What makes robust political economy different?

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I encountered what would later become important elements of Mark Pennington’s book Robust Political Economy in two articles that he wrote on the limits of deliberative democracy, and the relative merits of market processes, for social and ethical discovery, as well as a short book Mark wrote with John Meadowcroft, Rescuing Social Capital from Social Democracy. This research program inspired me to start my doctorate and pursue an academic career.  Why did I find robust political economy so compelling? I think it is because it chimed with my experience of encountering the limits of neo-classical formal models that I recount in my chapter, ‘Why be robust?’, of a new book, Interdisciplinary Studies of the Market Order.

While doing my master’s degree in 2009, I took a methodology course in rational choice theory at Nuffield College’s Center for Experimental Social Science. As part of our first class we were taken to a brand new, gleaming behavioural economics laboratory to play a repeated prisoners’ dilemma game. The system randomly paired anonymous members of the class to play against each other. We were told the objective of the game was to maximise our individual scores.

Thinking that there were clear gains to make from co-operation and plenty of opportunities to punish a defector over the course of repeated interactions, I attempted to co-operate on the first round. My partner defected. I defected a couple of times subsequently to show I was not a sucker. Then I tried co-operating once more. My partner defected every single time in the repeated series.

At the end of the game, we were de-anonymised and it turned out, unsurprisingly, that I had the lowest score in the class. My partner had the second lowest. I asked her why she engaged in an evidently sub-optimal strategy. She explained: ‘I didn’t think we were playing to get the most points. I was just trying to beat you!’

The lesson I took away from this was not that formal models were wrong. Game theoretic models, like the prisoners’ dilemma, are compelling and productive analytical tools in social science, clarifying the core of many challenges to collective action. The prisoners’ dilemma illustrates how given certain situations, or rules of the game, self-interested agents will be stymied from reaching optimal or mutually beneficial outcomes. But this experience suggested something more complex and embedded was going on even in relatively simple social interactions.

The laboratory situation replicated the formal prisoners’ dilemma model as closely as possible with explicit rules, quantified ‘objective’ (though admittedly, in this case, low-value) payoffs, and a situation designed to isolate players as if they were prisoners in different cells. Yet even in these carefully controlled circumstances, it turns out that the situation is subject to multiple interpretations and understandings.

Whatever the textual explanation accompanying the game, the score on the screen could mean something different to the various players. The payoffs for the representative agents in the game were not the same as the payoffs in the minds of the human players. In a sense, my partner and I were unwittingly playing different games (although I lost within either rules of the game!).

When we engage with the social world, it is not only the case that our interests may not align with other people. Social interaction is open-ended. We do not know all the possible moves in the game, and we do not know much about the preference set of everyone else who is playing. Indeed, neither they nor we know what a ‘complete’ set of preferences and payoffs would look like, even of our own. We can map out a few options and likely outcomes through reflection and experience but even then we may face outcomes we do not anticipate. As Peter Boettke explains: ‘we strive not only to pursue our ends with a judicious selection of the means, but also to discover what ends that we hope to pursue.’

In addition, the rules of the game themselves are not merely exogenous impositions on us as agents. They are constituted inter-subjectively by the practices, beliefs and values of the actors that are also participants in the social game. As agents, we do not merely participate in the social world. We also engage in its creation through personal lifestyle experimentation, cultural innovation, and establishing shared rules and structures. The social world thus presents inherent uncertainty and change that cannot be captured in a formal model that assumes fixed rules of the game and the given knowledge of the players.

It is these two ideas, both borrowed from the Austrian notion of catallaxy, that makes robust political economy distinct. First, neither our individual ends, nor means of attaining them, are given prior to participation in a collective process of trial and error. Second, the rules that structure how we interact are themselves not given but subject to a spontaneous, evolutionary process of trial and error.

I try to set out these ideas in a recent symposium in Critical Review on Mark Pennington’s book, and in ‘Why be robust?’ in Interdisciplinary Studies of the Market Order edited by Peter Boettke, Chris Coyne and Virgil Storr. The symposium article is available on open access and there is a working paper version of my chapter is available at the Classical Liberal Institute website.

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