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Economics and time

from David Ruccio

Time poses a real problem in economics, both mainstream and heterodox. Mainstream economists tend to eliminate time entirely from their models, while heterodox economists often invoke time as a continuum, with an uncertain future and a stable, known present and past.

However, recent discoveries in physics require us to rethink our understanding of time. In particular, according to Robert Lanza, “whether events happened in the past may not be determined until sometime in your future—and may even depend on actions that you haven’t taken yet.” 

In 2002, scientists carried out an amazing experiment, which showed that particles of light “photons” knew — in advance −- what their distant twins would do in the future. They tested the communication between pairs of photons — whether to be either a wave or a particle. Researchers stretched the distance one of the photons had to take to reach its detector, so that the other photon would hit its own detector first. The photons taking this path already finished their journeys -− they either collapse into a particle or don’t before their twin encounters a scrambling device. Somehow, the particles acted on this information before it happened, and across distances instantaneously as if there was no space or time between them. They decided not to become particles before their twin ever encounterd the scrambler. It doesn’t matter how we set up the experiment. Our mind and its knowledge is the only thing that determines how they behave. Experiments consistently confirm these observer-dependent effects.

According to Lanza, what this means is that “choices you haven’t made yet might determine which of your childhood friends are still alive, or whether your dog got hit by a car yesterday.”

In terms of economics, what it means is that future economic events—policies, strategies, and theories—may determine which of the many economic possibilities in the past actually occurs. Right now, of course, we just don’t know. But we can certainly imagine a future when, under radically different economic and social conditions, the present common sense will have been changed to recognize capitalism as a long-past nightmare. Or maybe it’s already happening. . .

  1. Sandwichman
    August 19, 2010 at 2:24 pm

    These sound to me more like paradoxes produced by the metaphorical nature of language about time rather than features of “time” itself. It’s like the Liar’s Paradox or Zeno’s Arrow.

  2. David Ruccio
    August 19, 2010 at 2:57 pm

    OK but the question is: do we have any conception of time other than through the metaphors of language?

    The problem in economics is, some metaphors of time have been used (the “extended present” in neoclassical economics, historical time in many versions of heterodox economics) and others have not (such as those of quantum physics).

  3. August 19, 2010 at 3:47 pm

    Very interesting. I touched a similar idea in one of my novels (in French), an idea I intend to explore further in a SF novel not yet completed, that is, the idea that what we dig from the past through history, archeology, paleology, etc., is determined, or more precisely “changed” by the way we see the world, today and in the future. In other words,the metaphorical nature of language about time, as Sandwichm says, not only filters how we look at the past and what we see of the past, it also transforms it in its materiality, the past becoming what it was after the facts, so to speak.

  4. Geoff Davies
    August 20, 2010 at 2:46 am

    One should be careful about transferring from the microscopic quantum world into the macroscopic world. At best all you will have is a metaphor.

    Perhaps there is a metaphor here, which Jean’s comment brings out: our present world view affects how we perceive the past.

    There is a more prosaic problem around time in economics, namely that the neoclassical theory excludes it. Even when it pretends to include it, via probabilities of future events, it is merely telescoping an imaginary “knowable” future into the present. It can’t deal with the unknown future.

    Those theories of economics that try to preserve the general equilibrium by allowing it to change slowly are doing the equivalent of what physicists call a “quasi-static” theory. Such theories can’t address far-from-equilibrium phenomena – like market crashes.

    Steve Keen’s modelling of a dynamic economy includes full-strength time, and clearly that is what is required.

  5. Peter T
    August 20, 2010 at 4:21 am

    I agree the quantum world is too strange to be applied to larger events (so better not to try). I think the point about time, uncertainty and the difficulties of dealing with them in simple models stands without the reference.

  6. Peter Radford
    August 20, 2010 at 4:51 pm

    Let me add my agreement, with one additional thought: the physics of quantum level and higher level objects are clearly related but something intrudes to prevent quantum effects dominating at the macroscopic scale. Yet in economics we have become obsessed with conforming macro, or systemic, activity with micro theory. We thus ignore the entire issue of emergence within complex systems. It is as if we assume large scale systems have no properties not attributable to the forces operating at the lower level.

    For a discipline sometimes accused of having a “physics envy” economics entirely misses many of the deeper and more interesting aspects of that science.

    On a lighter note: having read Julian Barbour on the non-existence of time this summer I am now thoroughly confused as how to introduce time into economics, even though I think it is an urgent revision to basic theory!

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