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Common Econ Critiques

Consider this critique of physics:

Once upon a time the universe was full of magic, mystery, and majesty, wherein humans lived organically and intuitively with nature. But then physicists (and their engineering minions) pretended to know far more than humans can ever know in an irreducibly complex universe. And they pretended to far more objectivity and neutrality in their inquiries than is possible for humans. Using impressive math, physicists rose in status, while other less mathy but more fluid and organic ways of thinking fell in status. Physics concepts became used more widely, displacing other useful and more human but now neglected ways of thinking.

Physicists are reductionist, and focus overwhelmingly on the simplest physical parameters of the smallest physical parts. So they ignore more interesting parameters and large scale organization. They study particular phenomena via vastly-over-simplified models that neglect most of the rich complexity of the real world. Worse, regarding the items that they do consider in their simple models, most of their assumptions are just wrong.

For example, standard models of mechanical systems assume that they sit in a flat space-time. Most materials are uniform, isotropic, solid with sharp boundaries, and uncharged. Ground anchors do not rotate or accelerate. Perfect vacuum sits between most adjacent parts, and between the other pairs is either an absolute bond or frictionless relative motion. Yet real mechanical systems sit in rotating, accelerating environments full of corrosive fluids and cosmic rays, at temperatures and pressures that often melt materials, and amid vibrations that often break them. And estimates of all physical parameters in such models are known to be wrong, i.e., not exactly correct. Physicists claim that such deviations make for only small errors in their final analysis, but how can they know that if they don’t model the full complexity?

Engineers who use physics tend to create system designs that are more like typical physics models, with a small number of simple parts having a few simple relations to one another. These systems are quite different from the fluid, complex, highly-interdependent rich-relation biological systems that we are, and once lived among. These physics-model-derived systems are harsh, ugly, fragile, uninspiring, and alienating. These systems may do well by simple physics metrics, but that neglects a vast space of better if less formal ways to evaluate systems.

The dominance of physics in engineer training and related government policy has unfairly neglected intuitive, magical, arty, and literary approaches to engineering system design. Approaches that look bad by physics metrics, but not by intuitive organic human ways to evaluate. Today the fields of “design” use better approaches, and are displacing the fields of “engineering”. It’s about time.

Here’s an obvious response:

For most products, few customers care much about how their systems are engineered, or the parameters by which they are described. So in a free competitive world, firms are free to offer products designed and evaluated via “intuitive, magical, arty, and literary approaches.” But few do. Yes, firms today also commonly use design as well as engineering, but mainly for a few relatively aesthetic choices close to the user experience. For at the vast majority of other choices, out of user sight, physics-based engineering dominates.

Physics winning this competition suggests that alternate approaches just aren’t as productive. Yes, there is often less free competition to woo government buyers, and physics-dominated regulations often demand that physics be used to prove that products are safe and effective. But consider that the world still has many competing nations, and engineering matters greatly in war, where simple physical parameters are quite meaningful. If a nation could build more effective weapons using other approaches to weapons design, they could win wars that way. The fact that few nations try is more evidence that physics-based approaches work better.

Yes, models greatly simplify. But for humans with some abstract understanding and greatly limited mental abilities of other sorts, approximation via simple modular models and designs is our main way to manage complexity. Nature faced different constraints, which is why her designs are different. Yes, simple modular designs can be harsh and alienating, but without them we could not create engineering designs nearly as capable. Humans just can’t do analysis without making a mass of simplifying, and thus wrong, assumptions. But the fact that our designs tend to work shows that our approximations tend to be appropriate. Yes of courses if we approximate badly, our models and designs will go badly. Which is why physicists and engineers pay so much attention to approximating well.

Now consider the many critiques of economics, which I’ve just spent many hours sampling. Most econ critiques are much like the above physics critique, making a similar response appropriate. But with one key difference, to be discussed at the end.

Before going into details, let’s review a few basics. Like physics, econ uses math to create a space of possible models. But instead of describing physical systems, econ models describe social systems. Economists have a standard set of assumptions that they see as most likely to be true, and other standard set of assumptions that seem easiest to analyze. Assumptions from the second set are often preferred, to allow entire models to be simple enough to analyze. Different economists explore different models, comparing them to each other and to data, and arguing about their relative accuracy as approximations. If you are arguing for different models in this topic area, but accepting that models are a reasonable way to think about social behavior, then you are doing econ. (And you might have a valid complaint re if your kind of econ gets a fair hearing.) Econ critics, in contrast, reject, or at lest minimize the value of, the whole econ approach to studying social behavior, and designing policy.

That said, let us now consider some common econ criticisms. Continue reading "Common Econ Critiques" »

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