Visualizing the economy

Social Research, Summer, 2004 by Arjo Klamer

VISIONS

WHEN ROBERT HEILBRONER WRITES ABOUT THE VISION OF ECONOMISTS, he himself appears to be a visionary (Heilbroner, 1956; Heilbroner and Milberg, 1995). It is as if he sees something that others do not. Economists usually do not speak of their vision. Which economist would step forward to state: "I have a vision"? Economists are expected to formulate models, conduct statistical tests, and state their results. It is yeoman's work they do; not the stuff of visionaries. Even so, Heilbroner insists there is vision beneath that work too. If we presume he is right, then we must ask: Exactly what is a vision? How do we recognize it? And in what way does it matter?

The first source to go to for an answer is Schumpeter's The History of Economic Analysis (1972 [1954]). Economic theorizing begins with a vision, Schumpeter tells us. He speaks of a pre-analytic act. "Obviously, in order to be able to posit to ourselves any problems at all, we should first have to visualize a distinct set of coherent phenomena as a worthwhile object of our analytic effort" (41). How this is possible is not quite clear, especially if the researcher works "from scratch," as Schumpeter presumes. No researcher starts with a blank mind. Each one of us approaches a line of research loaded with our own concepts and methods, as well as the work of others. But Schumpeter is not interested in making a deep epistemological point. Being the historian, he is concerned with revolutions in economic analysis. He attributes such revolutions (my term, not his) to the intervention of a vision: "[Vision] may re-enter the history of every established science each time somebody teaches us to see things in a light of which the source is not to be found in the facts, methods, and results of the preexisting science" (41). It is as if at some point in time, while economists are doing their thing, an economist steps up and states: "I have a vision" and proceeds to show how this vision propels a change in economic analysis. We would now say, with Thomas Kuhn, that such a visionary intervention can bring about paradigmatic change in economics. Schumpeter's entrepreneur comes to mind. Like the entrepreneur, the visionary economist has a creative insight that interrupts the routines and initiates a new research program. The important point is that the development of economic analysis is more than a logical progression of ever more truthful models. It rather shows leaps and bounds that are not accounted for in strictly logical terms. The historian Schumpeter needs the visionary and his vision to account for what happens in economics as a science, just as he needs the visionary entrepreneur to account for the dynamics of capitalism.

Schumpeter's example is the intervention by John Maynard Keynes. The way he imagines it is that Keynes already had his novel vision in The Economic Consequences of the Peace (1919); Keynes already saw the psychological tendencies that underlie economic processes. But he did not yet incorporate them in a full-fledged economic analysis. Later, in The General Theory of Employment, Interest and Money (1936) he would give these psychological tendencies an analytic expression in the form of the marginal propensity to consume, liquidity preference, and the marginal efficiency of capital. What followed is history--for the history of economic thought, that is.

A vision is not arbitrary in Schumpeter's view. It does not come about "just like that." Schumpeter alludes to the possibility that an ideology biases the vision of a researcher. He speaks of a habit of rationalization that makes us see things more as we like to see them than as they are (Schumpeter, 1972: 35). He distinguishes in Keynes's vision the characteristics of "an English intellectual" facing "England's declining capitalism" (42). Preceding Keynes, Jevons, Walras, Menger, and Marshall had visualized "their economic world" as "a world of numerous independent firms" (892). We may add that they have presented the view of individuals seeking to maximize objective functions under certain constraints and interacting in a system of markets that move toward an equilibrium as if guided "by an invisible hand."

Recently the "vision" appears to have turned more abstract. You have to know how to visualize computers and information processes (prices constitute all kinds of information, after all) to get the picture of contemporary theorists. Game theorists appear to imagine the world as rational agents that are caught up in guessing games with other rational agents.

After observing the vision that underlies a particular phase in economic theorizing (the modern visions are my elaboration), Schumpeter proceeds with a discussion of the analysis. For him the analysis is the key. He suggests that in the process that we call science, erratic ideas will be eliminated. Thus Schumpeter subscribes to the distinction between positive and normative economics that most economists teach and profess even today. The vision, therefore, is relegated to a pre-cognitive act in the scientific process. It is normative insofar as it is ideological, part of the wishful thinking that precedes analysis. In his history, Schumpeter provides ample attention to the historical and cultural conditions in which new developments in the analysis came about to give insight in the vision that may have motivated such a development. It makes his history a fascinating read. Yet, if those passages are ignored, the reader will be able to follow each development just as well. The vision remains extraneous, an added curiosity.