by From Robert Locke As an historian, I am somewhat appalled at the inability of economists, including those on this blog to get the history of their own discipline straight. The obsession has been with neoclassical economic’s attempt to turn economics into a physico-mathematical discipline as Walras phrased it, and the economists usually discuss this attempt within the historical context of their discipline pre-1945, with references, to Walras, Marshall, Keynes, and others. It became clear to me over thirty years ago, that the neoclassical effort to turn economics into a prescriptive science had failed before WWII. I based this on good authority, when I read the following in the foreword to John von Neumann and Oskar Morgenstern’s now classic book published at Princeton UP in 1944,
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from Robert Locke
As an historian, I am somewhat appalled at the inability of economists, including those on this blog to get the history of their own discipline straight. The obsession has been with neoclassical economic’s attempt to turn economics into a physico-mathematical discipline as Walras phrased it, and the economists usually discuss this attempt within the historical context of their discipline pre-1945, with references, to Walras, Marshall, Keynes, and others.
It became clear to me over thirty years ago, that the neoclassical effort to turn economics into a prescriptive science had failed before WWII. I based this on good authority, when I read the following in the foreword to John von Neumann and Oskar Morgenstern’s now classic book published at Princeton UP in 1944, Theory of Games and Economic Behavior:
“The concepts of economics are fuzzy but even in those parts of economics where the descriptive problems have been handled more satisfactorily, mathematical tools have seldom been used appropriately. Mathematical economics has not achieved very much.”
If the mathematics of preWWII neoclassical economics had not achieved very much as a prescriptive science, then why study their work? That is what Neumann and Morgenstern were asking. The mathematics in Game theory, e.g., matrix theory and probability theory were not part of the mathematical toolkit of neoclassical economists prior to WWII.
When I wrote my chapter on The New Paradigm in Management and Higher Education Since 1940, CUP, 1989, I focused on the methods of Operational Research developed during WWII and the Cold War, that neoclassical economics imbibed . I wrote, for example, about how the Rand Corporation working on OR problems for the US Air Force gave birth to George Dantzig’s linear programming algorithms in 1947. Postwar military planners and the economists who worked with them at Rand believed the new toolkit would transform neoclassical economics into a prescriptive science. At Rand in 1948, the economist Kenneth Arrow used the toolkit in his work on Rational Choice Theory. The neoclassical economists Joseph Dorfman, Paul Samuelson, and Robert Solow applied linear programming to their subject as well (in Linear Programming and Economic Analysis, 1958)
Why isn’t the source of the new paradigm in OR being discussed, instead of preWWII economists.
When I wrote the second chapter in my 1989 book, “The New Paradigm Revisited,” I questioned through the critics, how the prescriptive prowess of The New Paradigm fizzled. The people I cited were primarily OR scientists themselves. That is, I note that the people whose methodologies led to the New Paradigm, questioned the effectiveness of their own discipline. The prime example of this volte-face is Russell Ackoff, who popularized OR methods in the UK in the 1960s, only to write in a 1979 article, “The future of operational research is past,” “OR problems can never be a perfect representation of a problem. They leave out the human dimension, the motivational one. [Problem solving requires] the application not only of science with a capital S, but also, all the arts and humanities we can command.”
When we note the failing of economists to admit the shortcomings of the methods that they imbibed postwar from the OR toolkit, we should not forget that this accusations does not apply to the OR people themselves who invented the methods economists borrowed. In the late 1980s invited to give a lecture in the Management School, at Trinity College Dublin, I told my host Bill Kingston, referring to Ackoff’s article and others, that OR had had a sort of “nervous breakdown” in the late 1970s. At a luncheon the next day, Kingston asked the head of OR in the Management School, who was in the luncheon group, “Professor Locke says that OR had a sort of nervous breakdown about the effectiveness of its methods, is that true?” I was slightly embarrassed to see him called out before his colleagues, using me as an instrument. He paused, thought, and then said, “yes, that’s true.”
If we could get the same sort of honest discussion in economics as I ran into in the OR community, we would not have the dialogue of the deaf about orthodoxy and heterodoxy today.
We could begin by discussing the sources of The New Paradigm in economics in OR methodology that people either forget or of which they never heard.