The Problem With Physics

What? You say. Why are we concerned with this?

Aaaah. There’s a story to be told. Ultimately it has to do with uncertainty, which as you know is near and dear to me.

You see physics has a big problem. It is way too successful. In fact it is so successful it has two well worked out and immensely documented, tested and tried theories – or sets of theories. One set covers the big stuff like you and me and the stars. The other covers the small stuff like all those exotic particles none of us can see but which apparently batter us by the trillion every moment of every day. The big problem is that the two sets of theories don’t fit well together. In fact in some respects that contradict each other. Much like two sides of a warring family, they peer at each other and try to make life very difficult for anyone who dares create harmony.

Physicists know this of course and are trying to bridge the gap. The discipline is at a fever pitch of debate, argument, and division as to how to accomplish the great unification. Some people even doubt it can be done. I have not heard of fisticuffs, but tempers are frayed. The stakes are high and reputations are at stake.

Superficially this sounds like the state of economics. An outsider might believe the turmoil within the two subjects is symptomatic of a unified search for knowledge.

Not so.

Not so at all.

That view holds for physics. Over there the debate is raucous, but at least everyone agrees what the problem is. Better yet, they agree that there is a problem to be argued over. Back here in economics there are droves of good folks who don’t think a problem exists.

Once upon a time, back in those days of Newtonian certainty, physicists strode the earth sure they had cracked the code of the universe. Sound familiar? Given the right data, they told us, they could predict everything. The universe could be wound up and wound down. It went forward and it went backward. It was a great big predictable machine made up of bits and pieces that obeyed so-called laws that held everywhere. It all workde so well for a while.

Whoops.

Not so much.

This elegant and perfect picture started to fall apart as soon as irritating people mucked about with thermodynamics, relativity, and – gasp – quantum mechanics. Poor old Newton was reduced to having given us a pretty good approximation, rather than the exact explanation of the world around us.

We now know, although we don’t really experience it, that the world is decidedly odd. That things can be in two places at the same time. That your time and my time are not the same. And that time, the greatest mystery of all, runs in only one direction. We can never revisit the past. The universe, it turns out, is a weird roiling miasma of information for ever changing and riven through with inherent and fundamental uncertainty. Non-ergodic sounds very dangerous, but it turns out to be deeply true.

Personally I blame entropy for this nightmare.

When Boltzmann wrote out his equation defining entropy he was greeted with howls of horror and disgust, it threw overboard the elegance of what was then so sure. It substituted vague notions of probability for great certainties of exactitude. Boltzmann committed suicide partly due to the opprobrium heaped upon him. His grave has his equation inscribed upon it.

In the vernacular, entropy destroys everything. It is the process whereby structure becomes unstructured. It is the reason life is short rather than permanent. A thermodynamic universe turns out to be much like Hobbes vision of life: nasty, brutish, and short.

The problem with physics is that this turns out to be accurate. Yet we experience enormous stability. Big things don’t seem to fall apart all or jump about, or do any of that strange stuff that small things apparently do. There is structure. And it endures. You and I are comprised of particles whose exact location and trajectory is problematic. Yet we manage somehow.

That’s a problem physics will have to deal with.

We have our own issues.

We are much like the Newtonians. Our conception of an economy appears to work pretty well. At our local level the earth appears flat. Indeed for practical purposes, as I walk around the streets of Manhattan, it is flat. I would be a fool to try to compensate for the curvature of the earth on such a small scale. So I keep things simple: I assume the earth is flat. At least this bit of it.

But that isn’t the truth. It is a poor and misleading approximation.

So too with economics.

Great approximations that appear to provide good working models of the economy, but which are based upon the equivalent of the flat earth perspective, produce profoundly erroneous insights into what goes on. Sure they look good. Sure they are easily modeled. But they are an illusion based upon a false understanding of the deeper truth.

Let me go further.

One of my favorite thinkers is Karl Popper – I named a cat after him. In particular I like his simple phrase: “all life is problem solving”. Popper worked extensively on evolutionary epistemology and convinced has me that life is a solution to a problem. That problem being the overwhelming presence of uncertainty in our environment. Once something is counted as being alive we know it is struggling with its context. It has to fit with its environment or it will not survive. And in that environment lurk all sorts of dangers, not least the scarcity of food, but also enemies competing with it, and occasional disasters that could invalidate all its accumulated experience.

Entropy undoes all that is done. It un-structures all that is given structure. It causes all the information we acquire about the world to be lost. It produces change. And that change is the most destructive element life has to combat. It is a big problem. The biggest, in fact.

Hence Popper’s observation that all life is problem solving.

Now reverse his thought. He also means that wherever we detect a problem being solved we have detected life. And since entropy assures life that its context will forever change, and that it can never return to a state once travelled through, life has to keep learning.

So life is a constant search. A search for information sufficient to expand the area of the known into the area of the unknown. Sufficient, in other words, to put a boundary around life within which it can eliminate uncertainty at least for a while. That victory is never permanent. But it buys life an opportunity to replicate and pass forward its struggle. So life learns. It expands its equipment. It acquires more resources to make that boundary between the known and the unknown more secure and more distant. Life acquires vision, ambulation, smell, touch, chemical defenses, structural coherence, and all sorts of manifestations of having learned along the way how to deal with uncertainty. Of how to make its environment a little more secure for a little longer.

Notice that this struggle is not for a perfect defense, but for a sufficient defense. Life can never experience perfection since that is a meaningless concept in the face of entropy’s pull towards destruction. Life can only ever be sufficient. To use Simon’s concept: it “satisfices”.

The problem with physics and consequently with chemistry and biology, is that it has moved into this thermodynamic world of probability, oddity, uncertainty and change. The days of great images of a clockwork universe unwinding according to immutable laws has been replaced by a less certain world where prediction is just as accurate, but is now based upon a deeper understanding and the expansion or replacement of those laws.

And the problem with economics is that it ignores, deliberately, most all of that view.

The notion of understanding the properties of equilibrium is meaningless when there is no equilibrium. Yet the state of the art is trying to do just that. The notion of optimum efficiency or any other aspect of perfection is senseless in the face of inherent uncertainty. Until we embrace uncertainty and stop trying to eliminate its effects from our thinking we will not engage the real world. Economists will be “flat earthers” happy that we are correct on our small scale, but horrendously wrong on a large scale.

Physics can be abstract. It seeks to simplify in order to understand the real world. Economics can be abstract. It seeks to simplify in order to avoid the real world.

Approximation is a deception when we accept it for more than it is. As in when we prescribe policy solutions based upon doctrines and ideas that are equivalent to assuming the earth is flat.

An economy is a struggle between human creativity along with our search for structured consumable stuff within an uncertain and constrained environment, and the entropy that dissipates, devalues, and destroys all that structure. Production and search are creative. Demand and consumption are entropic. The tension between the two creates the flow and all the processes we observe in an economy. As we locate resources we add information to our world. As we structure goods from raw materials we add information to those inputs. As we advertise we add even more information. As we distribute we add more again. All these activities are centered around the addition of information and the generalization of what was previously highly specific. Generalization being the creation of order within disorder. Consumption is then the loss of that order and the deconstruction of the generalized product into the specific components that each of us uses to survive or satisfy our own requirements. You use your car to drive there. I use mine to drive here. We thus take the same generalized product – a car – and specify it to our own uses. Beyond deconstruction is the final dissipation of the structure back into its original disordered state and into pollution, depreciation, and other ways we lose order finally.

Creativity in tension with entropy. A vast cycle of information flowing from disorder through order and back to disorder. All very thermodynamic. Boltzmann would approve. All in the face of uncertainty. All a giant problem solution as life, in this case humankind, struggles to arrive at sufficiency in the face of that uncertainty. Popper would also approve.

Abstract? Yes. But rooted firmly in the real world. And related to the artifacts, institutions, and processes that litter our economic landscape. A utopia? Not at all.

You see, that’s the problem with physics. It moved on and learned. Economics didn’t. Heck, a lot of economists don’t even acknowledge the problem. They like to model dynamics in a world dominated by thermodynamics.

And therein lies the tale.