The Knowledge We Have Lost in Information
Metadata
- Author: Philip Mirowski and Edward Nik-Khah
- ASIN: B072JBKQBR
- Reference: https://amazon.co.uk/dp/B072JBKQBR
- Kindle link
Highlights
The truth, as conceived by modern economists, has not set anyone free. Instead, it brought about the death of the Kantian subject, and a subsequent lifeworld hollowed out the humanist concerns that many people mistakenly think are the heart and soul of a science of economics. — location: 100
But those who have some appreciation for the history of economic theory, and especially regarding the Sonnenschein/Mantel/Debreu theorems, which you can find in many graduate microeconomic textbooks, are also aware that those theorems essentially obviate the existence of any single valued smooth demand curve. — location: 150
See also seeing around corners for smoothing
It will probably come as no surprise that we personally do not accept the economist’s imprimatur of The Market as the final solution to the age-old problem of “What is Truth?” Thus do we owe the reader some brief cursory indications of the alternative stance toward truth that governs our principles of selection in this history. Contrary to academic expectations, it may be helpful to note we do not fall back on the Philosophy 101 version of “justified true belief” as the bedrock for our various narrative choices in this history of “information.”10 It strikes us that the pertinent organizing principles are not timeless monolithic criteria such as those often championed in Philosophy 101 but, rather, they involve acknowledgment that epistemology has meant different things to different groups in intellectual history. — location: 187
“Intelligence agents against their will”— — location: 230
The basic plot point is intended to induce vertigo: you, the protagonist, have no idea what you are doing, but no one but you are able to do this. The leading man’s meager moiety of information seems insignificant, but opens a crack to view an unseen world, such that he is caught up in forces beyond his ken which render that information (and therefore his life) so critical that the protagonist must risk everything. — location: 233
The history of economic thought often finds itself nostalgic for the older spy genres, as though the culture had never moved on. — location: 282
Neoclassical economists frequently characterize their schema as comprising three components: (a) a consistent well-behaved preference ordering reflecting the mindset of some individual; (b) the axiomatic method employed to describe mental manipulations of (a) as comprising the definition of “rational choice”; and (c) reduction of all social phenomena to be attributed to the activities of individual agents applying (b) to (a). These three components may be referred to in shorthand as: “utility” functions, formal axiomatic definitions (including maximization provisions and consistency restrictions), and some species of methodological individualism. — location: 346
The story must begin with the fact that the original neoclassical model was copied from energy physics — location: 436
was not the dread albatross that Giocoli conjures — location: 444
Wtaf
“habit psychology. — location: 458
And if that be the case, then what was it that caused the watershed around the mid-twentieth century, the rise of the “decision” as the hallowed hallmark of our (in)humanity, a tremor of tectonic proportions that Giocoli detects as well. — location: 474
Fuf
The short punchy answer, fleshed out in this volume, is threefold: it was the military, the rise of the digital computer and its complement “information,” and last but not least, the rise of the political doctrine of neoliberalism. — location: 477
The American military notoriously served as the incubator for the modern computer with its von Neumann architecture; what has only more recently come to be appreciated was that the American military was also the incubator for modern “decision theory.” As Heyck (2012, p. 110) reports, “If one searches an online database such as JSTOR for articles from the 1950s having to do with decision-making, one is over 90% likely to find that the author of the piece was at least partially sponsored by the Office of Naval Research or RAND.” — location: 492
The repercussions might even be momentous. What happens when the person on the street comes face to face with this kind of scorn (if that ever comes to pass)? Will the contempt of the economist be met with a different sort of disdain by the public? — location: 593
Fair
became relatively cavalier about treating trade as static allocation, and instead became all wrapped up in the image of The Market (or else the agent) as a processor of information or knowledge. — location: 601
“Information can be moved around easily in the products that contain it … but knowledge and know-how are trapped in the bodies of people and networks that these people form.” — location: 630
As Dan Schiller perceptively queried over a quarter century ago: “Why wasn’t the status of information a major topic in economic theory in 1700, 1800, or 1900? Why was it only in the postwar period that the economic role and value of information took on such palpable importance?”17 The easy retort—that it was absent-mindedly “overlooked,” exiled to peripheral vision until WWII—simply will not wash. Neither will the bad habit of searching for precursor statements from previous eras, anticipations which were never really there. — location: 649
“the era in which the retrieval, management, and transmission of information, esp. by using computer technology, is a principal (commercial) activity.” — location: 728
Shannon’s innovation was to treat the string of symbols conveyed as a stochastic process, with each symbol possessing its own characteristic probability. — location: 745
the mathematical expression for the average improbability of a string of such symbols would be exactly the same as the earlier definition of physical entropy: — location: 747
mixing and matching information metaphors — location: 760
Yes! Metaphors - and the mechanics of them
Machlup, coming from his Austrian neoliberal background, was appalled. “Information has become an all-purpose weasel word,” — location: 772
negentropy — location: 775
The physical instantiation of “machines who think” (whatever was intended by such locutions) provided irresistible metaphors for cognitive activities, many of which would be taken up to various degrees in all the social sciences in the postwar expansion of academic research. — location: 797
Is also responsible for belief and direction that computers replace humans
The cardinal insight of the early Hayek was to abandon Mises’s strange insistence that all “calculation” whatsoever would be impossible under socialism, and replace it with the seemingly more credible proposition that it would be impossible to collate and deploy all the knowledge required to coordinate the economy as successfully as the market managed to do in practice. — location: 961
The error of socialism, said Hayek, was to try and accomplish something through planning that had already been solved by The Market. — location: 965
The economic problem of society is thus not merely a problem how to allocate “given” resources … it is a problem of the utilization of knowledge which is not given to anyone in its totality. — location: 973
Here we witness the birth of the First Commandment of neoliberalism. Markets don’t exist to allocate given physical resources, so much as they serve to integrate and disseminate something called “knowledge.” — location: 976
The fact that this new image of markets as superior information processors so comprehensively swept everyone along—neoclassical theorists, market socialists, and neoliberals—with almost no serious scrutiny or skepticism is one of the more astounding facts of the latter twentieth century in economics. — location: 986
A tiny virus of meaning injected into economics in the 1940s so thoroughly took over that markets became an utterly different species by the 1990s, if not sooner. — location: 989
The fascinating thing about this fact is how it all tended to get neglected, soft-focused, and even forgotten over the decades, so that theoretical disputes might appear as low-temperature technocratic propositions instead. — location: 1004
It was also precisely at this juncture that Hayek began making explicit references to evolutionary theory as the basis of his entire philosophy. — location: 1054
Strangely for a doctrine that started out so concerned about respect for the inviolate individual and his or her subjectivity, the late Hayek rendered his system internally coherent by admitting that some knowledge did not really persist at the level of the individual mind, for the most part, but was processed and invested with meaning at the supra-personal level. In a catch phrase, since so much that people actually knew was inaccessible to them, the only entity that really was capable of judging and validating human knowledge was The Market. — location: 1070
Some latter-day Austrians have argued that entrepreneurs are just “smarter” than any dedicated intellectual, since they are marinated in this information and thus quicker to respond to market signals.14 Yet, almost by definition, there is no instrument available to humankind to “test” this proposition. — location: 1100
Recalling the insight of Hunter Heyck, the military was inclined to shift the focus from the mental state of the chooser to the choice as a freestanding phenomenon worthy of study; operations research was the vessel that supported the reorientation. — location: 1168
Once probability theory was married to utility theory in the 1940s—a specialty at Cowles—their “knowledge” became knowledge about the future consequences of current decisions, and it fed back directly into those decisions. — location: 1201
Marschak’s “team theory” never really caught on in economics (or anywhere else, for that matter), even though he devoted substantial efforts to its elaboration; but in retrospect, we might entertain it as a somewhat — location: 1293
Story using his theory
These studies quickly became wrapped up in considerations of “decentralization,” which had concerned Hurwicz since his earlier work on activity analysis (in 1950).25 Once market socialist proposals underwent redescription as informationally decentralized mechanisms, it became an accepted creed of Cowles market socialists that they, like Hayek, rejected a centralized solution. Socialism thus began to shed its more conventional connotations, and grew distant from any political theory. — location: 1333
Forms of socialism - here the economic form is different from commonly understood form
The doctrine that emerged in this tradition was the view that there was a trade-off between performance and information costs, which was deemed the real message of the economics of information. — location: 1348
In an extremely roundabout manner, this eventually led him to become one of the most important figures in the history of twentieth-century information processing, as one of the three or four founders of the field of artificial intelligence. — location: 1358
Perhaps more significantly, the Cowles approach later became ensconced in the postwar “new model” business school, partly in reaction to the rejected Harvard model. — location: 1505
Shannon had developed an argument that suggested information could be treated just like entropy in physics, comparing it to an enumeration of the ways a stochastic microdynamics of symbols could make up a measurable macrostate of messages. A concept originally fashioned to discuss mechanical obstacles to communication channels may turn out to be utter nonsense when used to discuss the semantics of communication in trade, as many soon came to suspect. But that did not exhaust its significance for economics. The Shannon mania of the first two postwar decades had the unintended consequence of bolstering the general impression that scientists could and should treat information as a quantifiable thing, and even as a commodity. In practice, it became quite common to conflate the embodiments and encapsulations of knowledge in objects and artifacts as mere epiphenomenal manifestations of a generic “thing” called information. It was a reification based largely upon a misapprehension—but that didn’t mean it still wouldn’t have untold consequences down the line. — location: 1568
more often than not through the instrumentality of the Coase theorem— — location: 1604
This ontological slipperiness of what, after all, is supposed to be a physical “given” to the model, is the first symptom of an outbreak of radical indeterminacy in this particular approach to an economics of knowledge. — location: 1608
Ri interesting euphemism
economists betrayed a weakness for synecdoche, misrepresenting the part for the whole. — location: 1614
and nothing would withstand the drumbeat of the reification of information into a commodity. — location: 1617
Since the story of psychology in the early twentieth century consisted of a series of frontal assaults on the conscious mind as executive in charge of rationality, a revanchist movement resorted to the theory of probability to stem the tide. — location: 1623
As Thomas Schelling once said in 1962, “There is a tendency in our planning [models] to confuse the unfamiliar with the improbable.” — location: 1670
“Although you may have false beliefs, you cannot know something that is false.”16 A parallel false universe was banished by construction. — location: 1681
“What equilibrium is in a particular market depends on what individuals in that market know. That the converse is true—that is, that what people know (or believe) is a function of the equilibria of the markets in which they participate—is an observation which surely must precede Marx.” — location: 1685
The standard game setup ends up inverted; realized payoffs tell you who your opponents really are. Of course, once mixed strategies are allowed over types, then all meaning of player identity dissolves into thin air. How you are supposed to know who you yourself really are under such circumstances is a mystery. — location: 1721
The computationalist turn has assumed two different formats in the history of orthodox economic theory: the first attempts to subject the standard rational choice model to be subsumed under a computationalist model of mind, while the second tends to fall under the rubric of “market design.” — location: 1762
Two models of computational analysis
The latter market design wing combines certain sectors of experimental economics with what might be best described as “engineers of automated markets,” where both claim to have superior insight into the informational properties of markets with large numbers of participants. This latter group has ambitions to be engineers of the human soul, arguing that their purpose-built machines can force people to tell the truth even when their every intention is to be mendacious, or provide them with information that they would otherwise find inaccessible through any conventional recourse to research channels. — location: 1770
One lesson he drew from this line of research was a thesis he dubbed the “Hayek Hypothesis” (1982, in Smith 1991): “Strict privacy together with the trading rules of a market institution are sufficient to produce competitive market outcomes at or near 100% efficiency”—that is, independent of the cognitive abilities or status of the agents involved. Smith believed that the neoliberal power of The Market had been proven in the laboratory, infusing it with the aura of real science. — location: 1806
While there is still substantial dispute over the interpretation of their results,30 it appeared that brainless programs produced nearly indistinguishable results with regard to convergence and efficiency compared to Smith’s human subjects. — location: 1833
“a science of markets need not be built from the science of individual behavior… . Market institutions may be society’s way of dealing with human cognitive limitations… . Efficiency of markets is primarily a function of their rules.” — location: 1840
Here, then, was a formal harbinger of a neoclassical economics without the trappings of “rationality.” — location: 1844
In chapter 7, we saw how Friedrich Hayek’s argument against socialism served as the initial provocation for economists to come to grips with “information.” Economists at Cowles interpreted Hayek as arguing the relative merit of “free markets” over socialism on informational grounds, and they found this argument wanting. In a move that would have vast and enduring ramifications for the future of the economics profession, Hurwicz and his colleagues at Cowles responded to Hayek’s provocations by reconceiving their task as external evaluation of the informational properties of economic systems, claiming soon thereafter that these methods could also inform choice among a plethora of “institutions.”1 The Cowlesmen eventually rebranded themselves as experts in “organization,” a term that assumed brash capacious dimensions so as to cover such varied phenomena as the internal structuring of large companies, the design of cost-plus contracts for the mobilization of industry during wartime, the evaluation of Soviet central planning algorithms, and the crafting of regulation. Indeed, the historian Hunter Heyck has described how a fascination with “organization” became conflated with themes of algorithmic reason and analysis of information across the immediate postwar social sciences.2 With increasing frequency, these new organization theorists (disproportionately concentrated at Purdue, Caltech, Arizona, and Northwestern) began to contemplate designing new institutions, ranging from novel legal regimes to “solutions” for public goods provision to the reorganization of entire economies.3 And in what turned out to be the most significant development for the future of the economic profession, they would also claim an ability to reconstruct individual precursor markets themselves. — location: 1852
Obv need to fit the models that theyre based on
The time was the 1980s; in an age of retrenchment, the Reagan administration had proposed drastic budget cuts for social science funding. Understandably, this alarmed a broad range of social scientists and provided an impetus for them to join in an unusual effort to justify the practical usefulness of their disciplines and highlight the most promising areas for development (and funding).9 With research financing now imperiled, the spadework undertaken at Cowles (and later, Purdue) began to bear fruit as the profession rallied around the study and design of novel “organizations.” Slowly at first, but then with astonishing rapidity, the aspirations of economists and policymakers converged on the task of thoroughly redesigning the organizations of the economic lifeworld from bottom to top. Market designers offered to lend their expertise (for a price), and with increasing frequency policymakers took them up on their offer. This convergence was no accident. Policymaker and economist alike came to appreciate how real-world markets came to increasingly resemble information processors, and they adjusted their aspirations in light of this;10 both would come to attribute immense epistemic capacities to these markets. — location: 1899
interesting the way that funding and regulation creates incentives that shape theory - in this case financial incentivisation to show how social sciences had worth in economic spaces.
Like detective stories, histories of economics tend to conform to certain conventions that make the reader comfortable. Almost all current intellectual history of economics portrays its protagonists as if they were all talking about the same “thing,” as if in a dialogue across generations. That endows the plot line with solid chronology and infuses a confident sense of cumulative understanding. — location: 1912