Inductive Reasoning and Stories

Plato: "Those who tell the stories rule society."

I believe those interested in learning more about stories and storytelling, about why we tell stories and want to hear stories told, have much to teach economists and other social sciences. This is one of the main places where my interests overlap. And my interest in stories and economics both are why I subscribe to the Austrian school of economics.

Mainstream economics is a deductive science (involving logic and math). And it is for this reason that it repeatedly fails to accurately describe any actual economy that has ever existed -- or will exist. The reason for this is that economies are made up of agents who primarily engage in inductive reasoning, creating very complex patterns. Inductive reasoning allows one to see complex patterns, meaning the system that emerges from agents using inductive reasoning is best understood through the same approach. An economy of deductive computers would be more likely to be understood using deductive methods. And even that would have to involve very complex math. An economic science should of course have deduction -- but it should have the right deductions. But a complex science will also need -- will indeed require -- induction as well. The most inductive school of economics is the Austrian school.

Eric Beinhocker, in The Origin of Wealth, argues that "Stories are vital to use because the primary way we process information is through induction. Induction is essentially reasoning by pattern recognition. It is drawing conclusions from a preponderance of evidence" (126). This should sound familiar to those familiar with Hayek's argument that all we can ever really do is engage in pattern predictions, not actual predictions. We are pattern-recognizing, pattern-making, pattern-predicting machines, and as such are able to deal with complexity far, far, far better than do deductive computers (or mathematical methods). And stories help us to do this.

What are stories for? "We like stories because they feed our inductive thinking machine, they give us material to find patterns in -- stories are a way in which we learn" (127). The study of literature allows us to concentrate on how stories work, how they teach us. History is primarily transformed into stories. And if you want to really drive home a point in the social sciences, you tell a story. Stories are so powerful that they can be used to override statistically significant data (induction beats deduction). I can talk about how over 90% of the population has health insurance and are happy with their insurance, but the guy with the story about the mother who dies because she doesn't have insurance wins the argument -- not because his argument is in fact better, but because he is taking advantage of the fact that humans are primarily inductive, not primarily deductive (129). As any good rhetorician knows, you need both, but the balance should lean heavily toward stories and anything else that takes advantage of our inductive reasoning. Learning how stories work thus allows us to learn how to be more persuasive in politics or when doing scholarly work for the social sciences.

Patterns and pattern-recognition are central to our thought processes and, thus, to our actions:

Humans particularly excel at two aspects of inductive pattern recognition. The first is relating new experiences to old patterns through metaphor and analogy making. [...]

Second, we are not just good pattern recognizers, but also very good pattern-completers. Our minds are experts at filling in the gaps of missing information. The ability to complete patterns and draw conclusions from highly incomplete information enables us to make quick decisions in fast moving and ambiguous environments. (127)

This again points to the importance of understanding literature. It is through literary studies that we learn about metaphors and analogies. And one of the contributions of poststructuralist theory is its emphasis on narrative gaps, at where there is incomplete information, and thus to the different ways we fill in those gaps. Why do authors leave gaps? Perhaps they do so precisely because we perceive a world full of gaps, that we learn to fill to make sense of the world. Stories reflect the world even at this level of structure.

The better we learn to understand stories, the better our inductive reasoning will become:

induction is essentially a problem-solving tool that an agent uses to further its goals. The collection of rules, shaped by feedback from the agent's environment, creates an internal model of the agent's external world. The agent then uses this internal model to make predictions about what will be the best responses to the various situations that it encounters in pursuit of its goals. (130)

Reading or hearing a story also creates this internal model such that one can learn from others' experiences. Our ability to empathize combined with this ability to create internal models allows us to experience others' experiences, to essentially have an experience without doing so in the real world. It wold certainly be safer for us to learn to avoid dangerous situations by hearing someone's story about having been in that dangerous situation than to have to each experience such a situation ourselves. The more internal models we have, the better able we are to act in the world and to understand that world. Indeed, the more stories we have, the more complex we understand the world to be. One of the dangers of this is that we can misunderstand this complexity as demonstrating incommensurablility among the different patterns. This is where many postmodernists have taken the high level of complexity in their heads. However, it may be that they don't have enough data, enough stories. It may be that one needs a truly astronomical number of stories from a variety of cultures to see both the differences and the commonalities. Without understanding both, we do not really (and cannot really) understand the social world.