John Rapley is a political economist at the University of Cambridge, as well as a journalist and co-creator of the Caribbean Policy Research Institute in Jamaica. He is the author of Twilight of the Money Gods: Economics as a Religion and How it all Went Wrong (2017).Two questions: is it good or bad that professional athletes earn 400 times what nurses do, and is string theory a dead end? Each question goes to the heart of its discipline. Yet while you probably answered the first, you’d hold an opinion on the prospects of string theory only if you’ve studied physics.
That annoys economists, who wonder why everyone feels free to join economic debates instead of leaving them to the experts, as they do with physics or medicine. What economists don’t usually admit is that, on a range of topics they examine, they often had an answer to the question before they began their studies. Scientists are supposed to reach their conclusions after doing research and weighing the evidence but, in economics, conclusions can come first, with economists gravitating towards a thesis that fits their moral worldview.Related:
That shouldn’t surprise us. Economics has always been an ethical and social exercise, its purpose being to produce the rules by which a community organises its production. It’s not accidental that Adam Smith, whose work The Wealth of Nations (1776) is often seen as the founding text of economics, was a moral philosopher. Yet ever after, it was the holy grail of economists to make their art into a science, using it to uncover the codes supposedly buried in their heart of human existence. They experimented with mathematics and pondered Charles Darwin’s revolution in biology, but it would be the late 19th century before economics finally found a model for itself. It found it in physics.
Alfred Marshall, one of the architects of the ‘marginal revolution’ that gave birth to modern economics, no doubt had the predisposition that inclined him towards a physical view of the world. A former seminarian who enjoyed unwinding with long walks in the Scottish highlands, he was undoubtedly attracted to the view of a universe that was inherently orderly. Yet the marginalists had another reason to adopt the physical view of the world. Physics was then emerging as the most canonical of the sciences. As a model, it had no rival. Besides, with a few basic assumptions, the physical model seemed to transfer rather neatly to human behaviour.
Think, for example, of that high-school lesson on energy transfer. You stick a piece of hot iron into a bucket of cold water, steam rises, the rod cools, and the water warms until the two eventually reach the same temperature: equilibrium. Well, you can similarly think of the hot iron as a shopkeeper, the bucket of water as a customer, and energy as money. The item the shopkeeper has to sell is hot – everyone wants it – but, as a customer, your empty purse makes you a bucket of cold water. Either the shopkeeper drops the price to reach equilibrium with you, or waits until a hotter customer, one with a full wallet, enters the shop. That way, the handbag will sell at an equilibrium-price more pleasing to the shopkeeper.
That’s sort of how the marginalists conceived of market transactions. Some of the early marginalists went so far as to explicitly liken pleasure, or what they would call utility, to energy. From there, it was a short leap to say market transactions revealed the laws of nature....MORE
July 13, 2013
Economists and Econophysics
I'm not sure what to make of Didier Sornette. As I said in "UPDATED--Commodities and High Frequency Trading: Prices Being Driven By Price Moves Rather Than Fundamentals":
He can be a bit of a flake but I'm guessing he's smarter than I....More after the jump.
One thing I do know, economists suffer from physics envy more than practitioners of other soft sciences.
Anthropologists, sociologists, psychologists et al seem to have accepted that they aren't really scientists, at least deep, deep down they do. Economists? They seem to believe that because they use the tools of science (maths) that their area of focus is akin to chemistry or physics. It's not.
At best they are modelers (no disparagement, it's something humans are pretty good at) and because the economy, like weather, is both a complex system and a chaotic system, it is probably going to take the advent of quantum computers to get to the next level of deep understanding.
For more insight into why economics is not a hard science read the work of author, raconteur, juggler and bongo player Richard Feynman:
Gates Puts Feynman Lectures OnlineAll that being said, I am reminded of a quote that describes similarities between both physics and economics, along with another human activity:
Physics is like sex. Sure, it may give some practical results, but that's not why we do it.
-Richard Feynman, Nobel Laureate, physics, 1965
-Richard Feynman, Nobel Laureate, physics, 1965
From the Wall Street Journal's FX Horizons at MoneyBeat:
Let’s face it, economists make lousy economists.....
May 26, 2010
"WARNING: Physics Envy May Be Hazardous To Your Wealth!"
I had a similar, albeit intuitive rather than empirical, thought in the June '09 post "Climateer Investing on Carbon Trading and Traders":
...Just as an economist using the tools of science (mathematics) doesn't make economics a science, carbon traders using the tools of markets doesn't make carbon trading market based....From the abstract at Physics arXive:...
June 3, 2015
Economists don't have "physics envy"
I hear all the time that economists have "physics envy". This doesn't seem even remotely true. I'm not sure whether "physics envy" means that economists envy physicists, or that economists want to make physics-style theories, or that economists wish their theories worked as well as those of physicists. But none of these are true.
Reasons why economists don't have physics envy include:
1. Economists make a lot more money than physicists.
2. Economists are treated as experts on practically anything. An economist can talk about why hipsters have moustaches, and get taken seriously. An economist can talk about which restaurants are the best, and get taken seriously (Update: NO, I'm not saying Tyler's book is bad, I haven't even read it, so HUSH). An economist can talk about politics, marriage, popular music, sex, race, or sports and get taken as seriously as any expert in those fields. An economist can talk about how much progress physicists are likely to make, and get taken seriously. Physicists get taken seriously when they invent quantitative rules for things, but otherwise are treated as just one more tribe of crazy nerds with their heads in the aether....
So there you go.
Except for point 1.
If that physicist happens to be running a quant fund in Greenwich even the richest economist in history is a pauper by comparison.
March 2, 2010
"Largest Group Of Nobel Laureates To Remove A Sword From Someone's Throat"
On October 1, 2009, during the 19th First Annual Ig Nobel Prize Ceremony in Cambridge, Massachusetts, eight Nobel Prize Laureates removed a 22-inch solid steel sword from Ig Nobel Prize Laureate sword swallower Dan Meyer's throat.
The Nobel Laureates involved: Rich Roberts - Nobel Prize in Physiology/Medicine, 1993 Wolfgang Ketterle - Nobel Prize in Physics, 2001 Dudley Herschbach - Nobel Prize in Chemistry, 1986 Paul Krugman - Nobel Prize in Economics, 2008 Roy Glauber - Nobel Prize in Physics, 2005 Frank Wilczek - Nobel Prize in Physics, 2004 Martin Chalfie - Nobel Prize in Chemistry, 2008 William Lipscomb - Nobel Prize in Chemistry, 1976
You'll note there is only one economist among this distinguished coterie.
We have many more posts on the shortcomings of economists, it's sort of a hobby.
Here, with an opposing view, is Oxford's Simon Wren Lewis:
Climateer you ignorant slut- Academic knowledge about economic policy is not just another opinion
