Friday, June 30, 2017

Chess metaphor for macroeconomics


I think of macroeconomics as being like a chess game. Similar to chess, the world economy is made of many different economic actors with different abilities and placements. The world economy has a structure that is continually evolving. Instead of relying on a particular macroeconomic theory, I think it's more effective to pragmatically analyze the structure of economic actors in an economy to determine the best course of action. In chess, players must also pragmatically analyze the structure of the pieces to make decisions.

Here is what each chess piece represents in the economy:

  • Pawns: low income people
  • Queen: billionaires
  • Rooks, bishops and knights: companies
  • King: planet earth
  • Opponent's pieces: goods and services

Pawns represents a low income people because pawns have the least mobility and are the weakest pieces on the board. If a pawn is able to miraculously reach the other side of the board, they acquire the abilities of a queen. This represents when a poor person through hard work and luck is able to become a billionaire.

The queen represents billionaires because the queen has the greatest mobility and power in the game. Billionaires are the most powerful actors in the economy.

Rooks, bishops and knights represent companies because they have a lot of power but not as much as the queen. Companies are extremely diverse, therefore it's fitting that they can be either a rook, bishop or knight.

The king represents planet earth because if the king dies, the game is over. If planet earth becomes so polluted that it's uninhabitable, it's game over for society. A defensive strategy to protect the king is symbolic of regulations to protect the environment.

The opponent's pieces represent goods and services because the goal of economics is to produce goods and services. The goal of chess is to conquer the opponent's pieces.

When playing chess, it's important that all of your pieces work together. It's important that your pieces back each other up. Unsupported pawns stand no chance of surviving. Pawns need the help of more powerful pieces to make a greater contribution. Bottom line, your pieces must act like a team. Imagine playing a game of chess without moving your queen; you will lose. This is the similar to not taxing billionaires to pay for things that will improve society.

Here's a final quote from Adam Smith which is the one of the early uses of the chess metaphor,
...in the great chess-board of human society, every single piece has a principle of motion of its own, altogether different from that which the legislature might choose to impress upon it. If those two principles coincide and act in the same direction, the game of human society will go on easily and harmoniously, and is very likely to be happy and successful. If they are opposite or different, the game will go on miserably, and the society must be at all times in the highest degree of disorder. (The Theory of Moral Sentiments, 1759)

Saturday, June 17, 2017

What is economics?


What is economics? Here is my answer:

Economics is the study of the production, distribution and consumption of goods and services.

In other words, economics is the study of the economy.

This post is a collection definitions of 'economics' from famous economists. I have divided the definitions into four categories: scarcity, wealth, decision-making and open-ended. This post was inspired by Roger Backhouse and Steven Medema's paper 'On the Definition of Economics'.

For each definition, I have provided a short analysis.

Wealth based definitions


Adam Smith (1723-1790)
"[Economics is] the nature and causes of the wealth of nations." (The Wealth of Nations, 1776)
  • I think Smith's definition in agreement with the definition I stated above. 'Wealth' is a good substitute word for 'goods and services'. 'Nature and causes' is a good substitute for the word 'study'.

Jean-Baptiste Say (1767-1832)
"[Political economy is] the science of production, distribution and consumption of wealth." (A Treatise on Political Economy, 1803)
  • This definition is basically the same as the one I provided above. 'Wealth' isn't as descriptive as 'goods and services' but means the same thing. My only problem with this definition is that the word 'wealth' could be misinterpreted for 'abundance', therefore I prefer the phrase 'goods and services'.

John Stuart Mill (1806-1873)
"[Political economy] is the science which traces the laws of such of the phenomena of society as arise from the combined operations of mankind for the production of wealth in so far as those phenomena are not modified by the pursuit of any other object." (On the definition of Political Economy, 1867)
  • Although this definition is confusing, I agree that economics revolves around the 'wealth'. That's really all this definition is saying.

Thomas Adams (1873-1933), Richard Ely (1854-1943), Max Lorenz (1876-1959) and Allyn Young (1876-1929)
"[Economics is] the wealth-getting and wealth-using activities of man." (Outlines of Economics 4th edition, 1926)
  • I agree that economics has to do with  'wealth-getting' (production) and 'wealth-using' (consumption) but I think this definition would be better if it mentioned 'wealth-distribution'.

Scarcity based definitions


Lionel Robbins (1898-1984)
"[Economics is] the science which studies human behavior as a relationship between ends and scarce means which have alternative uses." (Essay on the Nature and Significance of Economic Science, 1932)
  • This is currently the most influential and popular definition of economics. I'm generally against 'scarce' definitions of economics because I don't think 'scarce' is an accurate mindset for a world with unlimited opportunity.

George Stigler (1911-1991)
"[Economics is] the study of the principles governing the allocation of scarce resources among competing ends when the objective of the allocation is to maximize the attainment of the ends." (The Theory of Competitive Price, 1942)
  • Once again, I don't think economics should be about 'scarce resources'.

Milton Friedman (1912-2006)
"[Economics is] the science of how a particular society solves its economic problems... an economic problem exists whenever scarce means are used to satisfy alternative ends." (Price Theory: A Provisional Text, 1962)
  • I don't think economics should revolve around 'problems'. What about all the good things in life?

Paul Samuelson (1915-2009)
"Economics is the study of how people and society end up choosing with or without the use of money to employ scarce productive resources that could have alternative uses, to produce various commodities and distribute them for consumption, now or in the future, among various persons and groups in society. It analyzes the costs and benefits of improving patterns of resource allocation." (Economics 10th edition, 1976)
  • I agree with this definition except that I would replace the word 'scarce' for 'limited'. But even the word 'limited' is kinda wrong. There are some economic resources I would describe as 'abundant'. Maybe it would be best to just remove the word 'scarce'.

Gary Becker (1930-2014)
"[Economics is] the study of allocation of scarce means to satisfy competing ends." (Economic Theory, 1971)
  • I think this definition is too focused on the 'distribution' and 'consumption' part of economics with not enough emphasis of 'production'.

Robin Bade and Michael Parkin
"[Economics is the] social science that studies the choices that individual, business, government and entire societies make as they cope with scarcity." (Foundations of Microeconomics, 2002)
  • This definition revolves around scarcity. It's as if society is given a pie that must be divided up with no potential to create more pie. This definition doesn't talk about the 'production' part of economics.

Decision-making based definitions


Carl Menger (1840-1921)
"[Economics] is related to the practical activities of economizing men." (Principles of Economics, 1871)
  • What does it mean to economize? According to Google, "to spend less; to reduce one's expenses". Although this definition kinda works, I still think it's really broad and doesn't properly define the boundaries of what economics is.

Alfred Marshall (1842-1924)
"Political economy or economics is a study of mankind in the ordinary business of life. It examines that part of individual and social action which is most closely connected with the attainment and with the use of the material requisites of wellbeing... thus it is on the one side a study of wealth and on the other, and more important side, a part of the study of man." (Principles of Political Economy, 1890)
  • For the most part I agree with this definition. I agree that 'ordinary business of life' revolves around economics. I like how this definition focuses on what is 'most closely connected with the attainment and use of the material requisites of wellbeing'.

Summer Slichter (1892-1959)
"The subject matter of economics is industry; the process by which men get a living... economics studies industry, not as a technological process, but as a complex of human practices and relationships." (Modern Economic Society, 1931)
  • This definition is very similar to Marshall's definition. I agree that economics is all about 'industry' (goods and services) and the 'process by which men get a living' (production, consumption).

James M. Buchanan (1919-2013)
"[Economics is] the study of the whole system of exchange relationships."
  • This definition has too much emphasis on the 'distribution' part of economics while ignoring 'production' and 'consumption'.

David Colander (1947-now)
"Economics is the study of how human beings coordinate their wants and desires, given the decision-making mechanisms, social customs and political realities of the society." (Microeconomics 6th edition, 2006)
  • Although I think this definition is valid for economics, I think its better suited for sociology.

Greg Mankiw (1958-now)
"Economics is the study of how society manages its resources." (Principles of Economics 2nd edition, 2001)
  • This is a broad definition but I think it works. Ultimately, this definition has to do with the production, distribution and consumption of 'resources'.

James Gwartney, David MacPherson, Russell Sobel and Richard Stroup
"Economics is the study of human behavior with a particular focus on human decision-making." (Microeconomics: Private and Public Choice 11th edtion, 2006)
  • This definition seems better suited for psychology.

Open-ended


Jacob Viner (1892-1970)
"Economics is what economists do." (Quoted by Kenneth Boulding in Economic Analysis, 1941)
  • This definition is completely inadequate. What's the point of definitions and words in the first place? Without words and concepts we are lost children in the woods. Philosopher Friedrich Nietzsche says, "The man of action binds his life to reason and its concepts so that he will not be swept away and lost; the scientific investigator builds his hut right next to the tower of science so that he will be able to work on it and to find shelter for himself beneath those bulwarks which presently exist." (On Truth and Lie in an Extra-Moral Sense, 1873)

Sunday, June 4, 2017

EconTalk: six part series on econometrics


Back in March 2016, Noah Smith had a blog post titled, Russ Roberts and the new empirical world. In the post, Smith mentions six episodes from Russ Roberts' podcast Econ Talk that are basically a series on econometrics. I enjoyed listening to this series because it's informative to hear verbal explanations for econometric concepts.

This post is a collection of my favorite quotes from the six episodes.

Ed Leamer on the State of Econometrics (May 10, 2010)

"Economists don't observe feathers in a vacuum. They observe feathers when the wind is blowing, when humidity varies, eagle feathers, duck feathers. Tons of things that will affect the result."

"So when somebody says in the past $100 billion of spending had such and such impact on the U.S. economy, if there was this level of unemployment and this level of growth in the previous period, people are presuming that the same structural relationships that help when those estimates were made will still hold. So even though the cause of the recession might be totally different, even though what the money is spent on might be totally different, implicit in those multiplier arguments is the presumption that it doesn't matter."

"If you want to know: does government spending have a multiplier? Then you need a treatment group and a control group. You need to randomly subject an economy to a burst in spending and see what happens to that economy and contrast that to the control groups that did not get that spending."

"Econometric analysis is really journalism. Journalist's job is to marshal facts and put them together persuasively."

"To think that designing experiments is suddenly going to change economics into an empirical scientific discipline. That's doesn't seem likely to happen."

"All we have, especially in macro is opinions and their either persuasive and well thought out or not."

Joshua Angrist on Econometrics and Causation (December 22, 2014)

"We talk as an ideal the kind of randomized trial or field trial that's often used in medicine to determine cause and effect or to gauge cause and effect."

"Regression is just a way to control for things, to try and hold characteristics of groups that you're trying to compare fixed."

"I can't imagine seeing an empirical paper about cause and effect which doesn't at least show me the author's best effort at some kind of regression estimates where they control for the observed difference between groups."

"Each of these is an attempt to generate some kind of apples to apples comparison out of observational data."

"Sometimes instrumental variables is a method for leveraging experimental random assignment in complicated experiments where the treatment itself cannot be manipulated but there's an element of manipulation in the treatment."

"Regression discontinuity designs are non-experimental researched designed that attempt to mimic an experiment by using the rules that determine allocation to treatment states."

"So some of the evidence in these areas is stronger and weaker. There is certainly a lot of interesting evidence here that's worth discussing. That's my standard."

"Well science is done by human beings. When you come at it from an idealistic view, you're bound to be disappointed."

"One of the most influential documents in the history of social science is Friedman and Schwartz... It's an effort  to get at the causes of the Depression. I think we can do better than Friedman and Schwartz with the tools today. Their work is a benchmark and a worthy benchmark."

Noah Smith on Whether Economics is a Science (December 28, 2015)

"You can often exploit quirks of how policies happen or how the real process works to get clean identification."

"The most important difference with natural experiments is you can't replicate them or repeat because each natural experiment happens only once."

"It's extremely hard to find these clean natural experiments in macro."

"If you're going to believe the results of an experiment you always have to make a leap of faith that all the reasonable stuff has been controlled for, right? That the experimenter has good controls and that's an assumption and a leap of faith you have to make in every science experiment."

"I think the thing about the stimulus is... it's not at all clear. The stimulus was not an actual experiment at all."

"There are some thunderbolt studies but what's much more common is an accumulated weight of studies that all have consistent results... So don't rely too much on these thunderbolt studies even though sometimes they do exist but they're pretty rare."

Adam Ozimek on the Power of Econometrics and Data (February 8, 2016)

"Evidence is good even if it doesn't mean the same thing to everyone."

"I think the research comes out and looks at slightly different angles and adjusts for slightly different mechanisms and we know so much more about the minimum wage than we did 10 years ago... If you look at the literature closely it doesn't look like a draw where two sides just lob evidence back and forth. It looks like progress to me."

"Macro's definitely harder. There's no doubt about that. There's less data. It's harder to isolate partial equilibrium."

"The stimulus act isn't something like the minimum wage. It's not a discrete policy where you turn the fiscal level up and it goes from 0 to a 1 to a 2 to a 3. The stimulus act was like a dozen different things and so to say that research hasn't told us whether the stimulus act was good or not or increased jobs, well I mean you could write a 100 page paper on just what was in it... but I do think that within the stimulus package there are things we can learn and have learned."

James Heckman on Facts, Evidence and the State of Econometrics (January 25, 2016)

"The new techniques are not so new. They involve instrumental variables which I think go back to Philip Wright in 1928. Instrumental variables have been a central part of econometrics for the last 70-80 years."

"Unfortunately the credibility revolution has taken this notion that there's some missing variable out there, some unobservable and we want to control for that unobservable to a new level, to a new extreme so much so there seems to be an obsession with making sure that we don't have this unobservable contaminating our result without asking what question that we're getting from this instrument."

"I think there's been a huge shift away from understanding behavior and moving towards statistical artifacts that are hard to interpret as responses to economic questions. So I think the credibility revolution has been somewhat overstated and not properly appreciated as having really turned focus away from serious economic analysis towards something I think is purely statistical."

"Calibrated models are models looking at some stylized facts that are putting together different pieces of data that are not mutually consistent. I mean literally you take estimates of this area, and estimates from that area and you assemble something that's like a Frankenstein..."

"I think every successful body of social science that use basic models, they've gotten to kind of the core of the idea; not bells and whistles. And bells and whistles are kind of second generation, third generation add-ons. Bells and whistles are often professionally and privately rewarding but maybe not so rewarding for the subject as a contributor to economic knowledge generally and public policy."

"Milton Friedman raised to me some of my first concerns about the credibility revolution. I remember telling him about some work I was doing and you remember the work I was doing was very complicated for its time. He looked at me and said, 'It looks like that kind of work has lots of room for fraud.'"

David Autor on Trade, China and U.S. Labor Markets (March 14, 2016)

"It's not that I think our estimates are cooked or even that sensitive. It's that they might miss other important margins. And I'm happy to concede that point. I mean, we've tried. It's not that we've sort of agreed to just sort of punt on that question. There's probably a lot of ways to look for those missing margins. We really haven't found them."

Monday, May 29, 2017

Macroeconomic experiments


In an earlier post I provided a list of 10 economic statements from famous economists. My goal is to determine the validity of each of these influential statements.

This post is a list of macroeconomic events that can be used to analyze each statement. I'm aware there are many confounding variables impacting these events, but I believe this list is a good starting point for compiling potentially useful macroeconomic experiments.

1. John Maynard Keynes (1883-1946):
"The right remedy for the trade cycle is not to be found in abolishing booms and thus keeping us permanently in a semi-slump; but in abolishing slumps [with fiscal and monetary policy] and thus keeping us permanently in a quasi-boom." (The General Theory of Employment, Interest and Money, 1936)

Key variable: GDP growth

Fiscal policy
  • United States' New Deal (1933-1938)
  • United States in World War II (1939-1949)
  • United States' American Recovery and Reinvestment Act (2009)
  • Greece austerity (2010-now)
Monetary policy
  • Federal Reserve quantitative easing (2008-2014)
  • Bank of Japan quantitative easing (2001-now)

2. Adam Smith (1723-1790):
"By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention." (The Wealth of Nations, 1776)

Key variable: GDP growth
  • Union of Soviet Socialist Republics communism (1922-1991)
  • United States free trade (1776-now)

3. Milton Friedman (1912-2006):
"I am in favor of cutting taxes under any circumstances and for any excuse, for any reason, whenever it's possible... because I believe the big problem is not taxes, the big problem is spending. I believe our government is too large and intrusive, that we do not get our money's worth..." (Quoted in Conservatives Betrayed, 2006)

Key variable: GDP growth
  • United States tax policy (1932-1988)
  • Sweden tax policy (1939-1988)

4. Joseph Schumpeter (1883-1950):
"The innovation is hazardous, impossible for most producers. But if someone establishes a business having regard to this source of supply, and everything goes well, then he can produce a unit of product more cheaply, while at first the existing prices substantially continue to exist." (The Theory of Economic Development, 1934)

Key variable: quantity of replaced businesses
  • Walmart (1962-now)
  • Microsoft (1975-now)
  • Amazon (1994-now)

5. David Ricardo (1772-1823):
"Under a system of perfectly free commerce, each country naturally devotes its capital and labour to such employments as are most beneficial to each." (Principles of Political Economy and Taxation, 1817)

Key variable: GDP growth
  • World Trade Organization and China (2001-now)
  • Smoot-Hawley Tariff Act (1930)

6. Friedrich Hayek (1899-1992):
"The misconception that costs determined prices prevented economists for a long time from recognizing that it was prices which operated as the indispensable signals telling producers what costs it was worth expending on the production of the various commodities and services, and not the other way around." (Coping with Ignorance, 1978)

Key variable: price
  • It's hard to think of what specific event can help test this statement. Maybe a good example could be the event that the popularity of an artist takes off and the price of their paintings greatly exceeds the cost of production.

7. John Kenneth Galbraith (1908-2006): "In recent times no problem has been more puzzling to thoughtful people than why, in a troubled world, we make such poor use of our affluence." (The Affluent Society, 1958)
  • This type of statements can't really be judged based off of a single event. It makes more sense to analyze facts and evidence to determine this statement's validity.

8. Robert Owen (1771-1858):
"The advantage of pure, and the disadvantage of impure air are experienced each time we breathe, and all who understand the causes of disease know that an impure Atmosphere is most unfavourable to the enjoyment of health, and an efficient cause to shorten human existence within the natural life of man. It is therefore most desirable that decisive measures should be devised and generally adopted to ensure to all a pure atmosphere, in which to live during their lives." (The Book of the New Moral World, 1836)


Key variable: quality of life indicators
  • United States quality of life
  • Sweden quality of life

9. Robert Thomas Malthus (1766-1834):
"The employment of the poor in roads and public works, and a tendency among landlords and persons of property to build, to improve and beautify their grounds, and to employ workmen and menial servants, are the means most within our power and most directly calculated to remedy the evils arising from that disturbance in the balance of produce and consumption." (An Essay on the Principle of Population 2nd Edition, 1836)


Key variable: unemployment
  • Europe's Marshall Plan (1948-1951)
  • United States' New Deal (1933-1938)

10. Karl Marx (1818-1883):
"The worker's existence is thus brought under the same condition as the existence of every other commodity. The worker has become a commodity, and it is a bit of luck for him if he can find a buyer... " (Paris Manuscripts , 1844)

Key variable: unemployment
  • Industrialization (1800-1900)
  • Computerization (1900-now)

Saturday, May 20, 2017

Tjalling Koopmans: pioneer of optimization models


Tjalling Koopmans (1910-1985) was an influential economist best known for optimization models and applying linear programming to general equilibrium models. He was also director of the Cowles Commission (1948-1955) and is 1975 co-recipient of the Nobel Prize in Economics. The Concise Encyclopedia of Economics says,
Koopmans showed the conditions required for economy-wide efficiency in allocating resources. He like Kantorovich, used his activity analysis techniques to derive efficient criteria for allocating between the present and the future.
Economist Thomas Sargent said,
Koopmans complained that macroeconomic models weren't satisfactory because they didn't handle randomness. (Conversations with Economists by Arjo Klamer)
This post is a collection of quotes from Koopmans talking about the philosophy of economics.

Philosophy of economics


"One is led to conclude that economics as a scientific discipline is still somewhat hanging in the air." (Three Essays, 1957)

"We looked upon economic theory as a sequence of conceptual models that seek to express in simplified form different aspects of an always more complicated reality." (Three Essays, 1957)

"It is worth pointing out that in this particular study our authors have abandoned demand and supply functions as a tool for analysis, even as applied to individuals... [The problem] has been reformulated as one of proving that a number of maximizations of individual goals under interdependent restraints can be simultaneously carried out." (Three Essays, 1957)

Pierre-Simon Laplace and probability theory


Pierre-Simon Laplace (1749-1827) was an influential mathematician and scientist best known for his contributions to probability theory and celestial mechanics. Mathematician Morris Kline says,
Laplace created a number of new mathematical methods that were subsequently expanded into branches of mathematics, but he never cared for mathematics except as it helped him to study nature.
Journalist Kathryn Schulz says,
Pierre Simon Laplace refined the distribution of errors, illustrated by the now-familiar bell curve... Laplace used the bell curve to determine the precise orbit of the planets... By using the normal distribution to graph... individually imperfect data points, Laplace was able to generate a far more precise picture of the galaxy... aggregate enough flawed data, and you get a glimpse of the truth.
 This post is a collection of quotes from Laplace talking about the philosophy of knowledge.

Knowledge


"Imaginary causes have gradually receded with the widening bounds of knowledge and disappear entirely before sound philosophy, which sees in them only the expression of our ignorance of the true causes." (Philosophical Essay on Probabilities, 1812)

"The theory of chance consists in reducing all the events of the same kind to a certain number of cases equally possible..." (Philosophical Essay on Probabilities, 1812)

"All these efforts in the search for truth tend to lead it [the human mind] back continually to the vast intelligence... but from which it will always remain infinitely removed." (Philosophical Essay on Probabilities, 1812)

"The most important questions of life... are indeed for the most part only problems of probability." (Philosophical Essay on Probabilities, 1812)

Marie Curie and the philosophy of science


Marie Curie (1867-1934) was an influential chemist best known for her pioneering work in radioactivity. Wikipedia says,
She was the first woman to win a Nobel Prize, the first person and only woman to win twice, the only person to win a Nobel Prize in two different sciences, and was part of the Curie family legacy of five Nobel Prizes.
This post is a list of quotes from Currie talking about the philosophy of science.

Philosophy of science


"If I see anything vital around me, it is precisely that spirit of adventure, which seems indestructible and is akin to curiosity." (Quoted in Madame Curie: A Biography by Eve Curie Labouisse)

"Life is not easy for any of us. But what of that? We must have perseverance and above all confidence in ourselves. We must believe that we are gifted for something, and that this thing, at whatever cost, must be attained." (Quoted in Madame Curie: A Biography by Eve Curie Labouisse)

"In science, we must be interested in things, not in persons." (Quoted in Madame Curie: A Biography by Eve Curie Labouisse)

"All my life through, the new sights of Nature made me rejoice like a child." (Pierre Curie, 1923)

"I am one of those who think like Nobel, that humanity will draw more good than evil from new discoveries." (Quoted in White Coat Tales by Robert B. Taylor)

"...humanity also needs dreamers, for whom the disinterested development of an enterprise is so captivating that it becomes impossible for them to devote their care to their own material profit. Without doubt, these dreamers do not deserve wealth, because they do not desire it. Even so, a well-organized society should assure to such workers the efficient means of accomplishing their task, in a life freed from material care and freely consecrated to research."

Friday, May 19, 2017

John von Neumann and mathematical science


John von Neumann (1903-1957) was an influential mathematician best known his contributions to game theory and working on the Manhattan Project during World War II. Von Neumann also made contributions to statistics and quantum mechanics. His daughter Marina von Neumann Whitman said,
...throughout much of his career, he led a double life: as an intellectual leader in the ivory tower of pure mathematics and as a man of action, in constant demand as an advisor, consultant and decision-maker to what is sometimes called the military-industrial complex of the United States... He had the scientist's passion for learning and discovery for its own sake and the genius's ego-driven concern for the significance and durability of his own contributions.
This post is a list of quotes from von Neumann talking about mathematics.

Philosophy of mathematics


"A large part of mathematics which becomes useful developed with absolutely no desire to be useful, and in a situation where nobody could possibly know in what area it would become useful; and there were no general indications that it ever would be so." (The Role of Mathematics in the Sciences and in Society, 1954)

"When we talk mathematics, we may be discussing a secondary language built on the primary language of the nervous system." (Quoted in John von Neumann, 1903-1957 by Oxtoby and Pettis)

"Young man, in mathematics you don't understand things. You just get used to them." (Quoted in The Dancing Wu Li Masters)

"The calculus was the first achievement of modern mathematics and it is difficult to overestimate its importance. I think it defines more unequivocally than anything else the inception of modern mathematics; and the system of mathematical analysis, which is its logical development, still constitutes the greatest technical advance in exact thinking." (Quoted in Bigeometric Calculus by James Stewart)

Philosophy of science


"Truth.. is much too complicated to allow anything but approximations." (Quoted in The Works of the Mind by R. B. Heywood)

"It is exceptional that one should be able to acquire the understanding of a process without having previously acquired a deep familiarity with running it, with using it, before one has assimilated it in an instinctive and empirical way… Thus any discussion of the nature of intellectual effort in any field is difficult, unless it presupposes an easy, routine familiarity with that field. In mathematics this limitation becomes very severe." (Quoted in The World of Mathematics by James Roy Newman)

"The sciences do not try to explain, they hardly even try to interpret, they mainly make models. By a model is meant a mathematical construct which, with the addition of certain verbal interpretations, describes observed phenomena." (Method in the Physical Sciences, 1955)

"If people do not believe that mathematics is simple, it is only because they do not realize how complicated life is." (Quoted in Archaeology of computers)

Isaac Asimov and science fiction


Isaac Asimov (1920-1994) was an influential writer and biochemist best known for writing science fiction books with an emphasis on scientific accuracy. Computer scientist Simson Garfinkle says,
...the true value of Asimov's insight is his reflections on his life - and, in his mind, Asimov was first a genius, second a prolific writer, and only thirdly a sci-fi writer. (Asimov the Explainer Explains Himself, 1994)
This post is a collection of quotes from Asimov talking about science.

Philosophy of science


"Science doesn't purvey absolute truth. Science is a mechanism. It's a way of trying to improve your knowledge of nature. It's a system for testing your thoughts against the universe and seeing whether they match. And this works, not just for the ordinary aspects of science, but for all of life." (Interview on Bill Moyers, 1988)

"I believe that every human being with a physically normal brain can learn a great deal and can be surprisingly intellectual. I believe that what we badly need is social approval of learning and social rewards for learning." (Quoted in Newsweek, 1980)


Futurism


"The machine is only a tool after all, which can help humanity progress faster by taking some of the burdens of calculations and interpretations off its back. The task of the human brain remains what it has always been; that of discovering new data to be analyzed, and of devising new concepts to be tested." (I, Robot, 1950)

"Well, I hope [the shuttle program] does get off the ground. And I hope they expand it, because the shuttle program is the gateway to everything else. By means of the shuttle, we will be able to build space stations and power stations, laboratory facilities and habitations, and everything else in space." (Quoted in Southwest Airlines magazine, 1979)

"All we need is the political go-ahead and the economic willingness to spend the money that is necessary [referring to space travel]. It is a little frustrating to think that if people concentrate on how much it is going to cost they will realize the great amount of profit they will get for their investment." (Quoted in Southwest Airlines magazine, 1979)

Philosophy of art


"The true artist is quite rational as well as imaginative and knows what he is doing; if he does not, his art suffers. The true scientist is quite imaginative as well as rational, and sometimes leaps to solutions where reason can follow only slowly; if he does not, his science suffers." (The Roving Mind , 1983)

"Books... hold within them the gathered wisdom of humanity, the collected knowledge of the world's thinkers, the amusement and excitement built up by the imaginations of brilliant people. Books contain humor, beauty, wit, emotion, thought, and, indeed, all of life. Life without books is empty." (Puzzles of the Black Widowers, 1990)

"Science fiction writers foresee the inevitable, and although problems and catastrophes may be inevitable, solutions are not." (How Easy to See the Future, 1975)

Jimmy Wales and Wikipedia


Jimmy Wales (1966-now) is an internet entrepreneur and co-founder of the website Wikipedia. Tim Adams said in an article for the Guardian,
The more time I spent on the site the more I came to think of Wales as some kind of Queen Ant, letting the vast colony go about its work, at the centre of a system where the knowledge of the community is infinitely larger than the sum of experience of all its individuals. (For your Information, 2007)
This post is a collection of quotes from Wales talking about Wikipedia.

What is Wikipedia?


"It turns out a lot of people don’t get it. Wikipedia is like rock’n’roll; it’s a cultural shift." (Quoted in Computerworld, 2006)

"Imagine a world in which every single person on the planet is given free access to the sum of all human knowledge. That's what we're doing." (Quoted in Wikimedia Founder Jimmy Wales Responds by Robin Miller 2004)

"Wikipedia is first and foremost an effort to create and distribute a free encyclopedia of the highest possible quality to every single person on the planet in their own language." (Wikipedia-l mailing list, 2005)

"Wikipedia is a non-profit. It was either the dumbest thing I ever did or the smartest thing I ever did."  (Keynote Speech, SXSW 2006)

"We are growing from a cheerful small town where everyone waves off their front porch to the subway of New York City where everyone rushes by. How do you preserve the culture that has worked so well?" (Quoted in ExpressIndia, 2005)

Thomas Edison and inventions


Thomas Edison (1847-1931) was a famous inventor best known for developing the phonograph, a longer lasting light bulb and many other things. Edison had 1,093 patents in the United States. Physicist Nikolai Tesla said,
If Edison had a needle to find in a haystack, he would proceed at once with the diligence of the bee to examine straw after straw until he found the object of his search.
This post is a collection of quotes from Edison talking about inventions.

How to make an invention


"I find out what the world needs. Then, I go ahead and invent it." (Quoted in American Greats by Wilson and Marcus)

"I speak without exaggeration when I say that I have constructed 3,000 different theories in connection with the electric light, each one of them reasonable and apparently likely to be true. Yet only in two cases did my experiments prove the truth of my theory." (Quoted in Harper's magazine, 1890)

"I never did anything worth doing by accident, nor did any of my inventions come indirectly through accident, except the phonograph. No, when I have, fully decided that a result is worth getting, I go about it, and make trial after trial, until it comes." (Quoted in A Photographic Talk with Edison by Theodore Dreiser)

"Through all the years of experimenting and research, I never once made a discovery. I start where the last man left off... All my work was deductive, and the results I achieved were those of invention pure and simple." (Quoted in Makers of the Modern World by Louis Untermeyer)

"To invent, you need a good imagination and a pile of junk." (Quoted in in Behavior-Based Robotics by Ronald C. Arkin)

Leonhard Euler and pure mathematics


Leonid Euler (1707-1783) was an influential mathematician best known for his contributions modern mathematical notation, calculus and graph theory. Mathematician Carl Boyer says,
The Introductio does not boast an impressive number of editions, yet its influence was pervasive. In originality and in the richness of its scope it ranks among the greatest of textbooks; but it is outstanding also for clarity of exposition. Published two hundred and two years ago, it nevertheless possesses a remarkable modernity of terminology and notation, as well as of viewpoint. Imitation is indeed the sincerest form of flattery. (Introduction to the Analysis of the Infinite, 1950)
François Arago says,
He calculated without any apparent effort, just as men breathe, as eagles sustain themselves in the air. (Wikiquote)
This post is a collection of quotes from Euler talking about the philosophy of mathematics.

Pure mathematics


"It will seem a little paradoxical to ascribe a great importance to observations even in that part of the mathematical sciences which is usually called Pure Mathematics, since the current opinion is that observations are restricted to physical objects that make impression on the senses. As we must refer the numbers to the pure intellect alone, we can hardly understand how observations and quasi-experiments can be of use in investigating the nature of numbers. Yet, in fact, as I shall show here with very good reasons, the properties of the numbers known today have been mostly discovered by observation, and discovered long before their truth has been confirmed by rigid demonstrations." (Quoted in Induction and Analogy in Mathematics by George Polya)

"...we should take great care not to accept as true such properties of the numbers which we have discovered by observation and which are supported by induction alone. Indeed, we should use such discovery as an opportunity to investigate more exactly the properties discovered and to prove or disprove them; in both cases we may learn something useful." (Quoted in Induction and Analogy in Mathematics by George Polya)

"Mathematicians have tried in vain to this day to discover some order in the sequence of prime numbers, and we have reason to believe that it is a mystery into which the human mind will never penetrate." (Quoted in Calculus Gems by G. Simmons)

Philosophy of science


"Although to penetrate into the intimate mysteries of nature and thence to learn the true causes of phenomena is not allowed to us, nevertheless it can happen that a certain fictive hypothesis may suffice for explaining many phenomena." (A conjecture about the nature of air, 1780)

"Since the fabric of the universe is most perfect and the work of a most wise Creator, nothing at all takes place in the universe in which some rule of maximum or minimum does not appear... there is absolutely no doubt that every affect in the universe can be explained satisfactorily from final causes, by the aid of the method of maxima and minima, as it can be from the effective causes themselves." (Quoted in The Anthropic Cosmological Principles by Barrow and Tipler)

Thomas More and utopia


Thomas More (1478-1535) was an influential lawyer and philosopher best known writing the book Utopia published In 1516. More was also counselor to Henry VIII 1529-1532 in England. Referring to his book Wikipedia says,
Utopia contrasts the contentious social life of European states with the perfectly orderly, reasonable social arrangements of Utopia and its environs (Tallstoria, Nolandia, and Aircastle). In Utopia, there are no lawyers because of the laws' simplicity and because social gatherings are in public view (encouraging participants to behave well), communal ownership supplants private property, men and women are educated alike, and there is almost complete religious toleration (except for atheists, who are allowed but despised).
This post is a collection of quotes from More's describing his vision of Utopia.

Utopia


"The island of Utopia is in the middle two hundred miles broad, and holds almost at the same breadth over a great part of it, but it grows narrower towards both ends... The channel is known only to the natives; so that if any stranger should enter into the bay without one of their pilots he would run great danger of shipwreck." (Utopia, 1516)

"They have but few laws, and such is their constitution that they need not many. They very much condemn other nations whose laws, together with the commentaries on them, swell up to so many volumes; for they think it an unreasonable thing to oblige men to obey a body of laws that are both of such a bulk, and so dark as not to be read and understood by every one of the subjects." (Utopia, 1516)

"They have no lawyers among them, for they consider them as a sort of people whose profession it is to disguise matters and to wrest the laws, and, therefore, they think it is much better that every man should plead his own cause, and trust it to the judge, as in other places the client trusts it to a counsellor; by this means they both cut off many delays and find out truth more certainly." (Utopia, 1516)

Religion


"There are several sorts of religions, not only in different parts of the island, but even in every town; some worshipping the sun, others the moon or one of the planets." (Utopia, 1516)

"...he therefore thought it indecent and foolish for any man to threaten and terrify another to make him believe what did not appear to him to be true... he therefore left men wholly to their liberty, that they might be free to believe as they should see cause. "  (Utopia, 1516)

Gottfried Leibniz and the philosophy of mathematics


Gottfried Leibniz (1646-1716) was an influential mathematician and philosopher best known for developing differential and integral calculus independently from Isaac Newton. Leibniz was also known for building calculating machines. Mathematician Michael Beeson said,
Gottfried Leibniz is famous... for his slogan 'Calculemus', which means 'Let us calculate'. He envisioned a formal language to reduce reasoning to calculation, and he said that reasonable men, faced with a difficult question of philosophy or policy, would express the question in a precise language and use rules of calculation to carry out precise reasoning. This is the first reduction of reasoning to calculation ever envisioned... he actually designed and built a working calculating machine, the Stepped Reckoner... inspired by the somewhat earlier work of Pascal, who built a machine that could add and subtract. Leibniz's machine could add, subtract, divide, and multiply, and was apparently the first machine with all four arithmetic capabilities.  
This post is a list of quotes from Leibniz regarding his philosophy of mathematics.

Support for mathematics


"...if controversies were to arise, there would be no more need of disputation between two philosophers than between two calculators. For it would suffice for them to take their pencils in their hands and to sit down at the abacus, and say to each other (and if they so wish also to a friend called to help): Let us calculate." (Dissertatio de Arte Combinatoria , 1666)

"Only geometry can hand us the thread [which will lead us through] the labyrinth of the continuum’s composition, the maximum and the minimum, the infinitesimal and the infinite; and no one will arrive at a truly solid metaphysic except he who has passed through this [labyrinth]." (Dissertatio Exoterica De Statu Praesenti, 1676)

"Music is a hidden arithmetic exercise of the soul, which does not know that it is counting." (Letter to Christian Goldbach, 1712)

"This miracle of analysis, this marvel of the world of ideas, an almost amphibian object between Being and Non-being that we call the imaginary number." (Quoted in Singularités by Christiane Frémont)

Epistemology


"I am convinced that the unwritten knowledge scattered among men of different callings surpasses in quantity and in importance anything we find in books, and that the greater part of our wealth has yet to be recorded." (Discours touchant la méthode de la certitude et de l'art d'inventer, 1688)

"There are two kinds of truths: those of reasoning and those of fact. The truths of reasoning are necessary and their opposite is impossible; the truths of fact are contingent and their opposites are possible." (The Monadology, 1714)

Blaise Pascal and the philsophy of logic


Blaise Pascal (1623-1662) was an influential philosopher and mathematician best known for inventing the first modern mechanical calculator in 1642. Regarding Pascal's philosophy, Thomas Molnar says,
Pascal was no obscurantist, but he measured how far science (esprit de géometrie) may go and become irrelevant to the problems of human destiny. The achievements of science are not denied by this stand, nor are they dismissed as the ostrich with its head burrowed in sand dismisses reality. What is asserted is that our original endowments as they reflect on the data of experience, are, with all their limitations and imperfections, the only necessary and indispensable means by which we confront existence, the only weapon commensurate with our struggle.
This post is a collection of quotes from Pascal talking about his philosophy of knowledge.

Epistemology


"In order to enter into a real knowledge of your condition, consider it in this image: A man was cast by a tempest upon an unknown island, the inhabitants of which were in trouble to find their king, who was lost; and having a strong resemblance both in form and face to this king, he was taken for him, and acknowledged in this capacity by all the people." (The Art of Persuasion)

"Logic has borrowed, perhaps, the rules of geometry, without comprehending their force... it does not thence follow that they have entered into the spirit of geometry, and I should be greatly averse... to placing them on a level with that science that teaches the true method of directing reason." (The Art of Persuasion)


Knowledge and emotion


"God only pours out his light into the mind after having subdued the rebellion of the will by an altogether heavenly gentleness which charms and wins it." (The Art of Persuasion)

"Of the truths within our reach... the mind and the heart are as doors by which they are received into the soul, but... few enter by the mind, whilst they are brought in crowds by the rash caprices of the will, without the council of reason." (The Art of Persuasion)

"It is necessary to have regard to the person whom we wish to persuade, of whom we must know the mind and the heart, what principles he acknowledges, what things he loves; and then observe in the thing in question what affinity it has with the acknowledged principles, or with the objects so delightful by the pleasure which they give him." (The Art of Persuasion)

Thursday, May 18, 2017

Franz Kafka and the frozen sea


Franz Kafka (1883-1924) was a famous writer best known for his analysis of emotion and surrealism. Wikipedia says,
His work, which fuses elements of realism and the fantastic, typically features isolated protagonists faced by bizarre or surrealistic predicaments and incomprehensible social-bureaucratic powers, and has been interpreted as exploring themes of alienation, existential anxiety, guilt, and absurdity.
Writer Marthe Robert says,
The only way Kafka could envisage of creating his in every respect impossible writing possible was to demarcate the area of impossibility by making a language without a particular color, without a local tone, without qualities, as it were. (As Lonely as Kafka, 1953)
This post is a list of quotes from Kafka talking about the emotion and epistemology.

Emotion


"I think we ought to read only the kind of books that wound and stab us. If the book we are reading doesn't wake us up with a blow on the head, what are we reading it for? ... we need the books that affect us like a disaster, that grieve us deeply, like the death of someone we loved more than ourselves, like being banished into forests far from everyone, like a suicide. A book must be the axe for the frozen sea inside us." (Letter to Oskar Pollak, January 1904)

"We are as forlorn as children lost in the woods. When you stand in front of me and look at me, what do you know of the griefs that are in me and what do I know of yours. And if I were to cast myself down before you and weep and tell you, what more would you know about me than you know about Hell when someone tells you it is hot and dreadful? For that reason alone we human beings ought to stand before one another as reverently, as reflectively, as lovingly, as we would before the entrance to Hell." (Letter to Oskar Pollak, November 1903)

"Theoretically there is a perfect possibility of happiness: believing in the indestructible element in oneself and not striving towards it." (The Zürau Aphorisms, posthumous)

"The indestructible is one: it is each individual human being and, at the same time, it is common to all, hence the incomparably indivisible union that exists between human beings." (The Zürau Aphorisms, posthumous)

Epistemology


"Truth is indivisible, hence it cannot recognize itself; anyone who wants to recognize it has to be a lie." (The Zürau Aphorisms, posthumous)

"The whole visible world is perhaps nothing more than the rationalization of a man who wants to find peace for a moment. An attempt to falsify the actuality of knowledge, to regard knowledge as a goal still to be reached. " (Parables and Paradoxes, posthumous)

"The right understanding of any matter and a misunderstanding of the same matter do not wholly exclude each other." (The Trial, 1920)

Wednesday, May 10, 2017

Jean-Baptiste Say and markets


Jean-Baptiste Say (1767-1832) is an influential economist best known for Say's Law. Economist John Kenneth Galbraith says,
Say's major, and for a full 130 years his lasting and exceedingly influential, contribution was his law of markets. To this day reference survives in the textbooks to Say's Law... Say's Law held that out of the production of goods came an effective (that is to say, actually expended aggregate of demand sufficient to purchase the total supply of goods. No more, no less. There could, in consequence, be no such thing as general overproduction in the economic system. (A History of Economics, 1987)
Economist Robert Heilbroner says,
[Say believed] for every good that was produced cost something - and every cost was some man's income. Whether that cost was wages, rent or profits, its sale price accrued as someone's income. And so how could a general glut ever occur? The demand for goods existed and the incomes to buy them existed as well. (The Worldly Philosophers, 1953)
This post is a collection of quotes from Say talking about his philosophy of economics.

Demand and supply



"A man who applies his labour to the investing of objects with value by the creation of utility of some sort, can not expect such a value to be appreciated and paid for, unless where other men have the means of purchasing it. Now, of what do these means consist? Of other values of other products, likewise the fruits of industry, capital, and land. Which leads us to a conclusion that may at first appear paradoxical, namely, that it is production which opens a demand for products." (A Treatise On Political Economy 4th edition, 1832)


"Demand and supply are the opposite extremes of the beam, whence depend the scales of dearness and cheapness; the price is the point of equilibrium, where the momentum of the one ceases, and that of the other begins." (A Treatise On Political Economy 4th edition, 1832)

"I have made no distinction between the circulation of goods and of money, because there really is none." (A Treatise On Political Economy 4th edition, 1832)

Critique of mathematical economics


"It is, perhaps, a well founded objection to Mr. Ricardo, that he sometimes reasons upon abstract principles to which he gives too great a generalization." (A Treatise On Political Economy 4th edition, 1832)

"Some writers maintain arithmetic to be only the only sure guide in political economy; for my part, I see so many detestable systems built upon arithmetical statements, that I am rather inclined to regard that science as the instrument of national calamity." (A Treatise On Political Economy 4th edition, 1832)

Philosophy of science


"A science only advances with certainty, when the plan of inquiry and the object of our researches have been clearly defined; otherwise a small number of truths are loosely laid hold of, without their connection being perceived, and numerous errors, without being enabled to detect their fallacy." (A Treatise On Political Economy 4th edition, 1832)

Leonardo da Vinci and nature


Leonardo da Vinci (1452-1519) was an influential Renaissance polymath best known for painting the Mona Lisa. He is also credited with many inventions including parachutes, helicopters and tanks. Leonardo da Vinci's interests included painting, sculpting, architecture, mathematics, anatomy, geology, music, astronomy and botany. Historian Sherwin Nuland says,
The more the manuscripts of Leonardo are studied, the more one begins to see him not so much as a transcendent artist, but primarily as a man of science, whose skills and commissions as an artist and engineer enabled him to support his fascination with nature. (Leonardo Da Vinci, 2000)
Writer Edwin MacCurdy says,
What thinker has ever possessed the cosmic vision so insistently? He sought to establish the essential unity of structure of all living things, the earth an organism with veins and arteries, the body of a man a type of that of the world.
This post is a collection of quotes from Leonardo da Vinci about the philosophy of science.

Philosophy of science


"We, by our arts may be called the grandsons of God." (Quoted by The Notebooks of Leonardo da Vinci by Rudolf Flesch)

"Fire may be represented as the destroyer of all sophistry, and as the image and demonstration of truth; because it is light and drives out darkness which conceals all essences [or subtle things]." (Quoted by The Notebooks of Leonardo da Vinci by Rudolf Flesch)

"Though I may not, like them, be able to quote other authors, I shall rely on that which is much greater and more worthy - on experience, the mistress of their Masters. They go about puffed up and pompous, dressed and decorated with [the fruits], not of their own labours, but of those of others. And they will not allow me my own. They will scorn me as an inventor." (Quoted by The Notebooks of Leonardo da Vinci by Rudolf Flesch)

"Human subtlety... will never devise an invention more beautiful, more simple or more direct than does nature, because in her inventions nothing is lacking, and nothing is superfluous." (Quoted by The Notebooks of Leonardo da Vinci by Rudolf Flesch)

"The eye, which is called the window of the soul, is the principal means by which the central sense can most completely and abundantly appreciate the infinite works of nature; and the ear is the second, which acquires dignity by hearing of the things the eye has seen." (Quoted by The Notebooks of Leonardo da Vinci by Rudolf Flesch)

Monday, May 8, 2017

10 macroeconomic statements


In an earlier post I said that economics is essentially a two step process:

1. Make an economic statement (hypothesis)
2. Determine the validity of the economic statement

For this post, I created a list of 10 statements about economic phenomena from famous economists. The statements are divided into two parts: markets and quality of life. I tried to find quotes that are central for understanding economic phenomena. I'm not exactly sure how to test each of these statements, but it will probably involve analyzing empirical evidence and natural experiments.

Markets


1. John Maynard Keynes (1883-1946):
"The right remedy for the trade cycle is not to be found in abolishing booms and thus keeping us permanently in a semi-slump; but in abolishing slumps [with fiscal and monetary policy] and thus keeping us permanently in a quasi-boom." (The General Theory of Employment, Interest and Money, 1936)

2. Adam Smith (1723-1790):
"By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention." (The Wealth of Nations, 1776)

3. Milton Friedman (1912-2006):
"I am in favor of cutting taxes under any circumstances and for any excuse, for any reason, whenever it's possible... because I believe the big problem is not taxes, the big problem is spending. I believe our government is too large and intrusive, that we do not get our money's worth..." (Quoted in Conservatives Betrayed, 2006)

4. Joseph Schumpeter (1883-1950):
"The innovation is hazardous, impossible for most producers. But if someone establishes a business having regard to this source of supply, and everything goes well, then he can produce a unit of product more cheaply, while at first the existing prices substantially continue to exist." (The Theory of Economic Development, 1934)

5. David Ricardo (1172-1823):
"Under a system of perfectly free commerce, each country naturally devotes its capital and labour to such employments as are most beneficial to each." (Principles of Political Economy and Taxation, 1817)

6. Friedrich Hayek (1899-1992)
"The misconception that costs determined prices prevented economists for a long time from recognizing that it was prices which operated as the indispensable signals telling producers what costs it was worth expending on the production of the various commodities and services, and not the other way around." (Coping with Ignorance, 1978)

Quality of life


7. John Kenneth Galbraith (1908-2006):
"In recent times no problem has been more puzzling to thoughtful people than why, in a troubled world, we make such poor use of our affluence." (The Affluent Society, 1958)

8. Robert Owen (1771-1858):
"The advantage of pure, and the disadvantage of impure air are experienced each time we breathe, and all who understand the causes of disease know that an impure atmosphere is most unfavourable to the enjoyment of health, and an efficient cause to shorten human existence within the natural life of man. It is therefore most desirable that decisive measures should be devised and generally adopted to ensure to all a pure atmosphere, in which to live during their lives." (The Book of the New Moral World, 1836)

9. Robert Thomas Malthus (1766-1834):
"The employment of the poor in roads and public works, and a tendency among landlords and persons of property to build, to improve and beautify their grounds, and to employ workmen and menial servants, are the means most within our power and most directly calculated to remedy the evils arising from that disturbance in the balance of produce and consumption." (An Essay on the Principle of Population 2nd Edition, 1836)


10. Karl Marx (1818-1883):
"The worker's existence is thus brought under the same condition as the existence of every other commodity. The worker has become a commodity, and it is a bit of luck for him if he can find a buyer... " (Paris Manuscripts , 1844)