Mises Wire

Even When They’re Wrong, We Can Learn From Understanding Others’ Theories

A few years ago, I got very excited about pluralistic economic thinking.

In hindsight I realize that I was heeding the advice of two influential people whom I wasn’t more than briefly familiar with: the nineteenth-century British political economist and philosopher John Stuart Mill and the now ninety-year-old Swedish economist Assar Lindbeck. To an international audience the latter is mostly known for developing the insider-outsider theory of labor markets and for being the longest-serving member of the Nobel Prize committee in economics. Among everyday Swedes, his name is mostly associated with the public commission he chaired following the 1990s banking collapse, which proposed 113 recommendations for improved economic policy (including a floating exchange rate, deregulation, and sharply reigned-in public spending)—all laying the ground for the successful capitalist economy that is modern Sweden.

Early in his career, Lindbeck wrote several papers on competing economic frameworks, explicitly calling for the benefits that a pluralistic outlook brings. Learn about others, assess their strengths and weaknesses, and build your intellectual understanding horizontally, not vertically.

It’s along the edges of theories and ideologies that you discover what makes them tick—what makes and breaks scientific theories. Being curious about other approaches is usually beneficial for your own development, too. Mill, a liberal philosopher and great thinker, has a striking quote in his 1859 On Liberty that couldn’t be more sorely missed on college campuses today:

He who knows only his own side of the case, knows little of that. His reasons may be good, and no one may have been able to refute them. But if he is equally unable to refute the reasons on the opposite side; if he does not so much as know what they are, he has no ground for preferring either opinion.

Both Lindbeck and Mill cherished the construction and acceptance of competing economic frameworks, all in the name of furthering understanding.

A pluralistic outlook also goes very well with the study of the history of economic thought, as the same approach is applied through time. Researchers in the history of our discipline investigate previous economists’ convictions without necessarily sharing any of their underlying beliefs and premises. Tracing methods, convictions, conclusions, or policy proposals through various economists is valuable work even if you believe that those methods or policy proposals are unworkable or mistaken.

Usually, reality is one thing—not many. When something happens in the world, it has a cause—even if that cause is a combination of different people acting or interacting with critical institutional systems, or if we can’t tease out exactly what it is. When Babylonian long-distance traders set out for foreign lands or medieval knights decided to band together to oust some intruder from a castle, they did so for specific reasons—for lack of surviving evidence we might not know those reasons, but we can be sure that they existed.

Academic research aims at truth, at figuring out what is—at separating what happened and what caused it from what merely coincided with it.

That being said, some theoretical paradigms apply to the question one is investigating and others are mistaken. A good reason to defend pluralism approach nonetheless is that economic data is usually quite noisy: many theoretical interpretations are consistent with observed outcomes—outcomes that are often subject to statistical illusion.

The philosopher of economics Daniel Hausman argues that economists sticking to their theoretical postulates in the face of empirical observations seemingly contradicting them are not irrational or dogmatic. Rather, as economists are “blessed with behavioral postulates that are plausible, powerful, and convenient, and cursed with the inability to learn much from experience,” maintaining a commitment to many different theoretical frameworks enriches your understanding of economic events. Taking “account of how bad these data are,” argues Hausman, is a prudent reaction—not a scientific failure.

Another reason to favor a pluralistic outlook in economic scholarship is Hayek’s idea of “fatal conceit” and the broader idea of complete knowledge analogously applied to ideas rather than the direction of economic goods. The presumption of knowing better than a decentralized market—which central planners hold everywhere and anywhere—is highly unlikely to be correct, if not laughably impossible.

It is prudent for individual economists to pursue their research with humility and respect for deviants. Mises himself seems to have adopted such a position in encouraging Rothbard’s update of his theory of consumer sovereignty as well as the dispute over monopoly theory. Franz Machlup, a student of Mises and prominent mid-twentieth-century Austrian economist, reflected on the master’s contribution and took pride in his teacher’s tolerance towards some of his diverging beliefs: “admiration for the teacher and his teaching should count more than orthodox conformity with revealed articles of faith,” Machlup finishes.

In short, pluralism in economics just means to follow Mill: learn from many different strands of thinking and be familiar with more paradigms than just your own. That enriches your understanding of economic debates and puts you in a better place to assess opposing arguments.

This is as true today as it was during the flourishing intellectual era of prewar Vienna. In true Enlightenment fashion, we ought to reawaken the fin-de-siècle Viennese intellectual atmosphere so celebrated by authors such as Stefan Zweig.

In this, economists have their part to play.

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Note: The views expressed on Mises.org are not necessarily those of the Mises Institute.
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