Sunday, March 22, 2009

Wiener On Economics As A Cargo Cult

I've seen this quote referenced from time to time:
"The success of mathematical physics led the social scientist to be jealous of its power without quite understanding the intellectual attitudes that had contributed to this power. The use of mathematical formulae had accompanied the development of the natural sciences and become the mode in the social sciences. Just as primitive peoples adopt the Western modes of denationalized clothing and of parliamentatism out of a vague feeling that these magic rites and vestments will at once put them abreast of modern culture and technique, so the economists have developed the habit of dressing up their rather imprecise ideas in the language of the infinitesimal calculus." -- Norbert Wiener (quoted by Joan Robinson in Freedom and Necessity)
Looking at the last chapter in his Cybernetics: or Control and Communication in the Animal and the Machine (John Wiley & Sons, 1948) provides some insight into Wiener's attitude. That chapter is titled "Information, Language, and Society". He looks at society as an organization, the elements of which are themselves small organizations. He looks at communication between these elements as being an application of cybernetic theory, now days more commonly known as C3I. And Wiener makes such observations as:
"In connection with the effective amount of communal information, one of the most surprising acts about the body politic is its extreme lack of efficient homeostatic processes. There is a belief, current in many countries, which has been elevated to the rank of an official article of faith in the United States, that free competition is itself a homeostatic process: that in a free market, the individual selfishnesses of the bargainers, each seeking to sell as high and buy as low as possible, will result in the end in a stable dynamics of prices, and with rebound to the greatest common good. This is associated with the very comforting view that the individual entrepreneur, in seeking to forward his own interest, is in some manner a public benefactor, and has thus earned the great rewards with which society has showered him. Unfortunately, the evidence, such as it is, is against this simple-minded theory." -- p. 185
Wiener also comments on those those who
"consider the main task of the immediate future is to extend to the fields of anthropology, of sociology, of economics, the methods of the natural sciences..."
He thinks they "show an excessive optimism, and a misunderstanding of the nature of all scientific achievement." He thinks the social sciences do not have the requisite "degree of isolation of the phenomenon from the observer."

So it seems the prodigious Norbert Wiener considered cybernetics to encompass an alternative to neoclassical economics and was concerned about the proper methodology of applying his theories to society.

3 comments:

bill greene said...

This excellent post reminds me of Thomas Sowell's useful distinction between hard-science and soft-science. In the physical sciences, carefully measured tests and repeatable results have led to fairly consistent and dependable knowledge of how things work. However, soft-sciences, which deal primarily with human behavior, can never attain similar certainty because of human free will.

Imagine if the moon and planets were subject to individual whims and fancies--not to mention unique hormonal influences--what kinds of varied and unpredictable paths those celestial orbs would follow!

Sowell laments that many students who cannot fully grasp the hard sciences gravitate to the soft-sciences. And they frequently bring a strong personal bias to their work. Then, with that as a wobbly foundation, they attempt to dress up their work as objective and scientific! Let their readers beware!

Wiener's observation about needing sufficient "isolation of the phenomenon from the observor" is echoed by Eric Voegelin who looks at how the ideas and theories of soft-scientists "become separated from their engendering experiences and as independent entities become deformed." He suggests that those ideas, "once separated from their experiential roots, are subject to ideological reconstructions."

However, this weakness found in economics and other humanities, does not mean there are no principles to be learned from human experience. I have used the case method to examine the common attributes of the few societies in history that succeeded and contrasted them with the attributes of that great majority that stagnated or declined. In my book "Common Genius" these lessons of history are outlined and in general terms form the "Radzewicz Rule" that defines the governing features for a peoples' success.

The major feature of success was always based on a free economy, an open and positive culture that encouraged all to participate, and minimal political or spiritual oppression. Such an environment is not the same as a totally "free market" powered by the unchecked individual "greed" of participants. The beneficial open and free economy requires a certain degree of control, safeguards, and moral direction.

The most common failing of soft-science thinkers is that they want to impose central governmental planning and controls to achieve their abstract ideas of a perfected society. Those abstractions have often become ideologies that undermine the creative and energetic genius of their citizens; and, consequently brought a huge burden to their society that limits growth and prosperity.

To further their socialist agenda such soft-scientists scoff at the completely free market led by the greed of its participants. But their target is the proverbial "straw horse" -- actual case studies of past success-stories show a carefully designed set of institutional support for open and free economies. These include a fair and responsive judiciary, protection of private lives and property, accessible legal and financial mechanisms to facilitate trade and investment, and the maintenace of essential infrastructures. Such a society can never be totally free, but it must be free enough to empower its people so they can apply their energy and enterprise for everyone's well-being.

The main point here is that economics is not a physical or mathematical science. A sound economy is simple mechanics, and its design is much like an automobile engine--you need parts: a judiciary, registry of deeds, banks, contract law, roads and airports, fair and minimal taxation, limited government, only the most essential regulation, and a moral populace governed by honest politicians.

The hardest "part" to come by is the last one--which is why the best government is the government that governs least.

root said...

Interesting post. I comment only to show that someone other than a fan of the worthless Thomas Sowell read and appreciated.

bill greene said...

Root may denigrate Dr. Sowell as "worthless" but the post that root seemed to enjoy makes clear that Wiener and Sowell share the same belief that social scientists can only pretend to dress up their calculations as scientific! It is pretty obvious to most people that the actions of individual humans can not be predicted as clearly as the movement of celestial bodies!