In his exploration of the organization of complexity, Herbert Simon brings out the understanding of economic rationality in, “The sciences of the artificial”. The book is more of Simon’s conception of complexity in terms of how it can be studied, adapted to and understood by human beings.
With knowledge from diverse fields such as social science, economics, psychology, computer science and biology, Simon has well illustrated a theme that pervades these fields, namely, the complexity emerging from simplicity of a complex environment.
He explores how human beings are viewed as behaving systems while the real thing is that the complexity of their behaviour is a reflection of the complexity of their environment. He defines economics as a theory of human rationality stating that decisions are usually made based on procedural and substantive rationality (Simon 1996, p.57).
The author starts by describing the differences between artificial and natural; he explains that artificial is the one that is made by human including skyscrapers and software (Willemien 2006, p.181). It is through this statement the point is rarely discerned. In his explanation, he talks of how science deals with things as they are perceived.
For instance, classical science only allows people to reason about the various properties of the structure they put in question; but what they do not tell straightforwardly is how to come up with a new structure from scratch with better designs that meet the needs of consumers. Also on the basis of design, accumulated knowledge is better as it gives rational view of things helping people make better decisions.
The real world is usually satisfied by the strictness of standards generalized on matters (Simon 1996, p.129). It is for this reason that designers study old designs aiming at making better ones that meet the new demands. Therefore, economic rationality is a scientific reasoning mode that economists use to interpret the models and designs of future behaviours of socio-economic systems.
On the other hand, Milton Friedman’s, “The methodology of positive economics” is cited as among the most influential and controversial pieces of methodological writings in the economics of the twentieth century. The essay is Friedman’s research based on John Neville’s distinction of normative and positive economics.
The relation between positive and normative economics somehow brings out inevitable confusion, which has resulted in mischievous errors.
Tautological completeness should not be the judging factor for a useful economic theory; instead, simplicity, fruitfulness, predictability and the ability to generate additional information on the matter should take the role; the more unrealistic the assumptions are, the more significant the theory is. The essay is a plea for a positivistic interaction of theories and observations (Friedman 1953, p.14).
The essay primarily focuses on certain methodological problems that arise when constructing the so called “positive science”. In other words, the problem comes when determining whether a theory should be accepted as part of knowledge it emphasizes (Maki 2009, p.91). Assimilation of theories, unrealistic concepts, social constructions, predictive tests and explanatory unification are the concerning issues that Friedman raises.
The author acknowledges the element of omission of details perceived to be irrelevant, and as a result, presents invalid predictions. What is more, the book provides an insight of useful heuristics of economics. It is in this book that the author talks of economics as a rationalized skill used to predict behaviours, and determining whether they are factual through perceptions.
Reference list
Friedman, M 1953, Essays in positive economics, University of Chicago Press, Chicago.
Maki, U (ed.) 2009, The Methodology of Positive Economics: Reflections on the Milton Friedman Legacy, Cambridge University Press, Cambridge.
Simon, H 1996, The sciences of the artificial, MIT Press, Cambridge.
Willemien, V 2006, The Cognitive Artifacts of Designing, Routledge, London.