I'll start first with your last point.
> Every scientist has an incentive to present their results as important
> and their arguments to be on a sound basis rather than quicksand. Why
> expect economists to be first in line for admitting "that the only
> thing I really know is that I know nothing"?
It is certainly too late for them to be first; see climateaudit.org .
While I find the critiques there stubborn and intemperate and the tone
counterproductively arrogant and rude, I think that many of the
questions being asked should indeed be answered.
I would hate to follow in their footsteps with a comparably aggressive
econaudit.org . I just wonder why it is climatology rather than
economics that is subject to this level of criticism in the debate on
how to conduct policy rationally. After all, climatology is almost
entirely rooted in classical physics with its precise and inescapable
laws. Economics, on the other hand, is only a generalization of human
behavior. There may be principles that generalize human behavior, but
the overriding influence of culture (and, importantly for our
purposes, context or "environment") are at best treated as second
order phenomena.
On 11/16/06, [EMAIL PROTECTED] <[EMAIL PROTECTED]> wrote:
>
> > Still, my impression is that the tendency
> > to assume away huge issues and then derive airtight arguments based on
> > those dubious assumptions was comparable.
>
> It seems to me that economists question their assumptions just as
> thoroughly as other scientists. What evidence is there that economists
> in particular would be more prone to a "tendency to assume away huge
> issues and then derive airtight arguments based on those dubious
> assumptions" than other scientists would be?
There are quite a few simplifying assumptions. One which David
Friedman makes explicitly is that even though individual behavior is
irtrational, aggregate behavior is rational in the mean. I think it's
easy to identify cases where this is wrong. Another is that aggregate
individual behavior by others has no effect on my circumstances other
than by making products and services available to me. I believe that
there are "advanced" schools of economic though t that question this
assumption, but it seems so trivially wrong that it's a poor basis for
starting the analysis.
The assumption which is at the core of the Stern report and which is
the one I am calling into question here is that aggregate capital is a
perfect measure of aggregate wealth, where wealth is taken as some
degree of match between what an indivdual wants and what he or she
gets.
I believe any complex optimization requires a formal cost function in
order to proceed rationally. In this I agree with economists, and
probably not with most environmentalists.
However, it seems to me a fair generalization that economists assert
without argument that the appropriate cost function to apply is
(formally speaking the negative of) integrated income, or gross
national product, or perhaps in rare, more enlightened cases, gross
terrestrial product. I find this not only non-obvious but almost
certainly incorrect.
I believe, in fact, that this assumption is a root cause of the
screamingly obvious fact that contemporary global response to global
climate change is inadequate.
We can, of course, add to it the already well-known controversy about
the impact of discount rates on long-range planning. At least this is
being examined, and I was pleased to see the Economist mention it (and
the ethical issues of intergenerational equity) in their recent
featured series of articles on climate change. As is the issue of
externalities. We see economic thought treating these issues as
exceptions rather than as crucial issues.
The idea that the thing we must maximize is identical to the size of
the economy measured in some fictitious quantity such as "constant
dollars" that seems to me quite unexamined except by people who want
to eschew quantitative thought altogether. This is the question I have
the temerity to raise here.
A fluid dynamicist might simply say that "on longer time scales,
these terms are not negligible, and hence the equivalence of wealth
and capital is not valid in problems where the time scale exceeds some
constant". That is, however successful conventional economic thought
is in guiding policy on short tme scales is insufficient to prove that
it is useful at all on long scales.
I observe that complex systems behave differently, have different
balances, at different temporal and spatial scales. Why should the
governance of the world be exceptionally simple?
I am not sure I agree with Kooiti Masuda's effort toward an
alternative formulation, but I very much appreciate the effort toward
one. At present, the world seems to me caught in a debate between an
emotional, impractical and vague program (the precautionary principle
accompanied by outrage) and a pseudo-rational one based on incorrect
premises (the economic one that equates capital and wealth at all time
scales).
For those who understand the analogy, I think we should stop trying to
apply something analogous to a geostrophic approximation on time
scales where dissipation is part of the first order balance.
We need a quantitative approach to think clearly, but we need to think
about the right quantity. I don't think we know what that quantity is.
mt
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