On Sat, Aug 24, 2013 at 11:16 AM, Perelman, Michael <[email protected]> wrote:
> We are talking about two different kinds of bookkeeping. Economists were telling the physicists that their understanding of economic growth and the physicists' understanding of their own discipline were almost identical because they both used mathematical principles. Why do you presume that the economists view economic growth as "unconstrained"? Aside from the behavioral assumptions, the economists impose "resource constraints," "equilibrium conditions," "equations of motion," etc. to pull the solutions down to earth. My objection is not that their theories of growth are unconstrained, which is patently false. My objection is that their "resource constraints," etc. tend to be interpreted as constraints to capital. The right "resource constraints," from my viewpoint is those for workers and, thereby, for humanity. What is a benefit (cost) for capital is not necessarily what is a benefit (cost) for humans. Capital's limit is itself -- wrote Marx. But that is not humanity's limit. > The physicists mocked the economists' naïveté because physical laws mean maximization with respect to some conservation principle. That is what Maxwell's sneer was about. I do not know enough about Maxwell's understanding of economics. What I know is that, in thermo-dynamic systems (e.g. a thermo, a rocket sent to outer space, the *material* reproduction of a society), the conservation principle imposes the Lagrangian or, more generally, the Hamiltonian. What Mirowski seems to be saying is that economists should not use the Hamiltonian setup until they answer questions that he doesn't feel competent to answer. It's like me saying that people should abstain from using weed to calm their chronic pain, because I have no freaking idea of what the weed effects on pain are, and/or because the government says that weed does more harm than good. Well, the research is out: weed can be a good painkiller and, in some cases, may be the best painkiller available. I think the economists *must* use the Lagrangian/Hamiltonian setup, but (again) they should interpret resource constraints, etc., not as those of capital, but as those imposed by the productive force of labor, with entropy costs internalized (because -- as I try to say in my book -- that is what entropy is: a cost or subtraction of human productive force) and with social structures (relations of production) endogenized (because in the big scheme of things, they are "choice variables," not "parameters" as capital would wants us to believe). > G-R was on the side of the physicists, arguing that economists' model of unconstrained growth neglected physicists' "bookkeeping" in the sense that the economists were ignoring the underlying physical law of entropy. > > I suspect that is what Gene was appreciating in this dialogue. Entropy is an internal cost to the human race, but it is external to capital. Capital is into self expanding, and everything else looks to it like a barrier. If you're doing capitalist bookkeeping, you ignore external costs. You transfer them to the rest of society. Can the rest of society take them? If they can't, you'll know in due time. But all that is a separate matter. I repeat: the economists' models of growth are *not* unconstrained. Take any growth model -- Harrod, von Neumann, Solow-Swan, Ramsey, Samuelson, endogenous-growth, AK, putty-putty/putty-clay, younameit. They all have resource constraints. If you are a capitalist and you wish to smuggle your ideology through those models, you interpret the variables in the model, the resource constraint, bookkeeping condition, etc. your way, not the way of your class enemy. Except that, if you push logic to the limit, if you truly look at the longer run, capital winds up denying itself. If you are thinking of "environmental constraints," well, the fact that capital cannot indefinitely dump entropy costs on the back of working people without threatening their destruction and thereby self destruction becomes obvious. I see G-R as raising that yellow flag to the economists. We have to be careful about *what* specifically we are objecting to. > Phil Morowski publishes a number of similar exchanges in which the physicists were exasperated by the economists' failure to recognize what they and G-R considered obvious. You might say that the physicists were arguing that economists had no comprehension of the kind of bookkeeping that was necessary for a scientific theory of economics. Yes, there's that too. I mentioned it (though perhaps not clearly) in Doug's FB page. The physicists have an inclination towards what they call the "phenomenological" approach to theorizing. This is the organic historical way in which physics evolved and physicists are imbued with philosophical positivism. You go out and define an interesting aspect of the physical world and by so doing (i.e. by determining its quality) you make it quantifiable, turn it into a "number" (old usage) or a "variable" or "set." (Yes, everything that can be defined qualitatively is quantifiable.) By comparison to other parts of the physical world with the same thing, you establish a standard and thus a unit of account to quantify your thing (think of the 0th law of thermodynamics, which defines temperature and, hence, a thermometer transitively). Then you gather experimental data on it, estimate parameters, and infer the shape of relationships between the variables. Finally, there comes a Maxwell who organizes a lot of seemingly disjoint work (e.g. electricity and magnetism) and unify it into a set of neat equations showing that workers in all those disjoint fields were actually looking at the same thing from a slightly different angle. Later on, your students refine, simplify, and generalize your equations, etc. and they become established physics. The work of theoretical physicists is to propose stories to rationalize the experimental data and then synthesize seemingly disjoint stories into a grander framework a la Maxwell. But the standards of logical proof are a bit loose, they are not of the essence, because the experimental side drives things, discipline them, and avoid them the embarrassment. Theoretical physicists are continuously pulled down to account for the documented physical experience. Mirowski and other casual observers think that this is the totality of physics and if there's anything in physics that economists should imitate, this is it. Well, IMO, this is wrong. First off, the bulk of mathematics is an integral part of physics. Math is largely the abstract wing of theoretical physics -- math = theoretical theoretical physics. Yes, today's math owes a bit to social sciences proper (cf. games). A chunk of math seems to be flying on its own without any apparent physical referent. But math is mostly the language of theoretical physics. The "axiomatic" approach in mathematics is, I argue, a piece of theoretical physics developed with relative autonomy from the immediate pressure of experimental physics, even if most professional physicists view it as separate and too abstract. But regardless of whether the development of math has responded more or less directly to the concerns of physicists, it is clear that, without the so-called "axiomatic" or Bourbakian approach, modern physics would be stunted. Mirowski and others who share his views are shocked that the economists, instead of going the way of physics, are so hangup with abstract mathematics. I am convinced that the impulse towards the Bourbakian approach in theoretical economics -- as argued by Debreu, Arrow, and (with some nuance) von Neumann -- was and remains a positive step. It is not the whole, it's a part, but it is good to move that part in this direction. It is precisely this impulse that irks most critics (e.g. Mirowski) and leftist economists I know. They view it as a sleight of hand to hide ideology behind abstract math. In fact, it is exactly the opposite! It does a favor to serious critics who want to strip modern theoretical economics off its ideological garbage. Radical, critical, socialist, Marxist, heterodox economists should demand that the axioms and the logic of these models be explicit and transparent -- something that requires that they learn the language of math. Because, as Debreu and von Neumann noted, the myriad problems that limit the usefulness of empirical data in economics make it even more necessary than in physics to demonstrate the logical consistency of a theory. Professional physicists can afford to play quick and dirty. Experimental data can help settle matters more directly. Controlled experiments are cleaner. Professor Walter Lewin (MIT) is famous for saying: "Can we prove Newton's laws of mechanics? No, we can't. Do we believe in them? Yes, we do. Why? Because all experimental data of phenomena involving speeds substantially below the speed of light are completely consistent with the laws, plus or minus measurement errors." In physics, very often, you don't need to prove your model logically, derive it from first principles, in order to establish its validity. For that very reason, in the social sciences, the logical derivation needs to be more rigorous (you can prove anything starting from a logical contradiction), because observational data and their interpretation is largely (though not entirely) hocus pocus. I say this, even though I am strongly in favor of using the empirical paraphernalia that statisticians and economists have developed to crunch numbers. I'm all but a nihilist on this, but -- if you follow the derivations carefully -- stuff like time-series econometrics requires huge leaps of faith. Mirowski seems to have a partial technical sense of physics. He utters the words. But he seems to have been much busier capturing and reporting information in almost a raw form, insinuating connections here and there, but never working things out to synthesize all that in an orderly manner. He's been using the occipital lobe of his brain a lot, but he hasn't let his temporal and front lobes do their work, and they do tend to work more slowly. Mirowski's typical argument is: "The economists have a superficial view of things. They mechanically copy the setup from physics. The physicists develop it, so they have a better sense of its limitations, etc. (this part of the argument makes sense to me). Things are really complex. The physical world and society seem like two entirely different things. To show that, here's a bunch of undigested references and half-baked allusions. I do not understand how the economists can meaningfully use these methods. Conclusion: They should not use them." I say, exactly the contrary is true: Use them, because they have been used fruitfully in other fields. If you are an economist and you spot an analogy between the physical world and society, explore it. This should not be a surprise, because -- as I say -- society is just a piece of the universe with some unique properties. Copying is not bad, as a start. Von Neumann and Morgenstern, in the first chapter of their Games and Economic Behavior, say that the underdevelopment of economics is due to the lag on the empirical side. Yet, what is their book about? Not the empirical side, but the theoretical one! Why? The empirical project is too big a challenge! You start where you can. But you don't stop there. "In order to elucidate the conceptions which we are applying to economics, we have given and may give again some illustrations from physics. There are many social scientists who object to the drawing of such parallels on various grounds, among which is generally found the assertion that economic theory cannot be modeled after physics since it is a science of social, of human phenomena, has to take psychology into account, etc. Such statements are at least premature. It is without doubt reasonable to discover what has led to progress in other sciences, and to investigate whether the application of the same principles may not lead to progress in economics also. Should the need for the application of different principles arise, it could be revealed only in the course of the actual development of economic theory. [NB] This would itself constitute a major revolution. But since most assuredly we have not yet reached such a state and it is by no means certain that there ever will be need for entirely different scientific principles it would be very unwise to consider anything else than the pursuit of our problems in the manner which has resulted in the establishment of physical science. [...] "The importance of the social phenomena, the wealth and multiplicity of their manifestations, and the complexity of their structure, are at least equal to those in physics. It is therefore to be expected or feared that mathematical discoveries of a stature comparable to that of calculus will be needed in order to produce decisive success in this field. (Incidentally, it is in this spirit that our present efforts must be discounted.) A fortiori it is unlikely that a mere repetition of the tricks which served us so well in physics will do for the social phenomena too. The probability is very slim indeed, since it will be shown that we encounter in our discussions some mathematical problems which are quite different from those which occur in physical science." http://ia600301.us.archive.org/29/items/theoryofgamesand030098mbp/theoryofgamesand030098mbp.pdf
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