Monday, April 04, 2011

Two Cases of Mistaken Identity

A book review (3 April) in The Dartmouth Review (HERE):

“Dartmouth College Professor Creating Homo Economicus”

In the past few years, it has become ever more apparent that the Homo economicus that Adam Smith postulated does not exist. For those of our readers who are not acolytes in the dismal science, Homo economicus is the "economic man" or a consumer who makes the perfectly rational decision and thus maximizes his self-interest. A great deal of ancient economic theory depended upon this conceptual man, but more and more research has proven that small details can entirely change people's behavior.”

When I first saw the Dartmouth Review, I thought, with horror, that I was about to criticise a publication from The Royal Naval College, Dartmouth in England, which I visited long ago to deliver a paper on some aspect of defence economics (my specialist subject at the time) to a class of its young officers in the company of a visiting panel of admirals and senior captains. Then I looked closer at the post and realized it was an American college, so I relaxed a little.

Adam Smith never had a theory of Homo economicus, a wholly late 19th -century notion assembled over a hundred years after Smith died in 1790. The author of the piece, a ‘Dartmouth professor’ no less, is absolutely wrong in his (perhaps her) wrongful attribution.

Smith did not have a notion of "economic man" or a consumer who makes the perfectly rational decision and thus maximizes his self-interest.” Wrong person and also wrongly dated too. “Perfectly rational economic man” is a modern notion (not Smith's) among mathematicians and theorists – it makes their equations work, mathematically perhaps, though not in the real world.

I trust the officers at Dartmouth are better equipped in their navigation classes than in economics.

Incidentally, sneers of the ‘dismal science’ variety are actually a wholly racial diatribe from Carlyle in his rabid pamphlet “On the Negro Question” and had nothing to do with either Malthus or Ricardo from the 1800s, but was a disgusting attack on the views of John S. Mill for his perfectly sound views in support of the equality of black slaves and their shared humanity with whites, an idea that his racist critics abhorred.

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Blogger michael webster said...

Of course it is a myth, nobody ever made this claim.

I cannot find a single serious economist who claimed that economic man was a: perfect calculating machine who maximizes self-interest.

A very best, we have the claim that economic man aims at maximizing utility, under some budget constraints. Utility may or may not be identified with self-interest; and under conditions of interdependence, what utility is, or what is revealed by choice, is not obvious.

Without the constraints, there is no economic problem to solve.

BTW, whatever happened to your negotiation program? I have a couple books of yours on the topic.

11:29 am  
Blogger Gavin Kennedy said...

If you set out to determine how a function operates under constraints you get a determinate answer to the equation, but not necessarily to events in the real world, where many other non-determinate constraints operate in a manner than can be modelled within the constraint you specify.

Self interest is much more complex than x=(f)y. Two parties seeking to bargain must mediate their self interests (called 'bargaining' by Smith in WN (Book 1, ii. pages 25-6).

My courses on negotiating continue in my daughter's company, Negotiate Ltd (since I retired in 2005 -

1:37 pm  
Blogger michael webster said...


1. If the argument is that a calculation is neither sufficient nor necessary for a recommendation, then I agree with this point. The calculus recommended by game theory, of which I most familiar, is simply not sound enough to provide recommendations - nor even insights at the level of Schelling. Much more is needed - from the social psychologists.

2. I like the turn of the phrase "mediating self interests", will return to your negotiation books for more insight.

3. Finally, however, I do believe that if people are going to be trained, get better, and retain this advantage, then little formal exercises are going to play a role. Formalization makes the complex simple - one half of the philosophical role according to Bertrand Russell. Formal game theory when aimed at showing how two different things have similar strategic content can be illuminating. Solving for the equilibrium, noting that people don't do this to solve their problem, is generally a non starter as intellectual approach.

10:43 am  
Blogger t said...

RESPONSE IN THE DARTMOUTH REVIEW: "I have quoted the above comment from Prof. Kennedy's blog so that other readers will not be confused as I respond to each of his points in turn (and so they can appreciate the very ridiculous nature of his comment). First of all, I find his pompously Anglophilic tone to be rather disconcerting, especially given his nation's current state in the world. Perhaps if his countrymen had studied more economics and less navigation, their country might still rule the world...or at least matter. Secondly, I am a freshman, not a professor at Dartmouth, although I appreciate the compliment. As for the more intellectual arguments that appear in his post, I am shocked that an actual professor would post such faulty reasoning -- even on his own website (although I do have to note that his website features very little activity other than his own).

First, Adam Smith did not develop the term Homo economicus explicitly. Upon that, Mr. Kennedy and I agree. Smith did, however, say that man was motivated by self-interest and that he was rational. Any self-respecting intellectual will admit that Smith's work and Homo economicus are inextricably linked and associated, especially within the mind of the layman. Perhaps in the smoky backrooms of ivory towers the very hazy distinction might be worth debating, but in any brief article covering the recent developments in behavioral economics in comparison to classical economics, it seems superfluous to the point of inanity.

On the same note, the dismal science is a term that has been associated with economics for hundreds of years despite the fact that it originated from a particular paper advocating slavery (which by the by, I do not support). Even that most august of publications, The Economist, uses the term to generally refer to the field of economics.

Despite Mr. Kennedy's ad hominem remarks, I believe the article does not require revision. Given several of the misunderstandings apparent in his remarks (including terming the piece as a book review and myself as a professor), I would also suggest that he actually read the article before dashing off to angrily comment on two fragments...and a stylistic quibble."
Posted by a reader of that editor's website TryFreedom.US

4:13 am  
Blogger Gavin Kennedy said...

1 My comments are hardly “anglophobic”: I am Scottish, not English. Any acquaintance with Britain would make clear that there is a difference (it’s like calling a person from Atlantic City a “damn Yankee”).

2 I referred to you and treated you, as a ‘Professor” because that is how you were credited in the Dartmouth Review: “Dartmouth College Professor Creating Homo Economicus "

3 If my post shows “faulty reasoning” then you, or any reader is welcome to correct it (education, as “Freshmen” come to realise, is partly about the acquisition of humility, at least for those who progress to scholarship, and perfectly obvious when you retire after 38 years teaching).

4 Smith also wrote extensively about man living in society and having to depend upon many others for things he wants and needs, and he conducts himself by mediating his self-interest/self-love by offering a bargain, summed as: “Give me that which I want, and you shall this which you want”. In short, we have to mediate our self-interest to the self- interest f others in exchanging what they have for what we offer in return. Two solely self-interested individuals would never come to a bargain if they single-mindedly pursued their own self-interest without considering the other person. We must “address ourselves, not to their humanity, but to their self-love, and never talk to them of our necessities, but to their advantages” (Wealth Of Nations, Book 1, chapter 1, paragraph 2).

In the opening paragraph of his Theory Of Moral Sentiments (1759), Adam Smith writes: “How selfish sover man may be supposed, there are evidently some principles in his nature, which interest him in the fortune of others, and render their happiness necessary to him, though he derives nothing from it except the pleasures of seeing it” (Moral Sentiments, Part 1, Chapter 1, paragraph 1). You may care to reflect on both of these paragraphs from Adam Smith - they are quite different from the perfectly rational theories of modern economists. The demonstrate the fuzziness of people, not their perfect rationality, as captured in modern economics from 1870 with mathematical (false, in the sense of being unreal) precision. Rational economic man and Homo economicus are not related at all to Adam Smith’s perception of human behaviour explicitly nor implicitly, as modern behaviourist theorists show (more correctly, as they have re-discovered from Adam Smith.

In Scotland, there are no “smoky backrooms” in our public buildings, since laws were passed by the Scottish Parliament.

5 I am unaware of any references “ for hundreds of years” to economics as the “dismal science’ before Carlyle. Worse, its reference is taken (and often still is) to be the work of Thomas Malthus in the late 18th and early 19th centuries. The Economist newspaper follows modern versions; I was merely pointing out its factual origins, as I do occasionally to such editors as are responsible for The Economist.

6 I apologise if my comment caused you “offence”. The article described you as a “professor” about which I intended no personal disrespect. The quality of the article did not sit tidily with such status – which surprised me.

That you are in fact a “freshman” explains why you are so angry at my comments. I can assure you if I had known your status, I would not have been so robust in my comments. Please rest assured I remain respectful of students on the verge of joining (hopefully) the Republic of Letters.

2:22 pm  
Blogger Dave said...

Beyond the "academic" discussion, if it can be termed such...

1 "My comments are hardly 'anglophobic'" - you might want to investigate the difference between phobic and philic...

2 The title clearly refer to the the work of an actual Dartmouth professor mentioned in the article, not the author of the article.

3 Your arguments, littered as they are with fallacies, typos, and a seeming sluggishness of mind with respect to images, are hardly quality and certainly are on par with the author's - humorous, since you are so belligerent about differentiating between yourself as a "professor" and him as a "freshman." Your arrogance is striking for someone who claims that humility is part of scholarship. Is there any particular reason that your response seems to focus primarily (5/9 paragraphs) on your own superiority? Discussion ought to be based on the quality and legitimacy of the points at hand, not the individual behind them.

4:18 pm  
Blogger michael webster said...

Dave, I am not sure that this type of personalization of the issues is helpful to moving the argument forward.

7:49 am  
Blogger Gavin Kennedy said...

Dave (and 'T')

My observation still stands after the slip on ‘phobic v philic’: Most Scots are neither: it is the identification of Scotland as ‘Anglo’ that irritates us. Adam Smith – a Scot – did not favour Britain founding an ‘Empire’, nor it spending millions on defending it from other European powers. In fact he advocated Britain should have quit defending its colonies, and which the military defeat in the British colonies in North America (except Canada) provided the ideal opportunity, but the King’s successors continued to wage wars on the Continent and elsewhere in support of their ambitions of Empire.

The title of the Dartmouth Review article is ambiguous because it says “Dartmouth College Professor Creating Homo Economicus”. I am still not clear exactly to whom it refers: which Dartmouth Professor created ‘Homo Economicus’? I report that it was invented in the 1870s.

Dave writes of my ‘seeming sluggishness of mind with respect to images, are hardly quality’, and etc., and ‘t’ accuses me of ‘ad hominem’ debate. I suggest that you both re-arrange a well-known phrase that includes the words: kettle’, ‘pot’ and ‘black’.

I completely agree that “Discussion ought to be based on the quality and legitimacy of the points at hand, not the individual behind them” but not with your claim that my ‘response seems to focus primarily (5/9 paragraphs) on [my] own superiority’. I did not claim to be superior – we learn from our students too, as tutors of graduate and undergraduate students know.

I am accused of ‘inanity’, ‘pomposity’ and etc., and have apologised for not knowing that ‘t’ is a ‘freshman’ and not a ‘professor’. Had I known I would have debated differently because professors are held to higher standards of scholarship than freshmen – that is all. It is not because of their ‘status’ - professors have been known to argue nonsense too (attend any Senate meeting where faculty interests clash, for example). The difference is that of expectation in informed debate, like that of a golfer playing off par and one playing with a handicap, to make the game fairer. At the Masters in Atlanta, every player plays from zero and counting; at their local Sunday afternoon golf club, the members play according to their known handicaps, if any. That makes it fairer and more interesting, to reflect their relative skills as golfers.

This debate has gone past the point where anything useful is being added to the ‘debate’ on Adam Smith. I suggest a quiet withdrawal before it utterly bores readers of ‘Lost Legacy’ (If not myself and 'Dave').

11:03 am  

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