Saturday, February 2, 2008

Social Equilibrium

1.-Social Equilibrium

In the classical Samuelson´s text, Economics is defined as “the social science that studies the production, distribution, and consumption of goods and services”. The field, defined in that fashion looks useful and important, but also narrow and boring. The definition, fortunately, is outdated.

It was Ludwig von Mises, in his classic “Human Action” (1949) the first social scientist that defended that methodological individualism was a unifying methodology for social science. The “praxeology”, as defined by Von Mises, was the theory of the action of a volitive rational being facing scarcity. What was traditionally named “economics” was no more that a subfield of that general science of “rational action”, related to trade and production (“catallactics”). His personal approach to “praxeology” was fiercely anti-mathematical, but for mathematicians, the definition of “praxeology” sounded like some subfield of “optimization theory”.

In the fifties, John Nash and John Von Newman created the twin fields of Decision and Game Theory. The “Nash equilibrium” was a mathematical construction describing the action of a set of rational agents maximizing their selfish objectives in a non-cooperative way. The conceptual framework described by Nash was able to accommodate all the mathematical models of neoclassical economics: the oligopolistic models of Carnot and Stackelberg, the Ramsey model of inter-temporal optimal consumption, and the jewel of the crown, the Walrasian General Equilibrium, were all Nash equilibria. Suddenly, it was realized: methodological individualism could be described with mathematical precision and universality, and it was not restricted to production and trade; all the field of rational choice was permeable to maginalism and individualism.

In my view, after Nash and Von Mises, a new definition of economics should be proposed. I leave the task of building a technical one for the technicians. For philosophers, I will try my own one.

Since Descartes (and Newton), we can divide reality in two parts: the thinking subject (“res cogitans” in Latin) and the physical reality (“res extensa”). We have a few sciences to understand the “res cogitans”: Logic, Mathematics, Decision Theory, Semantics and Descartes & Wittgenstein’s Philosophy. Arts and Psychology also have a role in describing that World. The existence of the external world cannot be proven, but as a general rule we accept it does exists. Hard Sciences (Physics and its daughters) describe it.

But the fact that we are not the only thinking beings in the World creates some intermediate plane of reality: the inter-subjectivity: the place of social interaction and morality.

On one hand Decision Theory is the Algebra that describes how Reason and Desire turn into Action. On the other hand, Economics is the Geometry of Inter-subjectivity.

2.-Applied Social Equilibrium

Game Theory was the beguining of a silent revolution: James Buchanan applied methodological individualism to Political Science, creating the field of Public Choice Economics; Gary Becker expanded economic into classical sociological fields: gender, crime, race and class were all open to the economists. Schelling expanded both the theory and applications of Game Theory. In his classic “Nonzero”, Robert Wrigth attempted a World History based in the concept of “Commitment technologies”. In my opinion, the attempt was partially failed, but it shows the way for future “Theoretical historians”. The use of methodological individualism across social sciences received the name of “economic imperialism”, and the empire looks to comprehend the full field of social science.

This blog is devoted to social science: I mean positive social science. But I do also have normative views: political action is always the sum of positive reason and normative desire.

It is more difficult for me to provide my readers with my normative views; theoretically they are essentially “utilitarianism”; but when you try to make give inter-temporally consistent advices, the classical utilitarian recipes many times are no more that short-termism; utilitarianism corrected by inter-temporal consistency and hayekian meta-rationality is perhaps a good label for my normative views. On a more emotional layer, I suppose I am a sort of hobbesian libertarian: that is, I can accept power with resignation, but never with enthusiasm.

Finally, in order to clarify, in the Great Fight of our time I support Globalization, American Hegemony and Israel against Nationalism, international anarchy and Islamic fascism.

Note: The blog

In 2004, when I began the Spanish version of Social Equilibrium, I named it Kantor, simply my favourite nickname [1] at that point, in honour to the creator os Set Theory, Georg Cantor. It is still its name in Spanish.

In the beguining economics was supposed to be one of the many things I would devote my writings to. But in these three years, Kantor has been essentially a blog about economics, social science, and post-Cartesian philosophy (that is, materialism that takes into account the conscience problem).

This international edition of Kantor is the result of the work of a good friend from South America that has translated all the texts into English at an affordable price.

[1] Labour commitments make impossible to me the use of my real name.

1 comment:

Citoyen said...

Nice blog. I am satisfied that this post does not teach me anything new (:))

Maybe you should try to make some publicity about it, not only in your former blog, but also in some anglo saxon networks (I know that there are nice neocon network where your posts would be welcomed).

Just one observation: I think that it is too ambitious to call Robert Wrights' book a "classic" at the same level of Schelling and Gary Becker. It is just a more or less divulgative book with some original ideas. You could have talked about Steven Lewitt :) freaknomics changed my life (since i read that book i want to learn econometrics)