Imperial Economics
This article summarizes the views of various economists on using the methodology of (orthodox) economics in neighboring disciplines such as law and political science. The literature refers to this recent expansion of the problems economists attempt to address as “economic imperialism.”
Table of Contents
George Stigler
Stigler (1984) argued that economics should indeed be considered an imperial science because of its aggressive and uninvited attempts to expand its domain into areas that were previously considered the domain of neighboring disciplines.
So economics is an imperial science: it has been aggressive in addressing central problems in a considerable number of neighboring social disciplines, and without any invitations. (pg. 311)
Stigler was positive on the prospects for this endeavor and even expected that training in the techniques of economics would become necessary in some branches of neighboring disciplines.
I have already indicated that I believe that economic history, sociology and political science will permanently change. Enough people are employing economic analysis in each field so that the practice must continue and even expand unless the work is unsuccessful. I believe that it has been and will continue to be successful, where success is defined as achieving higher explanatory and predictive power with, than without, economic analysis. That does not mean that the other fields will be taken over by economists. It does mean that training in economic analysis will be essential for some branches of these disciplines. (pg. 312)
However, he was less optimistic about the ability of economists to expand their reach into law because of the role law schools as trade schools.
Law is in a different position. The primary task of the law schools is to train lawyers: law schools are trade schools. Research is permitted and in recent years even encouraged at the better schools, but that research is frosting on the cake of professionalism. If the overwhelmingly normative orientation of legal writing should be redirected to the explanation of legal institution and their evolution, there will be a place for economic analysis in legal scholarship. Until that happens, economists in law schools will be economists working on legal problems, with their main professional base in the economics community. (pg. 312)
Stigler suggested that economic imperialism began within the two or three decades preceding his article (published in 1984). And he – tentatively – suggested that the reason for this timing was that the increasing abstractness and generality of economics made its methods more readily applicable to new problems.
Why did economics begin its imperialistic age so recently as the last two or three decades? My answer, which I advance with limited confidence, is that the extended application of economic theory was invited by its growing abstractness and generality. The statement of economics began to be abstract and general, and increasingly to use mathematical language, in the 1890s with Marshall, Pareto, Fisher, Edgeworth and others. By 1907 Pareto was saying that an economic problem contained only two ingredients: goals and obstacles to their achievement. Goals (or tastes) and obstacles can be found everywhere. It took two generations for this transformation to be completed: by 1940 the new Ph.Ds at good universities began to be proficient in the viewing and handling of economics as a general analytical machine, the machine of maximizing behavior. The abstraction increased the distance between economic theory and empirical economic phenomena - not without some cost to economics - and made the extensions to other bodies of phenomena easy and natural. If that explanation is correct, there will be no reversal of the imperialism. (pg. 312)
Edward Lazear
Lazear (2000) argues that economics has been “imperialistic”.
[E]conomics has been imperialistic[.] …. Economic imperialism is defined as the extension of economics to topics that go beyond the classical scope of issues, which include consumer choice, theory of the firm, (explicit) markets, macroeconomic activity, and the fields spawned directly by these areas. The most aggressive economic imperialists aim to explain all social behavior by using the tools of economics. Areas traditionally deemed to be outside the realm of economics because they do not use explicit markets or prices are analyzed by the economic imperialist. (pg. 103)
Additionally, those issues that lie at a deeper level than those of traditional economics are also part of economic imperialism. Economics is extended to consider questions that are inside the "black box." For example, microeconomics historically took the firm as an entity. Modern economics examines the structure of relations within the firm, including issues of personnel policy and market strategy that have traditionally been outside the scope of economic analysis. Historically, economists assumed that firms would simply do what was best for maximizing profits, without attempting to describe the details on how profit maximization is best achieved. (pg. 104)
Much of economic imperialism is analogous to looking inside the atom. For many purposes in physics and especially chemistry, taking the atom as the relevant unit of analysis is appropriate. For example, chemists tell us that water is made from the combination of two hydrogen atoms with one oxygen atom. But for other purposes, such as the production and harnessing of nuclear power, it is necessary to understand that the atom is made up of electrons, neutrons, and protons and to understand how they interact with one another. The same is true in economics. For many questions, it is sufficient to think in terms of an individual, a household, or a firm. But the economic imperialists have not been content with answering questions that can be dealt with at that level of abstraction. They have tried to understand the preferences of the individual, the composition of the household, and the internal workings of the firm to answer more questions that are of interest to social scientists. (pg. 105)
It has never been much of stretch between economics and politics. Historians, political scientists, and economists alike have believed that economics can exert a strong influence on politics, both at the national and international levels. This connection, however, has nothing to do with economic imperialism. Economic imperialism in the realm of political economy consists of the use of economic methods to understand political processes. (pg. 135)
He considers economic imperialism a success because, he argues, it has been influential.
Economists generally believe in the market test. Economic imperialism can be judged to be successful only if it passes this test, which means that the analyses of the imperialists must influence others. The effort to extend the field measures its success by inducing others to adopt the economic approach to explore issues that are not part of classical economics. One possibility is that scholars outside of economics use economic analyses to understand social issues. Political scientists, lawyers, and sociologists come to use the methods of economics to answer the questions that are of interest in their fields. Another possibility is that economists expand the boundaries of economics and simply replace outsiders as analysts of "noneconomic" issues, forcing noneconomists out of business, as it were, or at least providing them with competition on an issue in which they formerly possessed a monopoly. Below, it will be argued that both routes have been followed with success. (pg. 104)
The most successful economic imperialists have used the theory to shed light on questions that lie far outside those considered traditional. The fact that there have been so many successful efforts in so many different directions attests to the power of economics. (pg. 142)
Written By: Aiden Singh Published: November 12, 2020 Last Updated: November 23, 2020
Sources
Edward Lazear. Economic Imperialism. The Quarterly Journal of Economics. February 2000. Vol. 115, No. 1. pg. 99-146.
George Stigler. Economics: The Imperial Science? The Scandinavian Journal of Economics. September 1984. Vol. 86, No. 3. pg. 301-313