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What do Durer and Soros have in common?

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From Peter Radford I know, this is one of those more philosophical moments.  In my case prompted by my continued meditation on the deleterious effects of a belief in utopias.  Such beliefs seem always to end up with authoritarian consequences.  People can all too easily get swept up by the illusion of having solved life’s great mysteries.  It’s been going on for ages.  It appears to be a commonly held human attribute.  We need, apparently, to think we understand things that are, beneath the surface, remote, opaque, and inscrutable.  It’s the way we are. The issue keeps popping up.  In the humdrum world of economics and economic history utopian ideas bedevil analysis.  Whereas we began with the humanistic description of the workings of an economy, for instance as articulated by Adam

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from Peter Radford

I know, this is one of those more philosophical moments.  In my case prompted by my continued meditation on the deleterious effects of a belief in utopias.  Such beliefs seem always to end up with authoritarian consequences.  People can all too easily get swept up by the illusion of having solved life’s great mysteries.  It’s been going on for ages.  It appears to be a commonly held human attribute.  We need, apparently, to think we understand things that are, beneath the surface, remote, opaque, and inscrutable.  It’s the way we are.

The issue keeps popping up.  In the humdrum world of economics and economic history utopian ideas bedevil analysis.  Whereas we began with the humanistic description of the workings of an economy, for instance as articulated by Adam Smith, we end up with a cramped mechanistic and needlessly formal model of human behavior that is stripped of all humanity in its effort to be all encompassing.  Each step away from the initial description, each small addition of reasonable progress, each brick in the wall, and each hard won insight merely solidify the edifice, making it ever more difficult to challenge, and ever more difficult to improve.

This difficulty is then compounded by the necessary effort to become conversant with its entirety.  In modern economics it isn’t even possible to be truly fluent across the board.  We rely on others.  It has become a community effort, an act of solidarity rather than an act of individual accomplishment.  How does someone on one edge of the discipline know and trust the notions and analysis taking place on a distant edge?  Mutual trust.  Which is ironic in a discipline so committed to models of the individual.

This ought to breed a humility in all of us.   Each is simply a small part of an organic whole that no one can master.  But humility doesn’t seem to be an attribute of the whole.  Indeed economics, taken as a single entity, often appears to be arrogantly self confident to a degree unfounded by the results of its application to its raw material — the real world economy.

Perhaps it is inevitable that the effort to extract some sense of order from the increasingly complex interdependencies that characterize an economy results in an overconfidence and belief in the universality of the accrued knowledge.  It is then just one step away from being a belief in utopia — we have arrived at a nirvana, we are supreme in our understanding, we are masters of our surrounding.  We posit a utopia because we have invested so much effort into arriving at what we know and want to close off that effort by declaring we have insight into the ultimate state of affairs.

Utopias are useful because they imply we don’t have to think anymore.  We already have the answer we were looking for.  Utopias are immutable and cannot be improved upon.  That’s also useful because they then become benchmarks against which we can measure our surroundings.  The perfect market becomes such a benchmark.  The ultimate victory of the proletariat is another.  We know where we are in history or in our environment by reference to the fixed point on our mental map: that fixed point being our particular vision of utopia.

Economics long ago fell into this trap.  Instead of contenting itself with being the contextual social critique that it ought to be, it tried to mine from its data certain inflexible realities.  It tried to assert universal laws.  It substituted the hubris of utopia for the humility of reality.  And, by so doing, has become ever less able to understand the workings of that reality.  It’s as if it decided to stand still in a particular moment and ignore the processes of history.

One victim of this is that it has become unable to revise or update its understanding of the raw materials of an economy.  It still speaks in the language of the agricultural era as it passes into industry.  It speaks of capital and labor and not of information and energy.  It is still intensely material rather than digital. Its practitioners grapple with modern issues, but through a lens designed for an earlier era.  The heroic efforts of those around the fringes allows us to investigate complexity, evolution, and the necessary solidarity created by the ever increasing division of labor, but all these efforts have, then, to be translated back into archaic individualistic language in order to fit within the established whole.

Instead of learning and fitting within a contemporary context, economics has to unlearn and retrofit its new knowledge so as to preserve the past.  It’s as if all that could be thought has been thought and the apex of understanding was reached somewhere in the middle twentieth century.

What new theory is there?  Really new.

In any case, and back to the beginning, I came across this quote from Durer, whom most of us think of as an artist, but who was also one of those broad thinkers that the modern division of thought has obliterated under the weight of our acquired knowledge:

“But I shall let the little I have learnt go forth into the day in order that someone better than I may guess the truth, and in his work may prove and rebuke my error.  At this I shall rejoice that I was yet the means whereby this truth has come to light.”

This quote is the coda that Karl Popper put at the end of his essay “Towards an Evolutionary Theory of Knowledge”.  It is the evolution of knowledge that underlies the evolution of our economy.  Popper is obviously not discussing economics, but his idea undermines the static mechanistic metaphors that underpin it.

In more modern language George Soros says this:

“We have now had 200 years of experience with the Age of Reason, and as reasonable people we ought to recognize that reason has its limitations.  The time is ripe for developing a conceptual framework based on our fallibility.  Where reason has failed, fallibility may yet succeed.”

I found this quote — it’s from Soros’ book “The Capitalist Threat”  — in Peter Erdi’s excellent text “Complexity Explained”.

And it returns us to utopia.  Economics as we now know it, and all the cascade of intellectual consequences it has, is very much a child of the Age of Reason.  It is filled with the hubris that reason can instill in its believers.  But we face a paradox.  The surge in understanding that came as a consequence of the Age of Reason has made the world so complex that it has become inscrutable to reason.  The interconnections are now so dense that the traditional equipment of reasonable scrutiny have become ever less useful.  We have moved our own world forward beyond the scope of our methods.  Which is why we must beware of the consequences of those who rush onward without reflection.  Those who purport to create machines that think like us must be made to understand that we don’t actually know how we think like us.

Polanyi, Michael that is, was right:

“We can know more than we can tell”

We need to be careful with our knowledge.  Because we don’t know much at all.  And our machines know less.  The hubris of utopia is the enemy of our ability to learn.  It is certainly the enemy of human reality.

Peter Radford
Peter Radford is publisher of The Radford Free Press, worked as an analyst for banks over fifteen years and has degrees from the London School of Economics and Harvard Business School.

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