Sunday, October 20, 2013

Judging by results (at the peak of a cycle)

Found a link in my Blogger stats to a post by Gabriel Rega:

The filtro-de is a dead giveaway that it's not English. But the hodrick-prescott caught my eye. So I clicked the link.

There is an intro, in Portuguese according to Google Translate. And then there's an excerpt from my De-Trending post a while back.

Sweet. So I looked around Gabriel Rega's site some, passing bits of it thru Google's universal translator. And I came across Darwins conjecture: resenha, which translates as "Darwins conjecture : review". A book review, according to Rega.

There is an excerpt, but I struggled with it even *after* translation. Something along these lines:

The quest to understand the interconnections of socioeconomic phenomena is recurrent in economic thought. But these ideas have never been the object of systematic treatment. Since Marshall in 1890, various thinkers have found biological analogy to be a shortcut to a fruitful, substantially Darwinian understanding of economic phenomena.

Not sure that's what the excerpt really says, but it interests me.

Rega's post links to Economia e Sociedade – Darwins conjecture: the search for general principles of social & economic evolution. So I go there.

No, not English. Just that bit of the post title, about "the search for general principles of social & economic evolution". The English is the title of a book by Geoffrey Hodgson and Thorbjørn Knudsen.

I Googled the title and found Geoffrey Hodgson's website and brief reviews of the book. From the first of those:

"Both Darwin’s Conjecture and From Pleasure Machines to Moral Communities present a formidable challenge to the previous assumptions of CGE [computable general equilibrium] economics, which is currently under siege on a number of fronts. These books offer a plausible, coherent alternative based on perhaps the most powerful idea of the last two centuries: evolution by natural selection.

Yeah, I'm liking this. An alternative to computable general equilibrium economics? Perhaps an alternative to Dynamic Stochastic General Equilibrium economics? Sure, I'm for that.

And you know, if you are talking about evolution of the economy and I am talking about business cycles within cycles within cycles within the cycle of civilization, then you and I are probably talking about the same thing, from different angles.

The search also turned up a 2-page PDF by Ronnie J. Phillips of the Networks Financial Institute. From the opening:

Ever since Veblen first asked the question “Why is economics not an evolutionary science?” in 1898, his followers have sought an answer to this query.

I can answer that one. It's not an evolutionary science because of first impressions. The modern study of economics began in the time of Adam Smith, at the beginning of the 150 years that Keynes called the greatest age of the inducement to invest.

For the first hundred and fifty years of economics, economists rode the rising crest of a wave: the wave of the greatest age of the inducement to invest. Everything they did, worked.  No matter what they did, it seemed to work. Things continued to improve. They assumed the success was theirs and took credit for it. And some of their ideas today are considered "laws".

Something similar happened in a much shorter time span after the end of the second World War. But things started to go bad in the 1970s and nobody knew why, so things continued to get worse. Things continue to get worse yet today. But time has passed and now people don't even know it is still the same festering problem.

Anyway, the economic environment of that age allowed economists to assume that their explanations were valid even when they were not. The result today is what we call economics.


Juan said...

Your talk of historical cycles and of crisis prone capitalism reminds me of Marxism. Have you ever read the old German?

The Arthurian said...

Ha! I did read the Manifesto, years ago. But I couldn't get through Das Kapital.

One book that did make a big impression on be was the novel A Canticle for Leibowitz. It's not economics, but it made the Cycle of Civilization real, for me.

Jazzbumpa said...

When you talk about cycles within cycles of civilization, you are talking about Elliott Waves, and when you say, "For the first hundred and fifty years of economics, economists rode the rising crest of a wave" you are even using the E W vocabulary.

Why is economics not an evolutionary science?

I'm not sure I'm reading this question properly. But my thought is that economics is a set of observations about human psychology, an aspect of human nature. I'm not sure human nature evolves, and certainly not at all in a time frame of 150 years.

The other interpretation is - "Why doesn't economics evolve as a science, getting closer to truth over time, like physics does?"

The answer is that econ and politics are evil twins, joined at the hip. Economists don't search out truth the way real scientists do [or at least not all of them.] They try to find ways to confirm preconceived biases.

You have the staff of George Mason U. working in a Koch-funded institution; and the Chicago school ignoring that Keynes ever existed. Hence, macro has devolved into ideas disproven 80 years ago, and all the relevant important lessons willfully forgotten.

To Juan's point - everywhere else in the world Marx is recognized as a great economist. Here, he is reviled and "Marxist" is only ever used as a pejorative.


Greg said...

" I'm not sure human nature evolves, and certainly not at all in a time frame of 150 years."

Oooooohhh I"m not sure about that now. Human "Nature" is constantly evolving, each generation. Our nature is our DNA and it constantly mixes and and has reexpressions with each generation.

Certainly some things change slower than others, or I should say some behaviors are more deeply imbedded within our DNA than others but I dont think its at all correct to say our nature doesnt evolve.

I think this is the mistake of those who believe in a homoeconomicus. Our nature aint so static nor predictable...... but it can be understood.

The Arthurian said...

Greg, somebody said George Washington had less in common with us today than with Caesar.

There wasn't much evolution between Caesar and Washington, but a lot between Washington and us. And what evolution there was, I'd say, was mostly an evolution of the economic environment, and not so much an evolution in the way we evaluate that environment.

The way we evaluate things -- what Adam Smith called self-interest -- that doesn't change much...

Greg said...

Im not exactly sure what you mean by evolution of the economic environment.

I would agree with the Caeser Washington thing. We have had much larger technological leaps since washington than between Caeser and Washington, making us all wealthier in real terms and I think much of our technology has allowed us to evaluate things differently. We see what is going on half a world away every night, we know how small the world is and how connected we are (we may not like it!). I think our self is changing so our self interest is changing too. Its in fits and starts I think but our trajectory definitely appears to me to be towards a new self and new self evaluation, I certainly hope so.