Wednesday, November 30, 2011

Stuart Kauffman Likes Austrian Economics

After telling Stuart Kauffman in an email that I used his work in my own, including in some upcoming papers, I received the following reply:

"Glad to hear you are using my work with Austrian economics. They are not, I'm glad, so wedded to equations. Kind regards, Stu Kauffman"

Which answers one of the questions I have always had about the Santa Fe group when it comes to economics: why aren't they reading the Austrians?!? Well, apparently, at least Stu Kauffman is.


  1. Thanks for the post! Giuseppe Longo, senior mathematician at the Ecole Polytechnique Paris, and I are writing a paper hoping to show that NO LAW ENTAILS the evolution of the biosphere or economy or culture. More, we think that these evolutions cannot be mathematized. If so, that is the underlying reason why there are no equations in Darwin's Origin of the Species, or in so much of Austrian economics. Anglo - American economics, in an honest drive to be rigorous, sought and seeks formal mathematical models and has accomplished an enormous amount. But the global economy has exploded from perhaps 1000 goods across the globe 50,000 years ago to ten billion today.This explosion of goods and production capacities must be a or "the" major driver of economic growth. If Longo and I are right, no mathematical laws of motion that can, like Newton's laws, be integrated to deduce = entail the evolution of this explosion can be written down. Thus, I think, Anglo-American economists tend to ignore this stunning fact of our economic life.

    Even now, some economies are supracritical, making ever new goods and production functions, eg the global economy. Alberta Canada is subcritical, making and exporting timber, oil, beef, and wheat. Alberta is wealthy, but a subcritical economy does not make, sell and buy goods internal to itself, largely buffered from the fluctuations of the export, eg commodity, markets. Nor does the World Bank seek to create regional supracritical economies of webs of complementary goods and production capacities that might really help impoverished nations, particular, I suspect, if the webs started at the local technological level.

    Thanks again for posting. Stu Kauffman

  2. Considering the authors, such a demonstration would constitute a major blow against overly-mathematized economics.

    I actually made a similar point about rural economies, arguing that they are subcritical, vs. urban economies, which are critical, in a paper that will be coming out in a future Advances in Austrian Economics on spatial economics and economy geography. It's titled "The Far-From-Equilibrium City." I'm glad to hear you find the same thing for places like Alberta.

  3. Stu: the problem with trying to turn economics into math is that not everything which can be measured matters, and not everything that matters can be measured. Unfortunately, that doesn't stop the people who think that a BS in math is a prerequisite to a PhD in economics.

  4. I think most mainstream economists do miss the importance of the vast number of goods. Interestingly, Adam Smith emphasized this very point, saying that the complexity of the division of labor "exceeds all computation." Today it is possible to use formal methods to find the limits of formal methods, just as Hume used reason to find the limits of reason. Computability theory gives us the formal tools to show the limits to formal methods. This sort of math lets you give a rigorous meaning to statements like "No economist can process information faster than the economy." Morgenstern was interested in self-reference, as with his discussion of Holmes and Moriarty. And he knew about Goedel and, presumably, Turing. But he went for game theory instead of computability theory to get at the issue. That didn't quite work to get at the paradoxes of self-reference, IMHO. But today we have a literature on computability *in* game theory and *that* lets us really get at self-reference and the corresponding limits of formal analysis.

  5. Here are more of my musings inspired by Stu Kauffman.