Sunday, March 23, 2014

Econolosophy — Fundamental Value in the Social Sciences

To understand why some phenomenon is the way it is, you need to assess its fundamental value. This is reasonably straightforward in the natural sciences. For example, if you want to understand why that bridge over there isn’t collapsing despite the fact that those big trucks are driving over it, then you need to assess the bridge’s ability to handle the compression forces that the trucks are exerting on the bridge.[1] If the compression forces are too great, then the bridge will buckle and collapse. Figuring out whether the bridge will buckle and collapse is reasonably straightforward because:
We all agree that the bridge’s ability to handle compression forces is fundamental to its state.

We all agree on how to best measure the compression forces (use newtons).

Our actions toward the bridge once we measure its ability to handle compression forces don’t end up meaningfully altering its ability to handle compression forces.

Assessing fundamental value in the social sciences is not at all straightforward, because:
  1. We sometimes don’t agree on what the fundamental value of a given social variable is.
  2. Even when we do come to an agreement, we each sometimes measure the fundamental value differently, in ways that aren’t easily convertible.
  3. When we then act on our measurements, our actions sometimes end up changing the fundamental value on which we acted.
For some social variables, we can’t even get past 1. For others, we run into measurement problems (2). And certain social variables have a fundamental value that is highly responsive to our actions (3). Importantly, only when we get through 1, 2 and 3 with ease and agreement will a stable equilibrium for a given social variable emerge. It is of course very rare that we get through 1, 2 and 3 with ease and agreement; the more likely case in the social sciences is that 1, 2 and/or 3 will introduce difficulties in our assessment of fundamental value, meaning that disequilibrium is probably the general state of most social variables.
So let’s look at some examples....
Fundamental Value in the Social Sciences
Econolosophy
We all tend to agree that a government’s debt-to-GDP ratio is a key factor determining solvency.
No, we don't tend to agree on this. Governments that are currency sovereigns without  debts denominated in a currency they do not issue have no operational solvency constraint. Governments that are currency users, like US states and members of the EZ, have a solvency constrain, as well as government that do not float their currency or taken on debt denominated in a currency they do not issue.

4 comments:

Matt Franko said...

This person is ignorant of the creative process.

Bridges DO NOT just "evolve", they are intelligently designed and intelligently constructed by human beings with a plan and purpose...

Bridges are not to be "examined" like you are, I dont know "examining" some rock formation or something that is occurring in nature... they are DESIGNED and have performance specifications, if "that bridge over there isn't collapsing", it is because it was designed NOT TO if used iaw performance specifications...

Its revealing (to me anyway) that this person is manifestly blind to the design process, perhaps thinks that bridges just "evolve" ex nihilo from the rocks or something, dunno; and then right on cue would also at the same time think that "we're out of money!" and "insolvent!" based on some sort of dogmatic belief that there is some sort of "natural" limit to currency creation by humans operating an economic system; this person is likewise blind to the fact that we design and operate these systems for our collective benefit as a society...

This person blindly examines the bridge as if we (humans) haven't had anything to do with its existence (?!?!?!), and then looks at our system of state currency EXACTLY the same way as if we dont have complete authority over its design and operation....

VERY revealing imo.

rsp,

Matt Franko said...

"To understand why some phenomenon is the way it is".... "For example, if you want to understand why that bridge over there isn’t collapsing..."

A bridge is NOT a "phenomenon"...

Phenomenon (noun): 1570s, "fact, occurrence," from Late Latin phænomenon, from Greek phainomenon "that which appears or is seen," noun use of neuter present participle of phainesthai "to appear," passive of phainein (see phantasm).

http://www.etymonline.com/index.php?term=phenomenon

Bridges do not just "occur" and do not just "appear"...

rsp,

Joe said...

Matt, your comment is of little relevance. I could have easily given the example of an ice bridge, which forms naturally and which, too, has a calculable and stable fundamental ability to handle compression forces. Tom, I did include a footnote right after I asserted that the debt-to-GDP ratio is a good indicator of fiscal solvency.

Matt Franko said...

Joe,

Strike 2 imo....

rsp,