Home > Uncategorized > The problem of weak first principles

The problem of weak first principles

from Bernard Beaudreau and RWER #91

Economics is both a social and non-social (pure and applied) science, social in its quest to understand human behavior in the realm of goods and services, and non-social in its understanding of material processes – that is, the way in which goods and services (our bread and butter) are produced. It therefore stands to reason that for it to be successful, it must decipher how human beings think, and second, how inanimate material processes behave. It must understand the mechanical and physical laws that underlie production processes. In short, before it can begin to say anything of value, it must understand its subject(s). Has it?

In this section, we argue that it hasn’t on both counts, namely consumption and production.[1] In short, modern consumer and producer theory is vestigial in nature, dating back to the mid-19th century, to a time when social sciences were virtually unknown and our understanding of production was devoid of science altogether. That this was the case back in the 1860s and 1870s is not the issue. Rather, what is at issue is the failure of economics to evolve, whether it be internally, or via the other related scientific disciplines (psychology, sociology, process engineering, applied physics). It is worth noting that all of these related fields have witnessed great progress over the intervening time period (e.g. the laws of thermodynamics)

1 Weak first principles: the case of consumer theory

For a college freshman, or any layperson for that matter, taking their first microeconomics course is akin to traveling to another planet or universe where the inhabitants are less evolved (more primitive), and where the laws of physics are, for all intents and purposes, suspended – in short, a case of social science fiction. It is a voyage back to a simpler time, a dark ages of sort, when behavior was ascribed to spirits, and motion, to something referred to as vis visu.  

In short, s/he learns that we as a species are concerned uniquely with something we call utility, measured in utils. There is no reason given as to why we are so intent on maximizing it, but instead are told that it has to do with our fundamental nature. While simplicity and reductionism do have a place in formalization, it is not and should not be seen as the end result. Unfortunately, this is where consumer theory comes up short for this is precisely where the analysis ends. Everything and anything is and can be a source of utility.

While we can forgive the likes of William Stanley Jevons, Francis Ysidro Edgeworth and Alfred Marshall their simplicity in formalizing behavior in the 19th century, it becomes a matter for discussion/debate whether we can do the same in the 21st century, given the advances made in the related behavioral sciences of psychology and sociology. For some reason, the profession has remained impervious to outside influences, with the result that today, despite having similar interests and concerns, economists and psychologists/sociologists do not see eye-to-eye, and have little-to-no common ground. Reducing Homo-sapiens to a mere utility maximizer/automaton has not earned economics any brownie points in the rest of the social sciences.

In the end, it boils down to one thing, namely that the ultimate purpose of the social sciences is to learn how members of our species think–or attempt to understand the way they think and hence, behave. Given its track record in so far as consumers are concerned (or economic agents), it is not at all clear that we economists have succeeded in that part of our mission.

2 Weak first principles: the case of producer theory

The same criticism applies to producer theory where output is modeled as an increasing function of capital and labor. While this may have been acceptable to mid-19th century political economists, it is orthogonal to our (non-economic) current understanding of material processes. Broadly-defined physics has shown us that all material processes, bar none, are energy based, and that modern-day labor and capital, not being sources of energy, are organizational inputs (read: non-physically productive). In short, the laws of physics (kinetics and thermodynamics) are what govern production processes. There can be no exceptions and no violations. Again, the role of the economist in so far as production is concerned is to understand the behavior of material processes. Once more, it is not at all clear that we have succeeded.  read more

[1] By consumption and production, it should be understood, mainstream consumer and producer theory.

  1. Meta Capitalism
    March 21, 2020 at 12:29 am

    In short, s/he learns that we as a species are concerned uniquely with something we call utility, measured in utils. There is no reason given as to why we are so intent on maximizing it, but instead are told that it has to do with our fundamental nature. While simplicity and reductionism do have a place in formalization, it is not and should not be seen as the end result. ~ Bernard Beaudreau, RWER #91, The problem of weak first principles, 3/20/2020

    .
    Amartya Sen in his essay Rational Fools: A Critique of the Behavioral Foundations of Economic Theory takes us on an intellectual journey back in time to the thoughts and reflections of one of the founders of the field of economics:
    .

    In his Mathematical Psychics, published in 1881, Edgeworth asserted that ‘the first principle of Economics is that every agent is actuated only by self-interest’. This view has been a persistent one in economic models, and the nature of economic theory seem to have been much influenced by this basic premise…. I should mention that Edgeworth himself was quite aware that this so-called first principle of Economics was not a particularly realistic one. Indeed, he felt that ‘the concrete nineteenth century man is for the most part an impure egoist, a mixed utilitarian’. This raises the interesting question as to why Edgeworth spent so much of his time and talent in developing a line of inquiry the first principle of which he believed to be false. The issue is not why abstractions should be employed in pursuing economic questions—the nature of inquiry makes this inevitable—but why would one choose an assumption which he himself believed not merely inaccurate in detail but fundamentally mistaken? (Sen, Amartya K., Rational Fools: A Critique of the Behavioral Foundations of Economic Theory. In Choice, Welfare and Measurement (1982). Cambridge: Harvard University Press; 1982; pp. 84-85.)

  2. March 21, 2020 at 10:06 pm

    A quick read of the larger article raises questions not considered. Why is growth a goal? How do we handle the limits to growth? We live on a finite planet but assume infinite growth is possible.

    What about the value assumptions inherent in the current and past economic paradigms such as the purpose of economic activities? Should we not be addressing well-being of people and how does one measure that? It seems the metrics used are faulty with assumed correlations that seems to be incorrect.

  3. March 22, 2020 at 3:53 am

    I appreciate that the post divides economics into two aspects: the social and non-social. Or, economics can be divided into: thinking and physical. Natural or physical laws restrict economic behaviors, but unnecessarily pessimistic. Why? Because of innovations, or the improvements of thoughts, which create the major part of growth. Once economics does not start from its “weaknesses”, but from a minimal unit of thinking, or the meta-operation, or the thinking “atom”, it will reasonably enter into the endless processes of computational evolutions, or the Combinatorial Explosions likely as the universal Big Bang, and the mainstream equilibrium will inevitably collapse. Economists have always correctly support the optimistic prospect of economic growth — despite occasional skepticism. Environmental problems, as one of problems mankind facing, are bound to be, following the innovative perspective, mitigated continuously — including the energy issue. Welcome to visit my site to read and comment the latest introductory paper of Algorithmic Economics: “The Birth of a Unified Economics”. Thanks!

  4. March 23, 2020 at 9:57 am

    I appreciate that the post divides economics into two aspects: the social and non-social. Or, economics can be divided into: thinking and physical. Natural or physical laws restrict economic behaviors, but unnecessarily pessimistic. Why? Because of innovations, or the improvements of thoughts, which create the major part of growth. Once economics does not start from its “weaknesses”, but from a minimal unit of thinking, or the meta-operation, or the thinking “atom”, it will reasonably enter into the endless processes of computational evolutions, or the Combinatorial Explosions likely as the universal Big Bang, and the mainstream equilibrium will inevitably collapse. Economists have always correctly support the optimistic prospect of economic growth — despite occasional skepticism. Environmental problems, as one of problems mankind facing, are bound to be, following the innovative perspective, mitigated continuously — including the energy issue.

  5. Ken Zimmerman
    April 4, 2020 at 12:30 pm

    It’s my view economists have “missed the boat” on first principles. Gabriel Tarde was a contemporary of Emile Durkheim and in his time considered a superior social scientist to Durkheim. I’ll summarize his social science and economics.

    Nothing in the economy is objective, all is subjective­-or, rather, inter-subjective, and that is precisely why it can be rendered quantifiable and scientific. But on condition that we modify what we expect from a science and what we mean by quantifying. These conditions will indeed modify our habits of thought in no small way.

    To make the social sciences into genuine sciences, it is necessary to reach a property that is quantifiable, which, paradoxically, is contained within subjectivities. But Tarde’s argument is not a marginalist one; the point of departure of marginalists is solidly anchored in individuals. Tarde never puts the adjectives “social” and “psychological” in opposition to each other. Despite Durkheim’s well-known criticisms of him, what Tarde designates as a psychological phenomenon never refers to anything personal or interior to the subject–what Tarde calls “intrapsychological” and about which he often asserts that nothing can be said–but always to that which is the most social in us, and which he calls, for this reason, “inter-psychological.” Better known today as inter-subjective. As a result, nothing is more foreign to his anthropology than the idea of economic agents cut off from the social world and whose calculations would present clearly defined boundaries. The words “intimacy” and “subjectivity” must not mislead us: at our most intimate level, it is always the “many” that rules. What makes Tarde so difficult for us to understand, after more than a century of assigning primary importance to just a single social science (e.g., sociologism, economism) is that he never places society and the individual in opposition, but, rather, he sees the two as nothing but temporary aggregates, partial stabilizations, nodes in networks that are completely free of the concepts contained in ordinary economics, sociology, etc. The basis of the social sciences is, in his view, a kind of contamination that moves constantly, from point to point, from individual to individual, but without ever coming to a halt at any specific stop. Subjectivity always refers to the contagious nature of desires and beliefs, which jump from one individual to the next without ever–and here is the crucial point going through a social context or a structure. The words “social,” “psychological,” “subjective” and “inter-subjective” are, thus, essentially equivalent, and they all refer to a type of path, a trajectory (a process) that demands, for us to be able to follow them, that we never presume the prior existence of a society or of an economic infrastructure, of a general plan distinct from the coming together of its members.

    The great advantage of these distinctly evolutionary ways of proceeding is that they immediately bring into plain sight the practical means through which the contagion, the contamination from one point to another, takes place — what Tarde calls “rayons imitatifs” (“imitative rays”) in the book that made him famous, Les Lois de l’imitation (The Laws of Imitation).

    This initial definition of the “quantum,” which is specific to values, will allow Tarde to unfurl, in lieu of the economy, a fabric made of intertwined relationships, where we must above all be careful not to rush to identify those which are literally economic and those that might only be metaphorically so. Tarde indeed will continuously show that, on the contrary, economics as a discipline risks losing all scientific objectivity because of a mistaken understanding both of its limits, which are too restrictive, and of its ambitions, which are too vast.

    Tarde’s views prompted French anthropologist Bruno Latour to create a new view of reality, a new ontology called “flat ontology.” Flat ontology is a model for reality claiming that all objects, even those that are imagined, have the same degree of being-ness as any other object. No object is more a subject than any other. All subjects are simply objects. The key factor in determining ontology is the ability of an object to affect another object. Over the past 30 years flat ontology has been applied in a wide range of scientific research. From high energy physics and chemistry to ecology, political science, sociology, and, yes economics. As far as I can determine, however, no American economist has applied flat ontology. The nearest I’ve discovered are the notions of consumer confidence and investor confidence.

  6. April 4, 2020 at 9:40 pm

    Ken, I had never heard of Tarde, and find this fascinating because the “inter-psychological” maps straight into Claude Shannon’s interpretation of information and indeed Aristotle’s logic: all messages are treated simply as information just as father-son, whole-part etc relationships are treated logically simply as relationships. Latour’s “all subjects are simply objects” today is simply his version of Shannon; but probably before Marconi’s radio transmissons and half a century before Shannon, Tarde seems to have seeing what Shannon was taking for granted: that messages can be broadcast so the same “message” can infect many people. Where Shannon still goes further is in seeing what Chesterton realised was happening in the two sides of human brains: that symbolic language has to be decoded before the object to which it refers can be envisaged and imitated.

    You make another very significant point, too. “To make the social sciences into genuine sciences, it is necessary to reach a property that is quantifiable, which, paradoxically, is contained within subjectivities.” Tarde, you say, “quantised” his inter-psychological objects. Shannon’s broke down his messages into “bits” of information to cater for information being encoded in different languages and carried on different physical media, so a nerve, or a wire in a computer memory, can represent one bit.

    So essentially, what you are saying here is what I have been trying to convince you of these several years: that the “first principles” of the social sciences should be drawn from information science, not Newtonian physics.

    As I see science, like everything else, evolving, I am very happy to recognise Tarde’s symbolism as an earlier form of science, as I recognise Aristotle’s formalism, Bacon’s “taking things to bits”, Chesterton’s imagining how they work and even monetised economics as earlier “object-oriented” forms of science. But the principles of Shannon’s science of communication and error correction are as fundamental and far-reaching as Newton’s laws of motion, combining with them in the hardware logic of digital computing and time-sharing networks, and the dynamic PID control logic that Keynes was reaching for before Shannon.

    Will you not use your silver tongue to tell the story of this, Ken, rather than belittle it?

    • Ken Zimmerman
      April 6, 2020 at 1:01 pm

      Dave.

      Every human and nonhuman object stands by itself as a force with which to reckon. No actor, however trivial, will be dismissed as mere noise in comparison with its essence, its context, its physical body, or its conditions of possibility. Everything will be concrete; all objects and all modes of dealing with objects will now be on the same footing. In this unreduced cosmos, philosophy and physics both come to grips with forces in the world, but so do generals, surgeons, nannies, writers, chefs, biologists, aeronautical engineers, and seducers. And though all these examples of actors are human, they are no different in kind from the forces that draw objects to the center of the earth or repress desires in the unconscious. The world is a series of negotiations between a motley armada of forces, humans among them, and such a world cannot be divided cleanly between two pre-existent poles called ‘nature’ and ‘society’. As Latour puts it: “we do not know what forces there are, nor their balance. We do not want to reduce anything to anything else […]. What happens when nothing is reduced to anything else? What happens when we suspend our knowledge of what a force is? What happens when we do not know how their way of relating to one another is forever changing?” What happens is the birth of an object-oriented philosophy. And with more difficulty, an object-oriented science. (Pasteurization of France, pp. 155-157)

      We cannot philosophize from raw first principles but must follow objects in action and describe what we see. Our science similarly cannot begin from raw first principles but must follow objects in action, describe what we see, and then write this up and publish the descriptions. Nonetheless, there are a small number of basic principles that guide such immense empirical labors.

      First, the world is made up of actors or actants (together called ‘objects’). Atoms and molecules are actants, as are children, raindrops, bullet trains, politicians, and numerals. All entities are on the same ontological footing. An atom is no more real than Deutsche Bank or the 2018 Winter Olympics, even if one is likely to endure much longer than the others. This principle ends the classical distinction between natural substance and artificial aggregate proposed most bluntly by Leibniz. It also ends the tear-jerking modern rift between the thinking human subject and the unknowable outside world, since the isolated Kantian human is no more and no less an actor than are windmills, sunflowers, propane tanks, and Thailand. Finally, it shows the profound rift with Aristotle’s views. Like Aristotle, we insist that what is real are only concrete entities. The billions of cats in the world are real individuals, not a single cat-form stamped in despicable clots of corrupt physical matter. But our notion of concreteness is more expansive than Aristotle’s. For Aristotle, individuals are substances—and substances are deeper than their accidents and their relations to other things, and capable of enduring despite changes in these inessential features. By contrast, an actant is not a privileged inner kernel encrusted with peripheral accidents and relations. After all, this would make a thing’s surface derivative of its depth, thereby spoiling the principle of irreduction. There cannot be an essential Socrates hiding behind the Socrates who happens to be speaking and wearing white at this very moment. A thing is so utterly concrete that none of its features can be scraped away like cobwebs or moss. All features belong to the actor itself: a force completely deployed in the world at any given moment, entirely characterized by its full set of features.

      Second, there is the principle of irreduction itself. No object is inherently reducible or irreducible to any other. In one sense we can never explain religion as the result of social factors, World War I as the result of rail timetables, or the complex motion of bodies as pure examples of Newtonian physics. Yet in another sense we can always attempt such explanations, and sometimes they are rather convincing. It is always possible to explain anything in terms of anything else—if we do the work of showing how one can be transformed into the other, through a chain of equivalences that always has a price and always risks failure.

      Third, the means of linking one thing with another is translation. When Stalin and Zhukov order the encircling movement at Stalingrad, this is not a pure dictate trumpeted through space and transparently obeyed by the participant actors. Instead, a massive work of mediation occurs. Staff officers draw up detailed plans with large-scale maps that are then translated into individual platoon orders at the local level; officers then relay the orders, each making use of its own rhetorical style and personal rapport with the soldiers; finally, each individual soldier has to move his arms and legs independently to give final translation to the orders from above. Surprising obstacles arise, and some orders need to be improvised—the enemy melts away at unexpected points but puts up stubborn resistance in equally startling places. Moving from war to logic, we find that even logical deductions do not move at the speed of light. Deductions too are transformed one step at a time through different layers of concepts, adjusting themselves to local conditions at each step, deciding at each step where the force of the deduction lies and where possible variations can be addressed or ignored. No layer of the world is a transparent intermediary, since each is a medium: or in Latour’s preferred term, a “mediator.” A mediator is not some obsequious eunuch fanning its masters with palm-leaves, but always does new work of its own to shape the translation of forces from one point of reality to the next. Here as elsewhere, our guiding maxim is to grant dignity even to the least grain of reality. Nothing is mere rubble to be used up or trampled by mightier actors. Nothing is a mere intermediary. Mediators speak, and other mediators resist.

      Fourth, actants are not stronger or weaker by virtue of some inherent strength or weakness harbored all along in their private essence. Instead, actants gain in strength only through their alliances. If no one reads Mendel’s papers, his breakthroughs in genetics remain weak. An airplane crashes if a few hydraulic lines malfunction, but the resistance of these lines is weakened in turn if they are discovered and exiled to a garbage dump. An object is neither a substance nor an essence, but an actor trying to adjust or inflict its forces, not unlike Nietzsche’s cosmic vision of the will to power.

  7. April 6, 2020 at 6:39 pm

    Ken, you sadden me. All this use of your silver tongue to drown me out, or disagree with me, or perhaps just to express what has already long been in your own head, completely ignoring what I have been sharing with you from mine. About following the evidence back into the past, and reconstructing what logically and on the evidence became possible and materialised as the aeons passed, as well as what is possible and materialising now. About how mankind learned to speak and hence to externalise his thoughts and so not apply forces but broadcast encoded information, disagree and perhaps not act. Your proclaiming as “basic principles” the Humean doctrines this outdates, along with your final resort to Hitler’s Nietzsche, sum you up.

    • Ken Zimmerman
      April 7, 2020 at 2:04 pm

      Dave, no effort to drown out anyone. You’ve explained your “first principles” several times. I’ve never fully reciprocated. This was my effort to do so. At least in a small way. As for Hume, he did not create the objects we all run into everyday. He offered some thoughts about how humans might, and for Hume sometimes must perceive those objects. I don’t agree with his version of empiricism. As I’ve clearly explained several times. But the objects are concrete and thus real, as I explained. As I’ve also explained thoughts are objects, thus concrete and real, no less so than the pub next door or the football match we attend. Certainly both Hitler and Nietzsche are real. And they interacted through mediators. We accept that Nietzsche’s understanding of Nietzsche was different than Hitler’s understanding of Nietzsche. That’s translation, as I’ve just explained.

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