Wet Economics?

Let’s get our feet wet. Or at least dirty.

Or maybe not. Why pull on those boots and ramble about by the stream, river or beach, when there’s a nice safe swimming pool nearby?

That, in a nutshell is the schism in economics.

One sort of economist wanders about the mountain side and studies the little stream that cuts deep into the rock. They see its chaotic movement as the water rushes by. They recall Heraclitus and his saying that we can never step in the same river twice. No matter how constant things appear, the stability we observe masks constant change and turmoil. So getting too specific becomes impossible. Instead we look at the ravine the stream makes. We look at the huge rocks and wonder how this little stream could ever have moved them. Then again maybe it didn’t. Perhaps it simply eroded the soil and opened the way for gravity to come into play. Then, yet again, perhaps the friction of the smaller rocks caused a jagged trajectory so that the boulder started over there and yet ended up over here. Oh. And those trees seem to have fallen in quite a time ago, how did that happen? Watch the stream in spring and admire the torrent of snow melt. Watch it the summer and wonder what all the fuss was about as the water is almost dried to nothing.

I know streams like this. One in particular comes to mind. Up in Vermont on the side of Mount Antone. I visit it occasionally. Only in summer mind. To look at that summer stream and imagine the enormous power it wields over the soil and rock on the mountain side is to take a tiny slice of an epic process that extends, logically, all the way back to the mountain’s own formation. Streams like this tiny one destroy every mountain eventually. No matter how imposing the mountain. In those terms the stream is part of a geological cycle that disappears into the murk of a time when this part of Vermont was the south coast of a continent in the southern hemisphere, when world temperatures were very different, and even before life had invaded land.

So this little body of water is part of a gigantic, open ended, complex and interconnected process. We can generalize all we want. But to explain this stream. Here and now. We must admit the generalization fades and the specific context steps forward in our explanation. It is a vastly entangled story woven through many different subjects and involving seemingly endless unknown quantities.

Then there are economists who look at things differently.

In my analogy they control the water in order to study it.

They don’t like raging streams. They like warm tropical swimming pools. Preferably with one of those infinity edges that allow us to imagine the pool and the ocean beyond are linked as one. They love the constancy of the temperature, of the water chemistry, and of surface. Those small ripples in the water are easily attributed to exogenous things like the breeze. Disturbances are few. Those that exist can be explained away with ease. The pool is enclosed. Safe. Controlled. The depth is carefully measured and delimited. Lines can be drawn to signify the deep end. Neat edges can be arranged to mark the boundaries. Whatever is in the pool is completely known. Nowhere is there a murky history ready to pop up with an unexpected problem.

A swimming pool is a great system to study. It is closed. It is a world unto itself. You can tinker with the chemistry and so on to test its senstivity to changes in one of its properties. Cause and effect become much more clear. There is a symmetry and beauty entirely different from the rage of a mountain stream. Pools are elegant. They are aesthetic in an athletic, transparent sort of way. People who excel in the pool are demonstrably superior to their competition.

Above all a pool isn’t wild. There is no mud. These folks see no reason to study anything else. They have found the representative body of water. Compliant. Measurable. Perfect. So perfect that its study becomes an end in itself. So mesmerizing that they succumb to its allure and ignore all other bodies of water. For them there are only swimming pools. Streams are, well, just too unpredictable to think about. So why bother?

So there are those who see pools and think they are studying bodies of water. And there are those who see streams, rivers, and oceans and think they are studying bodies of water.

Both are right.

The issue arises when we take knowledge gleaned in one and suppose it has relevance to the other. Just how relevant is my knowledge of that Vermont stream to a pool? Not much. And how useful is knowledge of a pool to understanding the stream. None at all.

There are deeper commonalities of course. But those are in the realm of physics, chemistry and so on. Neither pools, nor streams, can violate laws in those realms. Economics cannot either.

That’s not my point.

The issue is that when we teach people all about pools and then send them out to manage, oversee, or construct policies or otherwise play in streams we may have made a mistake. They may think they know something they don’t. So if they mess up it’s our fault. After all they “did it by the book”.

Just the wrong book. We do need to get our feet wet if we want to understand streams.

Where’s that book?