim, and Vilfredo Pareto—who simultaneously studied the economy, the state, religion, and culture—economics and sociology remained linked not only to each other but also to political science and law. In Germany, Weber, his brother, and many others had training in economics and taught in schools of public policy, welcoming all the disciplines that could possibly help policymakers in the design of better laws and policies (see Backhaus 2001). It is in one of the best known of these schools, the University of Heidelberg, that prominent American sociologist Talcott Parsons got his doctorate in economics in the 1920s. Pareto, whose name appears on every economist’s lips, was a sociologist in addition to being an economist. He inspired American sociologist George Homans, an important contributor to social exchange theories in the mid-twentieth century (see chapter 9).¹

In the United States, however, sociology was not considered part of economics, and sociologists had to struggle for acceptance in the universities. Most American universities did not have sociology departments until relatively recently. Not wanting to perform research about forms of exchanges and social relations that lay outside their concept of the economy, economists made room for sociology, social psychology, and social anthropology (in short, sociology). For instance, Harvard did not have a sociology department until 1931. Partly to gain acceptance in American universities, sociology left the study of the economy to economics and confined itself to subject areas that economics did not aspire to handle (Swedberg 1990, 10–14). The study of production handled by households and not by firms was relegated to home economics departments (see Yi 1996; Beller and Kiss 1999). Home economics often also included consumer studies, an area also mostly a function of decision making within households. This lack of interest on the part of economists is one of the reasons that in the early twentieth century many American universities created home economics departments.

In the first six decades of the twentieth century, economics, especially in the Anglo-Saxon countries, devoted most of its energies to refining its techniques of analysis of the production and market exchange of material goods and services. During this period economic theory became increasingly formalized. (Institutional economics, which was prominently represented in American universities before World War II, took a broader view of economics’ subject matter and vigorously resisted the formalism and methodological individualism of the mainstream, but it lost influence after the war; [Hodgson 1994, 1998].) The resulting edifice of economic theory was an impressive intellectual accomplishment, in comparison with what the other social sciences had to offer. Among the achievements were neoclassical microeconomic theory (or “price theory,” as it was then called), classical monetary theory (Keynesian macroeconomic theory), the Heckscher-Ohlin theory of international trade, and the theory of externalities and public goods. These theories offered many insights about how the economy functioned and about the effects of government policies on the economy.

The Expansion of Economics After 1960

After the rise of Adolf Hitler and World War II, continental universities lost their prominence. Since World War II, most new developments in economics and many innovations in other social sciences occurred primarily in the United States. Starting approximately in the 1960s, American economists began to invade other social sciences, especially political science and sociology. Political science witnessed the penetration of economists Anthony Downs (1957), James Buchanan and Gordon Tullock (1962), and Mancur Olson (1965), who applied economic models to politics and launched the new field of “public choice.” Buchanan eventually received the Nobel Prize, largely in recognition for this line of work. Economists who received the Nobel Prize in part for their contributions to the economic analysis of politics and law include Ronald Coase, who wrote on property rights (Coase 1960), Douglass North, who wrote on property and contract rights (e.g., North and Thomas 1973; see also Harold Demsetz 1964, 1967), Gary Becker, who wrote on democracy,² discrimination (1957), and crime deterrents (1968), and George Stigler (1971), who contributed an economic theory of regulation.³

Together with Jacob Mincer, his colleague at Columbia University in the 1960s, Becker was also at the forefront of economics’ penetration into some of the territory traditionally cultivated by sociology. Becker (1960) contributed to the earlier literature on economics of fertility (see chapter 9 of this volume). A breaking point was the onset of the New Home Economics, which originated when Mincer (1962, 1963; reproduced in Mincer 1993) and Becker (1965) placed companies and households on an equal footing as far as the applicability of economic analysis is concerned (see Grossbard-Shechtman forthcoming). They thereby erased borders that previous generations of American economists had erected among economics, sociology, and home economics. This return of economics into the territory of home economics and family production was strengthened after Becker published his theory of marriage and divorce (Becker 1973, 1974) and his Treatise on the Family (Becker 1981). More recently, economists have started researching other voluntary organizations such as churches and social movements. Most prominent in that area is the work of Laurence Iannaccone, who was a student of Becker at Chicago (see chapter 10 of this book).

The invasion of economics since the 1960s benefited from the marginalist revolution that gained momentum in the United Kingdom in the latter part of the nineteenth century⁴ and early part of the twentieth century, and from the mathematical revolution that originated in the United States after World War II and which owes much to the influence of Paul Samuelson. As a result, economists had become very effective at the use of economic analysis defined as the use of rational choice and market analysis. In a broader perspective, taking account of the history of the social sciences, economists’ recent invasions into fields traditionally tended by sociologists can be seen as a return to an earlier academic structure from which sociology was virtually absent. The expansion of economics after 1960 can be understood as a correction for the narrowing of the scope of economics that took place in the United Kingdom and the United States in earlier decades of the twentieth century. In contrast, during most of this time, some continental European economists took a broader view of the subject matter of economics (see Swedberg 1990; Backhaus 2001).

These forays of economists into neighboring territories disturbed the established order there and generated two kinds of reactions. One reaction was to deny the applicability of the economists’ framework and to try to push back the invaders by either attacking them verbally or by producing alternative research replacing economic analyses. Examples of sociologists going after economists verbally include Judith Blake’s (...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Table of Contents
• List of Tables and Figures
• Foreword
• 1 The Expansion and Reorientation of Economics
• Part I. Comparing Research Methods
• Part II. Comparing Ideas on Economic Development
• Part III. Comparing Ideas on the Firm
• Part IV. Comparing Ideas on Family and Church
• Part V. Comparing Ideas on Individual and Collective Behavior
• About the Editors and Contributors
• Index