Analytical bias

The world is made up of systems.  Our body is a system, or in fact a system of systems.  What we call “society” is another system of systems, as is the natural environment …

But these systems are very complex, difficult to explain or predict.  One successful strategy, which has had a revolutionary impact on how we live, is analysis …

By biting off chewable portions of a much larger world, science makes it possible to achieve progress in our understanding of how things work …

But this approach, for all its benefits, fails to capture most of the interactive effects that make a system a system.  It leads us to overstate the separateness of the things we study and observe and to understate their connectedness.  This is not an argument against thinking analytically, but for not being surprised by what this thinking fails to see so we can at least somewhat compensate for its shortcomings.

Peter Dorman

Using the ‘analytical’ method — “biting off chewable portions of a much larger world” — may indeed sound as a convincing and good scientific approach. But — as Dorman  notices — there is a snag!

The procedure only really works when you have a machine-like whole/system/economy where the parts appear in more or less fixed and stable configurations. And if there is anything we know about reality, it is that it is not a machine! The world we live in is not a ‘closed’ system. On the contrary. It is an essentially ‘open’ system. Things are uncertain, relational, interdependent, complex, and ever-changing.

Without assuming that the underlying structure of the economy that you try to analyze remains stable/invariant/constant, there is no chance the equations of the model remain constant. That’s the very rationale why economists use (often only implicitly) the assumption of ceteris paribus. But — nota bene — this can only be a hypothesis. You have to argue the case. If you cannot supply any sustainable justifications or warrants for the adequacy of making that assumption, then the whole analytical economic project becomes pointless non-informative nonsense. Not only have we to assume that we can shield off variables from each other analytically (external closure). We also have to assume that each and every variable themselves are amenable to be understood as stable and regularity producing machines (internal closure). Which, of course, we know is as a rule not possible. Some things, relations, and structures are not analytically graspable. Trying to analyse parenthood, marriage, employment, etc, piece by piece doesn’t make sense. To be a chieftain, a capital-owner, or a slave is not an individual property of an individual. It can come about only when individuals are integral parts of certain social structures and positions. Social relations and contexts cannot be reduced to individual phenomena. A cheque presupposes a banking system and being a tribe-member presupposes a tribe.  Not taking account of this in the ‘analytical’ approach, economic ‘analysis’ becomes rather uninformative nonsense.