The Sociology of Economics

Economist Paul Samuelson wrote an article in 1954 called the “Pure Theory of Public Expenditure” where he tries to model societal choices and culture into a mathematical equation. Then he blames Sociology when he can’t do it.

This reminds me of the graduate student who told me that we couldn’t count on BLS unemployment data because the BLS is political. Mind you he had no proof of that, and had no other measures of unemployment, but because he didn’t like what their data said, it must be political. Granted, the BLS has some methodological problems, but that doesn’t make it political, nor does it nullify the entirety of data. It could just be that it’s really difficult to measure 150 million people across 50 states.

The idea that economists are never wrong, because all of the theory is based on mathematical models is just wrong in itself. Economics is a Social Science in any academy, and as such, needs to be concerned with social issues. While Samuelson blames Sociology for not being able to factor social issues into a mathematical equation, the real issue is this: people in society won’t stay where economists put them. This is the fundamental difference between Sociology and Economics. Economists assume human behavior, while Sociologists actually study human behavior. When the economic model doesn’t fit reality, then (for the economist) it’s societies fault. When the Sociological frame doesn’t fit reality, the frame (or methodology) is blamed; then it’s back to the drawing board to re-study social facts.

So consider this: Total Government expenditures are currently 23% of GDP. We see a growth over time due to a myriad of reasons, including population growth, two wars put on a credit card, increases in government transfers (especially after 2007), etc. But what are we as a society getting for a mere 23% of the economy? We’re getting a standing army, a navy, border protection, a range of social safety nets, a national health insurance program, the interstate highway system, and services ad nausium.

fredgraph

While we can turn the actual expenses of those programs into an equation, we can never really turn people’s intrinsic values into a mathematical model. The social benefit of 23% of GDP can only be measured through Sociology; through the idea of studying people’s behavior, tastes and preferences, both historically, and in the present. That’s not a flaw of Sociology, that’s a flaw of economics

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