SOME PROBLEMS IN THE USE OF LANGUAGE IN ECONOMICS Warren J. Samuels

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1 SOME PROBLEMS IN THE USE OF LANGUAGE IN ECONOMICS Warren J. Samuels The most difficult problem confronting economists is to get a handle on the economy, to know what the economy is all about. This is, of course, the basic raison d'etre for economists and economics. The second most difficult problem confronting economists is using ordinary language--verbal and mathematical--in getting to know what the economy is all about. Language may communicate nothing or a little or much about what the economy is all about, or it may communicate error or mislead, at either the ontological or experiential levels. In this paper I propose to examine several ways in which our use of language can get in the way of learning about what the economy is all about. Some of my examples may be more or less well known; some are not; most if not all arise every day and are not given the attention and respect they merit; and all have at least as great a significance for political economy as they do for economics. Obviously I do not propose to do away with the use of language; such would be a poster-ad for absurdity. I do propose alertness over sloppiness and attention to limitations over stylized usages. For most if not all who hear or read this paper, both my argument and my examples may be superfluous, even banal, and I may be preaching, as it were, to the choir. The message may be more important for graduate students but observed deficiencies of professional practice support the view that not every economist is a member of the choir. Apropos of graduate students, however, during the week in which I began to write this paper, I saw anew that some of them (1) did not know the difference between a corporation and a partnership regarding liability (this was my biggest shock!)--this is an important matter of definition, (2) did not understand valuation as the capitalization of actual or expected income at some mathematical interest rate, (3) confused the work of knowing what something is all about and the tasks of critiquing it, proposing something better, and making predictions, and (4) did not appreciate the technical, substantive and epistemological assumptions of national income accocunt figures. In all these and other respects, our use of language, including quantities (which, after all, is a form of language), leave much to be desired in understanding what the economy is all about. Candidly, I think that most if not all of us know most if not all of what I am going to say. But I think we too much take it for granted. Above all, we do not regularly and explicitly emphasize the limits of what we do and say as economists. I know that it may be downright boring to continually repeat; but it is also downright misleading if not dangerous to overstep. I also know that the

2 psychodynamics of professional stature, the stature of our discipline and of each of us personally, drives us to make make statements more confidently than our epistemology and use of language warrant. I will address below some of the sources of our quest for unique determinate optimal solutions. An additional source is our anxiety over Harry Truman's displeasure with two-handed economists. It seems to me more sensible, more scientific, if you will, and more honest to admit to limitations, to acknowledge that the economy consists of conflicting forces, with variable and generally unpredictable weights. As Alfred Marshall envisioned it, the economy is an arena of tendencies, and economic laws, or propositions, are statements of tendency more or less specific to particular but variable conditions. But enough outright preaching. Let us identify some problems in the use of language in economics. Definitions: Definitions not only define words, when the words are used they define the world for us and that definition may mislead or completely define the world. Example 1. Consider the use of the word "corporation." Unless one knows that corporate stockholders have limited liability, one would not have any idea that the corporate form is a mode of socialized risk not unlike many elements of the welfare state. Example 2. When we use a metaphor to define a metaphor, we have not said much of substance. If "Invisible Hand" is a metaphor and if "market" is a metaphor, then identifying the Invisible Hand--to answer the question, what is the Invisible Hand?--as the market only goes so far. One must then ask the question, what is the market?--which leads to a profound difference between (a) the pure abstract a-institutional market and (b) actual markets which are a function of the institutions/power structure which forms and operates through them. Then one has to ask, what is an institution? Example 3. Consider the notion of a market as characterized by a single price for a given commodity. Is this a definition, an assumption, or a conclusion? If a conclusion, is it a matter of logical validity or an empirical fact? Is the theory built upon it a tautology, such that finding more than one price does not negate the proposition but implies multiple markets. Example 4. Terms like "private," "public," "voluntary," "freedom," "coercion," "property,"and the like are kaleidoscopic, subject to selective perception, given variable specification, often identified with the status quo somehow perceived, and often the point at issue. Validity and Truth: A valid statement is one which follows from its premises, given the correct use of the system of logic. Truth is a matter of descriptive accuracy or correct explanation. A conclusion that is valid may or

3 may not be true. It may or may not, even if true, say all that can and/or needs to be said about the object of inquiry. I find that a conclusion which is necessarily only valid may not be true; may, even if true, not deal with important considerations; may be true only with regard to certain social space (data) and not others; and is often taken as true because it follows logically from its premises. Is and Ought: A positive or"is" proposition is one which either (1) describes or explains, or (2) states what must be done in order to achieve a particular goal. A normative or "ought" proposition is one which either (1) affirms something as good or (2) affirms the desirability or goodness of seeking something. Several points: (a) one can thus distinguish between positive and normative propositions in principle, but (b) many, perhaps most, statements in economics are blends of "is" and "ought" elements; and (c) one cannot properly move from an "is" proposition to an "ought" proposition without an additional normative, "ought" premise. Optimality and the Role of Antecedent Normative Premises: The term "optimality" as used in economics is fraught with problems of nuance, definition, exclusion, and tautology. The desire for conclusions that can be designated optimal is driven by two motivations: (a) the desire to be, at least to be thought of as, scientific, with the supplementary understanding that a scientific conclusion must be singularly unique, a state of mind which is reinforced by the notion of equilibrium; and (b) the desire to have something important and persuasive to say about policy issues. Definitions and Theories: Necessity of Multiple Theories: Use of Primitive Terms: Very often terms are used in a generic sense. "Property," "liberty," "coercion," and so on, are used as primitive terms with unspecified meaning. This allows the author to escape the questions of both substantive content and the mode of its determination, thereby begging a, if not the, important substantive question, leaving it to each reader to provide substantive content. Consider also statements such as, "If the most is to be made of the new technology, the proper infrastructure must be in place," or that a policy "left things worse, not

4 better," or that a policy "worked," "failed," or "distorted" results. These statements leave unspecified both the substantive meaning of the key terms--proper, worse, better, worked, failed, distorted--and how to determine what they mean. It is left to each reader to provide substantive content. Similarly with statements that say that path dependence does or does not yield the "right path" or that posits "the right institutions." Substantive content must be adduced and it typically will be adduced in conjunction with antecedent normative premises as to whose/which interests are to count as to "right." The situation is manifestly obvious when a statement is made that "every citizen" can "participate" in the economy and/or polity. Participation to be substantive requires some specification of the distributions of wealth and income and of who counts as a "citizen." As such things go, it was not too long ago that the frame of reference was the domain of free white males. It should also be obvious with the term "market." One can discuss markets in the abstract--the idea of a pure a- institutional abstract conceptual market--vis-a-vis actual markets which are a function of the institutions and power structure which form and operate through them. One often reads or hears that sometimes one arrangement is most appropriate and sometimes another; for example, one set of laws or another, market or government, and so on. This is logically correct but empty. But how is one to determine when it is one and when the other? Reification: Rights: The identification of "rights" in economics is, like other terms, kaleidoscopic, subject to selective perception, given variable specification, often identified with the status quo somehow perceived, and often the point at issue. Rights are relative to other rights and to the legal process through which they emanate and revised. "Rights" has three levels of meaning: as a claim, as an interest given legal protection, and as the sanction used to enforce that protection. And all rights have their economic significance, including value, limited by the market. When we speak of property rights in particular, one must recognize that property is a name given to legal protection of certain interests in a way that gives them a privileged status in relation to other rights. Some other rights serve the same function of protecting interests, are the functional equivalent of property rights but are not given the same status.

5 Property is also subject to two modes of definition. On the basis of police power reasoning, property is subject to law which seeks to promote the public health, safety, welfare and morals through the modification of rights of property and contract; in which case property is defined by and a function of law. On the basis of eminent domain reasoning, any regulation is a compensable "taking;" in which property exists independent of law. Analysis which specifies "property rights" or assume only government protection of property is thus questionbegging along all the foregoing lines. Rationality: Dualisms: Fallacies: One common fallacy often deployed by economists is the fallacy of composition: what is arguably true of a part is not necessarily true of the whole, and vice versa. Consider the proposition that ours is a voluntaristic economy. This must be qualified from the start in at least one respect. Individuals exercise volition; they make choices from within their opportunity sets. The content of their opportunity sets is not, or not entirely, a matter of their volition. They do not voluntarily agree so to be constrained. Voluntarism would involve a greater degree of participation by people in the organizations that make decisions that affect them and their opportunity sets in important ways. But let us put that point--the difference between volitional and voluntary--aside. Clearly it is quite another thing to go from the individual to the group, to the entire economy. To the extent that the individual is socially constructed and to the extent that the group or economy can be structured in different ways, the relevance of both voluntary and volitional is compromised. At the least, again, Voluntarism (as distinct from volition) would involve a greater degree of participation by people in the organizations that make decisions that affect them and their opportunity sets in important ways. Forgetting, therefore, about the distinction between volitional and voluntary, the putative voluntary nature of individual action and choice must confront the problem of the structure, the whole, of which the individual is a part. And the matter is rendered further complex by recognition of inequality. This is because if individuals are unequal in any material respect, treating them equally--for example, by laws that are common, impersonal, abstract and procedual--is to treat them unequally, whereas to treat them equally may,

6 paradoxically, require that we treat them unequally. The relation of one part to another part and to the whole is, accordingly no simple matter. Opportunity Cost and the Ubiquity and Inevitability of Problems: Criteria of Structure versus Criteria of Results: The interpretation and evaluation of developments can be undertaken on two bases. One involves criteria of structure, such that given an agreed-upon structure, any policy result therefrom is considered apriori acceptable. The other involves criteria of results, such that any structure is evaluated on the basis of how well it achieves the desired policy result(s). Different structures, e.g., of laws, will tend to generate different results, e.g., different Pareto-optimal outcomes. Different structures will tend to generate different results, e.g., different Paretooptimal outcomes. One fundamental question is, whose criteria of structure and/or of results will become operative as results are worked out? Working Things Out. The gist of the foregoing is that in every respect the results in the real world must be worked out. They cannot be specified in advance by an analyst without introducing implicit antecedent assumptions as to whose inerests are to count, thereby substituting the perceptions and/or preferences of the analyst for those of actual economic actors and foreclosing and/or channeling the operation of actual economic structures and processes. [[[Much microeconomics and some macroeconomics and political economy exhibit some or many of the foregoing problems.]]]

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