math and economics
the death of jkg
a verbalizer of nimble resort
has the econcon blogs a twitter over the old bone
formalism and reality
in the social sciences
===================================
my slant
on the pangloss math models
far from being innocent ivy tower
other worldly nonsense
they have their very solid
raison d 'klass
and yet
a comment by pink
at max speak
might seem to indicate
i think otherwise
"surfing the econoblogs
i notice this pointmade repeatedly
"JKG ....he be not mathed up"
and to me it has
a absurd
coup de gras marde gras
feel to it
not found in discussions
of adam smith's
verbal boundedness
and coming here to a font of sense
i find
el supremo max writing :
"The problem with mathematical models
is the more complex they get,
the more they demand the suspension of disbelief"
i think that can be very true
if you say the more general not the more complex
after the path of any science
brakes thru to new ground
the inevitable happens
a very silly
ivy tower euclidian process of refinement begins
where logical lucunae and contradictions
are closed
by
the application of more restrictive assumptions
carrying the set of standard modelsunder analysis
back deeper into looking glass land
but obviously in most sciences
progress toward reality
is made despite this
so is economics different in some important way
well yes
because its about us
not rocks and rills
and not even about our bodies or minds
but our social system
if science were to declare capitalism fatally flawed
and that it leads to unnecessary human misery and oppresion
well it would have to be refuted right ???
proven not to be science
faster and more unrelentingly
then say
the finding that tobacco smoke
leads to lung cancer
and yet progress happens any way
i think first
of the biggest brake thru
of my econ con life time
dixit stiglitz late 70's model
of
a higher
more real market imperfection
but many others crowd my thoughts
more recently and in my twilight
therte's the lovely endogeneous
tech and preference models
this tug back and forth
between theory and its impact
on a class conflicted reality
proves
tiresome to all euclideans no doubt
but even among euclideans some directions
are more likely to lead
to fame and fortune then others
but never can science be totally falsified
thin air level
of a ken arrow
the contradictions and conflicts
abound
and those
that lie inside these class sanitized notions
create unexpected motions
toward reality
ie ken A himself
and
are in fact
the tangible tread of scientific progress
never fully faulters
and math indeed produces qualitative results
not availible with words alone
just watch
but as to jkg
like me
he was a policy guy at heart any way
a wit among ferengi
not a ferengi among wits
---------------
related but different
is this gas burp of mine elsewhere
surfing around aimlessly
pink found at
mark thoma
a review by st pauli girl
very on point about math and economics
krug btw notices this:
" Economic ideas play a large role in shaping the world"
and quotes keynes
"Practical men, who believe themselves
to be quite exempt from any intellectual influences,"
....are usually the slaves of some defunct economist."
then non sequitors to this :
"So it's odd how few popular books
have been written describing
the social and personal matrix
from which economic ideas actually emerge"
then hits his purpose :
"David Warsh has now made
a major effort to fill that gap"
"Knowledge and the Wealth of Nations"
"is the story of an intellectual revolution
largely invisible to the general public
that swept through the economics profession
between the late 1970's and the late 1980's
"Warsh tells the tale
of a great contradiction
that has lain at the heart of economic theory
ever since 1776
the year in which Adam Smith published
"The Wealth of Nations."
Warsh calls it the struggle
between the Pin Factory and the Invisible Hand"
" On one side,
Smith emphasized the huge increases
in productivity that could be achieved
through the division of labor
as illustrated
by his famous example of a pin factory
whose employees,
by specializing on narrow tasks,
produce far more than they could
if each worked independently"
" On the other side,
he was the first to recognize
how a market economy can harness self-interest
to the common good,
leading each individual
as though "by an invisible hand
to promote an end which was no part
of his intention."
" The parable of the pin factory
says that there are increasing returns to scale
— the bigger the pin factory,
the more specialized its workers can be,
and therefore the more pins
the factory can produce per worker.
But increasing returns
create a natural tendency toward monopoly
, because a large business
can achieve larger scale
and hence lower costs than a small business.
So in a world of increasing returns,
bigger firms tend to drive smaller firms
out of business,
until each industry is dominated by just a few players"
" for the invisible hand to work properly
, there must be many competitors in each industry,
so that nobody is in a position
to exert monopoly power.
Therefore, the idea that free markets
always get it right
depends on the assumption
that returns to scale are diminishing,
not increasing "
"For almost two centuries,
economic thinking was dominated
by the assumption of diminishing returns,
with the Pin Factory pushed into the background"
". Why?"
"As Warsh explains, it wasn't about ideology;
it was about following
the line of least mathematical resistance"
" Economics has always ... sought
the rigor and clarity
that comes from using numbers and equations
to represent their ideas."
" And the economics of diminishing returns
lend themselves readily to elegant formalism
, while those of increasing returns
— the Pin Factory —
are notoriously hard to represent
in the form of a mathematical model"
Yet the fact of increasing returns
was always a conspicuous part of reality,
and became more so as the decades went by.
Railroads, for example,
were obviously characterized by increasing returns.
And so economists tried, again and again,
to bring the Pin Factory
into the mainstream of economic thought.
Yet again and again they failed,
defeated by their inability
to state their ideas with sufficient rigor
. Warsh quotes Kenneth Arrow,
who received a Nobel in economic science
for work that is firmly in the Invisible Hand tradition:
increasing returns were an "underground river"
in economic thought, always there,
yet rarely seeing the light of day.
The quite well that they were leaving out
an important part of the story.
It also tells the tale of economists,
most notably Joseph Schumpeter,
who decided that if increasing returns
couldn't be modeled rigorously,
so much the worse for rigor —
and who found their literary,
nonmathematical versions of economics
simply ignored. ... "
" starting in the late 1970's,
Economists had finally found ways
to talk about the Pin Factory
with the rigor needed to make it respectable."
" One after another,
fields from industrial organization
to international trade
to economic development
and urban economics were transformed".
" Warsh's account misrepresents
that work in subtle but important ways".
He portrays a famous 1990 paper
about increasing returns and growth
by Paul Romer of Stanford University
as a sort of pivot around
which the whole way economists
see the world changed.
Now "Romer 1990" is a terrific paper
— I wish I had written it,
which is the highest praise one economist
can give to another.
Yet I don't think it can bear
the weight Warsh places on it."
" Nor is it clear
that increasing returns
really did transform our understanding
of economic growth"
--------------------------------------------------
Comments by pink
love ya mark
but what was interesting here???
besides the
the Romer hip check ????
NOT I HOPE
this golden calf ALIBI
"it wasn't about ideology;
it was about following
the line of least mathematical resistance
Economics has always ... sought the rigor and clarity that comes from using numbers and equations to represent their ideas"
really ???? or just some economists ...ivy tower types
CAPITALISM'S WHITE KNIGHTS
" ... the economics of diminishing returns lend themselves readily to elegant formalism while those of increasing returns — the Pin Factory — are notoriously hard to represent in the form of a mathematical model"
not because
of
the nice tame marketsystem it produces
the near failure free leave it be for optimality
results
the welfare theorems
all the spontaneous fairness
and each according to his just deserts bull
that follows etc etc
not cause it went down so smoothly eh ??
not ideology ???
not usefully purblind
to crucial aspects of market reality
in a mechanizing industrial society
notthere fore
to the benefit of industrial corporations
wanting all eyes possible
firmly fixed on an illusion
of flat world effortlessly competitive exchange
how touching
---------------------
btw
i feel it only fair to add
my harsh strike was based on local knowledge
this warsh fellow
while a columnist at the boston globe
poured heeps of praise on krugman
and for years
i suspect paul the K
here is paying a little of that back...
but without really violating his sense of the truth
i respect this review for that reason
btw his two examples in other sciences
are both horrible travesties
one cause watson lied and in the process
tried to bury
the reputation of a far superior scientist
and the other
because the author like this warshing machine
is a shallow cheer leader
hence i deeply suspect this book's merit
based on years of reading
this chap's gush and gee gaws
Posted by pinky at May 5, 2006 03:15 AM