Following up on last week’s post, I wanted to highlight a chapter in For the Common Good: Redirecting the Economy toward Community, the Environment, and a Sustainable Future, by economist Herman E. Daly and a philosopher-theologian John B. Cobb Jr., called “The Fallacy of Misplaced Concreteness in Economics.” It identifies a critical problem resulting from prevailing economic theories which parallels remarkably the Buddhist critique of an individual’s unexamined approach to life.

“. . . Economists on the whole wanted economics to become increasingly scientific, and their idea of science was based on physics rather than on evolutionary biology . .. the decision to follow physics was the decision to mathematize. Mathematics can only work with what can be formalized. In economics this has meant, in practice, what can be measured. Hence the aim of mathematization biases economics toward aspects of its subject matter that can be measured” (pgs. 30-31).
Alfred North Whitehead, the illustrious mathematician and philosopher, used the phrase “the fallacy of misplaced concreteness” to describe the manner in which conclusions are often inappropriately drawn based on abstractions which are unrecognized as such. Daly and Cobb elaborate:
“What is the set of abstractions that political economy has riveted on economic thought and at which it has come to a self-satisfied halt? One of the most important is the abstraction of a circular flow of nation product and income regulated by a perfectly competitive market. This is conceived as a mechanical analog, with motive force provided by individualistic maximization of utility and profit, in abstraction from social community and biophysical interdependence. What is emphasized is the optimal allocation of resources that can be shown to result from the mechanical interplay of individual self-interests. What is neglected is the effect of one person’s welfare on that of others through bonds of sympathy and human community, and the physical effects of one person’s production and consumption activities on others through bonds of biophysical community. Whenever abstracted-from elements of reality become too insistently evident in our experience, their existence is admitted by the category ‘externality.’ Externalities are ad hoc corrections introduced as needed to save appearances, like the epicycles of Ptolemaic astronomy. Externalities do represent a recognition of neglected aspects of concrete experience, but in such a way as to minimize restructuring of basic theory. As long as externalites involve minor details, this is perhaps a reasonable procedure. But when vital issues (e.g. the capacity of the earth to support life) have to be classed as externalities, it is time to restructure basic concepts and start with a different set of abstractions that can embrace what was previously external” (37).
Cobb and Daly also cite a delightful example of the standard assumption of individualistic utility maximization breaking down:
“Your great-great grandchild will also be the great-great grandchild of fifteen other people in the current generation, many of their identities now unknown. Presumably your great-great grandchild’s well being will be as much an inheritance from each of these fifteen others as from yourself. Therefore it does not make sense for you to worry too much about your particular descendant, or to take any particular action on his or her behalf. The farther in the future is the hypothetical descendant, the greater the number of co-progenitors in the present generation, and consequently the more in the nature of a public good is any provision made for the distant future. To the extent that you are concerned about the welfare of your descendant, you should also be concerned about the welfare of all those in the present generation from whom, for good and ill, your descendant will inherit. . .although we are not all brothers and sisters in the literal sense, we are quite literally co-progenitors of each others descendants” (39).
As the authors relate, a pair of Chicago School economists were forced to utilize an assumption of asexual human reproduction in order to make their assumption of individualistic utility maximization work across an intergenerational time period!
Next week I’ll take a look at Daly and Cobb’s proposals for an economic model that recognizes the interdependence of human well being.