It is time to stop quivering in our boots in pointless fear of the future and just roll up our sleeves and build it.
- Ray Pierrehumbert

Tuesday, May 8, 2007

Economists vs Engineers

For those wandering in here without context, I am advocating a rethinking of economics in the light of sustainability issues in general and climate change in particular.

Consider minutes 4 through 7 of this video of a Google Tech Talk by Van Jacobson.

"It's not that the solution we have is a bad one, it's that the problem has changed."

I'd like to see this sort of breadth of vision coming from economic thinkers. (I'm not saying it never does, of course, but it doesn't seem that real alternatives bubble to the top the way they do in other applied disciplines.)

If you are a bit technical you will find the rest of the presentation, which goes into detail about these revolutions in the data communication sphere, interesting as well.

Why is there such little prospect of a Copernican revolution in economic thinking? Do people really think that the circumstances of the past two centuries as generalized by economics are invariant? That the system can have no regimes? That there is only one possible correct way of looking at aggregate behavior and that we already have it?

[Update: Yes, apparently some people are perfectly happy to go that far without even a hint of humility. See the comments to this entry. They must have some powerfully compelling evidence and rigorous arguments. It sure would nice to see these.]

Many people think the calling of a scientist is in some way higher than that of the engineer, but frankly I am not at all convinced. Scientists seek truth, and engineers seek solutions. The circumstances we are in require solutions, and so the engineering mentality will be more valuable for the foreseeable future.

We need more pragmatic economics. Ambitious economists ought to let go of this bizarre pretension that the world's economic system is anything but an artifact, and will start to think about how to redesign it to account for the fact that the problem has changed.

15 comments:

David Duff said...

If I may say so, Michael, your phrase " I am advocating a rethinking of economics in the light of [...]" indicates an intellectual bankruptcy which will shortly lead to a financial one! Consider, if you will, the number of alternatives that could be typed into the bracketed space I provided. For example, '[the financial inequalities of different classes]' which enjoyed some popularity for about a hundred years until its manifest, and manifesto, idiocy dawned on even the dimmest - and, oh dear, what a pity so many millions had to die in the great experiment!

The error, of course, lies in the chimera of believing (against all the evidence) that there are different types of economics that might be practiced for the benefit of Mankind and from which one might choose the best. The fact is that there is only *one* type of economics and that arises from the decisions of zillions and zillions of people making day-to-day decisions in their own interest. That is why economics as an academic subject is *descriptive* and all attempts to make it *prescriptive* are doomed from the start.

I hasten to add, lest I stand accused of extreme economic libertarianism, that all governments have a right and a duty to surround economic activity with laws but they should not kid themselves that such laws will somehow 'improve' economic outcomes. At their best, such laws will provide beneficial results for some, such as banning child labour, but that is a moral outcome not an economic one.

Michael Tobis said...

Good to see a scientific attitude, um, for sure, yeah...


The fact is that there is only *one* type of economics and that arises from the decisions of zillions and zillions of people making day-to-day decisions in their own interest. That is why economics as an academic subject is *descriptive* and all attempts to make it *prescriptive* are doomed from the start.


David, or anyone, please feel free to try to justify these assertions.

inel said...

Er, a fact relying on zillions … ?

Your model as described, david, has economics at its heart determined by the random interactions of selfish individuals, surrounded by a defensive ring of laws (to protect …?), and outside that there may be a fringe of benefits for some, including certain nice-to-have moral outcomes as by-products. That's not really the purpose of a descriptive academic subject. Is it?

Michael Tobis said...

I also might point out that I think there is some attempt at bullying going on.

I am not a Marxist and don't want to be taken for one, but apparently calling any economics, purported to be a science, into question at all is enough for me to be tainted with the ghost of Mr Stalin.

I have news for Mr. Duff. My parents and my cousins have had to live under the Soviet thumb and as a consequence I could hardly be advocating for anything similar.

How the fact that Stalin was evil or even that Marx was wrong should immediately lead to the conclusion that Milton Friedman was infallibly right is the part you'll have to explain to me, very slowly.

One often is accused of things that one's opponent is actually guilty of. Only Being In It For the Gold, for instance, is one. Trying to shut down legitimate skepticism by intimidation is another. Climatologists are often accused of shutting out minority opinion

Yet here I am daring to suggest that economics is not infallible and suddenly I am cast in the company of Joe Stalin.

To hell with that.

If economics is a science, I am allowed to question it. I don't call you Saddam Hussein for questioning climate science. I'll thank you to return the favor.

If you have something to say in defense of your opinions, say it. I promise to keep an open mind to your substantive arguments, if you have any.

I'm not even venturing an opinion yet. I'm just trying to think. Apparently economics is the sort of science where that is disallowed.

David Duff said...

I am away overnight and pressed for time now but I think on reflection, Michael, that you are a tad touchy. No one, least of all me, is accusing you of *any* political leanings not because you don't have any, everyone does, but because I don't know you and in the context of this conversation,it has no relevance. Calm down!

I merely used socialism as an *example* of an attempt to make economics 'prescriptive'. I assume, but feel free to correct me, that you are moving towards a similar experiment in order to avoid what you see as the approaching calamity of AGW. Fair enough, but I am offering you a warning that is writ clear in history - but not, alas, in any engineering hand-book.

Must go - have a nice day - see you tomorrow.

PS: Biology is similar to economics - it's descriptive and future outcomes are unknown: Discuss!

Heiko said...

I think economics does provide a number of good tools to predict the future of economic systems and the mechanics of how we get there.

The theory of economic growth is something I find very helpful.

Economies can grow with technological progress, and they do that through capital accumulation, capital as in infrastructure and educating the workforce.

Why is India poor today? The technology available to Indians is no different than that available to Americans. Do we need new inventions or new technology to make Indians rich?

No, but when you start with villages that have no electricity, no roads and people who have little to no education, to get to a rich country, you need to build roads and educate people. To build roads, you need to first build factories that turn out road building equipment, or alternatively purchase the equipment from abroad.
You need to build schools, and educate the teachers, and then it takes 20 years before the pupils are adults and can then go on to teach themselves, or become software engineers etc..

This process of capital accumulation I think is well described in economis and has some important implications for climate policy.

http://heikoheiko.blogspot.com/2007/05/economics-and-climate-change.html

Naturally, this assumes that there are investment opportunities with a high return that can be pursued without destroying the planet.

EliRabett said...

Given that Marxism came on as scientific economics raises ironic ignorance to new heights. However, I am more interested in the engineer vs. scientist idea. The problem with engineers since they are by nature "solution seekers" is that they are easily lead astray. Count the number of engineers who have wasted their lives on free energy machines. OTOH count the number of physicists who have wasted their lives on hidden variable theories.

ariafritta said...

"That is why economics as an academic subject is *descriptive* and all attempts to make it *prescriptive* are doomed from the start."

David,

economics is already prescriptive.
I don't believe in neutrality of actual economic science: as far as I know, think thanks who spread economic libertarianism are very highly subsidized. In other words, there is a very strong and ideological "prescription" about "no prescription".

(I apologize, English is not my native language, and I find myself in deep trouble when I try to express my thoughts in English...)

Anonymous said...

hi! Came here via a search on 'economists versus engineers', with a particular interest in changing power balance between industry reps (Eng) and the Market reps (Ecs).

I think your old lady in Mississippi is hilarious, and would like to let you know I don't think climate scientists have huge economic interests in what they are telling people; especially if you look at this in relation to the real and large economic interests that would have the climate change debate stopped.

Good on you for what you're doing; and so nice to have a forum where I can put in my 2 cents this morning! :)

The economic theory where people make decisions purely in their own financial interest is called Rational Choice Theory. Its is a THEORY, and although it has fairly wide currency (you'll excuse the pun, harhar) particularly in the US, it is not accepted by 6 billion people, and it is certainly not he modus operandii many live by. As a simple example of this: families; mothers dropping to parttime work even though it means less income, and in many countries less pension; ethical investing; and anywhere you hear that phrase, "NO! I would not accept that, don't be ridiculous... why? Because its Wrong! Why do you even ask?" etc. OK, maybe you don't hear that so often in the USA these days when it comes to finances.

When it comes to Marx, we can't just say, "Marx was wrong", because if we have read Marx (?) we know that he said a great many rather complex things that are not to be reduced to anti-capitalist soundbites. But let's say this: Karl Marx was not Khrushchev, and this is not a kitchen we are debating!

Karl Marx's theory of capital was primarily about social order, and his concern with domination and repression. When he looked at the suffering poor, he concluded that they were in that position because they were workers, not owners; and that what they produced was confiscated by people with more power. You can be VERY CRITICAL of Marx, and still not be advocating Rational Choice Theory! :-D
And, Marx was not a socialist! :-D

Capitalism comes in different forms, not only relating to the role of the state and expectation of service provision, but also the economic theory of regulation behind it. Like, the USA is more into monetary economics, and Britain is more into Supply Side...
Keynes is now discredited, Friedman is widely considered a prick...

Something that seems obvious to people outside the USA, looking at the USA: talk about economics, wealth, productivity seems to be very tied up with morals.
When folks from the US talk about cap versus communism, it seems to be invariably in terms of "Who was right, who won, and for what self-evident reasons". When there is talk about inquality in the US, its always either reduced to morals (they should get a job) or culture (they are culturally disadvantaged). And people seems to be forced into one of those discourses. I would argue that we can therefore conclude that capitalism in the USA is prescriptive: it is morally enforced.
And y'all freak out everytime somebody suggests your government should do something for you, like provide schooling or something. You act as if you are weak and taking handouts just because what you paid in taxes is given back to you in the form of a service provided with all the advantages of large economies of scale.

Having said that, honestly, I love Americans. Don't take this the wrong way.

markbahner said...

"Why is there such little prospect of a Copernican revolution in economic thinking?"

Why do you think one is needed? How many economists think the earth is the center of the solar system?

Michael Tobis said...

Most of them, from what I can tell.

TokyoTom said...

Michael, perhaps I can try to bridge what you and David are saying, which in a fundamental way is consistent.

You are dissatisfied, and rightly so, with the way our economy operates as an engine of destruction, and with how governments and corporations tend to contribute to problems rather than solutions.

It seems to me that the wide-scale problems and government`s role in them ARE a function of a dominant Keynesian/Pigouvian understanding of "economics" that is wrong and that has been used to justify an activist, self-aggrandizing central government. That this is true has really come home to roost in the past two years, with problems that can be seen to have been created by government.

I think that David is saying this much as well, and noting that most governments and pundits conveniently misunderstand economics, as it gives them more things to screw up while assuming the power to "fix" things.

David sees you want to see things "fixed", but warning that using government to deliberately "fix" things is fraught with peril.

If I may be so bold, I agree that we need a more pragmatic economics, one that puts people - and not governments or elites as God-like technocrats - first. That economics can be seen in the school of so-called "Austrian" economics (Hayek and von Mises) that focusses on understanding actual human behavior, preferences and voluntary institutions.

Elinor Ostrom, who just won the Nobel Prize in Economics for her decades of trans-disciplinary empirical research on how humans can cooperate to overcome tragedies of the commons (and how both governments and privatization may cause them), has been deeply influenced by this school:

http://bit.ly/2caqUr

You might want to take a look.

Tom

Hank Roberts said...

Something I know even less than usual about, but it's interesting:

http://www.montereycountyweekly.com/archives/2009/2009-Jun-11/marketers-at-the-sustainable-brands-conference-say-you-can-save-the-world-and-sell-products/1/

----excerpt follows----

“I worry about when the communications get ahead of the actions: You look under the hood, and they’re not changing their business model,” he explains later. “There’s opportunity for companies to change right now. There’s also opportunity for companies to cheat.”

He says he went corporate 10 years ago because he lost patience with activism: All his work with the Sierra Club only produced one piece of legislation, the California Desert Protection Act.

“I tried to pass laws. I failed at that,” he says. “Fifteen years and billions of dollars, hundreds of thousands of man-hours, and nothing. That’s why I got into this: because I can do something right now.”

The first step was shifting his view of mega-corps. “As hard as I’ve looked for that evil person – the old fat white man who sits in the back room plotting how to steal Christmas from his employees – that person doesn’t exist,” he says.

Nevertheless, aren’t the world’s biggest corporations also massive consumers of natural resources, generators of waste, destroyers of small businesses, exploiters of labor and producers of environmentally dubious goods?

“When a child takes a first step, they get cheered,” Werbach replies carefully. “When an adolescent learns to run a little faster, they don’t.”

He allows that corporate responsibility isn’t enough to save the planet, but asks who among us is environmentally pure. He, for one, isn’t sure what brand his leather lace-up boots are, or how they were made.

“I’m not in the business of absolving people,” he says. “There’s a huge amount of hypocrisy among green product users, myself included. So embrace it.” ...
-------- end excerpt -----

Hank Roberts said...

More excerpt -- this is where they go under the hood and look at corporate form. They're not talking about changing academic economics as a discipline, but about changing the legal rules by which corporations run.

---------

"... Conventional corporations are obligated to serve shareholders’ financial interests, she explains.

“From a legal standpoint,” she says, “if you go too far out of the box, shareholders can sue you.”

Slowly, that’s shifting. A small crop of so-called B corporations – “B” for “beneficial” – are forging a new model of operations, in which philanthropic values are legally protected as part of the company mission. They pledge to produce stuff that helps society, and they commit to strict standards of environmental practices and fair labor. Their directors are expected to serve not only shareholders, but also stakeholders: the environment and the community at large.

B corporations “use the power of business to solve social and environmental problems,” says movement co-founder Jay Coen Gilbert, whose Philadephia-area B Lab certifies and gives legal support to businesses like Numi Tea, Give Something Back office supplies and New Leaf paper. "
------
Dunno. Hopeful, maybe.

Anna Haynes said...

Shorter URL: http://bit.ly/savensell
("Marketers at the Sustainable Brands conference say you can save the world, and sell products")

Q - Given the notoriously short-term nature of corporate thinking, would there be a way to leverage that, and - in exchange for short-term corporate-friendly goodies - pass legislation that, N years from now, would strip corporations of (or otherwise nullify) their legislatively-decreed personhood and sociopathy?