On the Limited "Relevance" of Economics
Robert L. Heilbroner
[Reprinted from, "On the Limited 'Relevance' of
The Public Interest, No.21, pp.80-93, Fall,
Relevance is a word that makes professors of economics wince these
Is it [economics] relevant? Have the refined figments of economics
anything to do with ghetto life or the behavior of corporations or the
military industrial complex? . . .
... It must be clear from the title of this essay that I am not among
those who are so persuaded. For behind the question ... is a deeper
issue to which the standard reassurances do not always address
themselves. It is that economics exists for a purpose, and is
meaningful and useful only insofar as it serves that purpose. The
purpose is to enable us better to comprehend the structure and
tendencies of the economic order - that is, the institutions and
activities that affect the production and distribution of wealth.
Insofar as economics gives us this understanding, no matter how
abstract or far-fetched it may seem, it is undeniably relevant. But
insofar as it fails to do so, no matter how elegant or scientific it
may appear, it is not.
I do not think an instructor would take issue with this criterion of
relevance. Rather, he would argue that economics meets it very well.
Does not the enormous demand for economists, he would ask, imply that
the discipline has something to offer for which hardheaded businessmen
are willing to pay? Does not the recent creation of a Nobel Prize in
economics testify that it is an activity of high public importance? Is
not the flattery of imitation paid by other social sciences to the
techniques of economics similar testimony from the world of
scholarship? What further proof of relevance would one want?
The answer I wish to give is not to denigrate what economics has
done. It is to stress what it has failed to do. Obviously, economics
throws a good deal of light on the workings of the economic process.
But the light is curiously uneven. Some parts of the social machinery
are brilliantly lit. Other parts are left shadowy or totally dark. And
this uneven lighting, I would maintain, is not merely due to the fact
that, like all sciences, economics is more highly advanced in some
areas than in others. It is the consequence of the kind of
illumination that conventional economic theory sheds. In other words,
I believe there are aspects, of the economic system that economics, as
it now exists, cannot light up, no matter how brightly its lamps may
burn. For someone who wants to inspect those parts of the machinery,
economics today is as useless as a searchlight fixed in the wrong
The irrelevance of economists
. . . Let me give a few instances of this disregard of certain
economic problems. One area of nearly Stygian blackness is to be found
in the growth of American economic power abroad. Between 1950 and
1969, American overseas investment increased from $12 billion to over
$65 billion, giving rise to the familiar charge that American
imperialism has become a dominant force in international economic (and
perhaps political) affairs. Astonishingly, however, a student of
international events who depended for his knowledge of current trends
on the professional journals would have remained totally unaware of
this portentous development. The statistics of foreign investment
were, of course, reported. But I am unaware of an analysis of the
politicoeconomic consequences of this economic penetration in the
professional literature. Our knowledge of the extent, nature, or
effects of American hegemony in foreign investment has been gained
almost entirely from the work of Marxian economists or from that of
journalists such as Servan-Schreiber. . . .
This roster of ignored subjects could be easily expanded. I do not
know of any treatment in the professional literature of the size and
distribution of the benefits of the war economy by socio-economic
groupings; of any interest in the question of the means by which
private wealth and income are preserved from one generation to the
next; of any analysis of the benefits accruing from "public"
goods by income strata. Even poverty and ecological damage, now fairly
common subjects for professional examination, were not issues
originally unearthed by economists, although both problems would seem
to lie directly beneath their gaze.
This is not to say that nothing has been written on these matters.
Here and there an economist has looked in these directions, at aspects
of the social machinery that were formerly obscured. Yet I do not
think that many will dispute my contention that these are not the
kinds of questions that crowd the pages of the economics journals, or
that the attitude of most economists has been to avoid rather than to
seek out perspectives of this kind.
I would feel somewhat more uneasy in my contention that economists
were markedly one-sided in their outlook were not my belief bolstered
by the support of an impeccable observer, George Stigler, one of the
most respected economists of the conservative Chicago school. In a
well-known essay, "The Politics of Political Economists,"
Stigler has written that "the professional study of economics
makes one politically conservative." The reason for this is "the
effect of the scientific training the economist receives. ... It
becomes impossible for the trained economist to believe that a small
group of selfish capitalists dictates the main outlines of the
allocation of resources. ... He cannot unblushingly repeat slogans
such as 'production for use rather than for profit.' He cannot believe
that a change in the form of social organization will eliminate basic
Professor Stigler's point is clear: if economists tend to be
conservative, this is because it is the more intelligent thing to be.
Without conceding that point (for I am by no means convinced by
Stigler's examples of the things that economists cannot believe), I
would like to raise another, less elegant, explanation for the
phenomenon. It is that economists are conservative because they tend
to be located in the upper echelons of the pyramid of incomes. The
demand for economists has now raised their salaries until [as of 1967)
the median pay of an associate professor was $14,000, that of a full
professor $18,000, and of a "superior" full professor
$21,000. This scale of salaries, quite aside from the royalties,
consultation fees, foundation grants, etc. which are the common
complement of professional pay, suffices to place associate professors
in the top 15 per cent of all taxpayers; full professors in the top 5
per cent; and "superior" full professors in the top 2 per
In his article Stigler raises venality as a possible cause for the
conservatism of the profession, and dismisses it with the comment that
"current rates of pay for good economists are much below what I
would assume to be the going rate for a soul." But venality is
not the issue at stake. When we seek to explain the prevailing
political outlook of other groups in society, it is first and foremost
to their place in the socioeconomic spectrum that we look. Thus, if
economists are conservative, one prime facie reason would seem to be
that they simply share the conserving attitudes we find in the top
echelons of all societies.
To this one should no doubt add that special contemplative approach
of the scholar which in itself tends to militate against "radicalism."
But the first consideration remains to be faced; economists fare very
well in this social order; why should they search for problems that
might ruffle that serene temper on, which conservatism always rests?
The answer, to come out with it flat-footedly, is that they do not,
with the result that the picture of the economic order that
conventional economics gives us is not one which might emerge if every
portion of the mechanism were illumined as brightly as every other
portion, but a partial and selective view from which much that is
unpleasant or disturbing has been, no doubt unconsciously, passed
Let me now pass to more elevating matters. For there is a second and
more interesting reason for the unreliable illumination that economics
affords. It is (to continue our metaphor) that the light of economics
only seems to work when the machinery of the social system is turning
over smoothly, whereas any failure in the social mechanism
short-circuits the beam that economics throws.
This will take us into a quick tour of the electrical arrangements.
As anyone knows who has ever looked into an economics journal,
economics is now a very complicated subject, virtually inaccessible to
someone without a fairly thorough grounding in mathematics and
statistics. Yet what is really significant about the discipline
communicates itself immediately to the most casual browser. It is that
economics bases itself on the methods of "real" sciences. In
the severity of its language, its omnipresent formulae, the recurrent
use of the word "model," there is clear advertisement that
the paradigm of elucidation that economics follows is patterned as
closely as possible on that of the physical sciences. In particular,
economic methods stress rigor of procedure and proof, and a studied
absence of value judgments - an approach that finds its ultimate
expression in the depiction of the economic process as a series of
interconnected mathematical equations.
Now what is astounding about economics - or more accurately, about
society - is that this mathematical paradigm actually finds its
application to social reality. That is, economics can indeed construct
algebraic (or geometrical] analogues of social situations that
explicate social action with the irresistible force of a logical
demonstration, an achievement before which other social sciences pale
with envy. . . .
. . . The unusual attribute of economics - its claim to relevance, if
you will - lies in its ability to portray important aspects of the
social universe in terms of the same kind of determinate models that
we use to depict certain processes of the natural universe. What is
more, there is no doubt but that this fantastic claim is partly true.
There are relationships of an opposing-behavior or force-constraint
kind that hold with sufficient regularity to enable us to use
economics with considerable accuracy as a means of explaining or
predicting many economic events. As I have said, the practical
usefulness of economics is without question, and much of it derives
from this "scientific" base.
Economics and the real world
There is, however, a problem. It lies in the fact that the premises
... on which so much of the scientific model rests are behavioral
assumptions, and these assumptions, while valid enough of the time to
give the scientific model its usefulness, are not valid all of the
time. Behavior, in a word, contains an element of indeterminacy that
plays hob both with real social processes and with the accuracy of
their representation in mathematical models. For when behavior departs
from the pattern on which economic theory is built, the illumination -
the relevance - of that theory suddenly disappears.
But how indeterminate is behavior? ... In "ordinary"
circumstances the behavior of buyers and sellers and producers is
sufficiently like that on which economic theory builds its edifice so
that economics enables us to make predictions and analyses of
considerable accuracy. But conditions, alas, are not always ordinary.
Indeed, in precisely those times when we most want the assurance of
theoretic reliability- when, for example, times are unsettled, or the
economy seems poised at the edge of a boom or bust, or when
expectations are particularly labile (such as is the case right now) -
the dependability of the behavioral premises rapidly deteriorates.
As it does, the determinacy of the scientific model of society
deteriorates as well. . . .That is why the marvellously sophisticated
computer models of the economy, which perform well as long as things
fundamentally conform to the behavioral patterns of normality, lose
their predictive power totally when a sharp change in the winds of
opinion brings about a change in economic habits. It explains also why
the government which can build elaborate models of the economy for
normal periods, detailing with considerable accuracy the effects of
small changes in monetary or fiscal policy, cannot tell in advance how
a major change in policy will affect the economy because it cannot
know how such a change will be "interpreted" by the public.
Economics and social change
What we have seen so far is that economics lacks relevance insofar as
its practitioners are loath to apply it to "radical"
critiques of the system, and to the extent that the real world defies
the regularities of behavior on which the economic model of reality is
based. But there is, as well, a third problem to be faced. It is that
economics, by its very insistence on dealing only with the
quantifiable elements of social activity, thereby distorts and
misrepresents the activities it seeks to explain. Economics deals with
the economic order as if it were only a mechanism for the generation
and allocation of goods and services. But the fact is that the
economic order is also and inextricably a mechanism for the generation
of power and privilege, life-style and motive,. Hence, in wrenching
something called "the economy" from the larger "society,"
economics performs an operation that is intrinsically self-defeating.
For the economic variables cannot be excised from the larger social
system in which they are embedded and treated as a microcosm of that
system without seriously distorting the relation of the model to the
reality. . . .
There is, of course, a reason for this restricted scope of economic
analysis. It is that neither economists nor anyone else are in a
position to state with any degree of certainty what the social and
political effects of economic change will be. The economist is not
heedless as to the wider implications of the economic model he
manipulates. It is rather that he feels that he cannot say anything "scientific"
about them, within the rules and conventions of the paradigm in which
Here is where the "scientific" model of economics thus
meets its ultimate limit. For in its unwillingness to indulge in
sociopolitical "guess-work," out of fear of transgressing
the limits of proper scientific procedure, economics is placed in a
position in which its findings must be partial and incomplete and very
possibly erroneous. For every economic act, from the simplest response
to a change in prices to the most complex decisions of an
entrepreneur, is also a social act. Every action taken by the actors
in a social system is freighted with innumerable significances, which
we clumsily categorize under the rubrics of "economics" and "sociology"
and "politics," etc. Here is the problem of abstraction that
we encountered as the initial stumbling block in the approach to
economics, come home with a vengeance at a much deeper level of
significance. No one denies that abstraction is an essential
precondition for a social science if it is to reduce the complexity of
the real world to manageable proportions. But we can now see that the
sharper and clearer the abstract model we create, the less "interdisciplinary"
that model must be - and insofar as the reality of the social process
is unitary and indivisible, the less reliable as a guide to the social
mechanism it must also be.
Must economics resign itself to the "irrelevance" of an
avowedly inadequate grasp of society? Or should economists abandon the
scientific] paradigm that has given such distinction to their efforts?
There are, so far as I can see, two ways out of the impasse. The
first is to seek to widen the existing model of society by
deliberately setting out to add as many social and political linkages
as possible to the economic armature. The problem is how to go about
this ambitious task. . . .We seek ... a principle for introducing
order into seeming chaos. Because we do not have that organizing
principle, there is little we can do at the moment except to search
for one, and that will necessarily impose a considerable burden on
economic thought. For the search requires that we bring into sharp
focus the hitherto overlooked noneconomic aspects of the familiar
economic variables. The economist, in building his models, will have
to learn to think in units much richer - but correspondingly much less
easily manageable - than heretofore. . . .
It is enough merely to suggest such an enlargement of the model to
recognize its difficulties. For we are asking for an extension of the
orderly patterns of the scientific paradigm to cover a much wider
expanse of life than we have hitherto been able to encompass within
the bounds of equations. Indeed, it may be that we are asking for an
extension of the paradigm beyond the limits to which it can properly
be applied. Undoubtedly there are some linkages in the social process
that patient investigation will enable us to incorporate into a richer
model of society, but it seems very probable that many others will
remain elusive, or indeterminate (as we have seen economic behavior
itself to be under certain circumstances), or simply too complex. In
the end, the very ideal of a scientific model capable of representing
social change may be beyond hope of attainment.
In that case where can economics go? There is one direction, I would
suggest, that would enable it to retain the marvellous architecture of
the scientific model, while shedding the restrictions that rob that
model of so much relevance. This would be the conversion of economics
into an instrument of social science whose purpose and justification
was not so much the elucidation of the way society actually behaves,
as the formulation of the ways in which it should behave. To put it
differently, it would change the purpose of economics away from the
discovery of the consequences of presumably known behavioral
tendencies to the specification of the necessary behavioral patterns
to enable society to reach a postulated goal. . . .
Once a social destination has been posited (if only as the premises
of an economist's model), it then becomes possible to apply the "scientific"
procedures of economic analysis, supplemented to whatever extent we
can with sociological and political linkages. For the task of the
economist - who is now properly on the way to becoming a true social
scientist - is to describe the various ways in which a social system
that finds itself at point A may begin to move to point B. This
description must include not only the necessary technical steps, such
as the amassing or reallocation of capital or other resources, but
also the sufficient behavioral steps, including the political and
social as well as economic actions that will be compatible with the
final target. And in turn these behavioral conditions will cause the
social scientist to ask what institutional settings, what political
directives, etc., may be needed as a still deeper-lying prerequisite
for the desired social change.
It is enough merely to specify the width and depth of the necessary
instrumental analysis to indicate that such a redirection of economics
would be very nearly as challenging as the extension of the scientific
model we previously discussed. The difference, however, is that a
failure to specify all the various interactions of the social process
does not vitiate the instrumental model, as it does the conventional "predictive"
model. It simply means that various policies may have to be tried on a
pragmatic basis to see how well they succeed in bringing about the
desired result. Instrumentalism thus does not require a set of
universal laws of behavior, but only a commitment to the conscious
subordination of behavior to the requirements of deliberately selected
social goals. . . .Economics can thus find its ultimate relevance by
becoming the instrument through which men can, within the limits of
their knowledge and wisdom, use the procedures of science to gain
those ends they hold in high value.