Quote of the Day: 1
From Enrico Coen:
“If we could somehow eliminate all discrepancies then all learning would come to a halt. … A perfect knowledge of the future would act like a mental anesthetic.”
I wish economics would pay attention – or more attention – to people like Coen who explore real human capacities, and real human decision making. If it did, the absurdly naive and unreal pseudo psychology upon which it constructs its theories of exchange and other economic behavior would be tossed aside in an instant.
Its reliance, or dependence, on super rationality would wither; uncertainty would become central; learning would ascend to the top of the heap; and the way in which information is received and processed by real people rather than by robots would form the basis of a rather messy, but consequently human, economics.
I have always held that orthodox economics, with its overly simplistic caricature of humanity cannot produce much of any use when deployed to explain actual human action. It all too often reduces to a belief in rules that do not describe behavior as it happens, but as it needs to happen in order to produce a desired result. With that desired result being the smooth operation of a highly stylized, sanitized, and closed system that economists like to call a market.
The closure and perfection of the system denies the existence of the discrepancies, anomalies, and errors that Coen – and others – tell us are needed for us to learn. The perfect and isolated markets economists posit are sterile anesthetized zones of stasis, where the only impulse forward, the only source of innovation, the only spark of life, and the only possible portal to the future comes from outside the system. And when such things are detected by economists they are called, rather strangely, “market failures”.
It is an odd science that regards its real world subject matter as comprised of failures instead of the grist for the theoretician’s mill.
Discrepancies are precisely why prices do not convey all the relevant information needed by an economic agent. Misperception, misunderstanding, misconception, and misinformation are all common factors in any market. Denying their existence does not allow subsequent simplification to provide a basis for relevant theorizing. It simply means that those theories are about something else. Something that we do not encounter in our everyday economic routine. Something that only exists in the imaginations of those economists who theorize within the world of perfection.
Yet that is what those economists who hew to the orthodox line are doing: playing mind games with themselves. They have become critics and masters of a fictional narrative who imagine that their play world is somehow connected enough with the real world that they are entitled to make comments on the latter based upon the dreams of the former.
Which is rubbish.
Worse, along the way they managed to persuade themselves that any commentary by anyone on the economy at large had to be based upon their caricature of individual behavior. This mental breakthrough they named “macroeconomics on micro foundations”.
We can deride this effort. We ought to. We need to.
First, their micro foundation admits of no human action. It is a dreamscape.
Second, it presumes in defiance of all other human knowledge, that there are no effects beyond those within the realm of that micro dreamscape. There are no unexpected outcomes from interaction between people. There are no effects of groups. There are no worthwhile phenomena at all except those found in the basement of micro foundations. It’s as if these economists inhabit a time warp where the excitement and advance of other sciences, where complex, probabilistic, and relational influences are widely acknowledged and accepted, are carefully excluded. Lest, presumably, those advances clutter or muddy the dreams held dear within.
Lots of economists, of course, are working away outside the dreamworld. But they are all on the periphery.
When, I wonder, will they have the courage to seize the center?
