the return of history...

in a column called “a crisis of understanding,” robert j. shiller of yale pointed out that the best explanation of the crisis isn’t even a work of economic analysis. it’s a history book — “this time is different” by carmen m. reinhart and kenneth s. rogoff — that is almost entirely devoid of theory. one gets the sense, at least from the outside, that the intellectual energy is no longer with the economists who construct abstract and elaborate models. instead, the field seems to be moving in a humanist direction. many economists are now trying to absorb lessons learned by psychologists, neuroscientists and sociologists. they’re producing books with titles like “animal spirits,” “the irrational economist,” and “identity economics,” about subjects such as how social identities shape economic choices. this amounts to rediscovering the humility of an earlier time. after all, adam smith was a moral philosopher, friedrich von hayek built his philosophy on an awareness of our own ignorance, and john maynard keynes “was not prepared to sacrifice realism to mathematics,” as the biographer robert skidelsky put it. economics is a “moral science,” keynes wrote. it deals with “motives, expectations, psychological uncertainties. one has to be constantly on guard against treating the material as constant and homogenous..." economics achieved coherence as a science by amputating most of human nature. now economists are starting with those parts of emotional life that they can count and model (the activities that make them economists). but once they’re in this terrain, they’ll surely find that the processes that make up the inner life are not amenable to the methodologies of social science. the moral and social yearnings of fully realized human beings are not reducible to universal laws and cannot be studied like physics// david brooks, 03.25.10, new york times