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The Nobel centennial -- Fusing psychology and economics

P. R. Brahmananda

THE NOBEL Foundation has been celebrating its centennial by symposia on different subjects for which the prize is being awarded. Some 165 surviving Nobel laureates are expected to attend the various functions.

It is interesting to note how many laureates from different countries are attending the centennial. From the US there are 95, of whom 15 are from economics. Interestingly, there are three with citizenship rights from the US and Canada, the US and Egypt a nd the US and Switzerland. From Germany, there are 18; one is an economist. There are 12 from the UK, with one economist. However, there is one with citizenship rights from Great Britain and Argentina. France and Switzerland have five each. Japan and Swe den four each. The Netherlands has 3. Italy Belgium and Canada have two each. India, Ireland Australia, Denmark, Portugal, Russia, South Africa have one each. We have excluded this year's laureates. V. S. Naipaul's nationality is mentioned as that of Gre at Britain.

Of the 49 economists who have received the Nobel, including this year's laureates, 21 will be attending. If we include those who are not able to attend, probably 50 per cent of the Nobel economists would be surviving! The straightline depreciation formul a applied over a long run would indicate that the value of gross capital stock would be twice the value of net capital stock; that is, the stock worn out and written off would be equal to the stock surviving. This theorem would be applicable as a ratio o f surviving Nobel prize winning economists to the total number of economists who have received the awards.

Of course, India is represented by Amartya Sen in the centennial. He can claim at least four countries as his nationality (the UK, the US, India and Bangladesh). Probably, the Nobel Foundation would designate the nationalities on the basis of the passpor t identities of different persons.

Amartya Sen along with Norman Borlaug is participating in the Peace Prize symposia on Economic Exploitation and Inequalities. Amartya Sen thought that democracies are superior to dictatorships because they are less prone to have famines. But the current state of Orissa teaches us that democracy is not a sufficient condition for the absence of famines.

Economics was included in the category of subjects to be awarded the prize by the Nobel Foundation in 1969, thanks to the munificent donation by the Bank of Sweden, the country's central bank, to the Nobel Foundation. The Royal Swedish Academy is entrust ed with the responsibility of awarding the prizes in economics. The economics prize has been more controversial than the others since many dispute the claim of whether economics is a science of the same precision through experimental results as physics, chemistry, or physiology (including medicine).

Further, the criterion for objective originality is also difficult to satisfy in economics. Moreover, whether economics contributes to the betterment of the lot of mankind is also a matter of dispute, even among economists. One may add another hitch: In that it is difficult for the Nobel Foundation to be thoroughly knowledgeable and unbiased in a subject like economics wherein the country dominant in economic power tends to get a more than proportionate weightage in nomination and selection. Anyway, the Nobel Foundation has decided that they will not augment the list of subject for which the Nobel is awarded.

The Nobel centennial has arranged symposia on different subjects. In economics, interestingly, the papers seem to have at least one connected theme.

Professors of psychology are discussing whether the experimental methods adopted in psychology, especially animal experiments, can throw light on the motivating `materialistic' impulses in economics. If these papers carry conviction to the economists att ending the symposia, a bridge may be built between the experimental approach and the process of discovery of economic laws. It is important to note that Skinner, deemed by many psychologists, as the most outstanding in that area after Freud conducted exp eriments on rats of significance to economists studying human behaviour.

(Several years ago, Nicholas Georgescue Roegen, one of the most original thinkers in modern economics, who tried to incorporate the entropy law in economics, resigned from the membership of the American Economic Association because he objected to a lead article in the American Economic Review, dealing with the comparisons of human behaviour with those of rats.)

Probably, the Nobel Foundation is seeking indirectly to make economists aware of work of a similar nature in modern psychology. It should be a matter of conjecture as to whether future economists thinking so much about the materialistic motivation of eco nomic activity may try to establish new foundations for economics by drawing lessons from psychology. If that happens, laboratories of rats and rabbits may become adjuncts to departments of economics! This may mean that economics becomes experiment-depen dent like subjects in science. The inclusion of economics in the category of sciences for awarding the Nobel prizes may then get vindicated! The concept of a rat race as a description of competitive processes will be grounded on objective evidence.

However, there is also one paper in the symposia dealing with the need for induction of social preferences in economic behaviour of individuals.

The implicit hypothesis here is that human beings even in business activities tend to think of society and not just of themselves. Dr Fehr of Switzerland seems to think that there are costs in formulating policies, etc., only on the hypothesis that the w ell-being of society does not figure in the representative individual's pursuit of his material interests.

This line of thinking is alien to the dominant economics, especially in the US. It is not clear if rats or rabbits have any concept of aggregate well-being in their behaviour. In the theory of evolution, such a concept probably has no place. Do animals c ommunicate with each other and adjust their behaviour in terms of their collectivities as species? Does the aggregate figure in the DNA sequence?

Anyway, human beings think that they are different from animals and that they are superior to them. There have been efforts to derive concepts of society from purely materialistic instincts and motivations of individuals. But these efforts have not led a utomatically to the concept of justice. Moral and ethical codes have to be super-imposed on behaviour based on natural propensities. This at least is the view of philosophers like Kant and Rawls. Marx thought of a world in which socialist societies chang e and transform the propensities of human beings.

But Gandhiji thought that institutional change has to come from thinking and adjusted behaviour of individuals. Without transformation by individuals of themselves in their functioning, Gandhi thought that imposed institutional changes will fail. But, th e bulk of modern economics has no place for society and state unless the latter emerge through the motivations of self-interest.

My own submission is that self-interest in crucial materialistic lines such as those of survival and minimal efficiencies is important. But beyond that society's interests do figure in the normal thinking of human beings in enlightened societies.

This, however, assumes a historical process in which individuals broaden their visions and goals to encompass those who are not so fortunate and well to do as themselves.

The state, the government, has to assist such a process. It has a role in the transformation of individuals. This is where education, media and the functioning of leaders in different branches of activity including business matter. Probably, Kant's ideas are far away from the designers of the Nobel Centennial. There is a great danger in economists thinking only or dominantly in terms of self-interest as the mainspring of society.