Thursday, July 12, 2007

Science has it all...

One of my enduring interests outside science is economics. I don't get jazzed about the stock market or exchange rates or GDP, though, which is what I used to think economics was all about until I took a fabulous Microeconomics course from Mel Borland at Western Kentucky University. I took it because I needed credits to graduate, and suspected that I would hate it less than alternatives. I loved the course, and I left the class a different human being than when I entered it.

Economics, as a social science, is about allocating resources, resources that are limited, in order to get the most out of them. The goal is to provide the most happiness, or utility, or whatever variable you decide to maximize, at the lowest cost in effort, dollars, etc. Economists in the US tend to measure things in dollars, but one can pick whatever one wishes as a basis. Dollars are just an abstraction, to quantify something that we tend to believe, with little justification, to be ineffable.

If you have ever heard of the philosophical construct 'universal acid', an acid that dissolves everything, you get a sense of how I felt when I first began to grok economics. While there is always some irrationality in human beings, analyzing actions of people (especially in groups) as rational actors, seeking to maximize gain for a given investment, is a tool so powerful that is is easy to become quite intoxicated by it. It transcends very quickly the problems about supplying widgets at a given price. It helps to understand human behavior. Buying stocks, choosing a mate, making life or death decisions, all involve this sort of calculus, and while social mores tend to obscure them, recognition of them is, to not put too fine a point on it, majestic.

It is really easy to fool yourself into thinking that you and everyone else just automatically understands this stuff. But when you find yourself thinking "There ought to be a law limiting what they charge for gasoline" you generally ignore the fact that price controls inevitably lead to shortages. Inevitably. Gasoline, apartments in New York, whatever. And price floors lead to surpluses. Inevitably. People will argue with you until they are blue in the face that the minimum wage will NOT cause unemployment, but that is generally because anyone conscious of the issues is already making much more than that, and has no direct experience.

Statistical shenannigans and outliers will be trotted out about minimum wage, because it has such a personal face, but if you substitute anything else- say, TV sets- and say "No one can sell a TV set for less than $250", would you be surprised that fewer were sold than when the price could, in fact, go lower? How much is it worth to greet people at the door at X-Mart? As soon as it isn't worth it, would you expect someone to pay for it?

There are also dangers in over-simplification, and I don't mean to pretend that Econ 101 explains everything, or that the world is not in need of lots of serious reform. But Physics 101 doesn't, either, but someone with that level of knowledge is still miles ahead of someone who lacks it. Economics is like physics- fairness and gravity are unrelated, as are fairness and what people actually do. Not what they say they do, mind you, but what they in fact do. The most sublime bridge or skyscraper must ultimately bow to the laws set out in basic physics, or tumble to the ground. Similarly, basic econ knowledge can act as a preliminary 'bullshit detector' when considering what some cobra/politician is suggesting.

Econ gets obscured in the news, largely because reportage is unburdened by even the mildest familiarity with basic econ. But there are a handful of great books available to the interest layperson. Some of my favorites are David Friedman's Hidden Order: The Economics of Everyday Life, The Undercover Economist by Tim Harford, and Freakonomics by Levitt and Dubner, though Freakonomics is probably as much sociology as econ. Harford's book is especially recommended, especially if you have ever wondered why Africa stays poor no matter how much money we pour into it. (I apologize for the lack of links. Blogger pukes when I try to insert an Amazon link, and I am not in the mood to figure out how to do it by hand.)

Not only is economics pretty much understood, it can be pretty unloved, too. Bjorn Lomberg is a statistician/economist who is completely in agreement with Global Warming theory. He is convinced the world is warming, and he is convinced humankind is responsible. But his book, The Skeptical Environmentalist, committed the faux pas of considering how our (limited) resources could be spent in mitigating all of humanity's problems, not just AGW. And his contention is that Kyoto (for instance) would do almost nothing, but would consume so much money that things like disease control, hunger, poverty, the lack of clean drinking water, etc. would need to be forgotten. At the same time, he calculates (and not just him- see the Copenhagen Consensus for more details. Denmark is not exactly a neocon hotbed) that we could pay to solve all these other problems and adapt to global warming with the same money that would have no real chance to stop global warming. Bjorn excites a lot of passion, which is unfortunate, because people see environmental issues as proxies for left/right political issues, and ignore the data.

This sort of thing brings me back to reality. Physical science, at least at the hard edges of physics and chemistry, generally will yield a definitive answer, given time, money, luck, and careful experiments. Econ, not so much. I am reminded of the words of the great sage, Principal Skinner from the Simpsons:
Ah, there's nothing more exciting than science. You get all
the fun of sitting still, being quiet, writing down numbers,
paying attention... Science has it all.


At Friday, July 13, 2007, Blogger Ψ*Ψ said...

Never took an econ class, and it would appear that I won't be taking one before graduation (barring the unfortunate and unforeseeable). Freakonomics was interesting, though. What was the quote in the introduction? Something about a greater demand for prostitutes than architects? I like to mention that to the man in my life every so often (architecture student).

At Friday, July 13, 2007, Blogger David Eaton said...

Funny. There are a lot of counter-intuitive things about econ, no doubt. I'm not sure if the relative demand for prostitutes vs architects is one of those things, though...

Closer to home, science policy that gets set without serious economic thought can have a detrimental effect on the profession as a whole, I think. A good article on the scientist "shortage" is here:

At Friday, July 13, 2007, Blogger David Eaton said...


I'm not sure what beef Blogger has with my links, but it has given me fits lately...

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