Monday, March 26, 2012

Austrian Economics Forum Spring '12 #2--Emerging Rules

At our second AEF meeting, we discussed the work of one of the NC State University's Graduate Students, Richard Hammer.  He presented his work, "Life Grows Through Discovery of New Social Rules." 

He argues that life is thermodynamic.  If we start with some simple assumptions about basic life needs (rules to exist), he wants to know how far can we get with this line of analysis.  Can it circle around to be useful for analyzing our own behavior? 

He starts with single cell organisms (SCOs).  They need food and water.  If they lack enough food or water, they will die.  If food and water are distributed homogenously, then we really do not get interesting results, because there is no reason to act--other than simply consume. 

The interesting results begin when we assume that there are pockets of food and water that the SCOs have to go to.  If the food and water are too far apart, the SCOs die.  If they can travel back and forth, then they can survive. 

A fundamental law in economics, The Law of Comparative Advantage (Mises called it The Law of Association), is based upon specialization and the division of labor.  It says that when we trade, we can benefit.  We have certain advantages over others.  It might be that our skill set or natural talents are better than another's.  It might be as simple as being closer to a natural resource than another.  The point is that it is our differences that allow up to benefit.

So if we posit that food and water is irregularly distributed, then some SCOs will have a comparative advantage over others.  Some SCOs will be closer to the food and the others will be closer to the water.  This means that if they cooperate, both groups will be better off than if they opertated in autarky. 

So far, so good.  I agree, but I didn't really see much benefit to this line of analysis.  However, others did.  They asked, "Why do cells in our bodies perform particularized functions for the benefit of the overall body?"  Their reasoning followed along these lines...

When SCOs start to cooperate, they are able to specialize.  When they specialize, they give up other functions and become dependent upon other SCOs.  Thus, we see the inklings of the transformation from SCOs to multi-cellular organisms.  Additionally, a side discussion of meme theory took place.

All-in-all, it was an interesting disucssion, but I fail to see how such theories can circle back and inform economic theory.  Why make an argument by analogy?  Why not just make the argument?

I am reminded of a quote by Böhm-Bawerk, where he attacks arguing by analogy.  It took place in his debates on Capital and Interest theory with John Bates Clark.  He says,

There seems to dwell in the human heart an enervating proneness for playing the poet in matters of science, and for placing by the side of the common natural things and forces with which we have to do in the world of prose visionary doubles in the form of all sorts of mystical beings and powers, to which a semblance of reality is imparted by means of an ‘elegant’ abstraction. I hold this practice to be fraught with greatest danger to science. If one departs from the bare truths of nature by only a hair’s breadth, scientific accuracy of thought is irretrievably lost the sway of truth gives place to that of words and sounding phrases.
Until next time...


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