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Economics and The New World Order,

Mon Jun 26, 2006

1101 Words
Posted In: economics

Economics and The New World Order,

I had a rather detailed and engaging conversation on Friday night
with a couple of good friends of mine about Economics, and it's
explanatory power. My friend Brain holds that economics explains
everything, except perhaps for the laws of physics. Now I am
also tempted to buy into his arguments, he is quite a persuasive fellow,
however I intrinsically feel some caution in doing so, and I have
been trying to figure out why.

I am not sure whether my arguments hold any weight to them, or
whether I am just being an objectionable fucker for the sake of it,
but I'll try to lay out my thoughts here in any case. If nothing
else, it should draw a comment from Brain pointing out the error 
of my ways.

I think the argument is that if we want to find an explanation 
for all of the events in History, then the reason that 
some things happened, and others didn't is that the events
that occurred, and were successful, were the ones that had
an economic advantage over the ones that didn't. The scope
of what we consider, for this argument, to be economic advantage
is quite broad. Really, it seems to be anything that gives the
actors involved some sense of value. That sense can come from
moral well being, from money, from realization of religious
justification, I think. Certainly it's not simply money
as money is just one common abstract representation of
value. 

Now I think that I have two objections to the economic argument.

The first is that it might not have any predictive power. It 
may be tautological to say that when things happen, then
people to whom they happen feel value,  therefore those things
are the best fit things to happen (oh dear, that's not very clear
at all, but this is only a blog, and so in the spirit of such
I am not going to worry at all about not making sense). If you
can back fit all circumstances to your explanation, either
your explanation is very good, or it is very bad. If it adds no
predictive power, then it's not very good. I fear that though the
spirit of taking a truly market capitalist attitude might be 
correct, it might also have no value. In a broad market place 
there are many ideas that compete, but there are also 
a huge number of factors that go to influence success. The landscape
in which events operate (and by landscape here I mean every 
event connected to the event under consideration that has some 
effect on the event, weather, personal motivation, war, time
of year, news, car accidents, and so forth). If one's position
in the landscape has a great deal to determine whether the outcome
of an event will be a success, then though you could argue that the
even succeeded because economically it was best fit for it's 
location, I think there is something wrong with that argument.
I think that what you are looking at in economic terms is which 
direction in the landscape you want to be heading in, however
actually looking at the local geography of this abstract space
may tell you more about whether you will succeed than by looking
at where you want to go. It is not inconceivable that the 
only thing that matters is your position in this space, and 
not by any means your intent. The purely economic argument would then 
be a comforting chimera that we can wrap around ourselves to 
protect us from the vagaries of the world.

That's all well and good, but is there any way to tease these idea
apart and to test them? it's highly unlikely, but there may be some
option not from looking at the world, but by looking at worlds that
we create. In a simple model the economic argument should work. 
There are many studies of what is known as the prisoners dilemma,
I don't know much about what the studies say, but I think 
they should be a good test of economic predictive theory.
Therefore in a simple game economics should have a high 
predictive power to give a winner. Add complexity to the 
game and see how predictability changes as a rate of increasing
complexity. Hmm, actually, the stock market is a very good 
example of doing something like this, but we can't reverse 
engineer the world to see if we can make it more predictable.

Well, that was part one of my argument, which even I have to admit
just comes down to saying "perhaps things are just a bit more complicated",
and since we all seek simplicity, then perhaps there is not 
much harm in looking to economics (other than being wrong an awful
lot, and retroactively fitting by saying, ahh, but of course we didn't
factor in economic driver blah blah). Still, it's in our
nature to be wrong loving mammals, so I shouldn't worry too much.

The next thing that unsettles me is even if the economic argument
it is wright, and it would be quite nice if it were right, for if
it were it would give us the true power to change the world, 
there may be a temptation to confuse correctness of explanation
with justification for action. Being Irish I have a built-in
distrust of a lazzaiz-fair market, as this was the decision
that contributed to the deaths of many Irish people during the 
great famine of the 1840's. By saying that the open market
is the best option we forgo our ability to intervene when there
is pressing reason to do so. The best open market for ideas
is evolution, but even in evolution market forces can press
species into extinction, though sexual over-selection. The
same may be happening with America where there is a strong
market drive for light entertainment, cheap credit and cheap oil.
Perhaps these drivers are acting locally and may not be the
best actions that the market could be taking locally. Even though
humans are subject to evolution I believe strongly that we have
the capacity to transcend evolution (that sounds wishy-washy, but
I mean that we have the moral and technological ability to make decisions
that are nut just driven by competition with other species, indeed
our ability to do so almost gives us a moral obligation to do so, 
and that would be fine, as soon as we figure out what morals are).

Well, I have more to say, but for the time being that is enough on this topic 
from me.