Complexity Economics
from Asad Zaman
Classical Physics, the model for modern economics, was based on the ideas of stability and permanence of astronomical orbits; see Mirowski (1992). Deeper examination of astrophysics led to the replacement of this view by big bang which gave birth to the universe, and increasing entropy, which will lead to its heat death. “Equilibrium” just appears as a temporary and local phenomenon in an evolving and chaotic universe.
Complexity economics takes non-equilibrium seriously. Constantly evolving systems may never be in equilibrium and may even lack a tendency towards equilibrium. The mode of analysis required for such systems cannot be based on the kind of mathematic currently dominant in the economics profession. Complex systems theory was pioneered in the 1980s and 1990s by a small team at the Santa Fe Institute led by W. Brian Arthur. Some of the key elements of this approach to economics can be described as follows:
- Computational Aspects: It is essential to understand how closely our analytical methods correlate with our computational abilities. Just as tensor calculus enabled the discovery of relativity by Einstein, the computer power today enables us to explore consequences of behavioral assumptions far beyond the capabilities of mathematical formulae. Even the mechanics of human motion cannot be captured in formulae, but can be expressed and represented as a linked network on computers. Similarly, computers today allow us to capture and analyze dynamics of extremely complex systems.
- Complex Features: Brian Arthur et al. (1997) describe several features of complex systems which create models of types not easily accessible by conventional analytical tools and techniques. These include: read more
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Real-World Economics Review Blog 
Complexity economics has various dimensions. Asad Zaman presents here two of them: Santa Fe group of Brian Arthur and Harvard group by Hidalgo and others. However, complexity economics has much wider varieties of different dimensions that cannot be represented by the above two groups. For example, we can cite Alan Kirman (2016) Complexity Economics: Individual and collective rationality, E. D. Beinhocker (2006) The Origin of Wealth: Evolution, complexity and the radical remaking of economics, Boulton, Allen and Bowman (2015) Embracing Complexity: Strategic perspective for an age of turbulence. D. Colander, R.P.F. Holt and J. B. Rosser Jr. are following the evolution of complexity economics as historians of economic thought since 20 years ago. Perhaps needless to point, World Economics Association recently published a report of a symposium in a book form: J.B. Davis and W. Hands (eds.) (2020) Economic Philosophy: Complexities in economics.
In addition to these various movements, let me note that there is another, quite different strand of complexity economics. It was famous in Japan since 1996 but was not introduced into English speaking world until recently. Our book Shiozawa, Morioka and Taniguich (2019) Microfoundations of Evolutionary Economics is the first summary of this complexity economics for the English world. We have not used the term “complexity” in the title, because it is only a point of view in developing (new) economics. But, if you read Chapter 1, which has the same title as the book itself, will understand how complexity plays the key role for our economics. To “prove” that our book or economics is indeed complexity economics, let me quote Zaman’s list of major features of complexity economics and show how our book satisfies each of the features. To avoid baseless boasts, I cite Marc Lavoie’s book review (2020) as long as possible.
1. Computational Aspects
Except Chapter 6, our book does not appeal to computer simulation, but it is important to note that Moiroka’s theorem (the main result of the book) was obtained after computer experiments made by Taniguchi and computer calculations by Morioka himself. Computation by Mathematica was quite indicative for the theorem.
2. Complex Features
No global controller
Cross-cutting hierarchical organization
The book does not treat firms as organizations. But, it is fully compatible with classical organization theories as Lavoie put it:
Ongoing adaptation
Out-of-equilibrium dynamics
Our book refuses equilibrium framework as a method of analysis. So, we do not claim that the economic state is even out of equilibrium. The concepts of equilibrium and disequilibrium are both irrelevant to economic analysis. Instead, we consider the economy is a dissipative structure which is far from equilibrium in the case of thermodynamics. See my presentation Economy as Dissipative Structure.
Interactions between groups and individuals
Hence, our book carries full features as complexity economics by Asad’s characterisation of it (partly due to Brain Arthur). Of course, our book is not piece-meal examples of complexity economics, but a core of new economics that can replace mainstream economics represented by Arrow and Debreu’s general equilibrium theory. Without Arrow and Debreu foundations, Dynamical Stochastic General Equilibrium (DSGE) models, which are at the center core of mainstream macroeconomics (including both New Classical and New Keynesian economics), are simply a one-commodity model that has no qualification to claim as macroeconomics of complex modern industrial economy.
Yoshinori added the following note out of date sequence under “More complexity”:
“December 5, 2020 at 2:53 am
The plan to write a paper “Dynamic Capabilities of Nations” has been disrupted because of my eye disease: binocular di[p]lopia. After three months, I have got much better but I have for the moment no power to continue my original plan, although I have not abandoned it”.
Let us continue to wish him well and a full recovery, but this discussion is significant, so let us continue it without him.
First I refer to his earlier objection that complex number has nothing to do with complexity in the Santa Fe/Brian Arthur sense. He is quite wrong. The exponent in the complexity logistics equation is a complex number distinguishing four directions, its value becoming first bipolar then chaotic as it goes beyond two. These effects were being demonstrated by 1954 when (before the availability of superheterodyne radio receivers) positive feedback (reaction) was still being used to increase electronic amplifier gain. The effect on orchestral music was equivalent to reducing family run shopping centres to a set of supermarkets.
Here, at 2., Yoshinori says “Their goal is to show why it is that a market economy “works”, that is, how a fully decentralized input-output production economy will not be driven to chaos, and thus will converge to a stable quantity structure”.
The reality is that the present so-called market economy is not decentralised, but controlled by centralised finance. If his theory is right, is it not prescribing localised finance, e.g. credit cards where we create our own money (and only when we need it)? So “Shiozawa thus adopts the satisficing principle along the lines of Herbert Simon”, as do mature users of credit cards, able to satisfy their mental as well as physical needs?
“Our book refuses equilibrium framework as a method of analysis. … Instead, we consider the economy is a dissipative structure which is far from equilibrium in the case of thermodynamics”. In our ecological crisis this looks like an appropriate reference to entropy (physical dying of the universe) but it may be throwing the baby out with the historical bathwater, in which the paradigm of equilibrium changed from a shop-keeper’s scales to automatic to automated control as the concept of money changed from gold (stored value) to numbers in accounts to information in a PID servo system. Death is after all an equilibrium, which Shannon’s neg-entropy avoids by what I call “giving way”: using spare capacity to suspend action until entropic chaos has been avoided.
From what Yoshinori has said here, I’m wondering whether to joke about his seeing double, where Chesterton argued the ordinary man has stereoscopic vision. Are we looking at the same thing, but he seeing the mirror-image of what I see? What I must say it has given me second thoughts about Adam Smith’s taking local shop-keepers rather than international wholesalers (Chesterton’s “grossers”) as his paradigm; likewise Keynes’s #4 on Mercantilism in the “General Theory”.
@davetaylor1 I’m sorry, but I used to study physics, and I don’t understand any of your comments.
For a start, what do you mean by the “complexity logistics equation”? Verhulst’s original ordinary differential equation used a real exponent. Robert May’s 1976 so-called logistic model, which leads to bifurcations and chaos, is a discrete recursive model based on Verhulst’s equation, but uses a positive real parameter, ‘r’:
x_(n+1) = r • (x_n) • (1 – x_n).
There is a recent paper (Adrianov &al (2019) Symmetry 11:1446) in which May’s equation is expressed as an ordinary difference equation
x_(n+1) = (x_n) • exp [r • (1 – x_n)],
but again r appears to be real. So to what are you referring?
Also, I couldn’t catch your comment about equilibrium, shop-keeper’s scales, servo systems, etc. How can Shannon’s formulation of entropy avoid the Second Law of Thermodynamics? I can’t tell whether you are talking about open systems or closed ones (the 2nd Law applying to the latter only).
Shiozawa-sensei’s reference to a disspiative structure suggests he’s regarding the economy as an open system, far from equilibrium (just as living biological systems are open systems that are far from equilibrium). I don’t understand what is getting thrown out, other than an economic model that was formulated based on a thermodynamics analogy that was both inappropriate (equilibrium) and outdated (since it was formulated based on a version of thermodynamics that lacked the 2nd Law: see Mirowski 1988).
Might you be able to explain a bit less metaphorically?
Thanks for your comment, A.J. Unlike silence, that can be learned from and responded to.
What I know of the logistics equation came from Waldorf’s book on Complexity. I agree the exponent in it looks like a real one, but if you remember your Euclid, what we now write as the exponent 2 represents a square. Reality has, we say, three dimensions plus time. I’m thinking about the reality (ontology), not the mathematical metaphor of it.
On this and Shannon, I’ve learned something recently from a reference (in Delorme’s paper in Davids and Hands, ed, ‘Economy Philosophy’) to “second order cybernetics”. When you are learning how to program a computer rather than doing sums on it, it becomes fairly obvious one is computing with representations of the data (e.g. names and descriptions) rather than the reality. It hadn’t occurred to me before that this business of Shannon’s entropy was a sort of double bluff. His ‘noise’ is a representation of chaos in the physical environment, which is near enough like the reality for detecting its effects on the message to enable him not only to correct messages but to provide metaphors on how to deal with its effects in reality. One cannot see negative feedback in reality, but one can interpret what one is seeing as being that, and vice versa. His restoring a message is restoring its equilibrium (unchanged) state; in the cybernetic model steering restores a course, but not directly: it is “served” by a system of information feedbacks. This doesn’t of course eliminate the physical entropy lost in actual steering, and even telephony piggy-backs on an electric current. Here, even though the electric circuit has to be closed, it is open for the transmission of different messages. Perhaps you need to study how microphones and loudspeakers work? On shop-keeper’s scales, perhaps you need to refer to pre-spring balance and electronic history rather than physics?
So what Yoshinori is “throwing out” (or like most economists, scientists and historians like Mirowski, not even considering, even when told of it) is the concept of economics as an information science. I’m not throwing out the equilibrium concept. I’m saying its applications have evolved from the local grocer’s balancing granular goods against fixed weights, first to ships giving way to each other and now to computers handling messages coming from four types of I/O source at a time via channels not even physically enclosed in cables: i.e. not physically suppressing chaos but avoiding it by adopting timing priorities equivalent to fenced-in road traffic going in different directions giving way at roundabouts or prioritised traffic lights.
I want to be able to agree with Yoshinori, but always we come up against paradox: we are at the same point, but at a cross roads where reality (ontology) includes its representations (epistemology) but not vice versa; so I can give way to him but not, apparently, vice versa. No hard feelings about that: occasionally irritation but mainly sadness at what he is missing out on. May I refer you to Hugh Kenner’s excellent little book, “Paradox in G K Chesterton”?
Thanks for your reply. You mean perhaps the Waldrop book on complexity? On “second-order cybernetics,” this seems to be mainly a social science metaphor, so I’m not sure how it connects to Shannon’s formulations per se, though I should investigate further. Noise in a communications sense isn’t necessarily chaotic, by the way: e.g., it may be periodic. I believe Shannon’s theory is neutral as to the type of noise.
As for throwing out the equilibrium concept, though: *why not* throw it out, where economics is concerned? Its importation into economics seems to have been through an unwarranted case of “physics envy,” not based on anything empirical (for which see Mirowski 1989 “More Heat than Light” – I got the year wrong in my prior post). It was the “baby and historical bathwater” image that I found confusing, not sure what was which.
In particular, if you’re keeping the equilibrium concept in economics, it seems to me that requires some justification on empirical grounds. The mere fact that shop-keeper’s scales were used in commerce doesn’t seem to be adequate in that regard. I don’t have any opinion about Shoizawa-sensei’s dissipative structure model, but at least the fact that it discards the assumption of equilibrium seems a more realistic starting point.
‘Cybernetics’ I take to be the reality, “second order cybernetics” the representation of it. It seems one can go on to “third order cybernetics”, a mathematical specification of it, and a “fourth order” which is a working example of it, e.g. a PID servo, which can evolve into something more or less than itself, e.g. a servo with only P (e.g. price) feedback, or one with PI (proportional and integral) feedbacks. D feedbacks change course (like companies investing in different products), which if not allowed for quickly enough is liable to cause chaos. The best book I know on this is a rare one by the great helicopter engineer, “The Geometry of Meaning”.
On ‘equilibrium’, what’s in a word? If it is more trouble than it is worth I’m happy to throw it out, though its literal meaning and history are very instructive. Taking a long view, though, if we are using the word most people, families and firms seek to satisfy the need for equilibrium in their own lives.
On Shannon, the ‘noise’ is in his representation and that in the entropy representation of Brownian motion. I can agree with you the effect is neutral; it doesn’t really matter if in the short term the noise is periodic. His theoretical assumption enables him to explain how to rectify errors in signals, which has worked out in practice. With Mirowski there is a bit of history: he misrepresents Shannon in his otherwise excellent “Machine Dreams” and I wrote (and sent him a copy) of a review which said why.
On “It was the “baby and historical bathwater” image that I found confusing, not sure what was which”, the historical bathwater was the equilibrium in physics, the baby was its cybernetic form in information science.
Sorry, missed out the author of “The Geometry of Meaning”, who was Arthur M Young”. (1976; my copy published by Robert Briggs Associates, the original by Merloyd Lawrence, whose editor happened to be my Chestertonian friend’s father).
Complexity is a treacherous word. I greatly admire the work of Hausman and Hidalgo, one of the few bodies of work of recent years that has significantly advanced understanding in economics and controverted some prior belief. But their “economic complexity index” just describes the degree of diversification in an economy and is not the same as “complexity” as the term is understood in mathematics. They show diverse skills make further skill acquisition and diversification more possible, hence positive feedback. But their maths is matrix algebra – all linear. It shows what can be done with creative use of old concepts and careful attention to data. That said they don’t assume an equilibrium and I am sure Asad is right that equilibrium is a dead end. Computer simulation of evolving, potentially complex, systems is one way forward in economics and is the approach practised by the evolutionary school.
> Complex is a treacherous word.
Yes, indeed. Gerald is right. It is most often used as opposition to “simple.” Here “simple” means various traditions in sciences (including economics) and mathematics which seem to neglect the more complex features and factors.
Many mathematics-oriented people think that complexity is something that appears from non-linearity. Chaos and related theories belong to this category. They are a great achievement. But, when we study economics, there are two simplifying assumptions: (1) we can optimize (maximize or minimize) simple functions, and (2) economic states can be described as an equilibrium state or series of shifting equilibrium states.
If we doubt these two simplifying assumptions, most of modern economics would fall down. So, in my opinion, complexity as negation of optimization and equilibrium is much more important than complexity of nonlinear phenomena. What is asked for the breakthrough of actual economics impasse is how to go beyond the wall of simplification by optimization and equilibrium.
As I have pointed it in my first comment in this thread (December 4, 2020 at 7:17 am), there are many strands of complexity economics but there are only a few that try to go beyond the wall.
Shiozawa-sensei, your remarks are very sensible. Just wondering, though: when you invoke dissipative structures in your model, aren’t you indeed connecting to complexity in the sense of nonlinearity?
Dear A.J.,
I use the term “dissipative structure” mainly as a figurative word. Apart from “Economy as Dissipative Structure” paper (1996), I mentioned on it in in Subsubsection 2.5.5.3 of our book (pp.98-100). I inserted this subsubsection in order to give some comments on land (and mining) rents in the subsequent subusbsection. This part may not be called a theory, because it only gives a picture of an economy I suppose. But, in this occasion, the concept of dissipative structure is quite convenient to make clear that what I am thinking is different from that normally supposed by equilibrium theory. The main difference is that the system described by equilibrium normally assumes that it is constrained by boundary conditions: existence of marginal land or mine. When we use dissipative structure, the observed system is independent from such boundary conditions. An economy’s activity levels are determined by internal structure of the economy: e.g. by the cyclic constraints between final demand, income and expenditure.
I believe we can use the term “dissipative structure” in such a case, for convenience, although it may not be identical to dissipative structure in chemistry. If I write a theory of rent for itself, to depend on this figurative image may not be good. I will be required to argue how the internal cyclic constraints determine activity level of the economy and boundary conditions are normally not effective constraints of the economy. In the main part of my argument, i.e. theory of prices for industrial products that are not constrained by land surface or resource reserves.
As for the notion of equilibrium, I will post my comment after ghholtham and you.
Dear Shiozawa-sensei
Thank you for your helpful explanations, and your references. After reading the latter, I confess I still find the physics metaphors more confusing than helpful. There are so many aspects of economic activity or of the models that are different from physics usage of terminology, that the use of the metaphors seems more for the purpose of lending prestige than of producing clarity.
For example, even in the case of a dissipative structure, I had been thinking that economic activity might be a dissipative structure for reasons suggested by Georgescu-Roegen, namely that any economy is embedded in the physical world. (Certainly this embeddedness is true of the real economy of goods and services, and even the financial economy intersects the physical world in, e.g., resources needed for computational power.) The physical world is an open system to the extent we can receive energy from the sun, and there are certain resources that after use might not be able to be recyled without a tremendous expense of time or other resources. (E.g., it takes milions of years to re-create fossil fuels.)
However, it’s not clear to me how one can relate prices, which are psychological, to the physical, putatively dissipative structure that is the global economy. (To be clear, I’m here assuming only for the sake of argument that an economy truly meets the criteria of dissipative structure in this literal sense; I’m agnostic about whether that really is true.)
I certainly understand how metaphors can be suggestive to the imagination. But surely there is a difference between saying that an economy “is like” a certain physical phenomenon and saying that it “is” an instance of that phenomenon. Per my assumption, an economy might indeed “be” a dissipative structure, but if so, wouldn’t that be in terms of material and energetic throughputs, rather than in terms of abstractions like price? When price is considered, wouldn’t an economy at best “be like” a dissipative structure strictu sensu, rather than “be” one?
I think your second reply, concerning equilibrium, may be closer to the type of usage I’m proposing. More neutral vocabulary like ‘evolving state’ or ‘self-reproducing state’, and the use of explicit analogy instead of direct metaphor (“similar to dissipative structure”) might be less confusing, and might help those of us who consider economics from a physical science background take economic discourse more seriously. Thanks again.
A.J.,
I believe your are thinking in a reasonable way. Your are right in particular when you say “the physics metaphors [are] more confusing than helpful.” The trouble in economics is that it has accumulated so many traditions (good and bad) and it is not so free from the “standard” notions and terms. In physics too, you use many figurative metaphors when you try to explain a rough idea to the common people. In some methodological arguments and explanations to people who are not economists, it is inevitable that we speak in metaphors and figures.
There may be one misunderstanding. Prices are not psychological entities.* They are objective rates that gives exchange ratio (primarily between products and money). But prices cannot determine the state of an economy by them alone. In a traditional formulation, in Arrow and Debreu model for example, prices and exchanged quantities are simultaneously determined. In our theory, prices and quantities are primarily independent. But, self-replacing state is mainly described when we know how each quantities are related with each other. There are constant flows of various materials there. For more details, you should read our book.
Would you send me your e-mail to me: y@shiozawa.net . I will send you the PDF of our book in return.
*) Austrians emphasize subjective aspects of economy but Sraffians are more materialists in the sense that all relevant variables must be (ideally) objective.
N.B. One of criticisms against neoclassical economics is that it uses concepts such as utility function which is hard to estimate or measure.
Dave the conception of equilibrium in economics is a state of affairs which doesn’t change when reached. It can be a stationary equilibrium, literally nothing changes, or a regularly expanding situation in which everything expands at a steady rate so all ratios are preserved. The underlying thought is that it is a situation where no-one has an incentive to change what they are doing because they have arrived at an optimal situation. That is not the same as an evolving situation which avoids abrupt dislocations or discontinuities. The latter describes a well-functioning economy. The former “equilibrium” describes no economy that exists, at least since the industrial revolution, perhaps ever. The concept has had its uses in economics but we have to move past it to make progress. If information theory can be deployed to explicate the situation we observe: constant change but within limits, avoiding breakdown, all well and good.
@ghholtham May I ask an ignorant question about economic equilibrium? Here I’m asking a question about the theory, and assuming only for the sake of the question that ‘equilibrium’ is a concept worth dwelling on.
In, say, a chemical equilibrium, the situation is neither unchanging at a microscopic scale, nor expanding. For example, one can have an equilibrium across a boundary where particles are in constant motion, but the number of particles crossing from left to right is balanced by the number of particles crossing from right to left. At the bulk level, one might say nothing is changing, but at the micro level there is a constant flux.
As I understand microeconomic equilibrium, this is described as the intersection of the supply and demand curves. But in microeconomic theory, doesn’t this also mean that there’s a steady flow of exchanges of goods and money at the so-called equilibrium price? That is, that there can be a lot of economic activity at the micro level, rather than “nothing changes”? If not, then how else would microeconomic equilibrium be interpreted in terms of economic activity, rather than graphs?
Gerald, let me first appreciate A.J’s comment, and then recognise the truth in what you say, since on one hand I say scientists need separate words to distinguish separate topics, even though as a mathematician I see on the other hand that the same logic applies at different levels, since what is true of a class (more strictly a category, a distinct class) is true of all its sub-classes. When discussing economic methodology the issue is whether “equilibrium” is to be interpreted as a procedural word like “add” or a name for a variable like X. As a physicist I agree with A.J., but add that even Brownian motion is created by thermal energy, so I don’t believe that equilibrium just happens in economics any more than it does in an air pressure activated barometer. My big thesis is that if it happens it will be created via remote control by us, which if its theory is going to be considered a science makes it an information science, even though that is piggy-backing on the physics.
A.J.’s argument for our having different perspectives on what we see [seeing incidentally involving communication not of force but of information] perhaps characterises the difference between myself and Yoshinori when thinking of complexity-economics. I’m seeing macro foundation of the micro (like the arabic number format) where he is trying to articulate micro foundations of the macro (from the Roman number format we have the number of digits [fingers] or dimensions [we have two hands] needed to represent a whole number in either format). The rules of the arabic format are constant, its content is constantly evolving as the number grows. Where large numbers are involved, Gerald, the Arabs’ maths technique of systematically reusing a few symbols is almost infinitely simpler, more efficient and teachable than the Romans’ constantly having to invent new symbols: I, V, X, D, C, L, M …
A.J.
The both terms “equilibrium” and “evolving state” are used in economics. The former is very popular while the latter is used by economists of quite restricted strands, for example some people in Austrian economists (“Austrian” means economists who are in the strand of C. Menger and others. Many Austrians now live outside of Austria). von Mises and Rothbard use the expression “Evenly rotating state.” See for example the paper by Cohen and Fink (1985). Piero Sraffa (1960) called the same state “self-replacing state”. The latter image has a long history because François Quesnay described it in his famous Tableau. Many economists believe that both concepts are the same, but I believe it is necessary to distinguish the two as different concepts or notions.
Although the term equilibrium is often used to describe self-replacing state, evenly rotating state, or more simply evolving state, in much more frequent cases it is used to describe an imaginative state where no agents want to change the situation. This is the case of Arrow and Debreu’s general equilibrium. It is not often noted but Arrow and Debreu equilibrium gives a state at a moment of time (including its futures markets) and does not describe the state of the next moment. (In neoclassical textbook, the term “equilibrium” is more loosely used both in Arrow and Debreu meaning and in self-reproducing state meaning.)
Gerald is explaining the commonly used notion of equilibrium. Some economists use equilibrium in the same meaning as evolving state. So, it is extremely confusing.
I prefer terms like evolving state or self-reproducing state than equilibrium, because they contain a picture very different from that described as Arrow and Debreu. Evenly evolving state and self-reproducing state are much similar to dissipative structure. But evenly rotating state is not mathematically formulated and details are not very clear. This must be the main reason that Cohen and Fink oppose to this concept. In a sense, our book Microfoundations of Evolutionary Economics tries to give detailed description of Sraffa’s picture. Quantitative behavior of Sraffian system has been obscure for long time.
The economy takes in primary resources and discharges wastes (most often supposed as free of charge). Some economists think equilibrium as something similar to dynamic equilibrium in chemistry, but I do not think it is a good comparison, because internal mechanisms are quite different.
My Dec 09 03:45 AM reply is intended to be to Shiozawa-sensei’s Dec 09 02:18 AM comment. For some reason, it appeared under his 01:14 AM comment of that date.
AJS: You are quite right. The Walras-Arrow-Debreu notion of equilibrium is really timeless but a more informal notion of a market equilibrium just implies there are no unsatisfied buyers or sellers and the commodity in question trades at a single price at any time. Economics did not look for the conditions under which individuals acting in diverse, possibly random, ways would lead to an orderly market. We have no theory like statistical mechanics. In fact simulation experiments have shown an orderly market with stable prices can result from people with a wide range of arbitrary, sub-optimal decision rules. Economics preferred to suppose individuals would have well-defined, exogenous preferences and would seek to maximise their utility. In a stationary universe it can be shown that an equilibrium exists under those conditions but there is no proof it would be arrived at in a world without simultaneous trading under an auctioneer. We need an explicitly stochastic notion of quasi-equilibrium with individuals making mistakes.
It would be necessary to distinguish two different problems: (1) notion of equilibrium as framework of economic research and (2) how to consider the normal state of the economy.
These two different questions have been argued confusingly.
Among the various criticisms of equilibrium, there is one that identifies equilibrium with statics. Those people who adhere to this criticism ask to change economics into more dynamical one. Statics versus dynamics are old opposition that goes back to John Stuart Mill. But, probably they are wrong. The true question must be short-period versus long-period analyses. Long period should be analysed as the series of changes of short periods. For example, in a short period analysis, we can assume that the set of production techniques is constant, whereas in the long period we must analyzes how the changes of production and product techniques affect the economy. See my recent paper: Y. Shiozawa (2020) A new framework for analyzing technological change. Journal of Evolutionary Economics 30(4): 989–1034.
When we study short period problems, I believe we can safely assume various variables constant. In this sense, we are assuming stationary or stable state. Even in such cases, some variables are always moving. It is important and inevitable to identify which variables stay constant and which changes constantly. In many “equilibrium” analyses, all variables are assumed constant. I doubt if this is a good strategy of research. In our book Microfoundations of Evolutionary Economics (2019), prices are assumed constant and demand and productions were assumed to perpetually fluctuate. In this way, we could show that prices have a quite different function than that assumed in neoclassical economics. In our theory, quantity adjustment are done, not by changes of prices, but by producers’ inventory adjustment. In this kind of analysis, the notion of equilibrium is not only useless but in fact obstruction to a better analysis of economic processes.
What we have assumed is mainly observable relations as input-output coefficients, some stylized behavior of producers, and constantly fluctuating final demand for each product which changes “slowly”. In this way, our book showed that notion of equilibrium is not necessary.
I am proposing to reject all equilibrium notion from economics. Whether this kind of negative research project is productive or not must be judged by concrete results. But, when we see that economic analyses have been dominated by equilibrium analysis since the time of Jevons and Walras, rejecting equilibrium framework is at least presenting a new research project.
Dear Shiozawa-sensei – Thank you for your comment to my remarks earlier. I of course misspoke: I didn’t mean to say that prices per se are psychological, but that their dynamics are governed to a great degree by psychological (and sociological) factors, as various thinkers from Aristotle to George Soros have observed. I support your objective of getting equilibrium out of economics. And as for your kind offer about the book, I will contact you offline. Thanks.
Dear A.J.,
please call me simply Yoshinori. As long as we discuss in English, British or American custom prevails.
As for psychological influences on prices, I believe it is necessary to distinguish what kind of prices we are talking about. If you are thinking of stock (share) prices or indexes, psychological factors play a big role. But, if you are thinking of modern industrial products (goods or services), most of them are stipulated by produces or sellers. In these case, psychological factors play a weak role. So, the price theory based on demand and supply equality (law of demand and supply, or demand and supply equilibrium) is not a good theory for industrial products.
How about security exchange market? Are those prices are determined by equality of demand and supply? Yes, in the sense that prices are quoted at the point in which buy and sell offers come almost equal (Exact equality is not attained, because prices do not move continuously). But, this only shows how stock market officer (or computer program) determines prices. What George Soros argues by reflexivity is more complicated. He questions how people react to the change and tendencies of prices. When one expects that prices will rise in the future (next week for example), one may post a buy offer. In such a situation, demand and supply depend not only on the value of prices but on their trends. When speculations intervenes, equilibrium framework generally fails, because there is no stable demand and supply functions with the price as independent variable.
In such speculative market, the price of a stock moves intermittently. Stock price index moves at a millisecond time span. In such indexes, we can only argue their stochastic behaviors. Fluctuations (log of price change ratios) normally obey a (truncated) Levi stable distribution. This kind of fluctuation rarely occurs in physical movements (probably because those phenomena is constrained by law of conservation of energy). We may think that Levi stable distribution is a clear indication that speculation is working.
Dear Yoshinori — Thank you, although you may be able to appreciate that the custom is difficult to break, since I live in Japan.
Once again, I’ve spoke a little too broadly. Prices of most industrial goods and services indeed aren’t psychological in the Soros sense — but nonetheless they are set pursuant to pressures perceived by the seller’s management. E.g., a perceived need to earn such-and-such profit margin in order to meet the expectations of analysts, or setting a price to undercut a competitor. When I worked at Sony, management had a policy of setting prices higher than competitors’ prices (the so-called “Sony premium”), to feed into consumers’ expectations of higher price → higher quality. Other strategic aspects of pricing may include charging very little for certain hardware or certain apps in order to get consumers to make recurring purchases of something else (razors vs razor blades, to cite the classic example). So management’s psychology, both in its own right and in regard to its estimates of consumer psychology, does play a role.
My intention was simply to distinguish a dissipative structure strictu sensu, where the relevant parameters might behave less arbitrarily due to constraints by the laws of physics and chemistry.
HmmmmM! You pose a difficult question. I have never written the system of equations of a dissipative structure. I am wondering if someone has ever succeeded to write it down as a system of partial differential equations?
I am not sure of how much parameters can be arbitrary (of course within a certain range). Let us imagine the example that I picked up in the Keihanna Prigogine Conference paper, that is a lit candle in a room. As long as the oxygen density stays in a certain range and the melted wax continues to be absorbed into the wick, the fire continues. If we can consider this as an example of dissipative structure, it seems that parameters can take quite wide range of variation. It seems that dissipative structures are quite solid and resilient structure that keep its structure by its own. The economy of human kind seems also to have such resilience, doesn’t it?
A.J.
Your story in Sony was interesting and stimulating. Have you ever mentioned to the “Sony premium” in some published paper? If you have one or if you know one, please teach me. It may give me a useful point of discussion to my future paper.
The fact that markup rates are determined after considering various factors does not contradict to our theory of value. It is still valid as long as product prices are fixed by using the markup pricing formula even if the markup rate is determined by various reasons. I noted just after Postulate 2 (Price Setting) in our book that
The difference of product qualities is one of reasons to modify the standard rule of markup determination. In the paper referred to as Appendix to Shiozawa (2014), I have considered the case where producers are not perfectly symmetric. Moreover, I have indicated that markup rates have an aspect that they are determined by custom or tradition. Indeed how the markup rate is determined is not crucial to our theory, if it is determined with any reasons and if the product price remains fixed for a certain lapse of time. The story that I have developed in Chapter 2 holds without no (or with minor necessary) modifications.
In these three or four days, I was reading Roy Bhaskar’s book A Realist Theory of Science (1975; Verso 2008). Your comment was extremely stimulating and I found a new idea on the nature of theory or sciences. I will talk about it in the next post, if not my comment may become too long.
I was wondering about a paragraph in Chapter 1 of Roy Bhaskar A realist theory of science:
This reminds me a phrase of Hayek. He was using a term “algebraic” in his paper The Theory of Complex Phenomena. I have read this paper already several times. Still there were some discoveries. It was for me a new discovery that Hayek raised the theory of evolution as as an Instance of pattern prediction.
Please also see my comment below.
Responding to A.J on December 9 at 3:45 am, many thanks for setting Yoshinori (December 10 at 1:37 am) onto arguments I can relate to:
“It would be necessary to distinguish two different problems: (1) notion of equilibrium as framework of economic research and (2) how to consider the normal state of the economy.
These two different questions have been argued confusingly. … In many “equilibrium” analyses, all variables are assumed constant. … In our theory, quantity adjustment are done, not by changes of prices, but by producers’ inventory adjustment. In this kind of analysis, the notion of equilibrium is not only useless but in fact obstruction to a better analysis of economic processes.”
My work addresses the first of his two problems, his the second. What I see is the evolution of what might be called an institutional structure, within which I can visualise not only what Yoshinori is saying practically but a process in which each of the institutions has its own aim. Even though all are trying to achieve theirs simultaneously they operate intermittently, on different time scales. The system has to coordinate this on a continuous timescale, which it does by means of holding inventories and by accepting delayed payments (credit), i.e. “giving way”.
What we observe is something like a cinema show, where what looks like continuous equilibrium seeking is actually separate periods of satisficing driven by occasional moments of dissatisfaction. Getting one’s head round the PID theory of cybernetics (correcting aims by steering, repositioning, temporary diversions) and thinking in terms of it is much simpler than getting to know “what’s on” at dozens of different cinemas! Normally, though, most of us are only concerned with “what’s on” in our local cinema.
Do the cinema and steering analogies help make sense of the timescales in this? In pursuit of improvement: if not, why not?
Dave talks in a quite ambiguous way. Probably he understand what he wants to say but often readers have difficulty to understand, because he does not give the situation in which he is thinking. As for PID theory, I interpreted it as a control method of the economy as a whole, Recently, I came to know that he is talking of a person or an agent such as a firm.
If I understand it, it is not difficult to say that we are already using a part of PID control in our system. The most important point of quantity adjustment of firms is that it take a moving average μ and try to keep their inventory equal to (1+K) μ. This is what I stated as Postulate 18 (Inventory policy). See Subsubsection 2.7.2, Chapter 2 of our book. This is equivalent to say that we use I (Integral) feed in the inventory adjustment, because μ is equal to {d(t-1) + d(t-2) + … + d(t-M)}/M. In a discrete time situation, this is equivalent to take the integral of d(t) for the time interval from t-M to t.
Postulate 18 is a simple convention for firms and they can change K and M freely. What Morioka found is that if K and M are in a certain range, this adjustment system for all firms works for the economy as a whole. In other words, although the interaction between firms are extremely complex (because they are connected by materials flow stipulated by input-output relations), this system of adjustment can follow a slow movement of the final demand for each product. The meaning of “slow movement” is a little complicated, but it is explained in p.128 (at the end of Subsubsection 2.7.4). This is really amazing result. because the economy like Japanese economy contains number of products as big as one hundred million.
P (proportional to the present demand) and D (differentiation or difference by which we can take the tendency of growth or decrease of demand for the relevant product) feeds do not work. If we take these adjustment policy, the adjustment process diverges as a whole.
Thanks, Yoshinori. Having worked as a mathematician I don’t see a variable being ambiguous because it hasn’t got a constant meaning, and even more so with logic, which is relevant not to everything but to discussion of anything. The point about PID systems are that they are systems of circular logic, and in fact apply to all continuous processes, i.e from the Big Bang (and in Christian theology the Trinity) through all the phases of evolution right up to human physiology, language and communication systems, including honest and dishonest forms of economics. That’s what I was trying to show you in the paper I sent you.
Dave, it is your freedom to think that PID principle can be applied to all continuous processes from Big Bang through all the phases of evolution. Your readers are asking you to give some concrete examples of how you can apply your principle or theory. If they are persuasive one, people will take care of your theory and try to apply it in their field of research. When the people do not understand the proposal of a theory, is it the fault of the listeners or the fault of the presenters? The lesson is quite obvious.
Yoshinori, as I argued on December 10, 2020 at 11:49 am, I am addressing one problem and you (and I can agree, probably most of the other readers here) are addressing another. “Normal” readers cannot imagine concrete examples of applications of “revolutionary” theory until they have (at least for the sake of the argument), taken on the revolutionary viewpoint before looking for applications of it. If, three hundred years ago, long before the theory of germs became “normal”, would you have understood my talking about antibiotics? The same goes here. Until you have accepted the role of language in economics, and so the possibility of lies having been been built into economic institutions, you cannot see the practical task of seeing where the lies are and changing the institutions to honest ones, thus not laws that force us to act on the lies but conventions that encourage us to give way (i.e. refrain from lying). How to give a name to the paradigm change I’ve been suggesting? Mine was to see that economics (insofar as it is a science) is an information science rather than a physical one. That evidently sounds dangerous to the existing establishment, which has suppressed even awareness of information science by diverting attention onto information technology.
Dave, if you think your idea is very “revolutionary” so that normal readers cannot understand you easily, you are requested to have a good patience to explain from the start (without assuming that your readers have enough preparation) concretely, incisively and in a good order. Do you think that Einstein could succeed to persuade people (in this case, theoretical physicists) of his general relativity theory without being successful to persuade his special relativity theory?
Do you know William S. Clark (See en.Wikipedia)? He may not be so famous person in the world nor in his native country, the United States. He came to Japan and served as president of the Sapporo Agricultural School for a year. When he depart his students, he left impressive words: “Boys, be ambitious!” (At that time, there were no female students.)
These words became very famous in Japan and every Japanese from Meiji era to now know these words. He formed a part of the Meiji spirit of Japanese. Now, this is just a joke from me to you:
Of course, this does not stand for that you should abandon your ambition. Old men can be patient and ambitious.
Yoshinori, this is a blog, and I am doing what even serious book writers do: giving references which one can either see the point of or take the trouble to read for yourself. Einstein only got his “Special Theory” accepted because someone backed him, and my equivalent is not my own work but Shannon’s, which has been around revolutionising systems design since 1948. If bloggers here don’t have copies of Shannon’s work they can look it up on line, bearing in mind my warning against the risk of mis-information, about which they will need to become able to judge for themselves. The same goes for Heaviside’s earlier work underpinning the PID terminology. Both worked with practical telephony systems as well as mathematics.
As for “old man, be patient”, being a slow learner I’ve had to be patient all my life, having to look for understanding: being “top of my class” only at the end when I have seen the whole picture. My “ambition” has been to share things I’ve discovered that “work”, and having found that in 1976, have had to remain extraordinarily patient as security-conscious employers, friends, publishers, Chestertonians, Critical Realists and currently Post-Autistic communities have “looked my gift-horse in the mouth”, not been willing to take me seriously enough to help me explain myself. I except a few individuals like Stratford Caldecott, Tony Lawson and here Bob Locke and another Justaluckyfool, who have given me useful references and feedback.
So I appreciate your joke, Yoshinori,, but at 84 I’m being realistic. I’ve been getting letters published since about 1965, so I’m still doing that. My hope (I won’t call it “ambition”) is that some bright spark will discover these letters, research them and publish what [s]he finds. If our world hasn’t gone up in flames by then, of course. That too is a serious joke!
Complexity is par excellence an epistemological problem as well as ontological. It seems that many researchers on complexity economics (those who are interested in non-linear analysis in particular) have not understood what complexity really means for economics and what kind of epistemological problems (difficulties and possibilities) is implied.
I have already posted a comment August 21, 2020 at 2:56 pm (that starts with “I have bought the book”) on Peter Radford The Missing Middle on August 11. 2020, referring to Warren Weaver’s classical paper: Science and Complexity 1948. But, Weaver’s arguments may not be sufficient for majority of readers to reflect on the epistemic nature of complexity (what can we know and how is a science possible). Re-reading Hayek’s paper The theory of complex phenomena by chance, I have re-confirmed that Hayek was insightful already in 1960’s on the essential feature and problems of studying complexity.
Let me briefly introduce the paper:
The Theory of Complex Phenomena: A Precocious Play on the Epistemology of Complexity
Obtainable at https://bazaarmodel.net/ftp/Project-C/Bazaarmodel/Materiaal/Xtradetail/pdf/Theory%20of%20Complex%20Phenomena.pdf
As the paper counts 15 pages, it is not a long article and easy to read whole the paper. But, it may be useful to reproduce the list of sections here. Readers can know instantly what Hayek wanted to argue.
1. Pattern Precognition and Pattern Prediction
2. Degrees of Complexity
3. Pattern Prediction with Incomplete Data
4. Statistics Impotent to Deal with Pattern Complexity
5. The Theory of Evolution as an Instance of Pattern Prediction
6. Theories of Social Structures
7. The Ambiguity of the Claims of Determinism
8. The Ambiguity of “Relativism
9. The Importance of Our Ignorance
10. A Postscript on the Role of ‘Laws’ in the Theory of Complex Phenomena
In a word, this is a deep reflection on the possibility and limits of social science and economics. It is remarkable that Hayek picks up “evolution” as the main possible aspect of social research. I do not think he has succeeded in this attempt, but he clearly shows that the theory of evolution is a good model example when we prospect constructing and reconstructing social sciences. I even imagine that Hayek may be implicitly indicating that the dynamism of capitalism (or market economy) lies not on the rational capability of humans but on the evolution of institutions, behaviors, and technologies (There is no explicit argument here).
The paper is also a clear objection to Popper’s philosophy of science (falsifications, etc.) and its variant Friedman’s instrumentalism (anything goes if it predicts well). I even wonder if Tony Lawson and Lars Syll have deeply reflected on the question of complexity. Their image of theories and models seems to be too restricted to the conventional ones used for simple systems. Please read the following two citations:
The next is what I think the core part of the paper:
The last part coincides with what Lars Syll emphasizes. We should abandon prediction as purpose of sciences of complex phenomena, but what seems different between Hayek and Syll is the prospect of the theory making in social sciences.
Yoshinori, I am grateful for your link to the Hayek paper. Although I have distrusted Hayek on account of how in a note at the beginning of “The Servile State” he misrepresents Belloc as just being against socialism when when he was equally against capitalism, one of Tony Lawson’s group, Steve Fleetwood, thought I might find Hayek interesting on information, as indeed I now have. This from section 2 has been exactly my own approach:
“Yet when we consider the question from the angle of the minimum number of distinct variables a formula or model must possess in order to reproduce the characteristic patterns of structures of different fields (or to exhibit the general laws which these structures obey), the increasing complexity as we proceed from the inanimate to the (‘more highly organized’) animate and social phenomena becomes fairly obvious”.
However, Shannon is not referenced. Hayek’s only reference to information is in a mistaken limitation of it by the number of neurons; he focuses on pattern recognition but not Boulding’s iconic language; at Section 3 note 14 he picks up the idea of “algebraic theory” from J W N Watkins where I got it from Hadamard; at Section 6 note 28 he sees a parallel between economics and Chomsky’s linguistics (from which Algol68 derives). The “algebraic theory” theme is in fact relevant to our earlier discussion of Keynes’s “effective demand:
“A theory destined to remain ‘algebraic’, because we are in fact unable to substitute particular values for the variables, ceases then to be a mere tool and becomes the final result of our theoretical efforts. Such a theory will, of course, in Popper’s terms, be one of small empirical content … But as in many fields this will be for the present, or perhaps forever, all the theoretical knowledge we can achieve, it will nevertheless extend the range of the possible advance of scientific knowledge”.
Dave,
if your were thinking of the importance of “algebraic” thinking, why didn’t you protested against Lawson and his group (and Lars Syll) for their total refusal and negation of mathematics as a tool of theory building?
As for Hadamard, are you talking of An Essay on the Psychology of Invention in the Mathematical Field? I have once read it by Dover edition, when I was mathematics student, around later half of 1960’s. But, I have forgotten all except a few number of scenes about Poincaré, for example. Discovery of a theory on Fuchs functions is very famous. As Hadamard was a great mathematician, it is natural that he referred to algebraic thinking. Can you remind me what he told about it?
Yoshinori, Lawson and Syll do not protest against the right sort of mathematics, only against econometrics used to claim truth “inductively”. My objection has been that they would have been more constructive if they had indicated relevant types and uses of mathematics. Lawson has implicitly done that by accepting Bhaskar’s philosophy of science.
On Hadamard, yes, though I have the original rather than the reprint, and can fairly accurately date my reading of it to 1968. I thought I had remembered Hadamard discussing not just algebraic “thinking” but specifically “algebraic numbers”, in the context of Fermat’s Last Theorem. The book is unfortunately not indexed, but mentions Kummel’s discovery of algebraic numbers, which are indexed under “Numbers, algebraic” in Bell’s “The Development of Mathematics”.
What is far more interesting is Hadamard’s detailing of the difference between verbal (logical) and visual (intuitive) thinkers, with Poincare having to change his mind by realising there are two types of intuitive thinkers. Most of this is in Chesterton, but I don’t think I understood what “Orthodoxy” was saying until I had read this and “G F Watts”. This “wordy” blog might perhaps be more accommodating of its difficulties for visual thinkers if its disputants had studied this.
Relevant to economics, Mirowski’s “Machine Dreams” says today’s mathematical modelling came from Koopman, of whom Hadamard says:
“The mental pictures of the mathematicians whose answers I have received are most frequently visual, but they may also be of another kind – for instance, kinetic. There can also be auditive ones, but even these, as the example of J Douglas show, quite generally keep their vague character. For B.O.Koopman, “images have a symbolic [arbitrary] rather than a diagrammatic relation to the mathematical ideas” which are considered, a description whose analogy with the above is evident. Professor Koopman’s observations also agree with mine on the fact that such images appear in full consciousness while the corresponding arguments remain in the “antechamber'”.”
For myself, my diagrams remain fully conscious but kinetically (topologically) deformable and with contents imaginatively flowing. Hadamard agrees with what I’ve said about Keynes but in the following I disagree with his 1944 view of the need for “very advanced calculus”, since in 1957 I was taught Heaviside’s D notation for manipulating differentials algebraically.
“Hardly intelligible and conceivable as it seems, in the ideas of contemporary physicists (in the recent theory of “wave mechanics”), the new notion, the treatment of which is accessible only to students already familiar with very advanced mathematics, is absolutely necessary for the mathematical representation of any physical phenomenon. Any observable element, such as a pressure, a speed, etc., which one used to define by a number, can no longer be considered as such, but is mathematically represented by a functional! “
Dave,
the first sentence is doubtful. They often talk in an unconditional way that This is an example:
Why did he make this kind of title, if he is only against “econometrics used to claim truth
‘inductively'”? The content of the article is not so bad as the title indicates, but but is it right to make this kind of title?
How about this? He often talks about mathematics (and models) in general. Doing mathematics is of course a form of thinking and it cannot replace all kind of thinking, but math is often very powerful mode of thinking. Why can Syll deny its utility like this?
Your objection to Syll and Lawson (in the second sentence) is quite right. You have met Lawson many times. Have you told him your “objection” or “advice”? Has he changed his opinion and stated it publicly somewhere?
Syll became more cautious than before, but still I believe he is often too misleading. This is the most recent example.
Sorry! I made many mistakes in the above post. Still I hope it is readable. It is possible to post a corrected one.
Yoshinori, I read this as an attempt to divert the discussion from the issue just raised of Keynes’ thought using modern mathematics where his critics still don’t.
Your attempted criticism of Syll suggests you disagree with him, but whether he has considered algebraic theorising, you will have to ask him. I suspect not, if the only type of mathematics he sees is the old-fashioned economist’s formal type which has not yet seen that the symbol for an operation is meaningless without specifying in real terms how and where to perform it. Geometry by contrast is literally about earth measuring, Euclid’s “flat earth” geometry being made more realistic with provision for electromagnetic radiation, Einstein’s curvature of it, and time. Though that may sound like “very advanced mathematics”, since the introduction of Tesla’s alternating current electrical systems c.1900 the mathematics has had to be simplified to a level trainee technicians can understand. Real economics too requires applied mathematics.
As this discussion is about complexity in economics I looked in Hadamard for support of what I’ve been saying all along about complexity being fundamentally about the complex form of complex numbers and not Santa Fe’s logistic (logarithmic?) function becoming non-linear. I’ve found lots of interesting things about ‘growing up’ and the increasingly ‘abstract understanding of money’, but what I did not find was ‘Kummel’, (mentioned above) nor the passage I remembered about complex numbers. I probably need to apologise for a wrong reference there. I suspect I have followed up Fermat’s Last Theorem in Bell’s “Development of Mathematics”, which I was reading at the same time. The history of the development of number notation and rotation operator i in that is fascinating.
Algebraic thinking and algebraic numbers are very different things as B.O. Koopman and T.C. Koopmans are totally different mathematicians although they have the same stem in their family name. Your writing is full of jumps and I cannot follow you. I will not ask Lars Syll if he has ever considered about algebraic theorizing and its significance. Whether he answers yes or no does not change my idea that algebraic theorizing will be one of important pillars when we want to consider scientific research in social affairs. We need a good understanding of complex systems in ontology aspect as well as epistemology aspect.
Please read my comment on December 17, 2020 at 11:13 am:
Okay, Yoshinori. Not so much a case of seeing double as “more haste, less speed” when being so slow to find the right words for an intuitive insight leaves one deserting one’s wife and “making haste” an attractive proposition.
Dear Yoshinori — Thank you for your comments. Sorry to have been so slow to reply: things always get busy at this time of year, as the end of the academic term approaches.
Concerning the Sony premium, I don’t have any publications that mention it. It was a term we used internally. However, the general strategy is mentioned at p. 70 of John Nathan’s “Sony: The Private Life” (1999).
That it is so surprising is indicative, though, of how rare it is for economists to talk with actual businesspeople. I used to work in venture capital and intellectual property law, as well, and I was always amazed at how alien economists’ descriptions of those fields seemed to me (not to say often outright ludicrous, especially when it comes to patents). A much more interdisciplinary and truly empirical/anthropological approach is needed if any reformulation of economics is to have any chance of describing the real world (other than performatively, i.e., where actors deliberately conform their behavior to economic theory).
I don’t quite get the idea of the links between (i) evolution, (ii) pattern prediction and (iii) algebra. Evolution is a path-dependent process, with a direction. Algebra is neither, and in particular when applied to physical models tends to be symmetric in time. So it seems poorly-suited for describing evolution.
There are cases of convergent evolution, such as many different lineages of sighted animals losing their vision after long times of evolving in cave environments — maybe this is where the idea of pattern prediction comes from? But sightlessnes is hardly the only response to that environment. E.g., many creatures in severely low-light environments acquire photoluminescent symbionts, along with unusually large eyes.
There are also some differences, it seems to me, between biological and social “evolution.” One is that biological evolution isn’t teleological, while I think it may be harder to say the same about social “evolution.” So is the exstence of patterns in the latter a result of some hidden laws of nature, or is it simply ideology, class warfare, etc.?
A great visual thinker and particularly witty mathematician, the late Vladimir Arnol’d, is credited with saying “Physics is an experimental science, a part of natural science. Mathematics is the part of physics where experiments are cheap.” As such, it’s no substitute for engaging with nature. Without that engagement, there is a danger that many purported patterns will be little better than mirages, it seems to me.
A.J., hope you don’t mind my joining in on this, where I differ somewhat from Yoshinori.
“I don’t quite get the idea of the links between (i) evolution, (ii) pattern prediction and (iii) algebra. Evolution is a path-dependent process, with a direction. Algebra is neither, and in particular when applied to physical models tends to be symmetric in time.”
(i) Evolution (despite detailed developments being subject to extinction) is a one way process in time. (ii) Pattern prediction of behaviour becomes possible AFTER a path has been formed. (iii) “Algebra is neither” when it treats time as an object to be manipulated, but both when (as in modern computing) time is built into the logic: the sign of this being the symbol ‘=’ being replaced by ‘<=' (becomes equal) '.
" Mathematics is the part of physics where experiments are cheap.”
Lovely! But what we learned from twenty years of experimenting in Algol68 with database architecture was how different methods of indexing enable e.g. people to be more easily sorted by first sorting their names. I learned from G K Chesterton (1904) that the brain is organised that way, and physiological psychology confirms it. In personal computers most of the computing is done in high speed memory, while data and programs are stored in files.
Thanks, Dave, for your comments. But as for “Pattern prediction of behaviour becomes possible AFTER a path has been formed,” I’m not sure things are so simple when it comes to biological evolution.
Apparently, it’s becoming possible for biologists to predict some adaptive mutations in bacteria — but that’s only possible after a painstaking mapping of regulatory networks in the organism. See Lind & al. (2019) Predicting mutational routes to new adaptive phenotypes, https://doi.org/10.7554/eLife.38822.001. Also, that’s a relatively simple, unicellular organism in a controlled environment.
More complex organisms in more complex environments aren’t yet amenable to prediction of phenotypes,and may never be — not least because their phenotypes aren’t entirely genetically determined (due not only to epigenetic processes but to phenomena such as phenotypic plasticity and niche creation).
I bring up biology, because it seems to me that the juice of the evolutionary metaphor in economics is some sort of comparison to biology. After all, if it were simply time-dependence, then one could just call it “time-dependent economics.” Cf. the “time-dependent formulation of quantum mechanics,” a phrase often used by physicists.
I haven’t yet seen how one establishes biological evolution in general as pattern prediction, much less how one builds a successful analogy between economics and biology that also maps evolution and its (purported) pattern-predictive properties. And by analogy to the Lind et al. model, one might also first need to map certain regulatory networks in an economy; that might be more problematic than in a bacterium, since the environment of economic activity is changing so rapidly — it would be hard to construct a series of experiments over an extended time where circumstances can be entirely controlled by the experimenters. There’s also the issue I mentioned earlier, about the telological nature of change in social systems.
So I’m concerned that borrowing the evolutionary metaphor in economics might be just as much wishful thinking as the neoclassicals’ borrowing of the thermodynamics metaphor. Wouldn’t it be better to investigate economics for what it is, or at least with a more open mind, before squeezing it into such baggage-laden metaphors?
Interesting reaction, A.J. We are back on the argument about whether ‘equilibrium’ should be taken literally or metaphorically, the point of the metaphor being (referring back to Hadamard’s argument here) “functional”: not so much to change the factual reference as to help convey a way of thinking. Here I wasn’t thinking of biological evolution so much as J H Newman’s pre-Darwinian “Development of Christian Doctrine”, and town developers laying down a shorter path to the bank.
A. J. Sutter
This is a comment that should be added on A.J. Sutter’s comment on December 17, 2020 at 3:58 pm. There are so many comments now in this thread (more than 110 comments to date) and arguments are so confusing.
Please see my series of posts:
These comments are to answer to your comments or objection in your comment above:
Erratum:
The second part that commence with “I am sorry” is my own text. I am sorry. I have forgotten the closing “blockquote” tag.
Dear Yoshinori – Thank you for your explanations. This has been the end of the academic term, and I have been too occupied with deadlines for grading exams and submitting paperwork for the upcoming academic year to respond. Also, as you had surmised, I had not had time to read Hayek’s paper carefully. I do need to read it more closely, as a quick first reading did not suffice to dissolve my skepticism about his understanding of evolution as “pattern prediction.”
In any event, thank you for your care and effort in trying to address my questions. My best wishes for a happy and healthy O-Shougatsu and 2021.
Dear A.J.,
thank you for the information for John Nathan’s book and even for the relevant pages.
There are two different themes in your comment.
(1) Why it is rare for economists to talk with business persons?
(2) Is the idea of evolution useful for economics?
It is not good to discuss these two very different themes. I argue only the theme (1) in this post. I will post a different Reply for (2).
The question you pointed is in my understanding a crucial point to the re-construction of economics. Let me explain.
Neoclassical economics (or majority of mainstream economics) assumes rational economic men (maximization of utility etc.). This means in fact that humans have unlimited capability in computation and information collection. For such men and women, there is no need of management science as Herbert A. Simon wrote in his book Administrative Behavior:
Here Simon talks about administrative theory, but we must also think of the economics side. For neoclassical economists management is something that can be expressed in two lines of a sentence: Always select that alternative, among those available, which will lead to the most complete achievement of your goals. For them, there is nothing interesting to study from management or business people. Under the fact that it is rare that economists talks with business people lies their basic assumption of unlimited (or infinite) rationality.
Now many mainstream economists talks about the necessity to extend their theory so as to include bounded rationality, but they are thinking that a minor modification is sufficient. So, for them, there is no need of fundamental reformulation of economics.
Evolutionary economists and many other heterodox economists think that such modifications are insufficient. There are then two currents of strategy. The dominant strategy among heterodox economists is to ignore microfoundations and concentrate in macroeconomics. Majority of American Post Keynesians stand on this position. My position is different even if I also belong to Post Keynesian economics in a wider definition. Our book with Morioka and Taniguchi assumes that economic agents are entities whose capability is very limited in comparison to the difficulty of their tasks (C-D gap after R. Heiner). This makes necessary that most of human judgment and behavior is done after a reflection and routine behaviors (See Chapter 1 of our book). This is the basic assumption of evolutionary economics. However, evolutionary economics lacked so far microfoundations on how large economic system as big as global economy works despite the fact that each agent has only limited capabilities in rationality and sight (i.e. information gathering). Thanks to Taniguchi and Morioka’s research, we could solve this difficult problems. With this reason, we claim that our theory lays the microfoundations for evolutionary economics. As Marc Lavoie, one of top leaders of Post Keynesian economics wrote in the book review on our book, this book provides also microfoundations for Post Keynesian economics, because our theory gives explanation how the quantity adjustment process proceeds within the complex input-output relationships among firms.
In this new theory (microfoundations), management behaviors are entities that evolve. So, the details of firms’ behaviors must be surveyed among the business people. If not, we can know very limited things. In my opinion a kind of synthesis between economics and management science is required in order that a new total theory of economic world is constructed.
As you pointed it, it is now rare that economists talks with business people. This is a very bad custom but to change this situation needs at the same time a change of economics. As this last condition is basically satisfied now, I am hoping that there will be some substantial change in the near future. If once management and economics are unified or synthesized in a more comprehensive science, we get a very strong discipline. It will not be difficult to beat the now dominant neoclassical economics.
Yoshinori, thanks for your comment. Just to be clear, I don’t have any use for “management science” other than to teach my students how ideological it is. (And actually, the one semester I tried to do that wasn’t much fun at all, so now I teach other things entirely.)
My point, with which I think the latter part of your comment may sympathize, is that economics must have a more anthropological element: study what it is that people actually do, instead of assuming what they do.
Without rootedness in actual behavior, it’s all too easy to come up with a theory — but the theory will be useless as a description of the real world (again, performativity aside). E.g., it’s easy to come up with a theory of mechanics while ignoring friction (apropos of dissipation, which is where we began), but such a theory has very limited usefulness for life on Earth.
When I look at what people do, I see us all growing up, mostly becoming pre-occupied with raising our own unruly children, and mainly in old age having time to think, by which time most of us either haven’t learned how to or don’t want to. The inevitable need for government and “management science” to help civilised the childish is my concern now: should it be offering grand-parental advice or (forgetting the Christian memes) coercing us into submission to conquering monarchs and corporate princes? The old Russian leader Gorbachev in “Manifesto for the Earth” (2006, Clairview) remembered the old days when Russia’s peasant communities were governed not centrally by dictators but by local elders.
A.J.
it was slipping from my mind that you are a proud law people. If you do not admit any usefulness of “management science” (I am not thinking that it has become a science yet, but there is no other word for this discipline), there are no useful social sciences. That is OK, because I am not doing economics believing it is very useful. But, I will post my “Reply” to the second theme on evolutionary economics, independently of your answer. I only wonder why you are reading and sometimes participate to the discussion here. Is it a kind of pass time just like that you like to read physics and others?
Yoshinori-san (Dec 19, 02:22), it has nothing to do with pride in being a lawyer. I am a transactional lawyer (negotiating contracts and collaborations), not a litigator (courtroom lawyer), and worked in industry as well as at law firms. Businesspeople are my clients, and when I was at Sony I was on the business side myself. I do believe there are well-run companies — I used to work at one in Silicon Valley, called Applied Materials. However I don’t think “management science” has much to do with anything good that they do.
Applied was when I joined, and still is 25 years later, the world’s biggest company in its field (semiconductor fabrication equipment). At Applied, our products were based on physics and chemistry, and our best leaders were engineers and applied physicists — not MBAs. Our legal team, when I was there, was outstanding, and understood how to deal with our customers successfully, in ways usually contrary to what is taught in business school. We also understood the technology: in order to get my lawyer job, I had to demonstrate some basic knowledge of solid state physics.
Sony was founded by applied physicists, too. Another factor in its early success was one of the founder’s (Morita-san’s) empathy for customers. He had what I’d call an anthropological intuition on how users of the products would use them. However, when I was there, it had entered a phase of being run by MBAs, and it was a disaster — despite the fact that there were wonderful engineers in the product development groups. Indeed, that particularly bad CEO was succeeded by one who had failed miserably at developing Sony’s version of iTunes, a task at which he’d been working for years while running Sony’s US business, and at which Steve Jobs completely toasted him; it was AFTER his failure that he was invited to head Sony global. (So you see, real businesses don’t optimize.)
In a next phase of my career, I was a columnist for two magazines from Nikkei Busienss publications (Nikkei Business Associé and the short-lived Nikkei Business Management). To help do that job, I read a great deal about economics and its history and philosophy. My practical experience, plus my math/physics background, led me to the conclusion that mainstream economics was nonsense. I started reading more works by heterodox economists from this period. I wrote many columns for Nikkei about why textbook economics wasn’t true, as well as discussing how managerial attitudes created the Great Recession, inequality, and environmental damage, among other topics. Another theme was that there is political ideology buried within textbook economics and most economists’ policy advice.
During that period, while on an unplanned visit to Paris in 2008, I discovered the topic of degrowth. I had already moved to Japan by that point, and degrowth (a/k/a décroissance) seemed like a much more reasonable policy for Japan than for even France or other European countries. So I became deeply involved in that topic, meeting many thinkers in that field in France, Italy and Japan. It occurred to me, though, that a purely economic approach was misguided, because there are many legal and political obstacles to achieving the utopias so many sustainability and degrowth writers write about. So I usually characterize my interest in this field as being in the area of political economy. I also published a Japanese book about the subject as it could pertain to Japan, in 2012. (Around that time, I also participated in a conference in Brussels on complexity economics, where I met Alan Kirman and others.)
As for social science generally, I pay attention to it for several reasons. One is to understand its normative and performative roles in public policy. Another is that, now that I’m teaching, I want to be able to teach my students how to think critically, instead of simply accepting what they read. A third reason is that some studies have data or findings relevant to my interests. And fourth, because I am hoping to find some good, creative ideas in various fields — especially if these ideas will be helpful for improving democracy and peoples’ lives here in Japan, and especially in rural areas such as Tohoku, where I live. That I happen to be married to someone who is an accomplished businessperson who is also a highly competent and effective leader, who now has an interest in a political career, makes the importance of well-thought-out practical social, economic, etc. policy of great interest to us both.
None of this requires, though, that I believe social science can be reduced to a form of natural science, or that natural science metaphors are good guides for a better sort of social science. But my skepticism on these points isn’t the same as a belief that there aren’t any discoverable regularities in economic behavior, much less that social science as a field is worthless. — Sorry for the long response. Does that answer your question?
Addendum
I believe with A.J. Sutter that it is necessary to re-orient economics toward a science rooted in actual behavior. This is what economics has forgotten after Milton Friedman’s article “The Methodology of Positive Economics” (a chapter in Essays in Positive Economics, 1953). Simplifying sinuous logic (and as it is understood), Friedman claimed that reality of assumptions does not matter, what matters for a theory is its power of prediction. Therefore, for those economists who believe in Friedmanian methodology, accusing that their assumptions are unrealistic has no effects. (On this point too, Lars Syll is mistaken in his strategy and mode of accusing neoclassical economics.)
However, I hope A.J. has understood at least partly that our book aims different orientation. I raised 18 postulates in my chapter (Chapter 2 A large economic system with minimally rational agents of our book). It is done from a totally different idea from Friedman’s methodology. I thought it is important to clarify what my assumptions are in my argument. Therefore I have adopted axiomatic method. Its purpose is to make clear my assumptions and the range of validity of our theory, as I have explained about the usage of axiomatic method and the term postulate as an Introduction to the method used in Chapter 2:
When I was writing my previous post, I did not know that you have posted on December 19, 2020 at 4:33 am. When I started writing, it had not appeared on the screen and I have posted the above “Addendum” without knowing your post.
Thank you for a long reply. I understand well what you have experienced and what you have thought during that long period of professional life.
Ken Zimmerman will be rejoiced to know about Morita’s anthropologic intuition. There are several active writers in this blog who are particularly politically oriented. I do not doubt their good will, but they are too hasty to implement their plan. Your experience or wisdom (“there are many legal and political obstacles to achieving the utopias”) would be a good advice for them.
As for management science, I do not thinking that management schools are producing good managers. You remind me of a professor of University of Michigan, called Peter, who customarily claimed that it is business schools that crashed American economy. We often talked with each other when we were in Cambridge University as visiting scholars. Another often reaped phrase was that he got lost when he landed at Heathrow Airport, London, because he could not understand English that people talked, while he completely understood English when he was in Belgium and Holland.
The performance of business or management schools is not very good (it may be even toxic). Yet it is still necessary to re-make management science to a better one as it is necessary to re-build economics in a right way. Despite your severe observation and low estimation, a synthesis of economics and management science will be one of good strategies to take for the moment.
It is also wonderful that you met Alan Kirman in Brussel. I attended his lecture that he made in Tokyo University at the annual conference of Japan Association for Evolutionary Economics in March 2016. He became a hero of mine since then.
The second reason of your interest in social science is interesting:
It is cynical that economics is now providing a very good (perhaps the best) material for critical thinking. There are many student who instinctively reject mainstream economics, but they should criticize it after they have understood the contents.
I am not thinking that “social science can be reduced to a form of natural science”. It is one of the reasons (very important one) that I am considering complexity since 1985. Classical physics (from Galilei to Maxwell) was a science of simple objects (“problems of simplexity” after Warren Weaver 1947). It evolved to a science of disorganized complexity (ibid.) in the fourth quarter of the 19th century, but as Weaver pointed, it did not arrived to a stage of science of organized complexity. Economics (and social sciences in general) must take into count that its object is an entity or a network that is grasped as problems of organized complexity. If we stand on this viewpoint, we need a new epistemology on how we can attack these difficult problems and to what extent we can understand them. We need a proper framework for such theories. Because this is a challenge that may go beyond our intellectual capacities, arguments on the ontology of social affairs (the economy and the society) alone are insufficient.
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Have been lucky enough to have several careers. From a relatively young age I was a social worker taking care of young boys and girls who came from abusive family backgrounds. Seeing no economic future in this field I spent some time in the military to fund further education in the field of of business (finance and accounting) and went on to work as a corporate accountant. My passion was forensic accounting. But I became disillusioned with the field (to long of a story to tell her, but the short version is I learned the Big Five along with their lawyers and other political enablers were enabling corporate corruption more than they were preventing it and Enron bore out this view later on). Eventually I retrained myself in software engineering and went to work (with my wife) at Microsoft as a software engineer. After years there I created my own technology and software company that my wife eventually joined and took our family around the world several times. I have no complaints but saw and learned a lot along the way. It was post Global Financial Crisis (GFC) aka Great Recession that I took up the deep dive into economics (history, philosophy, and theory) economics being the only library I shipped to Japan in this our most recent adventure her in my wife’s country of birth.
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Before the subprime driven GFC my wife and I were daily barraged with mortgage brokers seeking to move us from a 30 year fixed into one of Wall Streets new subprime adjustable rate loans that Greenspan crowed so glowingly about. I knew this was a shell game and Ponzi scheme even then. We finally invited one of the poor ignorant salespersons into our home so we could witness for ourselves her selling points (never once intending to fall for this short-sighted Ponzi scheme being waged against middle class Americans with little financial education and lacking the sophistication to see the downside, which once was a fiduciary duty for brokers to reveal). She sat there flipping pretty pie and bar charts reciting her sales mantra (“You will save $600 a month on payments”) never once discussing the downside — when interest rates change so does your payment, or interest only payments don’t decrease the principle, or when balloon payments kick and you can’t refinance as promised was so easy, you are essentially screwed. She even thought it important to tell us she herself had one of these exotic little financial monstrosities birthed on Wall Street. I bet she lost her home (and skirt) with the rest of the fools who bought into this loan sharking qua Ponzi scheme.
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I was working at Microsoft at the time and watched as Microsoft formed bought up Great Plains and then formed a strategic partnership with one of the Big Five (Arthur Anderson) to develop their new line of business (technology consulting). Microsoft made it very easy for its developers to move between these two companies seamlessly. If one studies the history of Enron one finds that this partnership was the seed (or at least substantially contributed) to the failure of the auditing role that the Big Five were supposed to play theoretically within our capitalist economy. Again, this is story best told by PBS ( https://www.pbs.org/wgbh/pages/frontline/shows/regulation/etc/synopsis.html ). I eventually left Microsoft (although not because of this) and formed my own technology company.
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I am now interested in new business models that can help solve the current twin crises of climate change and inequality (reading now The Inequality Crisis) and find degrowth an important part of that solution. One area I hope to explore in more detail is how Japanese capitalism has evolved through time and what meanings and values have influenced and guided major firms and how they have behaved and continue to evolve.
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Mainstream economics is (per Keen) an naked emperor. In my view it is less a theory crisis and more a value crisis; a crisis of integrity:
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As the current crisis in American culture and politics shows, integrity is not just the backbone of good corporate governance but of political governance as well. And I believe corruption in political and corporate governance tells us something of the underlying civilizational meanings and values or lack thereof underlying the twin crises of inequality and climate change. Economics as Religion is a dangerous adjunct to this loss of integrity.
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We need a new humane economics that has not lost site of means vs. ends. I don’t believe that capitalism is going to end because of some apocalypse and a utopia will replace it. I think speculation at either extreme is useless and yelling the sky is falling only gets one so far. We need to reengage with a philosophy of political economy and reframe the narrative the relationship between political and economics institutions. Just-so storying telling of abstract economic theories are not going to solve this problem. I think once we have a better handle on were we want to go (means vs. ends and meanings and values) we have a good chance of righting this sinking ship of civilization and sail into calmer waters of our uncharted future.
Thank you, Meta, for informing me about “The Economics Anti-Textbook: A Critical Thinker’s Guide to Microeconomics”. It is difficult for majority of students to think by themselves where the problems of mainstream economics lie, this kind of anti-textbook helps them to start thinking critically of economics. Education in the department of law seems to be based more on critical comparison of different opinions and doctrines than the education in the department of economics. The fact that economics comprises various strands can be used to remake economics education more on debate and criticism, although it is not easy to implement such an education.
My pleasure Yoshinori (December 22, 2020 at 2:28 am). I gave it, among a select few other works on economics, to both my daughters as extra reading even though their studies are in the field of science/medicine rather than the field of economics.
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Unfortunately, depending on where one lives the quality of undergraduate and graduate education can vary greatly. At least that is what I have seen my own experience as well as my daughter’s experience as told by them. One of the problems facing education today is that fields have become so specialized one can take courses in science and never be required to take a course in social science (economics). Who can blame thought when there is just so much to learn and so little time to do it in. My youngest is now double majoring with a minor in political science because the interest sparked by works like Hill & Myatt.
BTW, Perhaps I should temper my hyperbole and say rather, the ship of civilization is “listing” as this is a judgment in the eye of the beholder ;-)
True! There is just so much to learn and so little time to do it in.
Clearly the p-tag in html doesn’t work ;-)
I’m not sure what is proved by these citations. First, the appearance of atavistic traits in certain individuals, where the traits don’t persist and spread in the population, is simply variation, not evolution. It doesn’t necessarily imply that the traits become widespread in the population due to natural selection or genetic drift. Second, where phenotypic traits do appear in response to some environmental pressure, that’s not necessarily due to evolution at the genomic level: it may be a case of phenotypic plasticity already inherent in the general population’s genome. Third, and most generally, forward motion doesn’t preclude returning to a spot where one had been before. You probably return to the same dwelling and bed on most days — that doesn’t mean you’ve somehow moved backwards in time. Cf. the example cited above of sighted creatures evolving into sightless ones in cave environments.
Certainly one can theorize about inducing changes, “rewinding tapes,” etc. to affect evolution through laboratory manipulations. And the evo-devo field has developed a lot of knowledge that might make such feats more attainable someday. But those laboratory operations have a teleology to them — quite different from Darwinian evolution.
Re Meta citing “Evolution … is a one way process in time. (Dave Taylor, RWER, 12/17/2020)”, he’s missed out my qualifications and obscured what I was trying to say by following you, A.J., and going off on a wrong tack, i.e. into biology rather than information (genes rather than memes).
Hoping from the physics in your interesting apologia, A.J. [December 19, 2020 at 4:33 am], that you might understand what follows, my point anyway is stronger rather than weaker in biology. The fact that evolution has reached humanity – if not physically different supermen – doesn’t mean sub-atomic particles, atoms, benzine rings and sub-human life-forms no longer exist. What was true of the formation of the four persistent sub-atomic particles is still true of economics.(which is not a lot: a choice between Creation and a Big Bang; either way with change interpretable as energy, non-change by continuous circularity and expanding spherical geometry measured by complex variables (X,iY) in which the i represents rotation by a right angle). So that includes both physics and information, with one-way physical causation represented by logical deducibility. Just as a circle can be deformed into a circuit and circuits broken, so evolution can be represented as an algebraic number counting only up to four [right angles], in which adding and subtracting a little doesn’t usually change the format’s one-way expansion as possibilities become real.
@dave December 20 9:58 am: I’m sorry, I can’t follow your argument. I get lost at the comparison between subatomic particles and economics … this sounds like some sort of category confusion. Certainly subatomic particles have been around many billions of years longer than any sort of economic activity on Earth. What am I missing?
Must be that bloody spell-checker! Four lines up, for ‘algebraic’ read ‘arabic’.
A.J. above: ” I’m sorry, I can’t follow your argument”.
No need to be sorry. Back on December 18, 2020 at 10:24 am I was referring to Hadmard’s “Psychology of Invention the Mathematical Field”, on different types of minds, which on p.91 cites Ribot: “Men belonging to the typographical-visual type [which he had found to be “More frequent than would be expected”] cannot conceive how other people’s thought can proceed differently”.
On p.111 we find an example of what I have done. “Weierstrass draws a simple diagram, and after that initial step is taken, everything goes on in the profoundly logical way which is undoubtedly his characteristic, so that, by merely looking at that diagram, anyone sufficiently acquainted with mathematical methods could have rebuilt the whole argument. But of course there was an initial intuition, that of constructing the diagram”. Here the problem is, not being able to communicate the diagram so as to show how its interpretation has evolved over the last 200 years, from use of simple numbers for counting physical objects to complex numbers for mapping motions in space to complex PID logic for mapping flows of information in time. We are discussing complexity here, with complex numbers representing four completely different directions of motion (“the four winds”). The discussion is itself complex: a reality and its absence needing two symbols to distinguish them, which is what I spelled out.
The reality of persistent subatomic particles follows from energy becoming contained in one, two or three loops, the third being closed by becoming part of an atom, resetting to zero by releasing a photon with a cyclic wave structure but no loops. Power-hungry physics has become enchanted with smashing atoms, which is not the way to discover how they were formed.
The same is true when discussing human economics. Its minimal form is two parents feeding the kids and the old folk passing on their experience. That evolved via a communal larder into a monetary reclaim system that by now has evolved into a half-baked based PID control system in which the monetary information feedback conveyed are largely lies claiming power-hungry banks are lending physical value.
What I’m trying to get you typographical-visual types to accept (if you can’t see it) is that we information-processing humans become PID systems ourselves as we grow up, opening up the possibility of post-oil, post-Covid local economies based on grateful self-control for the availability of credit instead of fear of so-called debt to banks permitting centralised – so ill-informed – control of our own destinies, and indeed that of our Spaceship Earth.
@dave December 20 11:43 pm — Thanks for the explanation, but if I may make a personal and then a general observation:
1. You’ve got the wrong boy if you think I’m a typographic-visual type (i.e., one who visualizes printed words rather than images). Cf. my mention of Vladimir Arnol’d a few rounds of comments ago: he railed against the Bourbachique war on images. That, along with his terrific sense of humor, is why he is my favorite mathematician. (Arnol’d’s most famous visual contribution is of course his cat map.) I am buying math books every year in the Springer Yellow Sale, but I never invest in one without a healthy picture:page ratio.
And I don’t know if Ribot was attempting a sincere observation, or merely settling some old academic scores (as many French authors are wont to do), with the part about how t-v types “cannot conceive how other people’s thought can proceed differently.” But in the conext of this thread’s discourse, that comes across as very close to an ad hominem attack.
I would put it this way: it is something more like arrogance to assume that one’s own explanations are so clear that a listener’s/reader’s failure to understand must be due to some shortcoming of the listener/reader. Perhaps you should try teaching liberal arts undergraduate students: I do, and it’s been a lesson in humility on this point.
Perhaps too it would be good to consider: your own explanations have been entirely typographic, without any actual pictures. A truly t-v sort should be happy as a duck in water with that sort of explanation. But for some of us who think in visual images, your purely typographical explanations are hard to grasp.
2. The more general point: I’m willing to assume for the sake of argument that we individual humans are “PID systems,” whatever that is intended to convey. But you run the danger of the fallacy of composition to reason from the nature of individial actors to the behavior of a system comprised of those actors.
That’s the lesson of the Sonnenschein-Mantel-Debreu theorem, for example: contrary to Econ 101 textbooks, you can’t get a giant “market demand curve” from summing up the demand curves of individuals. And that’s even if one accepts the tenets of a theory that treats individual demand curves as being real objects. The SMD theorem is a critique of neoclassical economic theory by practitioners of that theory, so the question of “conceiv[ing] how other people’s thought can proceed differently” does not arise.
A.J., the only mistake I can see was my saying “you typographical-visual” types, implying you are one of them. If you are not, I apologise, but that then leaves the question of why you cannot (or don’t want to) construct a visual version of what I’ve specified in which you can “see” four different types of flow circuit. I’d just been trying to help you do so.
Here you are ending where I’d begun: understanding that SMD is a critique. I’m therefore spelling out what I see as the macro foundation of micro-economics, not the conventional vice-versa. I am seeing flow circuits, not demand curves. There is no fallacy of composition in seeing a river rather than the sum of its atoms, nor in the four types of message being transmitted down an internet channel rather than the meaning of the messages transmitted; nor in the four types of message being circulated separately in PID feedback circuits.
What we think of positively as “having capabilities” is to be understood negatively as our being able to control what we do. So how PID control systems work is one explanation of how we and economic systems work; there are others (more familiar) based on power circuits. Our problem is that the power flow thinking works badly, and the information feedback PID system is being used centrally to control power over others.
Institutional changes (represented in constitutional law rather than political statute) are needed to reduce centralised power to information processing and provide the PID information channels needed (not just better education) to enable economies as local and diverse as families to more or less automatically do what only they can see needs doing. Simply, that means credit budgets/accounts and community/family planning coordinated by timesharing and giving way.
Sorry: in my Dec 18 10:26, that should be “effect,” not “affect”.
Teleology being essentially a philosophical term is not generally relevant to issues discussed in the literature regarding theoretical biology and the mechanisms of evolution. One the one hand it is a hangover from Creationism/Evolutionism controversies, and on the other a philosophical tradition ranging from Aristotle, to Kant, to more recent works such as Evan Thomspon’s “Mind in Life: Biology, Phenomenology, and the Sciences of Mind.” (Thompson 2007, Harvard University Press.)
Terms like biased variation, canalization, facilitated variation, homology, deep homology, genetic toolkits, etc., as used in the literature should not be confused with teleology in my view when discussing evo-devo, epigenetics, or the many interesting discussions going on now in the field of theoretical biology. For example, see The Vienna Series in Theoretical Biology for a sampling of a wide range of topics and views. ( https://mitpress.mit.edu/books/series/vienna-series-theoretical-biology ). I know creationists do attempt to claim recent discoveries imply teleology but that is not in my view helpful in understanding what is happening in the field. As you have already noted it does have a role when we consider human culture. A good introduction might be Jablonka:
The history of evolutionary theory reveals some interesting debates that were eclipsed with the hegemony of the Modern Synthesis that have returned in light of recent discoveries:
The Modern Synthesis, according to Stephen J. Gould (and many other evolutionary scientists), was more a constriction (Provine 2001, 203-204) than a synthesis and eventually turned into a cottage industry of hardened adaptationism. Any hint of biased variation or direction in evolution is heresy within this paradigm. Yet, there is a growing body of empirical evidence within the literature and evolutionary scientists publishing graduate level texts challenging the very idea that natural selection is the sole mechanism in evolution or perhaps even the source of novelty. And these are not creationists raising these questions, but well known evolutionary biologists. Deep homology was once thought impossible and now we know that there are deeply conserved ” genetic toolkit[s]” (Minelli, Fusco, Giuseppe 2008, 222) for building the wings on fly and the arms on human. Whole Genome Duplications (Wilkens 2002, 347; Gregory 2005) have been discovered through comparative genomics that appear to have been sources of change in evolution.
The fact is that there are almost camps or schools of thought holding very different views on the subject which cover a range of positions from natural selection is the sole engine of evolution to the other end that it is merely a sieve filtering out the unfit (survival of the fittest) while other mechanisms are the source of novelty and new form (arrival of the fittest) including a range of positions between these two extremes (my preferred view). Natural selection is undeniably real, but its role is an open debate within the field of theoretical biology; the literature clearly reveals this. It is not a question of teleology or creationism or anything like that, albeit philosophers of science and religion do consider these issues within their own domain. These questions are being revisited by some evolutionary biologists because of empirical discoveries. Many early embryologists pointed to evidence that epigenetics was a factor in evolution but lacked the scientific technologies to open the black box of variation. That black box has now been opened and many of the same issues debated then are now being discussed anew in light of new evidence.
Pigliucci et. al. 2006 in “Making Sense of Evolution: The Conceptual Foundations of Evolutionary Biology” argue that evolutionary theory is going through a New Synthesis. One can find many references to this in the literature, too many to post here. It has to do with including what was left because of the black box of variation that was opened with PCR techniques and technologies like CRISPER that made possible such fields as comparative genomics. Good overviews can be found in Shapiro (2011) “Evolution: A View From the 21st Century” or Krimsky & Gruber (2013) “Genetic Explanations.” Some good reputable works on the history of theoretical biology (Provine 2001, The Origins of Theoretical Population Genetics; Bowler 1983, The Eclipse of Darwinism: Anti-Darwinian Evolution Theories in the Decades around 1900;Bowler 2003; Evolution: The History of an Idea; Gould 2002, The Structure of Evolutionary Theory.)
It is easy to confuse metaphor for mechanism when theories become dogma that reify statistical shadows into misplaced concrete realities. Where this New Synthesis in biology is going I don’t know. But I do know that the history of theoretical biology raises many similar questions as Murkowski raised in his history of economics More Heat Than Light. The same desire to find “microfoundations” and pattern them after physics (the field of molecular biology would be the similar place to biology as physics was to economics) are playing out in biology in that molecular biology has reached its limits and cannot explain higher levels of complexity revealed in recent discoveries (genes are part of complex hierarchical network system from the CNS to regulatory pathways that functions as a whole) in evolution any more than economics can use physics metaphors to explain complexity in economics.
I wrote in another context:
What happens when yesterday’s “junk DNA” turns out to be “noncoding” regulatory DNA? An anomaly is defined by a fact which does not fit into an existing explanatory framework. Prior to the discovery of the genetic regulatory system (i.e., noncoding DNA), what now is explainable (partially anyway, as there is still a lot we don’t know) within the framework of genetic regulatory systems, was once labeled “junk DNA,” along with the a priori assumption it was nonfunctional (i.e., an “unproductive load”). There indeed may be “nonfunctional DNA,” but the ultimate meaning of this within the larger framework of the yet to be fully disclosed understanding of the genetic regulatory system and the cis-regulatory system and the now unfolding field of epigenetics (5th-base) and evolutionary developmental biology, has yet to be determined.
There are many examples in the history of science of overly confident (arrogant) premature conclusions delaying advances in science, sometimes for as much as 50 years in Alfred Wegener’s case! Take the premature conclusions espoused by Doolittle and Sapienza (1980) when they argued, “when a given DNA, or class of DNAs, of unproven phenotypic function can be shown to have evolved a strategy (such as transposition) which ensures its genomic survival, then no other explanation for its existence is necessary.” (Gregory 2005: 28)
Imagine if all scientists literally took their advice and didn’t bother to seek out further explanations for the existence of “noncoding” DNA? Some did just that, and they were not the one’s who discovered the fact of the existence of introns. And no wonder they were content with dogma; they were not looking for possible “functions” of noncoding DNA such as introns! They were under the assumption “no other explanation for its existence is necessary.”
It is very informative to look at other examples of this “monkey see no evil (introns)” mentality that periodically afflicts the scientific community. When Alfred Wegener proposed his theory of continental drift, based upon sound scientific evidence and reasoning, those that thought there was no reason to look any further than existing explanations to account for anomalies in then current theories scorned his ideas and dismissed contemptuously proponents of drift as cranks. (Hallam 1975: 88) Historical hindsight teaches they were afflicted with the fallacy of “misplaced concreteness”; the world famous mathematician Harold Jeffreys was able to demonstrate by simple mathematical calculations that the earth is far too strong to be even slightly deformed by such forces as Wegener proposed, which may be true, but which ignored the forces proposed by Joly and Holmes (convection currents) and which Wegener cited after they published their theories. Of course, we now know the Jeffreys et al. simply ignored the empirical evidence, which was the most substantial part of Wegener/Joly/Holmes argument. (Hallam 1975: 94)
Ironically, Jeffreys was adamant that drift couldn’t happen even up until his death, well after the tectonic revolution had proved beyond empirical doubt that drift was a reality! Jeffreys et al. had misplaced the mathematical model for empirical reality, and rather than continuing to test the model against actual empirical evidence ignored the empirical evidence (facts) and argued the mathematical model was reality! Hence, misplaced concreteness.
Another example is the historical fact that long ago the forefathers of evo-devo argued that the evidence of “deep homology” pointed to some internal common mechanism for variation which explained similar evolutionary pathways evolving in disparate phyla. With the historical constriction (Provine, 1988) of evolutionary ideas due to the rise of the narrow dogmatism of the neo-Darwinian “Modern Synthesis” this pluralism was replaced by a monocular vision of variation which lead Ernst Mayr to make the following statement about this search for the underlying mechanism of “deep homology”:
Ernst Mayr wrote:
“In the early days of Mendalism there was much search for homologous genes that would account for such similarities. Much that has been learned about gene physiology makes it evident that the search for homologous genes is quite futile except in very close relatives” (1963 [Animal Species and Evolution, Cambridge MA Harvard University Press], p. 609). (Gould 2002 539)
Why would Mayr make such a dogmatic statement? Because he believed with absolute confidence that “deep homology” was impossible:
Gould wrote:
“Mayr … formulated the issue in a forthright manner. After all, he argued, more than 500 million years of independent evolution must erase any extensive genetic homology among phyla if natural selection holds such power to generate favorable change [novelty]. Adaptive evolution, over these long intervals, must have crafted and recrafted every genetic locus, indeed every nucleotide position, time and time again to meet the constantly changing selective requirements of continually varying environments. At this degree of cladistic separation, any independently evolved phenotypic similarity in basic adaptive architecture must represent the selective power of separate shaping by convergence, and cannot record conserved influence of retained genetic sequences, or common generation by parallelism. But we now know that extensive genetic homology for fundamental features of development does hold across the most disparate animal phyla.” (Gould 2002: 1066)
Mayr was proven spectacularly wrong by the empirical evidence forthcoming from evo-devo in the discovery of vast amount of ancient conserved genomic modules found in the regulatory genome. As Goethe said, “To be sure, everything in nature is change but behind the change there is something eternal (Johann Wolfgang Goethe).” Carroll (2006) refers to these ancient conserved genomic “toolkits” as “immortal genes.” Mayr had absolute confidence in the mathematical (statistical) models which the “Modern Synthesis” was based upon and through which all evolutionary theory was filtered despite the contrary empirical evidence that did not fit within the confines of this model. Statistical/mathematical hubris can truly blind scientists who are susceptible to the fallacy of misplaced concreteness. Statistical shadows (see Pigliucci’s Making Sense of Evolution: The Conceptual Foundations of Evolutionary Biology, 2006, on mathematical models and “statistical shadows”) need to be continuously tested against actual empirical evidence forthcoming from empirical reality.
Thanks for your comment. But just to be clear: I was saying that teleology is ABSENT from Darwinian evoloution. (Even the much-reviled Mayr devotes a chapter to this, entitled “Teleology,” in his “What Makes Biology Unique?” (2004).) So you’re preaching to the choir.
Similarly, my references to plasticity and niche construction: I learned about those first from Jablonka & Lamb. So I’m with you in giving thumbs-up to Jablonka, too.
My point was simply that evolution is a process that, outside the laboratory at least, moves forward in time, that the reappearance of “atavistic” traits in individuals doesn’t negate this, and that even the species-wide reappearance of phenotypic traits that had manifested previously and then disappeared doesn’t mean that evolution is going “backwards.” Similarly, in physics there isn’t any allergy to a system occupying the same region of phase space at time τ_0 and at a subsequent τ_1; and generaly one doesn’t say that the system is going backwards in that circumstance.
While maybe my cave animal vision example might have given the impression that I was thinking of convergence as the only possible mechanism, that wasn’t at all my intention, nor was I ever so restrictive in my comments. I don’t have any reason to deny that conserved genomic modules, for example, could be a cause for the occurrence of this phenomenon in a variety of creatures. So really, is there an issue here?
Sounds reasonable to me A.J. and thank you too for your insightful comments. Mayr sounds like an interesting read.
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What I find interesting about the current debates going on within the field of theoretical biology (the controversy underneath the popular literature) is how similar issues (at least they seem similar to me) are being discussed within the field of heterodox economics. Within the field of biology certain metaphors are no longer adequate in light of new evidence. A good overview can be found in “Genetic Explanations : Sense and Nonsense” (eds., Sheldon Krimsky and Jeremy Gruber). Take Stephan L. Talbott’s chapter 5 “The Myth of the Machine-Organism From Genetic Mechanisms to Living Beings.” If biology is finding the machine metaphor to limiting so to is heterodox economics it seems. The computer metaphor is also misleading in important ways when it comes to living organisms.
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What I am seeing among some authors, in my view, is an abuse of biological metaphors. They take them literally as axiomatic truths and then attempt to build “micro” foundations upon them. I wonder why and the only reason I can come up with is that these metaphors are part and parcel of their worldview; their conscious or unconscious presuppositions about reality.
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I view metaphors in science as ways of telling stories, making points, or highlighting certain features of some problem at hand. Murkowski has shown how metaphors can become conceptually limiting rather than insightful aids at further exploration. Metaphors, like faith, betray their purpose and become false when they deny (or ignore) realities and confer upon their authors (devotees) assumed knowledge. The problem begins it seems to me when they assume too much, much more than we can know in fact. Machine Dream metaphors then become constraints limiting what one can see.
Some realities have to be ignored when addressing any question. The trick is to decide which realities can be safely ignored for the question at hand. When you ask different questions you ignore different realities. The difference between organism and machine is critical if you are trying to answer all questions at once or even many questions at the same time. For a particular question regarding the organism as behaving mechanically may be perfectly serviceable. If I observe and generalise that a person faced with two sellers selling evidently identical products at different prices will choose the cheaper, I have not begun to plumb the depths of that person’s soul or done justice to her complexity as a human being. Nonetheless, the generalisation might be right and can be tested with more observations. It can be represented as a machine-like reaction but that’s a good thing. We understand things by simplifying them – as much as possible though not more than is possible, as Einstein is supposed to have said.
I am going to risk a psychological generalisation even though I know nothing of the subject! I have observed two distinct temperaments at work when people comment on the attempt to do science in any field. One temperament is disappointed when the analytic method fails in the face of the complexity of reality. The other temperament is delighted because it prefers to emphasise the role of intuition in grasping the nature of the whole and resents the pretensions of the analyst in trying to break things down into comprehensible particles. Each temperament has its virtues and vices. The analytical vice is to ignore the qualifications that always pertain to the method; the “holistic” vice is to delight in mystery to the point of obscurantism. We should ideally recognise our own temperament and try to guard against its biases, though that is easier said than done.
“I have observed two distinct temperaments at work when people comment on the attempt to do science in any field. One temperament is disappointed when the analytic method fails in the face of the complexity of reality. The other temperament is delighted because it prefers to emphasise the role of intuition in grasping the nature of the whole and resents the pretensions of the analyst in trying to break things down into comprehensible particles. Each temperament has its virtues and vices. The analytical vice is to ignore the qualifications that always pertain to the method; the “holistic” vice is to delight in mystery to the point of obscurantism. We should ideally recognise our own temperament and try to guard against its biases, though that is easier said than done.”
The goal should be to practice Wisdom which is the mentally integrative process itself, the thirdness greater oneness process of integrating the particles of truths in apparent opposites and within which the set of science is entirely included.
Science-the reductive mindset/discipline of deciphering complexity is wonderful, fun and far too often a Bible beating hurdle to progress both temporally and ethically. That is why Wisdom-the scientific AND wholistic mindset/discipline must ALWAYS inform it.
The reply is always that Wisdom is also prone to orthodoxy and its idiocies, but that would be confusing Wisdom with religion which it is not, at least not of the literalistic and parochial variety.
Thanks Dave, you are most certainly right about my misuse of “to.” I’ll try to do better. No, you were not in mind in any of my comments so they were not aimed at you. Sorry Dave, but try as I have, I cannot understand or follow many of your arguments. All the best.
Gerald’s two temperament “theory” is interesting. Indeed, majority of reactions in face of complexity can be classified into two temperaments. However, I believe a third temperament (or, an effort to try to attack differently from the two) is required. It is to ask for a method or methods that seek to find a tool of understanding complex objects. As Gerald has pointed it out, both temperaments have their vice. Disappointment occurs when people stick to traditional tools or methods. They do not understand that complexity (at least of organized one) requires new methods. Holistic stance falls in two results: no positive results or obscurantism. (N.B: “positive” here does not stand for the narrow meaning of Friedmanian positive economics. It rather means productively concrete.) It easily falls into romanticism that Inoue pointed out in the latter part of his book review of our book with Morioka and Taniguchi.
Economics of complexity or complexity economics should stand on new ontology and epistemology. Organized complexity (after Warren Weaver) is a new entity that requires sciences new approaches than traditional sciences such as classical mechanics or quantum mechanism. See my posts on Warren Weaver (my comment on August 21, 2020 at 2:56 pm on Peter Radford’s article “The missing middle?” on August 11, 2020 that starts with “I have bought the book”) and on Friedrich von Hayek.
I think this “temperament” argument are bordering on thin veneer or arrogance and ad hominem presuming to read other people’s minds and motives. The better approach, in my view, is to examine presuppositions for they can be made explicit through a dialectic of conversation or an examination of explicit statements. Reading others minds is a very suspect way to build a theory in my view. Someone’s motives or “temperament” are irrelevant to the scientific process of testing reality and then via intersubjective communication repeating those tests based upon similar empirical evidence. It is presuppositions that lead a researcher to exclude one aspect of reality from a model vs. another, not whether they woke up with a nasty or bright temperament. Scientists come in all degrees of temperament but whether what they are empirically claiming has absolutely nothing to do with their temperament.
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This fallacious false dichotomy smacks of self-serving rhetoric to me.
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It is silly to think scientists are sitting around jumping up and down with “delight” or “disappointment” because some experiment didn’t come out to their liking of their “temperament” type or because one prefers or create a false dichotomy of “intuition” vs. “analyst” or other such poppycock. And to call this a “theory” is to stretch credulity to the breaking point.
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The philosophical naivete is telling.
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I am going to risk a psychological generalisation even though I know nothing of the subject! I have observed two distinct temperaments at work when people comment on the attempt to do science in any field. One temperament is disappointed when the analytic method fails in the face of the complexity of reality. The other temperament is delighted because it prefers to emphasise the role of intuition in grasping the nature of the whole and resents the pretensions of the analyst in trying to break things down into comprehensible particles
To make psychological projection of gross generalizations onto a subject one claims to know nothing about and then paint false dichotomies of “intuition” vs. “analytics” (whatever that means) “does justice neither to the complexity and fertility of the human mind nor to the needs of contemporary” science and the fact that since the Great Financial Crisis (aka Great Recession) and more recent events that fundamental presuppositions underlying the methodologies of economics are now being questioned.
I would just like to say how grateful I am for the insightful comments that help me understand better that A.J. Sutter has made in this thread. His questions are as enlightening as his comments.
Dear Meta — Many thanks for your kind comment, I appreciate it. Apropos of your other comment, “We need a new humane economics that has not lost site of means vs. ends”:
A group of Italian scholars is trying to revive an alternative view of economics called “civil economy” (economia civilie). This was articulated in the 1760s by a Neapolitan contemporary of Adam Smith, Antonio Genovesi, and a group of his contemnporaries. The basic principle of civil economy is that each of us has a duty to help others, and also a right to rely on others to help us.
Unlike the neoclassical version of altruism à la Gary Becker, this isn’t transactional, where I help X because I expect X will help me, or that I’ll get some psychic happiness from helping her. It’s more I help X because I have an obligation to do so, and I know I can rely on (unspecified) others to help me. It’s something like “paying it forward,” but posisbly with the steps reversed: I might pay it forward first (i.e., help someone in my community), but never receive help myself until some future date when I might need it.
I don’t think Genovesi was a monumental hidden genius, but he’s a convenient figure to personify this movement, which has deep roots in Catholic notions of charity and service going back to Renaissance times. There is much more available in Italian than in English about this, but a couple of books by one or both of the leaders of this movement, Luigino Bruni and Stefano Zamagni, are available in English, including:
Bruni, Luigino & Zamagni, Stefano. (2017) Civil Economy: Another Idea of the Market. Translated by N. Michael Brennan. Newcastle upon Tyne: Agenda Publishing.
I also recommend an essay by Stefano Zamagni in the collection:
Bruni, Luigino & Pier Luigi Porta (Eds.) (2005) Economics and Happiness: Framing the Analysis. Oxford: Oxford University Press.
That essay is what got me interested in the subject (and by the way, I’m neither Catholic nor even Christian).
I’ve met both Bruni and Zamagni and many of their students in Italy, and attended or participated in a couple of their conferences. While I like and admire them personally, unfortunately they are devoting much of their effort in promoting civil economy to trying to reconcile it with Adam Smith and adapting it to fit into standard economics textbooks. To me, it seems like it could be an important element of degrowth and a more heterodox view of economics overall. Some others have seen this potential, too, including Serge Latouche (a prolific writer about degrowth, but not my cup of tea) and Alberto Magnaghi (a very insightful regional planner based in Tuscany).
Long story short, I think Japan has retained a much better social foundation for a civil economy approach than most European countries. Magnaghi’s ideas about planning are also extremely pertinent to interpenetrating rural areas and small cities, such as we have here in Iwate Prefecture, where I now live.
I’m not sure how good your Japanese reading ability is — mine is still somewhere in the early primary school level — but I devote a chapter to civil economy in my 2012 book about degrowth, ‘Keizai seichou shinwa no owari,’ published by Kodansha and still in print. ‘Genseichou’ is the term my wife, my Nikkei editors and I coined for ‘degrowth’ (or at that time, ‘décroissance’), but it never caught on; the more usual term these days is ‘datsuseichou.’ Some other major philosophical influences on it were Aristotle and Ivan Illich. The book is also quite explicit about the connection to law, politics and political institutions. My wife translated it, so I’m quite confident the Japanese reflects what I wrote.
The MS is in English, and a few years after abandoning plans to publish it with a US university press, I figured I would just release the MS on free databases like SSRN, Academia, ResearchGate, etc. Unfortunately, I used MS Office instead of something like LaTeX, and there are many hours of technical tedium ahead in fixing some of the old PowerPoint diagrams and the like. (I even have to use an otherwise retired MacBook to do that work.) I was beginning that project when I became quite ill in 2019, so it’s been on hold since then; and in the meantime I have some other projects to work on. So unfortunately, it will remain available only in Japanese for a while longer. I have one or two of papers in English on SSRN (Social Science Research Network) that give some incomplete and sort of Jurassic versions of some of the arguments. Maybe those would be of interest if the book isn’t accessible to you. Thanks again.
What a breath of fresh air you are A.J.! I see promise in the vision you are sharing. We certainly need to reawaken a vision of a “civil economy” (economia civilie) to counter the anti-human caricatures created by the horse and sparrow economic theory of Becker et. al., to wit:
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A Yiddish proverb expresses it best I think:
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Thank you — I heard many Yiddish proverbs, but not that particular one, which is quite apt. Perhaps my family was too optimistic. The one my mother instilled in me from the age of four was “Af shpitzn zinge ligt di gantze welt”: On the tip of your tongue lies the whole world. Meaning: If you don’t know, ask.
You can find my academic email by searching on my name and ‘Akita International University’.
By the way, earlier I forgot that I’ve posted a conference paper about some notions of civil economy and their relevance to Japan: “Public Happiness in Japan” (2013) on SSRN.
Darn! One end-bracket off! But you can understand what I mean …
@AJ,
“We need a new humane economics that has not lost site of means vs. ends”
You mean an economy based in and utilizing policy that relevantly expresses grace/graciousness, no?
@Craig — The quoted language was Meta Capitalism’s, and I was responding. ‘Grace’ and ‘graciousness’ no doubt have a lot of connotations that I might not be aware of, so I can’t respond directly. As indicated in my comments above, my response draws on the civil economy tradition, which has roots in Roman Catholicism — though ‘grace’ doesn’t feature prominently in that literature, as far as I recall.
Civil economy terms such as ‘reciprocity’ and ‘public happiness,’ as well as Ivan Illich’s idea of ‘conviviality’ and Aristotle’s qualitative concept of use value (though he had more roundabout terms for that) are some of the concepts I’ve used in various writings mentioned in my comments above.
Sorry, a typo in the Italian: economia civile.
Ha!, ha!, I am a master of typos! And we just gave a perfect example of how a gene mutation is amplified or a scribe mistake is perpetuated! Science in action!
Meta, I agree with you about A J Sutter’s contribution – especially his looking back to pre-Adam Smith Catholic attitudes – and I appreciate your own ability to expand arguments via relevant texts, being glad particularly of your reminding us of R G Collingwood. But perhaps you will find something to learn in the following observations? Your persistently typing ‘to’ where the context calls for ‘too’ suggests this is not a typo but a mistake in your understanding of English grammar. Also, “More Heat than Light” and “Machine Dreams” are by Mirowski, not Murkowski (unless perhaps Murkowski is the Japanese version)?
Re your critique of Gerard Holtham’s “black and white” psychological assumptions, it is not clear if you are including me when you say “I think this “temperament” argument are bordering on thin veneer or arrogance and ad hominem presuming to read other people’s minds and motives”.
My own position is not “black and white. It is scientific rather than presumptive, and I’m sad rather than derisory when other people can’t see what I can (though I can be sharp when others presume that is not seen but imagined). The Jungian/ Myers-Briggs types are about “tendencies” (as Tony Lawson puts it) to prefer one way of thinking rather than others of which we are capable. I’m nearer Yoshinori’s position: “Gerald’s two temperament “theory” is interesting. Indeed, the majority of reactions in face of complexity can be classified into two temperaments. However, I believe a third temperament (or, an effort to try to attack differently from the two) is required”.
Myers-Briggs distinguish four types of temperament – either one or the other or both, plus “feeling”; or (allowing for inputs and outputs to and from the senses and memory) sixteen possible combinations. I am in a one percent group habitually using not sense or intuition but both: thinking intuitively, but having to communicate via words and [other people’s] senses. Indeed I seem to be an extreme case even in this group, being right on a difference between being practical and philosophical. My wife (full of common sense and good feeling) is more or less the opposite to me, and when this became a problem it was Myers-Briggs that sorted us out. While Econoclast ignorantly dismissed this as not being science, it represents half a century of empirical justification of Jung’s initial expert intuition (following Chesterton’s, which led me to the evidence for Yoshinori’s alternative, “or, an effort to try to attack differently from the two”; namely, its physiological explanation in terms of neural architecture, and the internal use of language for “indexing” remembered data).
After all this discussion I am sure there must be more needs to be said, Meta, but lacking your and other contributor’s facility with language, I’ve run out of steam! Let me just hope A.J. is recovering well from his illness.
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Grace and Graciousness are indeed part of the answer Craig. These are worthy values, even character qualities to cultivate in one’s personal life. There was once a time when developing a well rounded character was part of what it meant to be a “self made man.” This was time when women were treated as chattel. But the idea of developing a well rounded character is an idea and ideal that can evolve, include women, and today be once again reconsidered. As I have said on this blog before, we are not facing a crisis of methodology as much as we are facing a crisis of values and meanings (means vs. ends) and for that simple solutions are really not solutions. Economics alone cannot solve such a crisis but it does play a significant role in how we do solve this crisis.
Well said, Meta. But the significance of taking into account language and personality differences becomes evident when you consider the on-going wars between Right and Left, which boil down to the conflict we have been discussing between the Sensory vs Intuitive thinking, culturally that of those we have learned from. We need both as well as Craig’s grace (seen causally as “feeling” grateful).
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I haven’t the slightest idea what you are talking about, and the dichotomy of “Sensory vs Intuitive thinking” doesn’t in the least make sense to me regarding the “wars between Right and Left,” whatever you mean by that. And I have no intention of going down that rabbit hole on the comment section of a blog.
Yes Meta. All of the aspects of grace as in love in personal action and systemic policy/gracefulness as in dynamic, interactive, integrative and unitary process are relevant to economics as well as every other area of human endeavor.
In economics the “trick” is simply to recognize where, when and how much to most effectively implement policies that will effect both its ethical and temporal expression.
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Got it. Oh, this is going to be fun ;-) There is a quality (despite the thorough penetration of secularism) in Japan that is fundamentally different than the pervasive individualism exhibited in cultures such as the US rooted in decades of the propaganda of market fundamentalism and American exceptionalism rooted in a rather pedestrian interpretation of “self-interest.”
I am not at liberty to share real time examples of a major Japanese corporation’s approach to complex issues during a world-wide pandemic that show that mere “self-interest” are not the primary motivating factors underlying business decisions. But I can attest that the approach is very different than many Western corporations on multiple levels.
Meta: ” Sorry Dave, but try as I have, I cannot understand or follow many of your arguments. All the best”.
Dave: “[The] on-going wars between Right and Left, which boil down to the conflict we have been discussing between Sensory vs Intuitive thinking …”.
Meta: “I haven’t the slightest idea what you are talking about, and the dichotomy of “Sensory vs Intuitive thinking” doesn’t in the least make sense to me regarding the “wars between Right and Left,” whatever you mean by that. And I have no intention of going down that rabbit hole on the comment section of a blog.”
Dave: This is the comment section of a blog on Complexity Economics, so the complexity of the brain and hence personality is certainly relevant. By “the on-going wars between Right and Left” I was thinking literally of wars between Capitalists and Communists, so now I don’t understand how you “haven’t the slightest idea what [I am] talking about”. I tried to explain that not all on the political Right are sensory thinkers, nor those on the Left intuitives. I tried to suggest that the founders of both were probably intuitive (or the entrepreneurial type, both logical and intuitive), but with a 70% majority of us being Sensory my suggestion was that those who follow either party are most likely Sensory types and following the tradition they have grown up in. So you have no intention of going down that rabbit-hole? At 84 that’s no skin off my nose, but I offered you something to think about and it is your loss if (like most of those here, e.g. Craig dismissing the link between grace and gratefulness) you choose to look gift-horses in the mouth. Not that I expect any of you to understand that suggestive North country idiom without seeking an interpretation which makes sense.
It is instructive to read this blog through again from the beginning, to see how people are continuing to blame me for not making myself intelligible despite not being understood being the normal experience of intuitives able to “think outside the box”, who think in terms of patterns rather than words. One of Shannnon’s key theorems generalises the proverb that you can’t fit a quart into a pint pot, which in mathematics takes the form that to resolve a problem in n variables you need at least n + 1 equations. What can be seen cannot always be expressed in words. It is simplest to give a practical example, but only if it is understood that the point is not the example itself but the way it gets you thinking. For three years I worked with the codification of a warehouse inventory, where a simple practical issue became the description of screw heads. One can say “cross recess head”, but someone having patented one form, many others were soon patented, and the only way to distinguish these simply was to draw pictures of what they looked like. When a scientist, a poet or a religious explanation uses an analogy, that is what is being done: illustrating not the example but a non-verbal way of looking. Here the analogy often used has been a “framework” theory: one that doesn’t de-scribe an economy but pre-scribes how to look at it. Note the difference between de- and pre-: the pre- comes first.
Ps. references: On frameworks, see Stephan Korner’s “Categorial Frameworks”, 1970, Basil Blackwell (Oxford).
Re Meta on December 22, 2020 at 9:28 pm: “Sorry Dave, I clearly don’t see the world in the same categories as you”.
The reference is Hadamard, op cit p.87. The issue is what the word ‘category’ refers to: does it follow that, even if we use the same words, Meta and I refer to the same things? The citation, “which, logically speaking, has been fully freed from any appeal to intuition”, is Hilbert’s “beginning, now classic among mathematicians”:
“Let us consider three systems of things. The things composing the first system we will call points; those the second we will call straight lines, and those of the third system we will call planes”, clearly meaning that we ought by no means to inquire what these “things” represent”.
Letting the things be ‘categories’, it seems Meta thinks them points, with no room for manoeuvre. The Myers-Briggs categories are planes, in which there is (figuratively speaking) space for variations, with any point definable by its latitude and longitude.
“like most of those here, e.g. Craig dismissing the link between grace and gratefulness”
But Dave I’m not doing that at all. I’m for all of the aspects and fruits of the concept/experience of grace. If grace as in monetary gifting is integrated into the daily human interaction with the economy with 50% discounts and rebates at the point of retail sale and at the point of loan signing how could that not be anything but evocative of gratitude from both individuals and enterprise??? In fact, due to those policy’s immediate, multiple, continuous and universally beneficial effects, it would undoubtedly help self actualize gratitude. Amen. So be it.
And remember, immediacy, multiplicity, continuousness and universality of beneficial effect are the signatures of mega-paradigm changes. The universality aspect of mega-paradigm changes means there are beneficial trans-systemic/trans-human body of knowledge effects.
The first mega-paradigm change when humans became self aware opened up all of the blessings (art, spirituality and every other cultural means of being and expression), and all of the curses of dualism which in fact are also blessings as dualism enabled the dynamic process of synthesizing the truths in opposites which is science/wisdom.
The second mega-paradigm change from nomadic hunting and gathering to homesteading, agriculture and urbanization forever changed the course of human history, brought greater abundant survival and even more blessings and blessings in disguise.
The third such change will do more to make conscious the concept behind all paradigm changes mega or simply pattern changing.
Sorry Dave, I clearly don’t see the world in the same categories as you. There you go again your arrogant gift horse BS, so you see, I find it best just to ignore your comments mostly as I don’t know where to get a handle on them to make sense of them and when I have at times asked I typically get more condescension than clarity. I am sure you can find a category to label me with to make it all make sense to you. No skin off my nose either Dave. Best to you.
So sad! The “handle” has always been the complex number format bent round a sphere, i.e. the latitude and longitude of navigation. If you don’t know what those words refer to, look them up!
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A display of specialized skill does not signify possession of spiritual capacity. Cleverness is not a substitute for true character.
Not that knowing about navigation demonstrates any special skill, but yes, if by “true character” is meant sensitivity to others’ feelings. Guilty as charged! The price of prioritising language, vision and the sensori-motor experimental experience needed to relate the two is for Myers-Briggs an insensitivity to and hence a relative lack of control of feelings, often compensated for by humour. What I said about the handle was not an emotional dig, it was a straight response to your saying you didn’t know where to get one. So is this: it is the guilty child who fears his father will murder him, not being able to see his father wanting to excuse him.
This blog started out as the Post-Autistic Economic Review, with the type of autism being economic professors of both Right and Left wing varieties not listening to feedback and not testing their theories in practice. The remaining variety is what concerns the medical profession, like the Asperger Syndrome of Greta Thunburg, which has shielded her from emotional abuse and enabled her to “speak truth to power”. It so happens I have been very much involved with another such. The function of the feelings is to switch attention to or from the appropriate part of the brain: the famous “fight or flight” response. This guy could remember everything said to him in the minutest detail, but could neither switch off nor quieten down what he was hearing. Spontaneously he began to refuse all but a few very simple foods, and he was helped by a gradual build-up of familiarity reducing his sensitivity. In Australia, a lady badly affected in a similar way was successfully treated for food allergies, and has written movingly on the subject. So this sort of autism is actually to be pitied and overcoming it admired; it is the academic types afraid of being found wrong who are the problem in economics.
Happy Christmas, everyone! I would like to stress the sincerity of that by thanking all those who have opposed me in this discussion for keeping me thinking and learning, which (however uncomfortable that has been) is as it should be. Two points in particular have become clearer to me.
On the “handle” being the complex number format bent round a sphere (i.e. the latitude and longitude of navigation), the lady who explained Myers-Briggs to me gave us this as the explanation of the characteristics on any side of a table of character profiles shading into those on the opposite side. She also said those of my INTJ type were typical of entrepreneurs.
Discussing the label “second order cybernetics” has clarified perhaps the most difficult issue in my own explanation. If the complex number format is a human invention, what would the lines representing the coordinated be in real life? They would occupy space, and not only contain the free flow of energy to regions of the sphere but (like a wire or a tube) constrain it to flow in particular directions. That of course is what happens in electronics and neurology.
Discussing my own limitations, I was set to wondering why I am actually such a lousy salesman, and coming up with “methodological individualism”. An entrepreneur is seeking “profit” for himself, whereas the Christian philosophy is (if you like) “methodical catholicism” – sharing with and caring for everybody. As the Marriage Encounter movement has it, “Love is a decision” – a philosophy – even if at a certain stage in growing up it involves feelings.
So here’s hoping you can share with shepherds, kings and angels the joy of a temporarily homeless family, living in times as turbulent as ours, at the birth of their first child. Let it be not merely joyful but kind (caring for our less fortunate kindred) and in thanksgiving, Merry!
As the letter ‘d’ comes next to ‘s’ on the qwerty keyboard, I accept [the lines representing the] “coordinated” is a typo, not due to a spelling checker! It should of course read “coordinates”. (I find that funny even if my wife wouldn’t! Enough of Covid: let’s re-joice and have fun)!
I wish you a happy Christmas, Dave! I wish all who celebrate Christmas a very happy Christmas!
Wishing you well Dave. May we all become more like Mr. Rogers:
https://www.theatlantic.com/magazine/archive/2019/12/what-would-mister-rogers-do/600772/
Complexity, evolution and economics
(A) How Hayek thought on complex phenomena
This post corresponds to the second theme in my reply on December 18, 2020 at 3:35 am. A.J. Sutter (in his comment on December 17, 2020 at 3:58) expressed several points of doubt on the usefulness of the notion “evolution” for economics. His doubt and objection are double-layered.
At the simplest or superficial level, he asks
(A) How the three terms: (i) evolution, (ii) pattern prediction and (iii) algebra are linked.
He must be asking this question in relations to Hayek’s paper: The Theory of Complex Phenomena (1961; 1967). In a more deep level, A.J. raises a severe question on evolutionary economics:
(B) Is the idea of evolution predicative in the sense that it predict the direction or path of evolution of a certain species?
He has taken up the topic of convergence through evolution and talked about examples of animals in a cave. I have no objection about it. He also raised a doubt on problems caused by the difference of biology and economics:
Sutter has pointed his objections on some comments by Dave Talyor and Meta Capitalism such as:
Let me explain my own understanding. This post argues problem (A). Problem (B) follows in the next two posts.
(A) Links between evolution, pattern recognition, and algebraic theory
These three items appears in Hayek’s paper. As this is written in a easy to read way (although based on a deep thought on complex phenomena), most probably, A.J. had no time to read Hayek’s paper carefully. If he had, he had understood how they are linked. Dave Talor gave his own explanation on the link in his post on December 17, 2020 at 8:47 pm. As I have not the same idea as Dave Taylor, please let me also explain.
The key to understanding is that Heyek is considering how to understand complex phenomena and how to build a theory of problems of organized complexity after Warren Wearver’s seminal paper Science and Complexity (1948). Weaver argued that there were three kinds of problems in the science: (1) Problems of simplicity, (2) Problems of disorganized complexity, and (3) Problems of organized complexity. (Modern) physics up to the 19th century treated problems of simplicity. The system was described by two or three variables. The fourth quarter of the 19th century and the first half quarter of the 20th century succeeded to develop theories of disorganized complexity such as kinetic theory of gases, statistical thermodynamics, and quantum statistical mechanics. They treated phenomena of large numbers but each of elements moved relatively independently from others (disorganized complexity). Weaver considered that the latter half of the 20th century must be and can be the age of sciences of organized complexity. Hayek was one of early rare thinkers who wanted to develop and implement Weaver’s program in economics.
Hayek considered that a theory of complex phenomena cannot contain precise predictions. They are only possible for problems of simplicity. So, Hayek tries to recede as far as possible and considered what is possible for us to know or recognize (in the case of organized complexity). We cannot know an exact series of events but patterns of those events. Thus, he argues how we can recognize patters and in what way we can analyze and examine patterns.
When we have to consider interactions of many elements (as in problems of disorganized or organized complexity), it is practically impossible to know all values of large number of variables. This poses a constraint for what we can know. Suppose, as an example, that the system we observe is deterministic in the sense that a well posed problem gives a unique future path. If we want to predict the future in an exact way, we must know the values of all boundary and initial conditions. But it is impossible. Even in such a case, there are many features we can know. Kinetic theory of gases could explain why Boyle-Charles law holds (Remark that it is not “predictive” law in the classical sense). If we have a good theory of how the system works, we can predict a pattern how the system behaves. To know the value of all variables is not necessary. It is sufficient that we know the existence of such and such entities and how they interact. In section 3, Hayek called this mode of theorizing algebraic theory. This is quite reasonable, because the essence of algebraic thinking is to assume that the existence of an entity and that it has a value. The value may not be known and it is impractical to try to find the value. Yet, we can get some useful information on the behavior of the system.
In the next section, Hayek argues that statistics is not well suited to to deal with problems of organized complexity, even if it is a good tool for problems of disorganized complexity. (Hayek does not use the distinction between Weaver’s three kinds of problems. It remains as a secret ingredient in his writing.) Then in section 5 he talks of theory of evolution as an example. A very loose pattern prediction (of evolution) can be a very important theory for problems of organized complexity. And finally, in section 6, he approaches the main problem for him: how theories of social structures can and should be organized. Two or three supplementary sections follow.
Although Hayek does not argue how evolution and complexity are related, the link between them is evident. If the system is simple, there is no evolution. Those that evolve are necessarily a system of certain complexity or in the word of Weaver organized complexity. Evolution is one of most important and relevant question for organically complex entities, because it gives the first key to understand the system. This is well proved in biology. But, how about the case of economics? Traditional economics did not observed evolution of economic entities and systems (except a few). Schumpeter was one of such exceptions. But, if we change our viewpoint, the economy is full of entities that evolve. In my paper Evolutionary economics in the 21st century: a manifesto (2007), I raised seven categories that we can consider as evolving entities or systems. They are commodities, techniques , economic behavior, institution, organization, system, and knowledge. They are entities that evolve or systems that contain entities that evolve and develops as a system. For example, dynamics of modern capitalism can be understood without focusing technological change. In the next post, I will argue evolutionary economics.
Complexity, evolution and economics
(B1) Usefulness of evolutionary thinking in economics
The main theme of this post is to answer the question: Is the idea of evolution useful for economics?
The question corresponds to the inquiry presented in A.J. Sutter’s reply on 2020.12.18 at 3:18 am to Dave Taylor, i.e.
This is very good and serious question to evolutionary economics. Yes, evolution is a baggage-laden metaphor. As an economist who believes the possibility of evolutionary view, I want to answer to this question as far as possible.
First, let me give some information on evolutionary economics, because its actual state is not well known even among heterodox economists. At the back of Sutter’s question it seems there are some misunderstanding on the research program of evolutionary economics. As evolutionary economics now comprises more than several hundred economists (even more?), it is difficult to give a uniformly agreed framework and orientation. If I summarize the conclusion in advance, there is a wide understanding that economic evolution should not be identical to biological evolution. But, some prefers to stick to the term such as Darwinian principle, whereas some others are more inclined to admit Lamarckian ideas. In a sentence of his comment on December 17, 2020 at 3:58, Sutter posed his “objection” in this way:
On this precise point, I believe most evolutionary economists admit that sociological and economic “evolution” has a teleological aspect, because we invent and create various things with some intention. But, a leading evolutionary economist Geoffrey Hodgson, whose book I will introduce soon later, prefers to conserve the term (universal) “Darwinism” as general principles of social and economic evolution. I do not commit myself to such philosophical arguments and prefer to build concrete theories based on evolutionary view.
The elements of evolutionary economics was explained in my paper Evolutionary economics of the 21st century: a manifesto (2004). A more detailed version was published as “General Introduction” (pp.4-141, written by me) to a Handbook of Evolutionary Economics (in Japanese, edited by JAFEE, published from Kyoritsu Shuppan, 2006). For those who can read Japanese, it is easier to understand the total scope of evolutionary economics to read this General Introduction. Of course, the two articles were written at least 15 years ago. My thought has changed a bit (let me say evolved), but the core remains the same. At the time of Manifesto and General Introduction, I had no idea on how to develop theory of international values that I was pursuing at that time as the most urgent task for me. I was working continuously on it but I was still wondering and could see no clear vision on it. So, at 2006 point, I did not emphasized the importance of value theory (i.e. price theory) including international values. Yet, the idea on how to investigate evolution of various economic entities remains invariant.
Evolution is often too loosely understood. There is always a risk that it is used as easy-to-use metaphors. To avoid such misuse, it is necessary to understand evolution that has and should be understood at least by three moments: reproduction, mutation, and selection (Manifesto, p.14). The first term of this triplet may be exchangeable to another term such as replication/inheritance/retention, and the second to variation (in later papers, I normally use triplet retention, mutation, and selection). If we want to analyze firms as an evolving entity, it is better to choose “retention” instead of “reproduction” or “replication”, because the evolution occurs within the same firm and it is rarer that new firms are reproduced from the older firm. With this reason, the term retention is preferred in the organization theories. Replication is normally used in evolutionary game theory. An evolving entity is called replicators. Retention lacks a such convenient word. Hodgson seems to prefer the triplet inheritance/replication, mutation and selection.
To know the actual situation of evolutionary economics, it would be best to cite some paragraphs from Chapter 4 of Hodgson’s book Is there a future for heterodox economics? (2019), which draws on a large scale bibliographic survey with Juha-Antti Lamberg:
As for the use of metaphors of evolution and others, Hodgson admits that “the word evolution is highly vague.” (Hodgson 2019 p.110)
In their bibliographical survey, Hodgson and Lamberg detected 14 clusters by citation link analysis.
As Hodgson put it, evolutionary economics is now quite strong strand of research which is still expanding its force, although I rarely find in this blog writers and contributors who seem to be an evolutionary economist. Now in the world there are four academic society for evolutionary economics: Association for Evolutionary Economics (AFEE, North America, old or orthodox institutionalists), The International Joseph A. Schumpeter Society (ISS, Worldwide, Schumpeterians), European Association for Evolutionary Political Economy (EAEPE, Europe), Japan Association for Evolutionary Economics (JAFEE, Japan). There are other associations such as Korean Society for Innovation Management and Economics (KOSIME) which has strong evolutionary influences. BTS, I was the second president and am a fellow of JAFEE.
As this post is becoming enough long, the main part of (B) will be postponed to the next post (B2).
Complexity, evolution and economics
(B2) Usefulness of evolutionary thinking in economics
Now, let me explain more directly how evolutionary thinking is useful for economics.
First of all, evolutionary thinking in economics is a change of viewpoint. As I have referred in my paper Evolutionary economics in the 21st century: a manifesto, there are many entities in the economy that can be better considered when we examine them from the viewpoint of evolution. They count at least seven: commodities (products and services), techniques (each element of technology, e.g. production and product techniques, systemic technology, social technology), economic behavior (pricing, inventory control, exchange by means of money, etc.), institution (firms as legal person, money as legal tender, legal system, etc), organization (firms, universities, non-profit organization, banks, law court, etc.), system (internet, transport system using containers, global value chains, etc.), and knowledge (science and technology, large set of knowing-hows). They are entities that evolve or systems that contain entities that evolve and which develop as a system.
Traditional economics (neoclassical economics and majority of mainstream and heterodox economics) does not consider these entities from the viewpoint that they are evolving entities. Take growth theory, for example. There are two generations of mainstream growth theories: classical or Solow-Swan type growth theory and new or endogenous growth theory (Romer, Lucas and others). Its main tool is aggregate production functions. The types of production functions are various, but they assume a form such as Y = f(L, K, H) where L is labor, K capital and H human capital. They all see economic growth from the viewpoint of the change and increase of factor inputs. There is no real technological development. In the evolutionary economics, technology change is the main object of study like the case of Dosi (1982) that appeared in the citation from Hodgson (2019) and his and his subsequent studies.
As explained in the citation from Hodgson (1982), Nelson and Winter (1982) gave a big impact for various subjects of investigation. Hodgson and Lamberg’s bibliometric analysis covered 8,474 article that appeared between 1986-2010. Excepting some clusters such as D endogenous growth theory and G evolutionary game theory, Nelson and Winter (1982) has served as a point of reference for many other clusters. It is loosely connected to seven out of 14 clusters that Hodgson and Lamberg detected by their citation network analysis.
At the achievement level, evolutionary economics contributed much in two fields: organization studies and technology development research. My book with Morioka and Taniguchi (2019) is a result that supplements a defect of evolutionary economics to date. Although it expressed dissatisfaction to neoclassical economics, it lacked a firm microeconomics. Out book gave a price and quantity adjustment theory which is capable to replace neoclassical price theory such as Arrow-Debreu general equilibrium theory. Evolutionary economics is now liberated from the straitjacket of neoclassical economics.
The significance of the new theory may be illustrated by my recent paper: A new framework for analyzing technological change, Journal of Evolutionary Economics 30 (2020): 989-1034 (Members of ResearchGate can download the paper at my personal RG page.). It explains under certain conditions how the real wage rate (of workers) increases when production technique improves. This was tacitly assumed in almost all people who emphasize the importance of technology progress. Classical growth theory (Solow-Swan type) detected the importance of technological progress, but it was treated only as residuals. Endogenous growth theory (Romer and Lucas) explained the economic growth as the increase of input such as human capital or technological knowledge). More recent arguments by Acemoglu, for example, is more refined in the sense it assumes change of production function. But it assumes labor expanding technological change. This is no other thing than Petitio Principi or a fallacy of begging the question. My paper explained without no specific assumptions on technological changes. They occur by chance and in all directions. Firms choose those production techniques that reduce the production cost. As a result of series of this half-blind selection, the real wage rates increased enormously since the first Industrial Revolution. This is the dynamism of capitalism. In this regards, even Hayek was mistaken. He emphasized the allocation function of prices. It explains allocative efficiency, but the real dynamism of capitalism was not there. Real dynamism of capitalism lied in its capability to improve and change its product and production techniques. If we call it dynamical efficiency, it is this dynamic efficiency that overwhelmed centrally planned economy. Thus, evolutionary economics helps us to understand capitalism in depth.
As I have inserted a subsection 4.6 History-friendly framework, my analysis does not tell what happens in the future for any specific goods or services. All depend on how a new product and production techniques emerge. We may know some loose patterns for this development but it is in fact uncertain. This must be the reason why neoclassical economists refused or rejected the analysis that I made in my New framework paper, because it does give any “predictive” results. We can only know the pattern but not how the numerical time series grows along a concrete function. In this point, Hayek’s paper The theory of complex phenomena (1962) was quite “predictive”, because he clearly detected that we should change our mode of understanding economic phenomena.
This is not a praise of capitalism. Understanding capitalism may lead to a true plan to reform it. This does not mean that I deny the degrowth and the problems of inequality. We should learn from the failure of Marxist-Leninists. They have found the vices of capitalism but could not understand (1) the difficulties to implement planned economy and (2) the dynamism of capitalism. When we really want to achieve sustainable economy (in various sense), it is necessary to know how capitalist economy works. Any proposals of reforms and new movements must be based on a realistic understanding of the actual market economy and its dynamic capabilities.
Complexity, evolution and economics
(B2) Usefulness of evolutionary thinking in economics
Now, let me explain more directly how evolutionary thinking is useful for economics.
First of all, evolutionary thinking in economics is a change of viewpoint. As I have referred in my paper Evolutionary economics in the 21st century: a manifesto, there are many entities in the economy that can be better considered when we examine them from the viewpoint of evolution. They count at least seven: commodities (products and services), techniques (each element of technology, e.g. production and product techniques, systemic technology, social technology), economic behavior (pricing, inventory control, exchange by means of money, etc.), institution (firms as legal person, money as legal tender, legal system, etc), organization (firms, universities, non-profit organization, banks, law court, etc.), system (internet, transport system using containers, global value chains, etc.), and knowledge (science and technology, large set of knowing-hows). They are entities that evolve or systems that contain entities that evolve and which develop as a system.
Traditional economics (neoclassical economics and majority of mainstream and heterodox economics) does not consider these entities from the viewpoint that they are evolving entities. Take growth theory, for example. There are two generations of mainstream growth theories: classical or Solow-Swan type growth theory and new or endogenous growth theory (Romer, Lucas and others). Its main tool is aggregate production functions. The types of production functions are various, but they assume a form such as Y = f(L, K, H) where L is labor, K capital and H human capital. They all see economic growth from the viewpoint of the change and increase of factor inputs. There is no real technological development. In the evolutionary economics, technology change is the main object of study like the case of Dosi (1982) that appeared in the citation from Hodgson (2019) and his and his subsequent studies.
As explained in the citation from Hodgson (1982), Nelson and Winter (1982) gave a big impact for various subjects of investigation. Hodgson and Lamberg’s bibliometric analysis covered 8,474 article that appeared between 1986-2010. Excepting some clusters such as D endogenous growth theory and G evolutionary game theory, Nelson and Winter (1982) has served as a point of reference for many other clusters. It is loosely connected to seven out of 14 clusters that Hodgson and Lamberg detected by their citation network analysis.
At the achievement level, evolutionary economics contributed much in two fields: organization studies and technology development research. My book with Morioka and Taniguchi (2019) is a result that supplements a defect of evolutionary economics to date. Although it expressed dissatisfaction to neoclassical economics, it lacked a firm microeconomics. Out book gave a price and quantity adjustment theory which is capable to replace neoclassical price theory such as Arrow-Debrew general equilibrium theory. Evolutionary economics is now liberated from the straitjacket of neoclassical economics.
The significance of the new theory may be illustrated by my recent paper: A new framework for analyzing technological change, Journal of Evolutionary Economics 30 (2020): 989-1034 (Members of ResearchGate can download the paper at my personal RG page.). It explains under certain conditions how the real wage rate (of workers) increases when production technique improves. This was tacitly assumed in almost all people who emphasize the importance of technology progress. Classical growth theory (Solow-Swan type) detected the importance of technological progress, but it was treated only as residuals. Endogenous growth theory (Romer and Lucas) explained the economic growth as the increase of input such as human capital or technological knowledge). More recent arguments by Acemoglu, for example, is more refined in the sense it assumes change of production function. But it assumes labor expanding technological change. This is no other thing than Petitio Principi or a fallacy of begging the question. My paper explained without no specific assumptions on technological changes. They occur by chance and in all directions. Firms choose those production techniques that reduce the production cost. As a result of series of this half-blind selection, the real wage rates increased enormously since the first Industrial Revolution. This is the dynamism of capitalism. In this regards, even Hayek was mistaken. He emphasized the allocation function of prices. It explains allocative efficiency, but the real dynamism of capitalism was not there. Real dynamism of capitalism lied in its capability to improve and change its product and production techniques. If we call it dynamical efficiency, it is this dynamic efficiency that overwhelmed centrally planned economy. Thus, evolutionary economics helps us to understand capitalism in depth.
As I have inserted a subsection 4.6 History-friendly framework, my analysis does not tell what happens in the future for any specific goods or services. All depend on how a new product and production techniques emerge. We may know some loose patterns for this development but it is in fact uncertain. This must be the reason why neoclassical economists refused or rejected the analysis that I made in my New framework paper, because it does give any “predictive” results. We can only know the pattern but not how the numerical time series grows along a concrete function. In this point, Hayek’s paper The theory of complex phenomena (1962) was quite “predictive”, because he clearly detected that we should change our mode of understanding economic phenomena.
This is not a praise of capitalism. Understanding capitalism may lead to a true plan to reform it. This does not mean that I deny the degrowth and the problems of inequality. We should learn from the failure of Marxist-Leninists. They have found the vices of capitalism but could not understand (1) the difficulties to implement planned economy and (2) the dynamism of capitalism. When we really want to achieve sustainable economy (in various sense), it is necessary to know how capitalist economy works. Any proposals of reforms and new movements must be based on a realistic understanding of the actual market economy and its dynamic capabilities.
I am sorry for this double posting. I posted this first on December 26, 2020 at 1:03 pm, but it did not appeared for a long time and I have posted the same comment for the second time on December 30. The first post appeared after that.
I’m not sure why my reply today (December 30 in most of the world, Dec. 31 in Japan) to Yoshinori wound up in the middle of this thread instead of at the end, so I will try it again here:
Dear Yoshinori – Thank you for your explanations. This has been the end of the academic term, and I have been too occupied with deadlines for grading exams and submitting paperwork for the upcoming academic year to respond. Also, as you had surmised, I had not had time to read Hayek’s paper carefully. I do need to read it more closely, as a quick first reading did not suffice to dissolve my skepticism about his understanding of evolution as “pattern prediction.”
In any event, thank you for your care and effort in trying to address my questions. My best wishes for a happy and healthy O-Shougatsu and 2021.
A.J.,
thank you for reading a long explanation. Your are at the end of academic year. You must be very busy. Please re-read my post when you will be a bit less busy. If you have any doubts or objections, we can re-start our discussion.
I wish you a happy good year of 2021. I sincerely hope that we can conquer COVID-19 in the coming year.