by From Peter Radford Simplification, in the context of an economy, is the eradication of all things of interest. This does not mean that studying an economy is thus doomed to be a pointless recitation of history as it unfolds. It is, rather, the recognition that as an economy moves through time it is never, to paraphrase Heraclitus, possible to see the same thing twice. Each economy is different. Each instance of the same economy is different. Any attempt to generalize eradicates those differences and thus eliminates the very substance we wish to explain. It is the existence of differences that are of interest in economics. Indeed, it is the existence of difference that allows an economy to exist in the first place. Difference as in the spatial scarcity of resources. Difference as in the complexity of human agency, motivation, and desire. Difference as in the application of and resistance to power. Difference as in variations in access to opportunity. Difference in the chance bestowed by birth. Difference as in variable interpretations of information. And so on … It is impossible to collapse all these differences into a model and then hope that such a model can capture even a modicum of reality. It couldn’t hope to. No amount of mathematical elegance and rigor can contain all the information needed to describe let alone predict an economy.
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from Peter Radford
Simplification, in the context of an economy, is the eradication of all things of interest. This does not mean that studying an economy is thus doomed to be a pointless recitation of history as it unfolds. It is, rather, the recognition that as an economy moves through time it is never, to paraphrase Heraclitus, possible to see the same thing twice. Each economy is different. Each instance of the same economy is different. Any attempt to generalize eradicates those differences and thus eliminates the very substance we wish to explain. It is the existence of differences that are of interest in economics. Indeed, it is the existence of difference that allows an economy to exist in the first place.
Difference as in the spatial scarcity of resources.
Difference as in the complexity of human agency, motivation, and desire.
Difference as in the application of and resistance to power.
Difference as in variations in access to opportunity.
Difference in the chance bestowed by birth.
Difference as in variable interpretations of information.
And so on …
It is impossible to collapse all these differences into a model and then hope that such a model can capture even a modicum of reality. It couldn’t hope to. No amount of mathematical elegance and rigor can contain all the information needed to describe let alone predict an economy. Such a task is a computational impossibility. Uncertainty condemns a model’s relevance to degrade rapidly through time, if not from the very beginning.
The only true explanation of an economy is its history. Beyond that everything is educated guess wrapped around opinion.
The simple so-called laws of economics may or may not hold, but they are inevitably swamped within a context so riddled through with idiosyncrasy that they become very weak and only partial explanations of events. To strengthen those laws in the face of this turmoil past economists have dedicated themselves to extracting bits and pieces from the economy for isolated analysis, as if by such reduction they could learn some truth that would still hold once the isolated part was re-introduced into the complex whole. This method has produced a brilliant array of components disassociated from their context none of which have much value when the components are all re-assembled. So modern economics is not a solid body of thought so much as an amalgam of “neat tricks” that are handy for illuminating this or that, but which are insufficient for explaining the whole. Even then they fall short.
Many of the great success stories in economic theory are actually failures. Many of them can be reduced to a “stuff happens” narrative and not much more. And much of the “stuff” that happens lies beyond the power of economics to explain: growth theory is a good example. Even after decades of tweaks we are left with an obscure object called “total factor productivity” that acts a clever sounding but vague veil for our ignorance. In contrast, the majestic work resulting in theories of general equilibrium are a direct contradiction of the very phenomenon it sets out to prove.
We must resist mocking the achievement hitherto: except, of course where we need to illustrate the arrogance of economics in its current form. The intellectual effort has been incredible. It has simply been misguided. Economists have produced an object of great beauty and of no relevance. It is a work of art not of science. Perhaps it could be hung on a wall somewhere as a caution against future efforts being similarly misguided.
You cannot reduce that which resists reduction.
Economies are such a thing.