The Consilience of Financial-Economics: Happiness

Title: The Consilience of Financial-Economic: Happiness

In a very brief article by David Sloan Wilson entitled, "A Tale of Two Classics," [New Scientist, 24 March 2012, 30-31], he reviews two influential academic articles:

[ ] Milton Friedman's essay, "The Methodology of Positive Economics," (1953); and

[ ] Stephen Jay Gould and Richard Lewontin's article, "The Spandrels of San Marcos and The Panglossian Paradigm."

The former sets out the classic statement on homo oeconomicus as a species that acts as if the assumptions of orthodox economic theory were true when in the individual cases it is manifestly untrue.  This distinction in size is very important and may help explain the differences in the opinion of classical versus behavioural theorists.  

The latter is a critique of the use of the argument of adaptation, where theorists fail to distinguish again between different levels of phenomena.  Thus, the general adaptive rule that desert animals are all likely to have similar hues for camouflage does not mean that all desert animals are necessarily genetically related. The distinction au fond here is between long-term and proximate cause.

Both papers and D.S. Wilson's own comments warn about what Aristotle first called "metaphysics." Indeed, the concept of cause and its four variations (formal, essential-substantive, efficient and teleological) were practically invented by Aristotle.   But the one big point Wilson makes is the need for CONSILIENCE (I believe this term was first coined and made popular by Edward O. Wilson, the great ant-scientist at Harvard).  Consilience is the test of an idea in light of its unity with the other sciences.

I find consilience completely absent in business schools and relegated to the fringe in US and UK law schools.  This is the main reason why business school and law school curricula  appear superficial and are probably marked for obsolescence in the next decade or two.  Given what D.S. Wilson says above, it is not difficult to see how the technical financial theology taught in US and European business schools could easily lead to numerous frauds and deceits in the financial industry.  The desert is general financial-economic theory and its camouflaged animals are the bad human animals.   For example, technical financial textbooks trot out the ideas that "arbitrage" and "net present value" are themselves self-justifying aims within financial theory. These little but significant facts tell us that consilience is utterly lacking in financial theory.  

The adjustments required for the benefit of the rest of society should be in the form of regulation, but here, if the game keepers turn a blind eye, the outcome at best will be small pockets of stability for the very rich in a sea of instantaneous instabilities for the rest and mostly poor.  

The long-term solution aims at consilience, but without the ancient Platonic ideals of social comity or the modern Bhutanese concept of 'happy economy', we have only ourselves to blame for failing to distinguish proximate from long term causes of misery and happiness.