People often make fun of social and behavioral scientists for seeking empirical evidence for apparently obvious truths about human nature. Rubinstein seems at some points in the interview to imply that such truths are so overwhelmingly obvious that there is no point to testing them empirically). One must take risks to learn., afterall.Ī comment on the experimental testing of obvious truths about human nature (Prof. When it comes to empirical testing, it is upon the individual to put his own views on the line and to resist the temptation to “explain away” recalcitrant evidence (which is especially easy when dealing with complexity and so many variables). Our ability to test scientific hypotheses about such models is extremely limited compared to physicists or even biologists (who face similar complexities). In any case, the problem with economics is that models which have anything more than an ad hoc or “rule of thumb” usefulness require extraordinary degrees of complexity and superhuman abilities of observation to test satisfactorily. But one should be careful to distinguish between the modeler and the scientist, even though they may be the same person in two different roles. By replacing variables within the model with measured quantities, predictions can be derived and hopefully tested. Models may describe logically possible worlds, but by themselves imply nothing about the actual world.Ī scientific hypothesis is usually a claim about a model, e.g. It is not, in and of itself, a proposition about reality anymore than an algebraic equation. I always make a distinction between a model and a scientific hypothesis.Ī model is an abstract mathematical toy, a formal object with tenuous connections to reality. I haven’t studied game theory, but I have studied a little of formal languages. Quite differently, economists and academics operate with abstract and conceptual cognitive machinery that is less applicable to enhancing an understanding of real world economics and in many cases may be more prone to errors of judgment. It is my belief that the reason “crowds” of ordinary people make good guesses, (and start almost all new small businesses which is the real fruit of economic activity), is that they think in “concrete” ways–a cognitive process that enhances decision-making. What is more insightful from Kahneman’s work is that they found only a small to medium correlation between IQ test performance and one’s capacity for rational decision making. They found that many people are very prone to errors of judgment and that decision-making skills vary greatly, are largely unpredictable, and are based on the unique nature of a person’s cognitive make-up. This topic led Rubinstein to cite the work of Kahneman and Tversky who won the 2002 Nobel Prize for their work on how people make decisions. He does indicate a liking for the Wisdom of Crowds, the supposition that ordinary people often are more correct than the experts–a wonderful endorsement of the free and open marketplace–a marketplace happily uncorrupted by enforced mandates of expert policy makers. And, then there is the fact that humans do not always make rational economic choices in reciprocal altruistic interactions, so application of presumed logical thinking is counter-productive. He indicates that all the presumed scientific “accuracy” of game theory is suspect, and that is true, because examples like the Prisoner’s Dilemma are based on an artificial setting that is not readily transferable to real world settings. The use of scientific language and technique to give the aura of certitude that it doesn’t deserve.” And when we do, we get into what Hayek called scientism, not science. So for me there is often a middle ground. But to pretend we can use those, then, to run the economy or to design a mechanism for a public policy is often a charade. Rubinstein admits that most economic hypotheses and experiments “provide insights into human behavior that are not obvious and that you wouldn’t have noticed before. Is it possible that, the more abstract and complex an idea is, the less chance it will predict or influence activity in the realm of human behavior?
The grandest plans frequently fail, and worse, have unfortunate unintended consequences. This an excellent example of the humilty we need to see in our experts, economists, and legislators.