a million years of logic, the end of economics, and the sociological future
This entry is cross-posted at the Marginal Revolution blog as the final installment of the book froum on Tim Harford’s Logic of Life.
We’ve reached the end of Logic of Life, Tim Harford’s engaging tour of economics and its lessons for everyday life. Harford ends the book on a highly speculative note about technology, economics, and growth. Tim does a good job summarizing the emerging consensus. The “normal” state of human life is poverty and near zero economic development. Once a community establishes reasonable institutions for commerce and trade, people can quickly produce and exploit technological advances. The effects are cumulative: once a nation allows markets to work beyond a certain threshold, the population experiences exponentially increasing benefits. The economists’ summary of world history is: “no capitalism = no growth, some capitalism = growth, growth, growth!!”
This discussion is interesting because of the connections to ideas outside the normal realm of economics, especially in areas like psychology and, my own area, sociology. Here’s just one example. Harford discusses the idea that population size should correlate with innovation. Simply put, if you have a hundred million people, you’ll get a least a few geniuses. The inventions of these geniuses can be mass marketed, which fuels later growth episodes. Fair enough.
But where do “geniuses” come from? Turns out, there is a fascinating literature on creativity and achievement. A few names: R. Keith Sawyer, a sociologist/psychologist, writes eloquently on the emergence of genius from networks and groups. Sociologist Randall Collins wrote a highly regarded book on prominent philosophers showing that “genius level” philosophers tended to be clustered in space and time, suggesting that genius is made possible by very specific kinds of “hot house” situations. Other research, pioneered by Florida State psychologist Anders Ericsson, shows that high level performance isn’t just a matter of talent. It’s also a matter of specific training techniques and immersion in a topic. Basically, it’s not just talent that leads to achievement, it’s also the right kind of social environment.*
What’s the point? It’s this: Economics, as understood for hundreds of years, has played out. The major problems of econ 101 have been solved. We know about supply and demand, marginal utility, choice under uncertainty, and budget constraints. We have a wide variety of tools, ranging from game theory to econometrics, that help us identify these processes in situations ranging from war, to car sales, to dating. We are also seeing how these processes plug into classic macroeconomic issues, such as growth and international trade.
However, the market system itself, as indicated by Tim’s concluding chapter, depends on population, innovation, and liberal economic institutions. These, in turn, depend on psychology, group culture, and networks, the domain of sociologists, psychologists, historians, and anthropologists. Economists have shown how the market system processes the inputs, but there’s still much, much more to be said about where the inputs come from. That’s what’s going to be exciting in the decades to come, and I can’t wait to see it.
* Author David Shenk nicely covers this research on his blog The Genius in All of Us.
The commenters over there will love this, I am sure.
Kieran
March 4, 2008 at 4:25 am
I’d like to see a debate about which came first (I know everyone here is a big fan of these dichotomies) — the market or its cultural machinery.
tf
March 4, 2008 at 4:38 am
Uh, Teppo, Weber answered that question a long time ago. By market, of course, I assume you mean the capitalist market.
brayden
March 4, 2008 at 4:42 am
And, I suppose Durkheim also resolved the structure-agency debate long ago.
tf
March 4, 2008 at 4:44 am
For certain values of “resolved.”
Kieran
March 4, 2008 at 4:44 am
Sure, for Durkheim it was all structure, no agency. Resolved.
BTW, great post Fabio.
brayden
March 4, 2008 at 4:46 am
Fabio, perhaps a beaten-to-death question, but nevertheless:
What does it mean to cede the operations of capitalism (within the hothouse, so to speak) to economics? In other words, to say that psych/soc/networks determine the inputs, but once determined, economics ‘works’? So sociology and attendant disciplines play a role primarily in establishing the market system itself, but by implication not so much once that system is established (I want to go on and whine about how sociology also has stuff to say about the operations of capitalist markets, obviously). Do you think this is something to worry over?
Peter
March 4, 2008 at 5:29 am
“the market system itself, as indicated by Tim’s concluding chapter, depends on population, innovation, and liberal economic institutions. These, in turn, depend on psychology, group culture, and networks, the domain of sociologists, psychologists, historians, and anthropologists. ”
Speaking on behalf of political scientists: ahem! What are we, chopped liver with nothing to say about institutions?
Jacob T. Levy
March 4, 2008 at 12:45 pm
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phuongnana
March 5, 2008 at 2:54 am
A hot-house theory would meld with the strength of weak ties curiously. Not quite a contradiction, but there’s certainly a balancing act to be had there — reminds of of the kinds of constraints Stuart Kauffman discussed (in The Origins of Order) as a limiting factor on available local optima in processes with lots of interdependencies between their parts. Plausibly, the ‘optimal’ density in isolation would mean a sub-optimal dispersion of social ties, though, and shunt the realm of actual optimization — in the presence of our interdependencies — back to Kauffman’s “order at the edge of chaos,” focused about a phase transition between weak and strong ties? Or maybe I just enjoy wide speculation!
But thanks for the research suggestions, Fabio! (Though, like the folks behind the MR comments, if with a bit less vitriol or stung pride, I also suspect your end-of-economics comment would have been more accurate if more measured!)
praxeologicalGoertzelite
March 5, 2008 at 5:02 pm
I believe that the nature of an academic discipline changes over time. How the boundaries between disciplines are created and maintained is an interesting question.
Michael Bishop
March 8, 2008 at 10:42 pm