Academic journal article American Economist

Assumption without Representation: The Unacknowledged Abstraction from Communities and Social Goods

Academic journal article American Economist

Assumption without Representation: The Unacknowledged Abstraction from Communities and Social Goods

Article excerpt

All theorems of economics are necessarily valid in every instance in which all the assumptions presupposed are given. Of course, they have no practical significance in situations where these conditions are not present, von Mises (1963:66)

I. The importance of acknowledging the assumptions

Those of us who believe that economics is reality-based--i.e., a science intending to have some objective grounding in and bearing on the real world--may feel insulted when economics is referred to

* as a game that economists play (Fisher 1989; Bloor and Bloor 1993:158,164; McCloskey 2002:37-48);

* as pure mathematics (Rosenberg 1994a) or as mathematical politics (Rosenberg 1992, 1994b);

* as ideology (Ward 1979; Solow 1994; Klamer 2001:70); as mythology (Perelman 2006); as theology (Benton 1990; Nelson 1991; Boli 1995; Simons 1995); or as religion (Dunbar 1995:161);

* as autism (Devine 2002; and the Post-Autistic Economics Network more generally);

* or as a form of brain damage (Hazel Henderson, quoted by Streeten 2004:2).

We maintain that the assumptions underlying economic analysis can be used for determining the boundary conditions of a model (Dunbar 1995:99), as diagnostic tools for counteracting discrepancies of reality from theory, i.e., for correcting market imperfections (Sutton 2000). Samuelson and Nordhaus (1995:30-37), among many others, use this diagnostic approach to explore the appropriateness of particular government interventions in markets. But how can we be sure that we have identified and analyzed all the important market imperfections, if we haven't clearly specified all the fundamental assumptions? And the problem extends beyond that. As Weintraub (1991:1) notes,

If the [general equilibrium] theory has defects, then the centerpiece of neoclassical economics may be flawed, and the larger enterprise may be suspect.

II. We get utility from social goods derived from communities

Landsburg (1997:160) notes that "other people--our friends and our children and sometimes even strangers who do us unexpected kindnesses--are among the luxuries that make life worth living," and McCloskey (1998:302) says "I get utility because I love (not the other way around)." My specific concern here is with this utility that Landsburg implies, and McCloskey refers to.

Feminist economists have recently directed attention to this issue again, though the fact that economics overlooks the social fabric of human relations has been pointed out for well over a century. There is an entire category of producer organizations in "civil society" that economic theory largely overlooks, and an entire category of goods that they produce: Communities (social groups based on kinship, location, or belief, such as families, neighborhoods, and religious groups) provide utility directly (unmediated by markets or governments) to their members (those who identify with and participate in them) via unpriced, unpriceable (untradeable) social goods (Wicks 2009).

Social goods include

* a sense of identity (Buchanan 1978:366; Akerlof and Kranton 2000; Bendle 2002; Cowen 2002:131,136);

* meaning and purpose (Iannaccone 1998:1480-81);

* love and companionship (Lewis, Amini, and Lannon, 2000; Lane 2000:9 and Part III);

* the sense of affirmation, recognition, and power that accompany entrepreneurship (Trigilia 2002:43);

* social cohesion and stability (Seabright 2004);

* social sustainability more broadly, for example through the birthing and nurturing of children (King 2003); and even

* feelings of belonging, esteem, self-expression, and intellectual and esthetic satisfaction (Maslow 1954:chs. 5 and 8; Wallach and Wallach 1983:130-2; Wilson 1991:242).

Social goods are thus clearly valuable--by revealed preference--to those who expend time, energy, and money in developing and maintaining membership in communities in order to obtain them (Ackerman et al. …

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