The Saving Lie: Truth and Method in the Social Sciences

Part I: Expediency

Part I Expediency How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortune of others, and render their happiness necessary to him, though he derives nothingfrom it, except the pleasure of seeing it . . . for this sentiment, like all the other original passions ofhuman nature, is by no means confined to the virtuous and humane , though they may perhaps feel it with the most exquisite sensibility. The greatest ruffian, the most hardened violator of the laws of society, is not altogether without it. -Adam Smith, The Theory of Moral Sentiments In the next three chapters I enter the domain of certain economists and examine their regnant expected-utility model, which presupposes that all actions-including what is done by the seemingly "virtuous and humane"-are motivated by self-interest. That model, for a century and more, has dominated not only our thinking about practical economic and political affairs but also much of our everyday dealings with one another. Nevertheless, it is in many ways patently out of touch with reality. Three chapters (1-3) chart a progressive acknowledging by economists ofthat problem but do not discover any satisfactory solution. The crucial difficulty is the complexity and uncertainty that is produced by our human capacity to make up our own minds. Are we to ignore that capacity and model a social system as a natural system? In that case, human choice-choice with intended consequences-is an illusion and we have no more ability to intentionally shape our destiny than does a flower or an insect. Nor can we be held responsible for what we do. Or should we model social systems as choice-theoretic, in part, at least, the product ofour own volition? The expected-utility model has a very powerful presence in social analysis. To show what it entails I will make a comparison between three economists, Milton Friedman, Ronald Coase, and Douglass North. All three happen to be Nobel laureates, but that is not why I selected them. They stand as representatives of particular points of view. In each case the discussion focuses on a single article or, in North's case, a short book. (The selected writings, I should make clear, do not represent the scholar and his life's work, but only the models he used on that occasion.) All three pieces are written in agreeably clear and forceful prose and are therefore accessible to those untrained in the mathematical language that most economists now use (thus, it is said, liberating themselves from the real world). The order in which the three men became Nobellaureates happens to match the logical order of my argument, which is a descent from 14 Expediency highly abstract general statements in the direction of empirically grounded particulars. The pattern is of a thesis, exemplified by Friedman (Chapter 1), followed by two recensions, one by Coase (Chapter 2) and one by North (Chapter 3), which are not out-and-out antitheses, but rather modifications intended to bring the original thesis somewhat closer to the world of action and experience. ...