Hahnemann-Archivar Martin Dinges (Foto IGM)

This year’s Nobel Prize in the Economic Sciences is being awarded to the Homeopathy Archives of the Institute for the History of Medicine (IGM) und and its current co-manager and archivist, professor Martin Dinges PhD. The archives, which form part of the German Robert-Bosch Foundation, maintain the assets of homeopathy’s founding father, Samuel Hahnemann and of his most important scholars and successors.

The prize was awarded in recognition of the important empirical and theoretical contribution of the field of homeopathy to the economic sciences, namely the falsification of the hypothesis that market players behave rationally. Influenced by the catch cries of the enlightenment, the authors of early economical models had postulated that customer behaviour was driven by reason. More than a century before the social scientist Herbert Simon introduced the principle of bounded rationality, Hahnemann had designed careful experimental procedures, which were to demonstrate that humans are in no way inclined to act rationally.

Hahnemann developed three easily falsifiable theses and combined them to a feigned therapy method: With the similis rule he proposed that diseases could be cured with substances, which cause symptoms in healthy individuals that resemble those observed in sick people, irrespective of their respective illness. Secondly, with his simplex rule he suggested that any patient could be healed with a single substance, again irrespective of the disease. And finally, Hahnemann formulated the principle of dilution: The effect of a substance supposedly to increases the more you attenuate it.

Hahnemann managed to provide impressive evidence that a charismatic appearance and the use of pseudo-scientific jargon – his «organon» was published in 1924 for the first time – were sufficient to largely inhibit rational thinking in his study participants. His roughly 5400 patient letters also show that Hahnemann generated an important empirical basis for the explanation of mass behaviour. But it was not to be before 1841 that Charles Mackay provided a systematic analysis of the topic: In his volume Extraordinary Popular Delusions and the Madness of Crowds he documented not only «peculiar follies» but also early economic bubbles.

In his publications, Dinges shows that neither struggles between schools of thought that emerged in the post-Hahnemann era nor scientific findings brought homeopathy’s popularity down. It has long been shown that not a single molecule of the original substance is to be found in a typical homeopathic remedy and that they are no more effective than other forms of placebo.

Stock market behaviour still offers evidence for the bounded rationality of market players. But in order to illustrate unbounded irrationality, homeopathy is a necessity. It was about time to appreciate this.

You read it here first! (Text in German available here.)