Re: CAMREC: Egalitarianism in a world of power-law distributions

From: the Campaign for Real Economics (camrec@mmu.ac.uk)
Date: Thu Dec 14 2000 - 23:03:08 GMT

  • Next message: the Campaign for Real Economics: "Re: CAMREC: Egalitarianism in a world of power-law distributions"

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    From: the Campaign for Real Economics <camrec@mmu.ac.uk>
    Date: Thu, 14 Dec 2000 15:03:08 -0800 (PST)
    Subject: Re: CAMREC: Egalitarianism in a world of power-law distributions
    

    Hi!

    sorry for the long delay in answering this mail. Last
    semester I had been attending a lecture series by
    Dietrich Stauffer of Cologne University. One of the
    topics was econophysics - which should'nt be a
    surprise. Didnt't find him particularly opposed to
    neoclassical economics, just Gaussian distributions.
    In contrast to other physicists he is aware of the
    problem of reinventing the wheelalthough I couldn't
    really probe him on his general economics knowldege.
    And vice versa I remember an article in ICC on fat
    tails...but that weren't necessarily neoclassical
    guys.
    After that lecture series we got into a small exchange
    of emails in which we discussed predictability (after
    publication of the results of an analysis) from the
    point of view of econophysics. I tried to argue in
    favor of a feedback effect a la reflexitivity. He did
    not seem to want to give it too much weight, but
    pointed me to Didier Sornette (UCLA?), who is
    researching earthquake prediction, whose theory might
    be better suited to modeling such an effect. I never
    got past reading his webpages due to lack of time but
    maybe there's sth here...
    As to the synthesis you speak of that should be
    "pretty simple" in terms of evolutionary approaches
    (not social darwinist or sociobiology) to economics:
    diversity (should go together with inequality) ->
    selection according to characteristics of
    socio-economic system -> adaptation; change triggers
    new cycle, overall result sth like progress based on
    differences the process of which is associated by
    necessity with different income/wealth. then comes a
    welfare evaluation trying to figure out optimal rates
    of change and/or diversity values and you are done.
    If I ever get my PhD done there should be an argument
    along these lines in it.
    I wouldn't associate it with any political direction -
    you can get your favorite political ideas in there -
    if you like by making some assumptions otherwise by
    putting some statements on what you consider best for
    society in front of it ;-).
    Of course there is a lot of issues from other fields
    (sociology, psychology etc)involved - which is part of
    the problem...

    Best regards,

    Carl Henning

    drs/Ma Econ
    Carl Henning Reschke
    Mainzer Str. 80
    50678 Cologne

      
    --- the Campaign for Real Economics <camrec@mmu.ac.uk>
    wrote:
    >
    >
    > I've been trying to find a connection between
    > econophysics and neoclassical
    > economics. Econophysics has been bouncing ideas off
    > the economic Ivory
    > Tower for several years now with very little impact.
    > I've wondered why.
    >
    > One possible answer is the focus of econophysics on
    > 'risk' analysis. The
    > econophysicists are big on gathering huge amounts of
    > trading data and
    > pouring it into their statistical routines designed
    > for quantum
    > mechanics. Pulling the results from their
    > mathematical machinery, they
    > announce the discovery that 'neoclassical theory is
    > wrong since it didn't
    > predict fat tails!' They then set up shop as 'risk
    > experts', as if all
    > economics was devoted to protecting assets.
    >
    > It seems they miss the rather utopian foundations of
    > economics. The point
    > of economic theory is building utopia, an equitable
    > society for everyone
    > (perhaps every living thing) in the world. UN
    > councils on economics are
    > supposed to assist our political organizations into
    > a tranquil era of peace
    > and prosperity. It seems fair to claim that unless
    > econophysics can
    > address these simple utopian aims, it offers no
    > economic insight.
    >
    > For example, consider the role of egalitarianism in
    > econophysics. Egalitarianism is a simple, almost
    > universal, credo. Who is
    > willing to advocate inequality! Adam Smith and the
    > neoclassical tradition
    > seems to assume that 'left alone,' economic
    > egalitarianism is natural. Man
    > has corrupted the balance of nature. Economics will
    > straighten out the mess.
    >
    > Unfortunately for the econophysicist, the data they
    > study provides a vast
    > collection of power-law distributions, a host of
    > lessons in
    > inequality. Equality is simply unnatural. Nature
    > distributes wealth via
    > power-laws! Equilibrium stability is unnatural.
    >
    > My guess is that we are waiting for someone to find
    > an attractive political
    > use for the knowledge that wealth is 'naturally'
    > non-egalitarian and we are
    > all somehow better off for this. Until someone
    > comes up with this
    > synthesis, econophysics and 'real economics' will
    > little impact on the
    > public at large.
    >

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