The Crucial Role of Reactivity in Economic Science

Abstract

Many academic economists take it as a matter of course that economics should become a natural science. Such a characterization misses an essential aspect of a social science, namely reactivity, i.e. human beings systematically respond to economic data, and in particular to interventions by economic policy, in a foreseeable way. To illustrate this finding, the paper uses examples from different fields: happiness policy, world heritage policy, and science policy. Reactivity requires a different policy approach from governments claiming to maximize social welfare in the form of happiness. What is needed are basic constitutional provisions, or “rules of the game”, decided behind the veil of ignorance. Moral considerations must enter when the basic rules setting the way in which individuals interact are determined. Moral aspects are also indispensable as guidance to individuals when they take decisions within these rules. It is most unlikely that intelligent learning machines can fulfill this task in an acceptable manner.