The study of human institutions is always a search for the most tolerable imperfections.
Richard A. Epstein
Do you know what a just-so story is? I didn't, but looked it up:
In science and philosophy, a just-so story, also called an ad hoc fallacy, is an unverifiable and unfalsifiable narrative explanation for a cultural practice, a biological trait, or behavior of humans or other animals.
In writing the following, Arnold Kling tempted me to add the below comment to his post Paul Krugman on the State of Macro:
4. So I have a PSST model for unemployment [see my post here, G.T.], and my “weak” model[s] for inflation. I think it is fair to criticize them as “just-so stories.” But I would say the same thing about the sorts of models preferred by Blanchard or Krugman. Just-so stories, dressed up in pretty math.
To which I replied:
Your concession as to the role of just-so theories in economics strikes me as significant, and even surprising. As I regard you as a serious thinker, I must rule out the conclusion that economics is idle prattle to you. But what is it?
To the extent that economics is based on story telling, what is it in the nature of that narrative habit that sustains economics as a worthwhile form of thinking about human interaction?
I hope, in writing this, I don't sound cynical or facetious. Increasingly, I get interested in the role of (rational) ignorance, which all conceivable societies are inevitably affected by in very considerable measure; and I wonder, how do we manage the vastness of our (rational) ignorance so well - in countries such as the US or Germany, where life is quite bearable?
The consideration that (rational) ignorance is a virtually invariant phenomenon in all modern societies including all conceivable improved versions (such as, say, a significantly more libertarian society), has led me to become a lot more respectful of politics and the state (as a functional necessity that, of course, may fail) than I used to be, their tremendous dangers and deficiencies notwithstanding.
Politics and the state seem to be (a) the result and (b) the instrumental basis of more or less successful story telling. For politics seems to be involved in seeking out procedures indispensable in dealing with large amounts of irreducible (rational) ignorance.
We need to tell us reassuring stories to sustain sufficient levels of trust while living in a largely anonymous society.
Politics is a spontaneous order - a hugely important aspect of spontaneous order totally disregarded by Hayek - that serves as a discovery procedure whose (functionally desirable) end product is at least a minimal level of trust etc. needed to support social order. A highly narrative enterprise, full of just-so stories.
If there is something to this view, what role does economics play in it with its just-so stories?
Arnold Kling replied:
I limit the scope of “just-so stories” to macroeconomics. Microeconomics often generates predictions that are falsifiable.
To which I replied:
Politics is what happens when we have to tell people:
“Sorry, serious economics cannot handle conclusively issues like unemployment or the nature of an advisable monetary regime.”
And macroeconomics is what happens when economists participate in politics.
Seriously, if there are vital topics of an economic nature that cannot be covered in a scientifically sound way, then there must inevitably develop a part of economics that deals in and is based on rhetoric and techniques of persuasion – not necessarily as something to be maligned, but possibly as a cultural pattern of mutual reassurance, just like free speech may work very well in maintaining peace (social order) even though what is being exchanged is partly of an acrimonious and a generally nonsensical nature, as the case may be.
I believe, this has very serious implications for liberty. If vital social issues of an economic kind cannot be resolved conclusively in support of a certain vision of society, say a classical liberal society, then the case for classical liberalism is incomplete, inconclusive in vital regards, and thus open to severe contestation not only among classical liberals but all citizens, parties, and factions of a free society.
The value of freedom lies in her ability to embrace and cope with the uncertainties and disunity underlying a community inevitably entertaining rhetorically constituted views of society.
No less than free markets, politics ought to be conceived of in terms of a spontaneous order.
Political structures evolve to seek out ways of attenuating the risks inherent in vast and widespread ignorance of the conditions giving rise to successful human coexistence.
Freedom produces these risks, while at the same time providing an excellent laboratory in which to test insurance and abortive products to defend against the dangers of inevitable ignorance.