Rory Sutherland Rory Sutherland

The tangled truth

There is a kind of mercantile speculation which ascribes every action to interest and considers interest as only another name for pecuniary advantage. But the boundless variety of human affections is not to be thus easily circumscribed.

This is from a sermon by Samuel Johnson. I can’t find the date, but suspect he is having an early pop at Adam Smith, whom he met only once (they didn’t hit it off). Around a hundred years later, here’s Friedrich Hayek, accepting the Nobel prize for economics.

It seems to me that this failure of the economists to guide policy more successfully is closely connected with their propensity to imitate as closely as possible the procedures of the brilliantly successful physical sciences — an attempt which in our field may lead to outright error. It is an approach which has come to be described as the ‘scientistic’ attitude — an attitude which… is decidedly unscientific… since it involves a mechanical and uncritical application of habits of thought to fields different from those in which they have been formed.

Both men spotted a fundamental flaw of standard economics — in that it owes its seductive mathematical neatness to an insane oversimplification of human behaviour. Human actions, especially our collective actions, almost never display the linear certainties of Newtonian physics, and do not even approximate to it. Meteorology or vulcanology might be more realistic areas for economists to draw on for inspiration, not least because these two sciences acknowledge the limits to their predictive ability.

Recent years have seen a slew of excellent books on how it is impossible to understand behaviour (and therefore riots, crashes and recessions) without understanding networks. Paul Ormerod’s Positive Linking is one excellent and easily intelligible example, as is The Tangled World, by Gerald Ashley and Terry Lloyd.

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