I thank you for your ongoing thought-provoking comments. I’d like to focus on the main issue, though. We seem to agree that free-market economics is deeply problematic, but we disagree on why that’s so. You say these economists mistake intensional for extensional truth. I don’t see how that’s relevant.
Economics is supposed to be a special science with ceteris paribus laws. Those laws posit probabilities or tendencies that aren’t observed necessities only because the system in question isn’t isolated from background systems which are outside the scope of the special science. By contrast, physics is supposed to be universal.
But notice that for a generalization to count as a scientific law about a probability or a tendency, the tendency has to actually hold. Typically, this is established by showing that the nomic pattern is normal, although it has certain exceptions which are accounted for by the hedging, by the ceteris paribus conditions.
There’s a big difference, however, between allowing for some exceptions to a norm, and _prescribing_ an outcome based on an unrealistic idealization or utopian vision. The former is scientific while the latter is religious or perhaps cultish (depending on the deviousness of the defense mechanisms). That’s the problem I mean to raise about neoclassical economics: it pretends to be a special science, hiding behind the idea of ceteris paribus laws that allow for exceptions, whereas its models are flatly fantastic. Free-market economics is therefore easily parodied by comparing its prescriptions to explicitly religious ones, as I did in my last reply.
The same holds for game theory, by the way. When you say game theoretic models are counterfactual, in that they’re about what we would do under certain conditions, you mean to say game theory’s assumptions are only ceteris paribus, not idealizations or prescriptions. But in actuality, game theorists take onboard at least some of the neoclassical assumptions about hyperrationality. Indeed, I didn’t make that up, but took the point from Philip Mirowski’s book Machine Dreams, which goes into the recent history of game theory and economics.
Have a look at the Stanford Encyclopedia’s article on game theory (link below): “Game theorists assume that players have sets of capacities that are typically referred to in the literature of economics as comprising ‘rationality’…For present purposes we will use ‘economic rationality’ as a strictly technical, not normative, term to refer to a narrow and specific set of restrictions on preferences that are shared by von Neumann and Morgenstern’s original version of game theory, and RPT.”
“RPT” refers to Samuelson’s Revealed Preference Theory, about which the article says, “When such theorists say that agents act so as to maximize their utility, they want this to be part of the definition of what it is to be an agent, not an empirical claim about possible inner states and motivations. Samuelson’s conception of utility, defined by way of Revealed Preference Theory (RPT) introduced in his classic paper (Samuelson (1938)) satisfies this demand.”
Thus, that article assumes the egoism of game-players. The article concedes this egoism isn’t empirical, but only definitional. That’s tantamount to saying game theory is either prescriptive or idle. Of course, if it’s prescriptive rather than descriptive, game theory isn’t scientific.
The article goes on to say, “In this article, ‘economic rationality’ will be used in the technical sense shared within game theory, microeconomics and formal decision theory, as follows. An economically rational player is one who can (i) assess outcomes, in the sense of rank-ordering them with respect to their contributions to her welfare; (ii) calculate paths to outcomes, in the sense of recognizing which sequences of actions are probabilistically associated with which outcomes; and (iii) select actions from sets of alternatives (which we’ll describe as ‘choosing’ actions) that yield her most-preferred outcomes, given the actions of the other players.”
Now as humans with big brains we clearly have some stupendous rational capacities, but our rational decisions are exceptions, not norms. Normally, according to cognitive science, we operate nonrationally. We don’t calculate probabilities, but rely on intuitions, emotions, and on authorities who exploit our cognitive weaknesses. That’s the reality, and neoclassical economists and game theorists mean to prescribe an alternative to reality, based not on science, but on cultish convictions or on cons that are useful to big business. Sometimes these convictions are drawn explicitly from Ayn Rand’s libertarian egoism, as in the cases of Alan Greenspan, Paul Ryan, and Rand Paul.
Either way, these rationalist models are toys that don’t reflect reality, fraudulent distractions from the plutocratic effects of free-market policies, or utopian prescriptions driven by religious faith in an idealization.
A good example of this is what you say about game theory’s reconstruction of Hobbes’s point about the social contract. Game theory may present an ideal way of thinking about reasons for cooperating. Hobbes pointed instead to the fear of tyrants. Which actually happened? What does ancient history tell us? The answer doesn’t align with game-theoretic whitewashing.
Incidentally, to say that any behavioural pattern in retrospect can seem rational is to concede that the definition of rationality is pseudoscientific (unfalsifiable, abstract, and faith-based). It’s the same with intelligent design. Organic traits seemed to be designed by a benevolent deity only because the notion of that deity was vacuous so that it could be imposed under any circumstances.