The Human Economy approach endorsed by Nobel laureate economist aged 102

Ronald Coase, an American economist of British origin, won a Nobel prize for inventing the idea of transaction costs in his famous paper "The nature of the firm" (1937). He is now 102 years old and has just announced his desire, with a young Chinese associate, to found a new journal called "Man and the economy" (well he was born in 1910).

A century ago, Alfred Marshall, author of Principles of Economics (1890) and Keynes' teacher at Cambridge defined economics as “both a study of wealth and a branch of the study of man”. But, in a manifesto published in the Harvard Business Review last month, "saving economics from the economists", Coase argues that "The degree to which economics is isolated from the ordinary business of life is extraordinary and unfortunate."

"In the 20th century, economics consolidated as a profession; economists could afford to write exclusively for one another. At the same time, the field experienced a paradigm shift, gradually identifying itself as a theoretical approach of economization and giving up the real-world economy as its subject matter. Today, production is marginalized in economics, and the paradigmatic question is a rather static one of resource allocation. The tools used by economists to analyze business firms are too abstract and speculative...This separation of economics from the working economy has severely damaged both the business community and the academic discipline. Since economics offers little in the way of practical insight, managers and entrepreneurs depend on their own business acumen, personal judgment, and rules of thumb in making decisions".

"Economics thus becomes a convenient instrument the state uses to manage the economy, rather than a tool the public turns to for enlightenment about how the economy operates. But because it is no longer firmly grounded in systematic empirical investigation of the working of the economy, it is hardly up to the task."

"At a time when the modern economy is becoming increasingly institutions-intensive, the reduction of economics to price theory is troubling enough. It is suicidal for the field to slide into a hard science of choice, ignoring the influences of society, history, culture, and politics on the working of the economy. It is time to reengage the severely impoverished field of economics with the economy. Market economies springing up in China, India, Africa, and elsewhere herald a new era of entrepreneurship, and with it unprecedented opportunities for economists to study how the market economy gains its resilience in societies with cultural, institutional, and organizational diversities. But knowledge will come only if economics can be reoriented to the study of man as he is and the economic system as it actually exists."

There is also an article on all this in Businessweek last November, "urging economists to step away from the blackboard".

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Comment by M Izabel on March 17, 2013 at 5:10am

I hate the idea that anthropologists can only contribute humanistic interpretation and abstraction to economics and simplify equations into anecdotes.  I have the feeling that most economists do not align themselves with humanistic social scientists for that reason--the softening of their discipline with something not mathematical and not empirical all the time.  Can you imagine what Postmodernists can say about market self-correcting itself?   

How can anthropologists expand and complete economics?  I remember what my roommate in college asked: "what is the relevance of culture in supply and demand."  He was an economics major who wanted to embarrass me in front of our other roommates. I thought I was bullshitting when I said the price determination model is limited and incomplete.  For some reason, my bullshitting made sense.  

I still believe my first attempt in anthropologizing economics is still a good example for someone who asks about anthropology expanding and completing economics. In the model, only supply and demand affect price.  What affect supply or demand indirectly affect price, but they are not included in the model.  Taste and preference that are cultural (anthropological--the demand of olive oil in China is low because Chinese prefer sesame oil) and influence and pressure that can be social (sociological--the demand of Nutella goes up after media advertisement) definitely affect demand and consequently price.

I know my example is basic, but anthropologists or sociologists, if they want to go further,  can copy the model using different variables and issues--election spending, candidates winnability, and corruption in government, perhaps.  One thing I'm sure, economics can definitely teach anthropologists empiricism and the usefulness of numbers.         

           

Comment by Keith Hart on March 17, 2013 at 3:02am

I am sorry that my reply to Nathan was so waspish. The issue was why some unknown persons he talks to would be shocked that I think a democratic politics might involve selective alliances with institutions that wield considerable power. This, first of all, means that what I have been writing for almost half a century has not been read, to be replaced by a sort of anthropological sentimentality. Second, Nathan switched the topic to the relationship between anthropology and economics, which is political only in the sense of competition for academic resources and perhaps, in a larger sense, about why the two disciplines are valued so differently in our societies. This may be important to a graduate student, but my game is about changing the world for the better and this rarely impinges on the outlook of academic anthropologists, more's the pity.

So to turn to John and Miyako, both of whom raise the question of anthropologists vs economists. I have published a book in 2011 with Chris Hann which explains at length what I think about that relationship. I also gave an interview to the European newsletter, Economic Sociology, which was concerned precisely with these issues. I don't think trying to summarise these views in blog soundbites is all that useful. But I am willing to answer specific points and, as I said, I wasn't sure what Nathan was getting at, since apparently he feels that making an argument is passe.

What is sure is that the AT issue on the anthropology of number has, in my view, almost nothing to do with the question of treating bureacracies as potential allies or the enemy. So don't worry about that, John. I should say that the manifesto for a human economy that sparked this blog post has very little to say specifically about anthropology or economics, since I conceive of and practice it as an interdisciplinary enterprise, like development studies. But the case study you report on seems entirely consistent with the Coase quote I began with and endorsed, namely that economics should be about real world circumstances and has little to offer businessmen in its present form, nor has anthropology. I know you think I am only interested in pushing an abstract philosophy, but this is because I am often called upon to question the value of ethnographers' messy particularism. In fact I direct twenty researchers, all of whom have very concrete topics of inquiry. I even dabble in empiricism myself, having just published a history of South African capitalism from the 1870s with an economist collaborator. This old polarity just won't wash as far as my own work is concerned and I get tired of trying to refute it in this sort of medium.

So, it is up to anthropologists and sociologists now to step up to the plate and do what economists don't want to explore. It is great to have you back, however temporarily, M. This is exactly what my manifesto is intended to clarify. How can we do that? I certainly want a Nobel and even have my placemen on the relevant Swedish committee which has recently been enlarged to include non-economists. I hope to get one eventually for the informal economy, human economy and, above all, as the author of a forthcoming road map for African development. But I am not holding my breath. Coase had to wait until he was 80 before getting one, so that gives me another decade or so. The interview I cited above says that I long ago gave up on the idea of being a broker of sorts between anthropology and economics in order to synthesize them, if I could.

And I am a mathematician with a special interest in the history of science, especially statistics (which I have taught for 40 years). It is probably not what Nathan had in mind, but my offering to the special issue of Anthropological Theory can be found here. It is quite out of step with the rest of the contributions, but I like it anyway.

Oh, I did once carry out a sort of ethnography of the Yale economics department's general seminars in the late 70s. The economists' problem was they had to speak in two complementary registers. The first was econospeak and it consisted of writing indifference curves and quadratic equations on the blackboard. But it was hard to have a conversation in algebra or geometry, so they resorted to a second lingo which had affinities with barber shop economics, i.e it was crude. For example, Arthur Okun, a chairman of the president's economic advisors, once said that price was "costs plus a markup (which is customarily determined)". It was usually a lot more vulgar than that. For me the interesting feature of this dualistic chat was the marker of the shift from one register to the other. Someone would say, "Let me summarise your STORY" and would then lapse into the barber shop talk. After a while, a senior professor would become anxious that the quality of the economics had deteriorated, so he would leap up and draw curves and equations on the board, in order to restore the seminar to respectability.

How many anthropologists have actually studied what economists do socially? I did. And I work with them because I do not reject the historical mission of economics to place our common material affairs on a rational footing.

Comment by M Izabel on March 17, 2013 at 2:09am

I like the idea of economists stepping away from the blackboard, Keith.  I hope that "stepping away" means going to the field.  If this is the case, should anthropologists and sociologists learn economics (econometrics, economic theories and principles, mathematical economics) or economists learn anthropology and sociology?  

Considering how science is preferred when it comes to research funding, academic priority, and public acceptance, I don't think economists will step away from the blackboard and go to the field.  Anthropologists and sociologists don't win highly coveted prizes; physicists and chemists who use mathematics do.  So, it is up to anthropologists and sociologists now to step up to the plate and do what economists don't want to explore. 

I wonder if the mathematicalization of economics has something to do with the making of economics as a difficult, exclusive, and specialized field.  Are prizes in economics given only to economists who do quantitative stuff?  If they are, economists will never change their ways. They are motivated the way MD-Phd's are in their cancer research.  Who doesn't want a Nobel?

Comment by Nathan Dobson on March 16, 2013 at 1:51am

I like the way this conversation has gone towards "getting along".

I was just reading Robert Bellah's introduction to a collection of Durkheim's essays that puts forward a good case for why he might have been so interested in social integration:

"After nearly a century of grave social conflict and turmoil when the very existence of French society was frequently threatened by total civil war, it is not surprising that a French intellectual might be concerned with social integration, especially under a regime which he saw as embodying the ideals of the revolutionary tradition and the potential for a greater realization of them" Bellah (2001: xvii).

Comment by John McCreery on March 16, 2013 at 1:16am

Nathan, Keith. 

I am not sure why (I have not read the Anthropological Theory special issue: 2010, 10, 36), but I have been around long enough to notice when cats bristle and extend their claws. For those of us not privy to the quarrel, it would be helpful to have things spelled out a bit.

But putting that aside, I would like to contribute a perspective from another part of the world. I have a paper in press on the work of the Keieijinruigaku (Anthropology of Administration) group organized by Professors Chirohika Nakamaki (National Museum of Ethnology) and Kenichi Hioki (Kyoto University Business School) in  Japan. Writing more than two decades ago, Hioki describes why, as a professor of management, he is interested in anthropology. He observes that management theory, which has for years followed the economists like a runner behind the leader in a marathon, suddenly finds itself in front, without a new model to follow. He then goes on to observe that while theories in economics are all well and good at the level of abstraction necessary to describe markets in general, they cease to be useful to managers grappling with concrete issues in specific organizational contexts, where particularities of company history, culture and organizational structure come into play. This, he says, explains his interest in anthropology and its ethnographic method, which he sees as opening the way to this more practical level of analysis. 

I observe in light of our conversation that the Hioki's focus of interest is not in replacing economics with some other abstract, philosophical theory, but in digging into the muck to see how the roots of organizational culture work (I am riffing here on a Buddhist image, enlightenment as a lotus blossom growing from the fertile mud at the bottom of the pond of everyday reality). 

I am not taking sides in a quarrel I do not understand well enough to have a position. I am saying to both parties, what if you looked at the topic this way? How, if at all, would that change your views?

Comment by Nathan Dobson on March 15, 2013 at 10:46pm

Thanks Keith and John.

I wrongly assumed that I could slim down what I was saying to a couple of lines because we were already in a conversation and you would understand where I was coming from. It's clear to me now that the only real engagement people can have on the site is if they present an argument (or use it to meet people). The conversation/ email exchange format doesn't work.

Comment by Keith Hart on March 15, 2013 at 10:27pm

Well, that's a funny one, Nathan. You start by referring to clandestine conversations without stating your own position. The topic appears to be bureaucracies (governments, capitalist corporations?), but then it shifts via language and maths to talking to economists. I fail to see what a series of articles in a technical anthropology journal has to do with whatever you started out referring to. But then since you didn't cite anything I said, that was unclear from the beginning. Dispossession is asked to carry a semantic load I can't figure out. This isn't just cryptic, it's terminally confused and evasive.

I don't know who could be shocked by my claim that self-organized grassroots initiatives are good for some things and large-scale bureaucracies for others, sometimes in complementary ways. I have been saying so for almost half a century. I suppose, since they don't read, they refer only to their own sensibilities. How do you suppose your message found its way to this public resting place? Do you have plans for replacing or avoiding the internet, mobile phone networks, credit cards, traffic lights, computer OS, universities?

Is there a political point in what you read or one you wish to make? I probably had in mind the role of large shipping firms who bankrolled the French revolution in order to get rid of the plethora of rents charged on their goods when they passed through the countryside, rather like the transport situation in much of Africa today. It costs $4000 to ship a car from China to Tanzania, another $5,000 to get it from there to Uganda.

My recommendation is that those who would like to do something for themselves might usefully consider if they have potential allies who resent the same obstacles they face. But all this is speculation, since your original post didn't make sense.

Comment by John McCreery on March 14, 2013 at 6:38am

Serendipitously, this piece on why bureaucracy is actually a good thing just appeared on Reuters.

Comment by John McCreery on March 14, 2013 at 4:09am

Nathan,

How in the world do they expect to achieve anything without engaging with bureaucracies? Come the revolution...overthrow the system? As someone who was there in the sixties, I'd have to say, "Been there, done that, have you seen what the usual outcomes of revolutionary fervor are?" Are you idiotic enough to believe that you can change the world by standing on the sidelines and moaning about it?

Comment by Nathan Dobson on March 14, 2013 at 1:18am

People I've spoken to recently are a bit shocked at how you endorse engagement with "bureaucracies they think are the enemy". I tend to think that we have to try and speak other languages but I suppose I get stuck on maths. How much are economists really prepared to think of number in the ways you and others did in Anthropological theory special issue: 2010, 10, 36? And dispossession of course?

I hope this doesn't sound too cryptic and you get my gist.

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