Art Shipman — Epicuro Samos: "Forget Market Rules"

At Mike Norman's, Tom Hickey links to Andrew Sheng and Xiao Geng — Micro, Macro, Meso, and Meta Economics.

The New Arthurian Economics
Epicuro Samos: "Forget Market Rules"
Art Shipman

Art's post is largely a posting of a comment that distinguishes market rules from the economy, which is ruled by laws. While I agree that markets are dependent on economic factors rather than vice versa, I don't agree with the idea that economics is based on natural laws, at least any that that have been put forward so far in an explanation that has withstood the test of prediction very well as a theory.

It is tempting to say that economics is based on human behavior and therefore has a real basis in fact, i.e., what people do individually and in concert, whereas markets are largely subjective and based on participants' projections that may or may not turn out. There are two sides to every trade. If markets were "lawful," this would not be the case.

But what about economies. There are many ways that economies can be structured, and economic history is a record of some of them. Are there invariant functional relationships of independent and dependent variables that hold "economically" across the board? It does not seem so — anymore than there are laws that have been discovered that hold socially and politically. In fact, there is still still nothing like an agreed upon "normal" paradigm in psychology. So how could a claim that there be "laws" of human action be sustained?

Rather, several factors stand out as primary, such as culture, knowledge and skill, institutions, energy, and money, which may be viewed as more relevant than land, labor and capital. These factors can be combined in many ways and have been historically to yield different kinds of economies and different types within the kinds. Economic history is quite heterogeneous rather than homogenous, as it would be expected to be if law-like.

So I would say that circumstances dictate what options are available at any particular time and economies must hew to those opportunities and contraints that are given at any point in time. This presents a range of possibilities that can be achieved through particular policies, strategies and tactics, but the outcomes are uncertain since the future is unknowable when it involves complexity and reflexivity, for instance.

It seems to me that as practiced economics is both a theoretical enterprise and also a policy endeavor, and that sometimes these are conflated. This can be compared to the quest of physics for a "theory of everything" and the task of engineering to create systems that get the job done that they were designed to do. 

Physicists and engineers don't conflate these. Theoretical physicists are not found found inserting themselves into engineering design and decision-making. Biologists and physiologists don't practice medicine as an adjunct of their discipline. Nor do engineers and physicians just make it up as they go along. They are cognizant of developments relevant to the field. 

However, in economics, there are economists who are chiefly theorizers and policymakers who are politicians with little or no knowledge of economics. Disconnect. As a result people who are primarily theoreticians are consulted about policy formulation and asked to put on the hat of a social and political engineer. What could possibly go wrong?

While it would be nice to know "everything" — and admittedly the quest for more comprehensive knowledge has spun off useful discoveries and inventions — modern civilization is built on engineering successes achieved incrementally by people experience in applying the methodology of engineering in addition to being grounded in the scientific field in which they are working. Economists and policymakers take note. Economies are either labs nor playgrounds.

I find it interesting that there are engineering schools and engineering degrees and a highly developed engineering profession. Economics and policymaking. Not so much. And it shows.