Questions and Critiques of Metaeconomics

 

 

Attempts to convince colleagues of the efficacy of Dual Interest Theory (DIT) and the Metaeconomics framework have raised several issues. The critiques tend to go along one or more of the following lines of questioning. See Lynne (2002, pp. 420-423) for the details (click here for the JSTOR pdf file of the paper).  In brief: 

 

First, could not the same phenomenon be modeled with interdependent utility?

 

Interdependent utility requires knowing the utility of the other, which is impossible.  In fact, interdependent utility takes away from perhaps the most fundamental feature of economics, that of the invisible hand of the market.  So, even if it was possible,  the invisible hand cannot facilitate the market resolving price P if each person has to know the utility of the other. 

 

Second, some ask what is special about point B (on path 0Z)?

 

The answer is that point B is not especially unique. It is a special point, however, in the sense that it is better than any point outside the self-interest only path 0G or the other-interest path 0M.  The unique feature of point B is economic efficiency is achieved, made possible only when the other-interest tempers the self-interest. 

 

Third, we are asked, would it not somehow be more reasonable to simply think of these two utility curves being weighted or otherwise transformed into one?

 

The payoff on each path in general is incommensurable, as in material payoffs (pushpins) on path 0G for which price P is the measure in contrast to value V (poetry, which is priceless) on path 0M.  It makes no empirical sense to weight incommensurable measures of payoff.  The fact of incommensurability among multiple objectives (like seeking both pushpins and poetry!) has shifted the focus to the interests, rather than to utility, with the payoff from achieving interests measured in what ever units one finds work best. At one point Metaeconomics was focused on dual utility; by time of Lynne (2020), it had been shifted to focusing on dual interest, while still acknowledging the interest could be measure in utils, in utility terms, if it works best. 

Fourth, does the benefit of adding another set of indifference curves, which makes the model mathematically less tractable, exceed the costs?

 

Avoiding mathematical complexity does not justify using a framework that cannot be supported with empirical tests. DIT and Metaeconomics are built on a solid empirical foundation. 

Fifth, we often hear that game theory solves the problem, with the notion that the moral dimension is captured in the strategic and cooperative behavior that evolves in games with feedback.

 

Game theory can help, assuming the game theorist opens the possibility that the game is also influenced by empathy, not just ego.

 

Finally, one of the most intriguing critiques has been that Dual Interest Theory (DIT) based Metaeconomic analysis leads to interesting and new questions and insights, while at the same time the Metaeconomics framework using DIT is somehow flawed. From Lynne (2002, p. 423):  “We are reminded of Khalil's criterion for deciding when an upstart theory needs to start replacing the conventional wisdom of a mainstream theory. As Khalil (1998, p. 614) notes, a substantive testing ground is ‘whether the proposed... is less burdened with empirical anomalies than alternative ones.’”  

 

Empirical testing of DIT and the Metaeconomics framework, now stretching back almost 3-decades (writing here in 2022),  has so far resulted in rejecting the null hypothesis of no influence from the shared other-interest.  In effect, testing to date suggests rejecting the Single Interest Theory (SIT) of Microeconomics, in that DIT generally adds important insight on the path to resolving the empirical anomalies represented in the many paradoxes and puzzles (e.g., voter paradox, person risking own-self to save a stranger or a fellow soldier, charitable and organ donations, tipping, to list a few) which cannot be solved using SIT in Microeconomics framing.  Testing of DIT needs to continue, while still recognizing a role for SIT. 

 

In particular, a failure to reject the DIT based null hypothesis gives credence to SIT as the default theory. Self-interest (as represented in SIT), afterall, is primal. And, as DIT suggests, if a particular economic choice is explained by SIT, it perhaps raises the warning flag that empathy nudging needs to be considered, to bring the other-interest into play.  As Adam Smith said it, economic choice (actually, Smith referred to command, not choice, as in self-command) needed to be tempered by that which the other could go along with: The other-interest represents it.

References

 

Khalil, E. L. 1998. "Interests and Commitments: Replies to Etzioni, Dolfsma, and van Staveren." De Economist 146: 613-618.

Lynne, G. D. 2002. "Agricultural Industrialization: A Metaeconomics Look at the Metaphors by Which We Live." Review of Agricultural Economics 24 (2): 410-427.

Lynne, G. D. 2020.  Metaeconomics: Tempering Excessive Greed.  New York: Palgrave Macmillan.