I propose on this occasion to address the same kinds of questions to an entirely different market: the market for new ideas in economic science. Most economists enter this market in new ideas, let me emphasize, in order to obtain ideas and methods for the applications they are making of economics to the thousand problems with which they are occupied: these economists are not the suppliers of new ideas but only demanders. Their problem is comparable to that of the automobile buyer: to find a reliable vehicle. Indeed, they usually end up by buying a used, and therefore tested, idea.--George Stigler (1982) Nobel Lecture (Economics), Stockholm.
As regular readers know, the Nobel (Chicago-economist), George J. Stigler, had a lifelong interest in the philosophy, and sociology of science. I have remarked in the past that this interest was not entirely disinterested; it's clear that Stigler's work also aimed at influencing the discipline (for example, encouraging consensus-aiming practices that would allow one to ignore criticisms) and I have argued here that he was rather successful at doing so and so is worth paying attention to how philosophical ideas shape scientific practice.
Somewhat surprisingly and unusually Stigler chose to structure his prize lecture around his interest in the sociology/philosophy of economics. I call it unusual because he won the prize for his "seminal studies of industrial structures, functioning of markets and causes and effects of public regulation," and ordinarily the Nobel lecture is an elegant discussion of and introduction into the material that generated professional recognition often accompanied with polite recognition of folk who did not get the prize, but paved the way to it. Stigler deviates from the precedent. It's not that he does not discuss these topics at all -- and one could argue that he is discussing the functioning of the markets in ideas -- , but they are all framed by his sociological interests in science. These interests are long-standing, and they were shaped not just by his teacher, Knight, but also his encounters with Merton (a colleague at Columbia) and Talcott Parsons (probably a colleague at Stanford), and his early readings of Kuhn.
As an aside, Stigler was a world-class historian of economics, even long after that had become professionally non-fashionable. This lack of fashion was itself a consequence, in part, because he would (while echoing Kuhn) tell folk that a sign of scientific maturity was that disciplinary history became of little interest to the puzzle solving economists (thus providing justification for the elimination of history of economics from graduate curricula).
In fact, the previous paragraph is not really an aside. The Nobel lecture relies explicitly on [A] a distinction "between prescientific and scientific stages of a discipline." (This is quoted from the abstract.) It also relies (more implicitly) on a [B] distinction between those (the few) that supply "new ideas" -- akin to Kuhnian legislators -- and those ("most") that "demand" ideas to be applied to the determinate problems with which they are occupied (the Kuhnian worker-bees, or puzzle-solvers). (The quoted material is the second paragraph of the lecture.)
It turns out however that the few are, from Stigler's perspective, unusual characters, I quote the relevant paragraph before I comment:
Those economists who seek to engage in research on the new ideas of the science to refute or confirm or develop or displace them are in a sense both buyers and sellers of new ideas. They seek to develop new ideas and persuade the science to accept them, but they also are following clues and promises and explorations in the current or preceding ideas of the science. It is very costly to enter this market: it takes a good deal of time and thought to explore a new idea far enough to discover its promise or its lack of promise. The history of economics, and I assume of every science, is strewn with costly errors: of ideas, so to speak, that wouldn't run far or carry many passengers (530)
Kuhnian legislators have two roles: being [C] developers of new ideas and, unless they have disciples willing to do the work, [D] persuaders of others to accept them. [D] means there is a need for scientific entrepreneurs and the art of rhetoric in science. It turns out that [E] there are high barriers to entry to become a Kuhnian legislator both because (i) it requires a lot of effort and time to be on top of existing science and develop new ideas, as well as (ii) the risks involved of producing ideas that do not pan out. Some of the costs involved, are (iii) investments in prior social infrastructure of science ("the machinery of intellectual exchange-journals, learned societies, and conferences"(535)) that make a "large expenditure of time, intelligence, and research resources" possible (536). Notice that such ideas may well be true, but if there is no uptake (recall [D]) and so no "prestige, reputation, and income" (530) worth having, then this, too, will be treated as failure.*
Famously, Kuhn divides the immature and mature stage of science in terms of consensus or lack thereof. Stigler had used such a measure, too, in the past. But in the Nobel lecture he offers a different criterion: the pre-scientific stage "is characterized by absence of a set of interacting practitioners who are devoting a large part of their lives to the accumulation of knowledge, and hence it is characterized by the absence of cumulative progress." (530) There are really two claims here: [F] in the scientific stage a science is progressing. More important, [G] a science is characterized by the presence of practitioners who (i) recognize each other as fellow travelers/scientists, who (ii) are professionals (in the sense that science is their main occupation), and (iii) who form a communicative community. It's not always clear if he thinks whether [G] causes [F] or [G] is a symptom of [F.]
One interesting feature of the absence of progress and lack of a scientific community in the pre-scientific stage that Stigler notes is that descriptions of it often (a) "almost totally lack a time dimension." In pre-scientific stages it makes little difference in what order doctrines are discussed. An interesting feature of the presence of a scientific community is that (b) detected errors will be refuted, and "only the detected errors of unimportant economists are spared a prompt reputation." (531)
Another criterion he offers between the pre-scientific and scientific eras, is that in the pre-scientific era the problems of a would-be-science are shaped by the (often practical needs of the) environment. While Stigler does not deny that "new circumstances" (political and technological changes) can spur interest in some questions and even innovation, but at bottom his view is that "an empirical science such as economics is to provide general understanding of events in the real world, and ultimately all of its theories and techniques must be instrumental to that task. That is very different from saying, however, that it must be responsive to the contemporaneous conditions and problems of the society in which it is situated." That is, Stigler [H] denies what in earlier work he had called “environmental theory.” And, in fact, it is accompanied by a further claim that [I] "A science requires for its very existence a set of fundamental and durable problems." (534) One may say that these problems are part of the identity conditions of the science and the ones that Kuhnian legislators help illuminate.+ But in the moment it's very difficult to distinguish between fruitful ideas and dead-ends. And this means [J] that all sciences will be subject to fashions that after the fact prove illusory in fruitfulness.
Because Stigler treats mature science as a fairly efficient communicative community, the [K] new ideas that will prove to be fruitful must in some sense be a natural and small enough, discrete extension from existing practices ("science also progresses through time without making large jumps" with an explicit nod to Darwin's Natura non facit saltus. ) This commitment follows quite naturally from the way demand in economics is conceived. For [L] any idea to have uptake it most (and Stigler credits his Chicago colleague, Gary Becker) be deploy-able by applied practitioners (who have specific human capital) with little extra cost and more potential reward (and who are risk averse). It also follows that given the structure of the market of economic ideas that there is a bias against novelty from the majority because their "capital would be reduced if [their] knowledge were made obsolete by the general acceptance of a new theory. Hence, established scholars should, in their own self-interest, attack new theories." (538) That is to say, [M] there is considerable status quo bias in any scientific discipline that also (and Stigler does not point this out) helps stabilize the boundaries and the identity conditions of the discipline.
In fact, [N] often novel ideas will be subject to controversy, although Stigler points to the uptake of his own work in the economics of information as an exception (there was little controversy). Stigler thinks this was due to the fact that "no established scientific theory was being challenged by this work." (539) So there are for Stigler [O] two kinds of new ideas: those that extend a theory or apply a known tool in a new area (relatively little controversy) and those that challenge existing practices. The latter can form the basis of a true challenge to the status quo [P], "it takes a theory to beat a theory." But Stigler admits that [Q] a true test is rare because it is rare that "a theory in economics has a well-defined domain of applicability." (542) Instead theories are tested indirectly for "fertility," by deploying them to "explore a variety of problems." Such [R] indirect tests take time and a theory can linger for a long time before it is ultimately discarded.
Stigler explicitly recognizes that there may be more other interesting factors. But we can treat [A]-[R] as the main factors of Stigler's public choice model of science. (He credits Downs, Buchanan, and Tullock, but seems to have been unaware of Tullock's The Organization of Inquiry, which (recall) anticipates many of his own views.
Because I have gone on too long for a blog post, I will not offer critical commentary today. I just note one final feature of Stigler's philosophy of science. For, Stigler, thus [Q] a science is characterized by fundamental Knightian uncertainty about its own development ("No one can describe the precise characteristics or content of a new piece of scientific work that will find ready and eager reception from the scientists of a period." (538))** This commitment to Knight's ideas is especially notable because he rejects the thought (which he explicitly associates with his teacher Knight) that the subjects studied by economists are mistake prone and do not grasp the effects of their policy choices (recall also my treatment of his Tanner lectures).
*It's only if you think the market in ideas is efficient (as Stigler does) and that all true ideas are fruitful/applicable (there is no reason to believe Stigler thinks that) that this is impossible. So, while Stigler often writes as if he denies arbitrage in ideas, he is not so foolish to think that the failed ideas must therefore be false. He does, however, seem to think, that true/fruitful ideas will be discovered at some point. (See 535ff.) [Z] So, the market in ideas is efficient and truth-apt in the long run.
+ Actually Stigler's position is more akin to an essential tension, "A viable and healthy science requires both the persistent and almost timeless theories that naturally ignore the changing conditions of their society and the unsettled theories that encounter much difficulty in attempting to explain current events. Without the base of persistent theory, there would be no body of slowly evolving knowledge to constitute the science. Without the challenges of unsolved, important problems, the science would become sterile." (535)
**I have suggested, by contrast, that a true Kuhnian legislator can understand the structure and practices of a "market" in ideas in advance and even shape it (recall this post).
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