Re: [Futurework] RE: Newton et al

[Ed Weick]

Keith's stuff and my old stuff is in black.  My new stuff is in blue. Ed Weick At 10:49 02/09/2003 -0400, you wrote: >(Stephen Straker) > > What is this legacy? ...> > > The basic idea is this: since there are (natural) > > *mechanisms* that assure best results -- in nature, in > > biology, and in society -- the enlightened citizen abandons > > a sentimental and childish pursuit of godly justice or the > > anti-social ethics of the Sermon on the Mount and realizes > > that there are no ethical or political issues *as such*. All > > our social ills are discovered to be social problems of > > administration and *management* -- hence the prominence of > > "the economy" and managing the economy in modern politics. > > All else is subsidiary to this. > > > > I think that a realization of how deeply and unconsciously > > "we" are committed to this vision of things, to this > > mechanistic understanding of the natural and social worlds, > > goes a long way to explaining our behavior and our politics. (EW) >I for one am glad that we have abandoned the Sermon on the Mount because I >don't want to feel that I have to gouge my right eye out or cut off my right >hand. That sounds a little too much like the absolute application of >Sharia. Nor do I always want to turn the other cheek. > >I would agree that, to some degree, we still adhere to the >Newtonian/Lockeian/Smithian vision of things as Stephen suggests. In >Economics 150 we are still taught that an economically efficient system is a >perfectly competitive one that achieves equilibrium by having everyone >behave in his or her self interest. Smith would never have imagined that we lived in a perfect world with perfect competition and perfectly efficient economies. What he was saying was that a competitive system achieves a great deal more equity for most people than if monopolists or governments manage the system. You are probably right, Keith. It’s a very long time since I looked at "Wealth of Nations." Nevertheless, the Classicists and Neo Classicists laid out the general theoretical principles which described the ideal efficient economy. As Stephen Straker pointed out, Newton’s approach to thinking about the physical world inspired social thinkers to try to think the same thing about the social world. If I recall my history of economic thought, the concern of the Classicists was not really equity but the efficient allocation of resources. Concerns about equity came somewhat later with people like Pareto, Kaldor and Hicks. You are right in saying that, in general, the Classicists and Neos argued that monopoly and government intervention led to inefficient or sub-optimal allocations of resources. It was up to later economists to point out that there are such things as "natural monopolies", activities so large and so vital to the national interest that only very large firms could undertake them (e.g. transportation), and that government has a legitimate role to play in the economy (Keynes). (EW) > In Economics 175, welfare economics, we >are still taught that such an equilibrium might not be fair and equitable >unless methods of having the "haves" compensate the "have nots" are >introduced without having the "haves" really lose anything. These concepts >of efficient allocation and equitable distribution, along with matters like >justice and maintaining the integrity of the state, continue to be among the >most important foundations of our political thought and actions. Notions of justice and helping one another were in our genes long before "the most important foundations of our political thought and actions" were laid. And when were they laid, incidentally? And who laid them? And if they weren't laid at any precise time or by anybody in particular, but enunciated by a whole succession of people throughout history, who is to say that we have not always had these in our minds and practised them? Or for 100,000 years at least. And probably for a million or so years before that. Altruism develops spontaneously -- a parent can see it happening among their children without having to instil it -- along with all sorts of other skills due to our genetic inheritance. Well, you are right of course. People have always thought about politics and acted on their thoughts. I don’t know if its genetic or not. Perhaps it is. However, what I’m concerned about is the foundations of how people think and act politically now. Some of the most important things they have to think about are fiscal and monetary policy, how to make the tax system fair and equitable, what the distribution of income and wealth should be, what balances should be achieved between monopoly and competition, and how best to achieve stable growth in GNP, employment and productivity. The way political actors and their advisors now think about these things draws on a long line of economists going all the way back to Smith and in some cases perhaps well back beyond him. (EW) > And, yes, >we do tend to believe that our elected governments can, for better or worse, >manage society and the economy. And who is to say that our elected governments are better than many governments of the past? They certainly seem to lead us into warfare just as often. And nation-state governments certainly can't control their economies except for brief periods. The European Central Bank and associated finance ministers are controlling the economies of Germany, Italy and France into recession at the present time and controlling Portugal and one or two others into wild inflation. If there is any improvement in the prosperity and longevity of life in the developed world then it's nothing to do with governments, but a plenitude of cheap fuel which energises all our manufacturing and freight systems and makes for prosperity which can pay for scientific research. That will draw to an end in the course of the nexst few decades -- and then our grandchildren will see just how governments can manage society and the economy out of that! If the worst doesn't come to the worst then it will be because individual innovators and individual entrepreneurs have launched a replacement energy technology. Governments will only catch on later by trying to regulate it and tax it. I for one would rather live under my elected government than many of the governments of the past that I can think of. If I don’t like my government, I can work to get rid of it, an option that many people in the past, and many people still alive today, don’t have. I agree that we may be facing a potential crisis with regard to energy. However, permit me to be optimistic in thinking that we will resolve it. If it’s hydrogen, we won’t have to go to war to ensure our supply. It exists in abundance everywhere. (EW) >Yet I would suggest that, even though we continue to bow in their direction, >we've come a long way from the thinkers of the Enlightenment. We know that >the world is not perfectly competitive and that self interested behavior >does not always lead to efficient solutions. It can as easily lead to >Microsoft, Enron or Worldcom. Nobody ever said that bad examples should not occur from time to time. Even in the evolutionary process which produced us there were many blind alleys and retreats. All the examples you've chosen have occurred by sophisticated use (patents) or evasion (gaps in legislation) of governments being involved in things that they shouldn't be. All would have been far less serious if governments concerned themselves with protecting the citizen and making all activities concerning the consumer transparent and not trying to regulate everything. Nearly all financial scandals are never revealed by governments -- which are able to do so and ought to do so -- but by pesky journalists. I know from past discussions that we disagree quite fundamentally on the role that government should play in society. Anything I’ve read on Enron, Worldcom, etc., has suggested that government should have played a far larger role than it did in protecting the citizen as consumer or shareholder. (EW) > And we know that, despite all of the >principles of equity we can come up with, the distribution of income and >wealth is still highly inequitable and, if one thinks internationally, is >probably becoming less equitable. This is not so. As several recent studies have shown (which have not been contradicted), if you compare incomes on a purchasing value basis (and not on an artificial exchange value basis) and compare populations on a numbers basis (and not on a 'one-country-one-vote basis') then inequality has been declining steadily for the past few decades from what obtained previously in non-trading agricultural economies. Even the fantastic salaries and perks of CEOs in recent years (a very short-run phenomenon indeed which is already declining rapidly) don't compare to within a hundredth of the inequalities that obtained within western populations before the industrial revolution. I’m not at all convinced, Keith. A few years ago, I did some work comparing 1980 incomes with 1990 incomes using UN data, and the gap was widening. And I know that you’ll say, that may be so, but what the poor can purchase with their incomes has increased or been underestimated. Perhaps that is so in some places, but I would suspect its general applicability. > However, in my opinion, our most >important departure from the Enlightenment lies within the fields of risk >and uncertainty. As Stephen explains it, the Newtonian world was certain. >It all fit together like clockwork and worked like a gigantic clock. If you >could but define the inputs and outputs and figure out the path of >causation, the results were predictable. This is no longer acceptable >because, in ever so many situations, we cannot do any of these things with >any real accuracy or certainty. We live in a world of surprise and >indistinct possibilities. There may not be any equilibria. All there may >be is uncertain process and indistinct possibilities. Very true in the mechanical world. Newtonian physics has been overtaken with quantum uncertainty. But as for the economics argument, you are repeating yourself, so I must repeat that Smith never expected perfect knowledge, perfect competition or perfect equilibria. He was talking in general principles. And these are still true in the real world. Always have been and always will be. Also, having lived near a fishing village Smith would have known that there are occasionally violednt storms at sea and having visited Pompei, Smith would have known that Vesuvius is not always quiescent. Perhaps I should have made the point a little differently. Smith’s theorizing, and the theorizing of subsequent economists, contained as implicit the notion of equilibrium, of everything tending toward and coming to rest at a certain point that represented the optimal allocation of society’s resources. What I was suggesting in the above passage is that perhaps we shouldn’t think that way because the world may not behave that way. There may not be such a thing as "equilibrium" and even if there is, it may not be useful to understanding how the world really works. It works dynamically, not statically, and, if you bring uncertainty into the picture, you can never be quite sure of where things are going, how they’ll get there, or what surprises will be encountered along the way. I read a piece on evolutionary economics the other day (yes, you got me interested) that suggested that we should think in terms of multiple equilibria depending on multiple paths the economy could take, but I didn’t find this very satisfactory because it still implies things tending toward some optimal point of rest when maybe that’s not how it works at all. Have we beaten this one black and blue? Regards, Ed