Thursday, March 27, 2014

Intuition in economics can't replace reason


One thing you will notice early on about economics is the overuse of the term intuition. Typically the terms is used like this “Let me give you the intuition behind this model”. Or something.

Let’s take a look at the common definition of intuition for starters. Google tells us that intuition is the ability to understand something instinctively, without the need for conscious reasoning.

Which, when you think out it (when you reason) you see that intuition is merely an excuse NOT to reason; it’s a way to latch on to ideas that support pre-existing beliefs.
When I hear a seminar presenter say “let my give you some intuition”, I now translate it in my mind as “let me align my theory with your beliefs so you will have trouble disagreeing with me regardless of the strength of me reasoning and the evidence I present”.

I find the elevation of economic intuition to a skill in itself to be very unscientific.

In physics, for example, I see people discussing intuition as either experience with certain types of mathematics (you internalise the steps of mathematical logic), or as experience in the physical world; of taking one’s lived experiment and applying what are now intuitive results to problems. You know a lever works because you have used levers many times. The results do not contradict your lifetime of personal trial and error and therefore the result is intuitive. But from my experience this is not what economists mean.

Duncan Watts describes much better how intuition pervades social sciences and stifles scientific advancement, particularly in economics
Part of the problem is also that social scientists, like everyone else, participate in social life and so feel as if they can understand why people do what they do simply by thinking about it. It is not surprising, therefore, that many social scientific explanations suffer from the same weaknesses—ex post facto assertions of rationality, representative individuals, special people, and correlation substituting for causation—that pervade our commonsense explanations as well.
In many ways intuition from experience should irrelevant to individuals analysing complex systems from within them, since the properties of the whole are typically unrelated to the properties of individual parts. 

With so much emphasis on intuition over reason it is no wonder that a fair portion of economic debate has not progressed in 140 years.

2 comments:

  1. Intuition is good at building basic ideas and concepts. Reason is good at constructing explicit, testable theories. Evidence is good at determining which testable theories are applicable to reality.

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  2. You miss one thing, because in economics, the word intuition is not what it usually means. The only thing it means is that for a moment, we stop using mathematics and use another language, e.g. english, to explain a model, for example. It has nothing to do with whether reason is involved or not.

    The reason that economists use the word intuition, I think, is that they think they're doing an exact science and need a lot of mathematics, which is a very basic mistake since economics is a social science, and in my opinion much more suitable for 'normal' language. Mathematics should be a tool of economics, not nearly an equivalent of economics.

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