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)
Note: 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)
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)
Note: 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)
Note: 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)
Note: 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)
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)
Note: 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)
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)
Note: 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)
Note: 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)
Note: 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)
Note: 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)
Note: 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)
