Open Systems Economics

January 25th, 2015
in macroeconomics

Article of the Week from Fixing the Economists

by Philip Pilkington

I recently came across a fascinating paper by Victoria Chick entitled ‘The Future is Open: On Open-System Theorising in Economics‘. I want to focus on a specific aspect of the paper; namely, Chick’s discussion on the psychological possibilities of actually teaching open systems.

Follow up:

But first I suppose I should make clear what the term ‘open systems’ means. The Wikipedia page actually has a rather nice summary.

In system theory, an open system is a system which continuously interacts with its environment or surroundings. The interaction can take the form of information, energy, or material transfers into or out of the system boundary, depending on the discipline which defines the concept. An open system is contrasted with the concept of an isolated system which exchanges neither energy, matter, nor information with its environment.

The first sentence is, I think, the most important. The key to open system theorising is the notion of constant interaction. In philosophy there is a long tradition of this type of thinking which goes right back to Socrates. It is known as the ‘dialectical method’. This was given its modern dynamic form by the likes of G.W.F. Hegel but much reasoning you find in philosophy is quite dialectical even if it does not explicitly say so.

Basically the idea is that thinking is a process of development. I suppose the best way to think about this is to consider how you interact with your environment. You do not go out into the world with rigidly prescribed rules — of what direction to walk, how fast, when to turn, when to extend your arm to open a door and so on — rather you continuously interact with the world around you. Likewise, if you engage someone in conversation you tend not to approach it with pre-established sentences. You may have a general notion of what topics you want to address — or you may not — but the conversation will evolve through continuous interaction.

Open systems thinking or, if you prefer, dialectical thinking applies the same idea to economic theorising. The idea is that you don’t want to produce a closed-system that gives you a single answer. Rather you want to have a series of tools, concepts or ideas which you approach the world with. This is the method adopted by Keynes in The General Theory. Indeed, I believe you can trace actual exposure to dialectical ideas in Keynes’ interaction with the likes of the philosopher G.E. Moore who was heavily inspired by the British Hegelians of the late-19th century.

Now, back to Chick’s paper. She makes the case that teaching open systems thinking to students risks encountering particularly difficult problems. Chick draws on studies in the psychology of education to argue that some people have an innate conservativism when it comes to thinking. What she means by that is not that they are politically conservative but rather that they tend to think in a very specific manner. Chick, following the psychologist Milton Rokeach, distinguishes between open minds that are capable of handling open systems and closed minds that are averse to them. She writes:

As a ‘primitive’ belief, the closed mind perceives the outside world as hostile, threatening, the open mind as friendly. Although we rely on external authority to tell us more about the world than we can experience directly, the belief that the world is threatening is responsible for the closed mind’s conflation of the course of information and the information itself. Authority for them, in the learning context as elsewhere, depends on the ability to mete out reward and punishment. Knowledge thus imparted by the subject’s authority figures is taken as a ‘package’ that the subject cannot dismantle into its components, making it difficult, if not impossible, to evaluate particular ideas on their merits. New ideas that do not conform to her/his belief structure are either rejected or modified to fit into that structure. (p64)

Regular readers will, of course, recognise in these words many of the problems with the mainstream economic profession. Some of it is manifest in the structure of the theory itself. The threatening world is represented by the cynical, self-interested agents that only interact with each other to obtain some sort of personal gain. Other aspects are inherent in the sociology of the discipline. The authoritarianism of the profession and the inability to pick apart models to examine their components, for example, and the slavish devotion to authority figures particularly manifest in the fact that it doesn’t so much matter what is being said as who is saying it (the idea of ‘stagnation’ that has been popular in Post-Keynesian circles since the 1930s is only picked up when Larry Summer and Paul Krugman start talking about it and even now experts in the field are not consulted when the topic is broached, etc.).

The economics profession has, for the past six or seven decades been sustaining itself by attracting students that have this type of mindset. It has evolved in such a way that students that do not have this sort of mindset will generally migrate into another more ‘open’ discipline. But the students with innately closed minds will tend to stay. Every generation the number of open-minded economists grows thinner and thinner until we reach the point where we are today. The halls of economics become populated by a certain personality type that literally cannot even understand some of the criticisms being leveled at it, much less the fact that thousands of students with a more ‘open-minded’ personality type launch a worldwide campaign against the curriculum and method of teaching. But when the world begins to look scary the closed-mind retreats in upon itself.

The difference could not be more marked. Chick writes about the characteristics of the ‘open’ personality type.

Openness can be characterised by the degree to which a person can react to relevant information from outside her/his belief system on its own intrinsic merits, without contamination. The extent of rejection of the disbelief system is less for the open minded, so new information, if considered valuable, is assimilated not by distorting the information to fit but by altering the belief system. The borders of the belief system are permeable. (p. 65)

The open systems approach is one that is inherently — and one might even say: primarily — empirical. Rather than altering the facts to fit the theory, one alters the theory to fit the facts. And if the facts begin to look like they completely overwhelm the theory then the theory is easily dropped and another one constructed in its place. In an open systems approach theories are mutable and non-permanent. Different theories may suit different situations and the thinker is always ready to create a new, provisional theory if the facts seem to merit this.

Because of the fact that in economics we deal with non-homogenous, historical time where two situations are never exactly the same, any closed system approach will always necessarily fail. It would be as if historians were still using the same historiography of the Ancient Greek historian Herodotus to try to understand events in the 20th century. The result would be a mess. Since economics effectively deals with historical material the same is true for the approach that it must take.

The key problem here is pedagogical. It is obvious that those who possess closed minds and who have been trained to think in terms of closed systems will not be able to alter their views. Indeed, if attacked they will bunker down and use every means necessary to try to maintain their monopoly so that they never even have to entertain the idea that there might be a fundamental criticism directed against their systems of thought. But what about students? Chick notes that many psychologists in the field claim that such personality traits are developed in childhood and cannot be truly overcome. She does not like this and she writes:

Rokeach’s and Rotheim’s characterisations seem static, reflecting the importance of childhood experience in the formation of personality. If character were so fixed, about all the teacher could do is identify the students to whom open systems will make sense and those to whom it will not. But hope is at hand: Rokeach speaks of learners becoming ‘more and more open in their belief systems’. (p. 65)

I would err on the side of pessimism here. I do think that some people who are inherently closed-minded, if caught at an early age — maybe their late-teens or early-twenties — can be made to open up a bit. But I think this should be a secondary concern. My reading of the student movement for economic reform is that it is made up of the portion of the economics class — and they are typically the majority in first year — that have more open minds. What they are fundamentally reacting to is that they find the modes of reasoning employed strange and alienating.

Their call for pluralism can thus provide a satisfactory solution to the problem at hand. If economics were allowed to be taught in a multitude of different ways then every personality type could find their natural homes. The closed-minded students would gravitate toward the closed-minded lecturers while the open-minded students would gravitate toward the open-minded lecturers. A sort of evolutionary process would then do the rest of the work. By introducing competition into the field it would soon be clear who was producing better and who was producing worse economists. What is more, this would involve no coercion but simply a more open-ended and pluralistic approach to teaching. But be sure that the closed-minded types will guard against this zealously as it will appear to them a threat. For all their talk of competition they are, in practice, monopolists.

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