Who misplaced post-modernism? Hume, Adam Smith and economic methodology

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This paper submits that while David Hume and Adam Smith are presumed to be founders of modernism in philosophy and economics they already were what now would be deemed post-modern. It outlines Hume’s concept of ‘the reflexive mind’ and to how this opened frontiers between philosophy and psychology that Russell denied and which logical positivism in philosophy and allegedly positive economics displaced. It links the anticipation of post-modernism in Hume to his influence on Smith, Schopenhauer and the later Wittgenstein, as well as to Gestalt psychology, grounded theory and recent findings from neural research and cognitive psychology. It outlines Kant’s reaction to Hume’s claim that one cannot prove cause and effect and how mainstream economics, since Samuelson’s Foundations, has been Kantian but wrong in claims for axioms that are universal truths. It illustrates how Samuelson’s presumption that language and mathematics are ‘identical’ was wrong and that his premising comparative advantage on no capital mobility both misrepresented Ohlin and has led to ‘dangerous errors’ from premise dependent reasoning against which Smith warned. It then relates Hume’s case on ‘the reflexive mind’ to Soros’ concept of reflexivity and suggests that economics will not evolve unless it recovers some of Smith and Hume’s already post-modern methodology.

Posted for comments on 29 Jan 2013, 2:07 pm.

Comments (3)

  • This paper constitutes a much needed contribution to our understanding of David Hume, Adam Smith, and of the connections of their approach to economic methodology. Because I foresee that the reference to “post modernism” in the title may make the paper look less attractive for those with a realist inclination, perhaps it is useful to start this comment by noting that the paper is very relevant for realists too. Indeed, a reading of the paper will show that the authors do not adopt the usual interpretation of Hume (adopted for example by Bertrand Russell, as the authors note) according to which Hume leads to a sceptical dead end in philosophy. Quite the contrary, the authors adopt indeed what may be termed a “realist” position concerning human dispositions: human dispositions are real entities which are essential for cognitive processes, and influence decisively our perceptions. Of course, because these dispositions function at a non-conscious level too, we cannot articulate discursive speech about those dispositions. But this does not mean that they do not exist. They exist, and influence our interaction with the outside world. As the authors note in page 6 of the paper:

    “In his Theory of Moral Sentiments, and directly citing Hutcheson (1726; 1742), Smith stressed that sensing and perception were dual processes, of which the first was direct, and the other reflexive. Thus sounds and colours were the objects of the direct senses. The reflex was not, including aesthetic and also moral judgements. The faculty by which we perceive either beauty or harmony or virtue – or vice – ‘was a reflex internal sense’ (Smith, 1759, pp. 473-474). Hume (1739) already had developed this from Hutcheson in terms of ‘connections’ between current cognition and what already is ‘antecedently present’ to the mind. He submitted that the ‘reflexive mind’ becomes habitually disposed to general ways of perceiving and thinking which influence how we make sense of the external world and what we expect the future to be. We are not normally conscious of this, or of how we come to acquire the values and beliefs that influence our behaviour.”

    The argument made in the paper has indeed interesting connections, for example, to the realist social ontology developed by John Searle, who emphasises the role of underlying dispositions that constitute a “Background” which shapes our perception and cognitive processes, noting that “[i]ntentional states function only given a set of Background capacities that do not themselves consist in intentional phenomena” where the Background is “the set of nonintentional or preintentional capacities that enable intentional states to function”, and capacities are “abilities, dispositions, tendencies, and causal structures generally” (Searle 1995:129, emphasis in original). Indeed Searle argues that underlying dispositions are connected to the physical world, as real physical entities. And Searle also connects this issue to Hume and Wittgenstein, as the authors do, for he writes:

    “My discussion of the Background is related to other discussions in contemporary philosophy. I think that much of Wittgenstein’s later work is about what I call the Background. And if I understand him correctly, Pierre Bourdieu’s important work on the “habitus” is about the same sort of phenomena I call the Background. In the history of philosophy, I believe Hume was the first philosopher to recognize the centrality of the Background in explaining human cognition, and Nietzsche was the philosopher most impressed by its radical contingency. Nietzsche saw, with anxiety, that the Background does not have to be the way it is.” (Searle 1995: 132)

    A missing link between Hume and Nietzsche, which Searle does not discuss, may well be the contribution of Arthur Schopenhauer, as the authors note in page 7 of the paper (also in the footnote where a reference is made to a reading group on Schopenhauer that Nietzsche attended). Wittgenstein, of course, was in turn much influenced by Schopenhauer in his youth, and maintained an interest in his work throughout his life.

    As the authors explain, Kant followed a different route, but was constrained by the science of his time. Thus the authors write in page 16:

    “For the Newtonian principles which Kant assumed were universal in physics, such as the constancy of time and space were later to be qualified by Einstein (1905), while Heisenberg’s (1927) ‘indeterminacy principle’ in sub-atomic physics then challenged the presumption that physics could predict any rather than some outcomes. Another ongoing challenge is that Euclidean geometry is only one of several geometries, and while a priori true by definition is only an abstraction.”

    Indeed, Kant was so convinced by the science of his time, that he built his whole philosophy around it. Thus, Kant writes in the Critique of Practical Reason that his argument that time and space are ideal forms of the mind (a priori conditions for subjective experience), made in the Critique of Pure Reason (and summarised in his Prolegomena, as the authors note) is central because it enables him to place moral will outside time and space, that is, outside the deterministic chain of phenomena, so that moral freedom is preserved. Schopenhauer saw this as a great insight Kant had, and tried to reconnect the Kantian will to the external world again. But if Kant had lived in a time where ‘Heisenberg’s (1927) ‘indeterminacy principle’ in sub-atomic physics’ was already developed, as the authors note, he would not have seen the world of phenomena as a deterministic world, and may have not have felt the need to place moral will outside space and time so as to preserve moral freedom. Kant saw cause and effect as universal laws, as the authors explain, and could not find a place for moral freedom within such a deterministic chain of cause and effect.

    Paul Samuelson, as the authors note, also attempted to obtain universal truths like Kant. And indeed modern mainstream economics is a deterministic approach. No matter how many stochastic elements are added to mainstream models, as long as probabilities are numerically measurable (something that Keynes thought was not always possible, hence the existence of inescapable uncertainty) the system can be given an exact mathematical form. In fact Samuelson sees no problem in translating economics into mathematics, as the authors note in page 16. But this leads to the generalisation of a method which is not always appropriate. As Keynes notes:

    “The object of our analysis is, not to provide a machine, or method of blind manipulation, which will furnish an infallible answer, but to provide ourselves with an organised and orderly method of thinking out particular problems; and, after we have reached a provisional conclusion by isolating the complicating factors one by one, we then have to go back on ourselves and allow, as well as we can, for the probable interactions of the factors amongst themselves. This is the nature of economic thinking. Any other way of applying our formal principles of thought (without which, however, we shall be lost in the wood) will lead us into error. It is a great fault of symbolic pseudo-mathematical methods of formalising a system of economic analysis … that they expressly assume strict independence between the factors involved and lose all their cogency and authority if this hypothesis is disallowed; whereas, in ordinary discourse, where we are not blindly manipulating but know all the time what we are doing and what the words mean, we can keep “at the back of our heads” the necessary reserves and qualifications and the adjustments which we shall have to make later on, in a way in which we cannot keep complicated partial differentials “at the back” of several pages of algebra which assume that they all vanish. Too large a proportion of recent “mathematical” economics are mere concoctions, as imprecise as the initial assumptions they rest on, which allow the author to lose sight of the complexities and interdependencies of the real world in a maze of pretentious and unhelpful symbols.” (Keynes 1936: 297-298)

    What we keep at the “back of our heads” in “ordinary discourse”, as the authors note, are the underlying dispositions which frame our cognitive processes. Keynes was well aware of this, and of the connection to Hume too. This is a crucial aspect of the methodology of Hume and Smith, and latter of Keynes, Sraffa and Wittgenstein, which was neglected within mainstream economics, which became obsessed with mathematical symbols.

    The paper constitutes, I believe, a brilliant contribution to economic methodology, which provides a much illuminating perspective on Hume, Smith, and of the way in which their contribution shaped subsequent economic and philosophical thinking. It also shows how this perspective was much distorted within mainstream economics, with important consequences for economic policy, as the authors explain. I have learned much from reading it, and became indeed convinced that Hume is not a dead end, as Russell thought, but rather a promising starting point for the study of human action and human cognition, if seen in line with the authors’ suggestive interpretation (connecting Hume’s contributions to psychology, and to such notions as psychological dispositions in particular).


    Keynes, J.M. 1936, The General Theory of Employment, Interest and Money, London: Macmillan.

    Searle, J. R. 1995, The Construction of Social Reality, London: Penguin.

  • Madalena Eça de Abreu says:

    Comment on Holland and Oliveira, Who Misplaced Post Modernism: Hume, Adam Smith and Economic Methodology
    This paper complements another On the Centrality of Human Value which the authors published in second issue of The Journal of Economic Methodology last year. Both encourage a rethinking of the commonplace assumption that David Hume and Adam Smith were founders of modernism and demonstrate that their methodology already was what since has come to be deemed post modern or ‘critical realist’. Nuno Martins already has placed a comment advising that those disconcerted by the concept of post modernism should not be so by this paper. I wish to reinforce this not least since I have been aware of its conceptual framework for some time before it was posted, and that it helped me in my research in an area directly relevant to Smith’s central concepts of sympathy and mutual sympathy in his Theory of Moral Sentiments – charitable giving.
    Figure 1
    The Self and the External World

    My own research into this included discourse analysis on such giving by both secular and religious donors in the UK and Portugal. This is a difficult area to deconstruct, even on a grounded theory basis, unless one has a methodology such as that which Holland and Oliveira outline in their Figure 1 and which they have derived from Hume, Adam Smith, Schopenhauer (influenced by Hume) and also Wittgenstein (influenced by Schopenhauer), especially in the claim that what is perceived depends on the perceiver and that understanding meanings depends on their use in different contexts. Habitus in their figure is Bourdieu’s use of the concept of in terms of the values, beliefs and dispositions that we less than consciously acquire from childhood and later life experience which already had been developed by Hume – if without the term, and without Bourdieu apparently being aware of this .
    Such values, beliefs and dispositions are central to charitable giving. This in one sense should be self-evident but in another needs to be demonstrated if this is to counter the self-interest hypothesis ranging from Hobbes to Friedman which the parallel Holland-Oliveira 2012 paper critiques. There is validity also in their distinction between beliefs and convictions, where the latter is a belief held without doubt whereas beliefs may be more nuanced. For one of the findings from my own research has been that many religious donors who are prepared to declare that they have ‘faith’, volunteer that they identify with the values of the Sermon on the Mount, while they may be less than convinced in the sense of belief-without-doubt by ‘the whole story’ of the Gospels.
    The Holland-Oliveira conceptual framework also proves functional for coding discourse analysis. This is not least in its distinction between cognition as presuming to know, which may be misplaced, and understanding, to which we may only approximate. The paper also is useful in elaborating the distinction, stressed by Smith, though echoed in the later Wittgenstein, between directed and undirected feelings. For example, most of the respondents whom I interviewed and who declared themselves to be religious were prepared to make a monthly subscription of their income to a religious charity, regardless of specific charitable work (undirected feeling) because they shared its values. Yet also were concerned in the case of perception of a particular humanitarian crisis, such as a famine in Haiti or sub Saharan Africa, to prefer giving to a secular charitable agency (directed feeling) if this had a good track record on the grounds that this would be more effective in terms of delivery.
    For those of us who never managed to penetrate Kant’s Critique of Pure Reason, and maybe never will, their citing Kant on Hume in his Prolegomena is both fascinating and one of the clearest expositions of the differences between him and Hume. The manner in which they show that Samuelson stripped the psychology from Keynes, assumed that language and mathematics were ‘identical’ and yet was less than consciously Kantian in his own alleged ‘proofs’ of ‘truths’ also is enlightening in a manner that one rarely is likely to find in a mainstream economics text.
    In stressing ‘missing links’ in the history of thought, such as from Hume through Schopenhauer to Wittgenstein, the Holland-Oliveira paper also encourages awareness of how some of the more recent debates within post-modernism or critical realism or social constructionism have been under-informed. It also encourages reflection by some of us experienced in quantitative analysis to question implicit premises within how we may have been trained and are training others. First, that to claim that facts are objective is false since facts are how we perceive them. Second, that to dismiss qualitative analysis as unscientific since involving evaluation is wrong since our perception of anything in science or social science is influenced by values, dispositions and beliefs gained from both life experience and professional training. Third, that qualitative evaluation therefore is inevitable in any analysis of quantitative data. Fourth, that that if it is found that people perceive their realities in a same or similar way – including what they value – this is as capable of analysis as of any other data in social science, as I certainly have found from my own research without having been aware that this already had been claimed by Hayek.
    I therefore am glad that the Holland-Oliveira paper now is ‘in the open’. I strongly recommend it not only since it rediscovers key dimensions of Hume and Adam Smith, neglected by many of us, and the missing links between Hume, Schopenhauer and Wittgenstein, which otherwise may mainly interest cognoscenti in the history of philosophy and psychology, but also because I have found it in my own research to be both analytically robust and also, within the methodological limits of verification, verifiable.
    Prof Madalena Eça de Abreu. Polytechnic Institute of Management and Accounting, Coimbra, Portugal.
    References (other than those in the Holland-Oliveira paper on Who Misplaced Post Modernism):
    Oliveira, T.C. and Holland S, (2012). On the Centrality of Human Value. Journal of Economic Methodology, 19, 2, 121-141.
    Abreu, Madalena Eça de Abreu, (2012). Drivers of Donations Practices: Altruism and Religiosity Revisited. Ph.D. in Management, Specialization in Marketing. Superior Institute of the Sciences for Labor and Enterprises – Lisbon University Institute, Lisbon, Portugal

  • John Latsis says:

    Holland and Oliveira (H&O) develop a complex and provocative argument in their paper “Who misplaced post-modernism? Hume, Adam Smith and economic methodology”. Their core proposal is that David Hume and Adam Smith can be interpreted as ‘postmodern’ despite their respective statuses as amongst the founding fathers of ‘modernist’ philosophy and economics respectively. The argument draws on evidence from the original sources in the works of Hume and Smith and connections drawn between those works and the subsequent philosophical literature, in particular the work of Schopenhauer and the later Wittgenstein. I believe that there is an interesting and original argument to be made here, though I am not yet convinced by H&O’s version of it. My reticence is motivated by two major weaknesses that I see in the paper, which, if addressed, would greatly improve it. I will outline and attempt to provide some suggestions on how to address these weaknesses in the remainder of this short comment.

    The paper is hampered by structural problems, which arise from the ambitious nature of the project and the complexity of H&O’s argument. The first issue is that the authors never clearly define ‘postmodernism’ or its foil, which is presumably ‘modernism’, though it could potentially be positivism, empiricism or even something else. Clarity is essential here, particularly because they are advancing a controversial interpretation of Hume and Smith. A definition would give a clear structure to the remainder of their argument and allow them to draw more explicit links between the sections of the paper. It seems to me that reflexivity is the key to their version of postmodernism, but how the modern concept of reflexivity (as developed by people like Giddens, Bourdieu or Archer) links up with Hume and Smith is unclear in the paper. A simplified and therefore more readable structure might go something like this:
    • Present the ‘mainstream’ interpretation of Hume and Smith as predecessors of modernism.
    • Present the author’s version of ‘postmodernism’ and explain its connection to reflexivity.
    • Show how it underplays (a) the connections between Hume and Smith; and (b) the connection of both to ‘postmodernist’ philosophy.
    • Present the postmodern interpretation of Hume and Smith.
    Much of the material needed to make this argument is already in the current version, but the structure does not bring out the argument clearly enough.

    The second area where the paper needs further work is in its connection to the existing literatures on Hume and Smith. I am not a historian, but I am aware that there are extensive debates in HET and philosophy about both authors that appear to be directly relevant to the paper, but have not been discussed or cited by H&O. Further attention to these debates may allow them to reduce the complexity of the argument and avoid the need to cover well-trodden intellectual ground unnecessarily. Two examples are: 1) the discussion of the epistemic status of invisible hand explanations in Smith (e.g. Jaffe, Hetherington, Montes); and 2) the distinction between ought and is in Hume (e.g. MacIntyre). More generally, as H&O are undoubtedly aware, the journals Hume Studies and Adam Smith Review are a good place to look for arguments that could support or contradict their interpretations of both authors.

    Boyd, R. 2008. ‘Manners and Morals: David Hume on Civility, Commerce, and the Social Construction of Difference’, in C. Wennerlind and M. Schabas (ed) David Hume’s Political Economy. London: Routledge.
    Dow, S. (2002) ‘Interpretation: The Case of Hume’, History of Political Economy, 34(2), 399-420.
    Dow, S. (2002) ‘Historical Reference: Hume and Critical Realism’, Cambridge Journal of Economics, 26(6), 683-97.
    Hetherington, N. S. (1983) ‘Isaac Newton’s influence on Adam Smith’s natural laws in economics’, Journal of the History of Ideas, vol. 44, no. 3.
    Jaffé, W. (1977) ‘A centenarian on a bicentenarian: Léon Walras’ Eléments on Adam Smith’s Wealth of Nations’, Canadian Journal of Economics, vol. 10 (1), pp 19-33.
    MacIntyre, A. C. (1959). Hume on” is” and” ought”. The Philosophical Review, 68(4), 451-468.
    Montes, L. (2004). Adam Smith in context: A critical reassessment of some central components of his thought. Palgrave Macmillan.
    Parusnikova, Z. Against the Spirit of Foundations: Postmodernism and David Hume, Hume Studies 19 (1), 1-17.
    Smith, A. 1795; (1980) ‘The History of Astronomy’, in W. L. D. Wightman (ed.), Essays on Philosophical Subjects. Oxford: Oxford University Press.