RufusDawes said:
What are your opinions on the discipline of Economics ? Do you think it has the potential to be used to help people or do you think it is simply a tool used by the rich and powerful.
Is Economics a science ? Is the mathematics behind it sound ?
I have friends who say it is fluff, that it is nothing more.
What do you think about Economics ? I have noticed as of late that policies that can be demonstrated to help the average person (such as higher minimum wages) under the right conditions are largely ignored.
I am interested to hear what some of you sound mathematicians think of Economics.
I think I know the problem you are having, because I had the same problem trying to figure out why economic theory seemed correct, but required so many "bags on the side of the machine" to make it work. It's like everytime you turn around, some god of externality needs to be invoked to fix some illogical conclusion.
Then I read the first page of Eco-economy by Lester Brown and the flaw was revealed. A different version of the same essay is available here at
http://www.theglobalist.com/DBWeb/StoryId.aspx?StoryId=2234
A bit of it...
In 1543, Polish astronomer
Nicolaus Copernicus published his famous treatise, "On the Revolutions of the Celestial Spheres." His book challenged the then prevailing view that the sun revolved around the earth. Instead, he argued it was Earth that revolved around the sun. With his new model of the solar system, he began a wide-ranging debate among scientists, theologians, and others.
Ecology vs. economics
After Copernicus outlined his revolutionary theory, there were two very different views of the world. Those who retained the so-called Ptolemaic view of the world saw one world — and those who accepted the Copernican view saw a quite different one. The same is true today of the disparate worldviews of economists and ecologists.
Just as Copernicus formulated a new worldview, we too must find a new worldview — based on environmental observations and analyses.
These differences between ecology and economics are no less fundamental than the ones faced at the time of Copernicus' reshaping of our entire global outlook. For example, ecologists worry about limits, while economists tend not to recognize any such constraints.
Ecologists, taking their cue from nature, think in terms of cycles, while economists are more likely to think in terms of linear, or curvi-linear developments. Economists have a great faith in the market, while ecologists often fail to appreciate the market adequately.
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In short, economists see the environment as a subset of the economy. Ecologists, on the other hand, see the economy as a subset of the environment.
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Ecologists view the market with less reverence because they see a market that is not telling the truth. For example, when buying a gallon of gasoline, customers in effect pay to get the oil out of the ground, refine it into gasoline, and deliver it to the local service station. But they do not pay the health care costs of treating respiratory illness from air pollution or the costs of climate disruption.
Like Ptolemy's view of the solar system, which had the Earth at the center of the universe, the economists' view is confusing efforts to understand our modern world. It has created an economy that is out of sync with the ecosystem on which it ultimately depends.
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Ecologists, after all, understand that all economic activity, indeed all life, depends on the Earth's ecosystem — the complex of individual species living together, interacting with each other and their physical habitat.
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In conclusion, just as recognition that the Earth was not the center of the solar system set the stage for advances in astronomy, physics, and related sciences, so will recognition that the economy is not the center of our world create the conditions to sustain economic progress and improve the human condition.
Just as Copernicus had to formulate a new astronomical worldview after several decades of celestial observations and mathematical calculations, we too must formulate a new economic worldview based on several decades of environmental observations and analyses.
December 9, 2001
Remember that the ecology of trees and birds and waters and fish is also the ecology all people live in.
People, rich, poor, young, old, sick, healthy, working, retired, are all consumers. Yet the economic model excludes all but the worker from this list of consumers.
The handwave is that all consumers are tied to a worker or capital. But when confronted with a person that isn't, the god of externality explains the wayward consumer crossing the economic flow.
Think of the magic of labor appearing when consumers demand more that the existing pool of labor can produce. It's like a god makes them appear, as in a video game. When demand no longer requires as much labor, poof, the person disappears.
The same is true for other natural resources. The economic model demands clean water? Poof clean water materializes. Toxic waste as a byproduct? Poof it vanishes from the economy.
I believe economic theory suffers from arrested development.
I think it traces to the cold war when it was the god ordained free world against the godless commies, and in the US, socialism and Marx, neither of which had anything to do with the Soviet Union or Red China. But in any case, all discussion about poverty stimulated a knee-jerk claim of becoming like the evil commies.
I liked Milton Friedman, not because I always agreed with him, but because he recognized the problems, like poverty. He proposed market solutions that acknowledged the existence of poverty.
But the problem is that he saw poverty as something that arises from something external, yet still considering the economy to be the whole. By taking that approach, the people who the economy makes believe don't exist end up being special cases that need to be treated specially every time they can no longer be ignored by the pressure on the economists to deal with them.
The economy takes place in the physical world and is absolutely constrained by the physical world, just as the actors in the physical and economic world are.
Economic theory like supply and demand can be seen as like Newton's Laws, useful simple rules that explain a small aspect of the laws of motion and energy. But they are lies, as Einstein showed. But still useful for many problems.
But economic theory has only partially embraced Newton's level of abstraction. Newton incorporated time, something that economic theory rarely does. Supply and demand is static, not explicitly dynamic, except for handwaves, like "in the short run" and "in the long run."
Going back to the Ptolemy vs Copernican difference; before discarding the Earth centric model, special rules of astronomy were used to explain comets and to explain the planets. Economics seems to be doing the same thing with special versions of economic theory, like environmental economics that come up with special rules rather than fixing a single set of rules to apply generally.
The physical sciences has divisions, but all divisions operate by the same rules. Even the social sciences, where economic theory is placed, connects to the physical sciences increasingly in the search for understanding; behavior is not considered separate from environment or the physical nature of the person. Yet economic theory seems to seek to escape from the confines and limitations of the physical world.
To see the degree to which economics seeks to exclude the real world, consider the many models for labor supply curves and the explanations for the shapes of the curves. No where do I see an explanation of what happens to the people who clearly exist to provide the points on the curve. A curve might represent the supply of workers who can't be supplied if the pay is too low, like below the cost of bus fare to get to the job, but nothing is said about the people who can't work - where are they in the economic model - they still exist in the physical world.
To recognize those people as part of the economy takes you into the territory covered by Marx which means communism which means evil which means that all reasoning must cease.
Time to move past the constraints of the inquisition: McCarthyism is nearly dead. You won't be black listed as a commie if you say that people are more important than property or money. Time to stop dividing economics into capitalism vs socialism vs communism vs who knows how many other ideologies there are.
