Objections:  The nuggets of truth in Scorse's essay are obscured by the ideology -- unspoken assumption that frame the discussion and bias the analysis.

The important truth is that we need to understand the Commons, what Scorse calls "open access resources."

The key issue, which Scorse ignores, is Who Makes the Rules.  For example, in a US dominated by business interests, who would trust govenment to police the actions of corporations?  We have seen how it works in the governance of the broadcast spectrum -- corruption, influence-peddling, monopolization by large corporations.  Why would it be any different for fish stocks?  

A fruitful path, which Scorse dismisses, is common ownership regimes. He calls them "imperfect and temporary solutions."  But let us remember these solutions were the rule for tens of thousands of years.  The modern market, with its record of resource depletion, has only been around for about 200 years.  I'd submit that older cultures may have more to teach us than mainstream economics.

Two general criticisms of Scorse's economics:

Scorse presents economics as if markets were a revealed truth, and his job is to preach it to the barbarians. In fact, there are multiple schools of economics, with different views on the roles of markets.  There are Keynsians, Eco-Economists and Marxists, none of which enter into his discussion. I would welcome an analysis with a grounding in economics.  Unfortunately what Scorse gives us is a one-sided view, which is neither scientific nor objective.

Scorse is incorrect when he says, "economics is based on simple principles of how people generally act in the real world, not necessarily how we would like them to act."  Mainstream US economics, particularly as it is practiced in academia, largely involves abstract models based on overly simple assumptions about human behavior.  These assumptions have been criticized from outside the field; recent academic work has shown the shortcomings of these assumptions -- people do NOT act in economically rational ways.

Despite my criticisms, I do think that market economics has a place in a broader set of solutions:

A government that is more democratic; not dominated by large corporate interests.

A de-emphasis of purely economic values.  Religion, spirituality and tradition have been powerful motivators in the past.

Getting outside the current ideology of markets, consumerism and US nationalism.  Foreign travel and reading history are antidotes to our present sleepwaking.  

I had a chance to read Jason's irate essay: "Uncommonly Bad: Why I Will No Longer Support the Sierra Club".

The question I have is, does Jason want to be a cheerleader for capitalism or an objective analyst?

One really can't have it both ways.  

He inveighs against people who don't understand economics, but I would reply that he does not understand the critique of his brand of economics.

The Sierra Club magazine, by the way, is not the place one would expect to get such a critique.

I guess I object to people waving the flag of "economics as science," and complaining about the ignorance of other people, when in fact their economics is more often propaganda and unexamined assumptions rather than analysis.  A theology for the modern age rather than science.

It would be possible to have a serious intellectual discussion about this.  Market economics does have many important things to say, within certain parameters.  But we've got to get beyond this dogmatism.  

For example, JS, can you understand why people would understand your economics and still disagree?  Could you put their arguments into words?  One of the first steps in having an intellectual engagement is to understand the other's point of view.  

"Above all, economics is based on simple principles of how people generally act in the real world, not necessarily how we would like them to act."

Except neoclassical economics does not do this. It is built upon a mythical concept, the rational man. We know from extensive research in cognitive psychology that people do not behave rationally - and more so we know how they behave and why (we also have a pretty good understanding of group psychology as well - which again, well you get the picture). Mainstream economics is ignorant of these things. It has pretensions to being a science, but does not act scientifically. Many of its theories have never been proved, and have barely been examined using any kind of real world data. Many of its analytical techniques are outdated and inadequate. Many economists use mathematics to obscure arguments that do not need making with maths, to give them the pretence of objectivity. Economists are not in a position to lecture anyone.

Admittedly, environmental economists sometimes come across as all-knowing smarty pants when it comes to telling our side of the story about understanding human behavior. We think that people tend to behave rationally and that this predictability can be used to influence behavior so that environmental damages are balanced with profits, jobs and economic growth. But what we don't always say is that our models don't explain everything (neither do the models of other social scientists). Understanding human behavior is complex and all of those involved in the social science disciplines should admit that fact and stop squabbling over who understands the most about human behavior.

Economists think that people behave rationally. This means that as the benefits of any activity increase (decrease) the pursuit of the activity will increase (decrease). And, as the costs of any activity increase (decrease) the pursuit of the activity will decrease (increase).

We do try to test these propositions scientifically, at least as scientifically as you can do so outside of the laboratory and with data from real people. For example, environmental economists have tested demand theory for the past 50+ years by examining the relationship between distance traveled to recreation sites (e.g., fishing holes, scenic wonders) and the number of trips. As it turns out, the number of trips declines with increasing distance (i.e., travel cost). The demand curve slopes downward. Bingo! Those outdoor recreationists are rational (at least in the way that we define rationality). The "mythical" ration (wo)man? Nope. The real life rational (wo)man.

It is true that recent advances integrating social psychology and economics (i.e., behavioral economics) has uncovered a bunch of instances where people are not so rational. It seems to me, and others, that this economic behavior is very insightful but not the norm. It explains the anomolies but neoclassical economics still explains the core of economic behavior.

While I agree with what John says, I think he may have understated the environmental economists position.  The tests of rationality are well-documented.  On average, people behave rationally.  Of course there are anomalies in individual behavior and I don't know of a single economist that would deny that.  But the evidence continues to mount in both experimental settings and with actual data that markets tend to induce rational behavior:  Experienced players in market settings behave in accordance with neoclassical assumptions.  Of course we can derive contrived settings where deviations are documented and expected, but these are the exceptions, not the rule.  Understanding such anomalies is of fundamental importance to economists and explains the emergence of the field of behavioral economists.  

Behavioral anomalies are not new to economists and are not ignored in our models.  Why else would economists recognize behavioral psychologists with the Nobel Prize in Economics?  Kahneman's Nobel prize was not for recent work that may someday influence economists, but for work that has entered the mainstream of economic thinking and has proven fundamental in understanding human economic behavior.  His award was "for having integrated insights from psychological research into economic science, especially concerning human judgment and decision-making under uncertainty"

Statements like this--

Mainstream economics is ignorant of these things. It has pretensions to being a science, but does not act scientifically. Many of its theories have never been proved, and have barely been examined using any kind of real world data. Many of its analytical techniques are outdated and inadequate. Many economists use mathematics to obscure arguments that do not need making with maths, to give them the pretence of objectivity.

--are based on an understanding of economic reasoning from 50 years ago.  Mainstream economics is fully congnizant of these 'things.'  Yes I believe people do behave rationally in most situations.  Not from dogmatic adherence to a philosophy but based on observation, analysis and hypothesis testing.

The strongest factor in decision making is emotion. There is very strong experimental evidence for this. The other thing is that we are very bad at making certain kinds of decision - particularly if they involve abstractions, or time. We are very bad at logical and statistical thinking (even people with training in these areas, amusingly) when it applies to everyday life (which includes financial/economic decisions - there is a literature studying this in banking, for example). the fact that you think that these experimental findings are anomalies rather underlines my point - they are not. If anything, the default axiomatic assumptions of economists are the anomalies. Maybe now that cognitive psychologists are beginning to influence economists, there is some chance that mainstream economics (there is of course perfectly fine work being done by heterodox economists) will have some relationship to reality (modern mathematic modelling techniques would help as well).

"Experienced players in market settings behave in accordance with neoclassical assumptions."

I'm not sure what this means. Certainly the claim that people in markets, or markets in the aggregate, behave rationally seems implausible based upon observation. But most professionals are trained in neoclassical assumptions - so if that is all you mean?

"Yes I believe people do behave rationally in most situations.  Not from dogmatic adherence to a philosophy but based on observation, analysis and hypothesis testing."

The problem with this statement is that its meaningless. Rational is a term that needs defining. One could define in a circular fashion (and I've seen defences of the rationality of financial markets that do this). One could say that people act in a way that best serves their own interest, but who judges that, what do we measure, what do we include? It is possible to keep moving the goal posts until almost anything can be judged as rational. Its rational that I give to charity because it makes me feel better about myself. Its rational that I don't get the best deal on electricity prices because I lack the time to go through the pricing arrangements. Well yes - but it doesn't really narrow down how I will behave in any given situation, does it. Also there is the problem of adhoc rationalisation, where anything can be justified after the event.

John,
Well acceptance of one's discipline's ignorance would be a good thing in any discipline, not just economics. However I'm not arguing over who understands the most about human behaviour, instead I'm arguing economists are not interested in human behaviour. Neoclassical economics is based upon axioms about human behaviour which are (largely) untested by economists. I'm aware that recently cognitive psychologists have started to do work in this area and this is beginning to make an impact. But economists for the most part do not study human behaviour in the way that other social scientists do - either through long term observation (ethnography, say), or experimentation. The kind of work that some economists should be doing (details analysis of the behaviour/relationships/etc of people in companies. Cross comparative studies of markets) - is done by sociologists, or anthropologists (and much of it contradicts the cosy theories of economists) and economists seem largely ignorant of it.

"Economists think that people behave rationally. This means that as the benefits of any activity increase (decrease) the pursuit of the activity will increase (decrease). And, as the costs of any activity increase (decrease) the pursuit of the activity will decrease (increase)."

This is one of those statements that only works in the abstract. What's a benefit? Is my benefit the same as yours? What's a cost? does the cost mean the same to me?

And then there are the problems with the concept of rational decision making. Am I judging the cost rationally (given our cognitive biases, quite possibly not). Where does emotion enter into this (answer - its a significant factor in decision making). Prior experience (we rely heavily on heuristics, to make rapid decisions)? What criteria am I using to judge (is it right? Is it the same as other people's?). Now you may be able to average all these things out, but you can't assume that.

Now granted, in some situations people will be able to make rational decisions (and most people will make similar decisions). The distance/recreation site would appear to be one - though its also a largely uninteresting one, being fairly trivial. Demand for other items is hardly so simple, or linear.

"It seems to me, and others, that this economic behavior is very insightful but not the norm. It explains the anomolies but neoclassical economics still explains the core of economic behavior."

i don't know about the integratory work (I know the work of a couple of people, because they're psychologists), but cognitive pscyhological work suggests the inverse I'm afraid.

I too have questions about the assumption of rationality. Seems to me there are plenty of cases one could point to where markets have produced patently irrational results. People are moving en masse to suburbs, despite the fact that it makes them fat, sick, more apt to be killed in car accidents, and more socially isolated. If you don't like that example, there are plenty of others -- people simply do not act in their own best interests, not even most of the time. If you ask me, people are not even particularly good judges of what their own best interests are. A brief examination of dating and sexual behavior will verify this.

I guess the neoclassical economist's answer is to say that people behave rationally in the absence of distorting features of particular markets, but it seems to me that life just is distorting features. There is never a situation governed purely by rationality.

I don't know how strongly neoclassical economics is wedded to this theory of rational behavior, but it strikes me intuitively as obviously wrong.

www.grist.org

What Tim Haab says here is true: "Experienced players in market settings behave in accordance with neoclassical assumptions."  

Fine, and within this domain, mainstream US economics is valid and helpful.  

The problem comes when economists venture outside that domain, and make unwarranted claims to authority.

It's important to keep in mind that the neo-classical models are abstractions, and that real world situations come with a history and power relations.  

The reason I say that neo-classical economics is a theology is that its proponents consistently ignore its limitations and use it to promote specific political programs.

My experience in the worlds of the corporation and investing is that economic rationality is only one part of what motivates people.  Ego, status and tradition are some of the powerful non-economic motivators.  

Advertisers know this, and cater to those non-economic impulses.  The billions of dollars spent on advertising shows that non-economic factors are not just a minor anomaly.

Actually I think Tim Haab is wrong about markets. Theories of the firm in neoclassical economics are ridiculous. Firms do not behave the way that theory suggests they should, for example. And traders in financial markets do not behave rationally. Ask an experienced trader sometime.

The other problem with neoclassical economics, is that it lacks the tools to model complex ecologies (unlike ecology, ironically). This is not a criticism of economics as an entire field. Merely one narrow interpretation of it.

The article's two fundamental assumptions -- that the only form of life worth considering is humans, making other forms of life are mere commodities, and that economic considerations should take precedence over environmental ones -- show the author's true feelings.  This stuff is crap and dosen't belong on an enviro website, except to be held up for ridicule.

One problem with environmental economics might be that the "economics" part operates on a relatively short timescale.  Or humans too often operate on a relatively short timescale and economics captures that.

Look at the incredible difficulty humans have managing ocean fisheries.  We have seen fisheries depleted time and again, and despite our experiments in alternate economics, keep on doing it.

How hard is it to stop fishing?  Or perhaps "why" is it hard to stop fishing?

I think the "why" could probably be explained by some behavioral economics (our idea that a fisherman deserves a reward?), but I'm not sure that economics are going to finesse a solution.

We probably need to stop fishing, at least in some large ocean reserves.