Archive for April 2010
Physics vs. Economics: Gravity edition
Newton discovered his gravity equation by empirical investigation. He did not derive it from theory, and in fact even once he had observed the relation he offered no hypothesis as to why it worked. Newton’s gravity implied that objects exerted force instantly by action at a distance, and many believed this could not be true. The modern explanations of gravity do not in fact use instantaneous action-at-a-distance, rather they posit the curvature of space-time and particles called gravitons which cause the movement observed.
Similarly, economists have used a gravity equation to explain trade between countries. Trade increases with the income of each country (like the mass of the objects), and decreases with distance. As an empircal relation it works reasonably well, though not as well as Newton’s gravity equation. But as stated the economic gravity equation is not derived from theory and it posits the same sort of action-at-a-distance. After all, countries do not decide to trade a certain amount because they know they have certain incomes and are a certain distance apart. It is individuals and firms who decide how much they will buy from foreign individuals and firms, and they base their decisions on how much they want specific goods and on how much those goods cost relative to their personal income.
After decades of using the gravity equation in economics, a theoretical backing is being developed to relate the observed action at a distance to individual decision makers – the “gravitons” who are the true proximate cause of trade. Economists always want to be like physicists and it seems that with regard to gravity the parellel is close.
-Inspired by presenting “A Theoretical Foundation for the Gravity Equation” at Temple’s graduate trade seminar (though the paper is dense and does not get very far in the quest for a foundation).
1. Icelandic Sagas, especially the Grettis Saga. I admit I was pretty silly at age 18, but the tales are engaging and show how people can live and prosper in essentially stateless societies.
2. Proust, Recherche des Temps Perdu. For the account of interior life. Vastly superior in the original French.
3. Spinoza, Tractatus Theologico-Politicus. It was after reading this that I realized the great books were becoming my friends.
4. Herbert Spencer, Social Statics. Ideas don’t always imply what you may think. Spencer’s premises are so close to those of Darwin and Marx yet his reasoning leads to very different conclusions.
5. Michel Foucault, The Order of Things. Everyone reads Discipline and Punish but Foucault’s best insights are found here.
6.Douglas Hofstader, Gödel, Escher, Bach. I would have got more out of this had I finished high school math first.
7. Roger Penrose, The Emperor’s New Mind. Thought-provoking but in the end I was not convinced.
8. Sir Arthur Conan Doyle, The British Campaign in France and Flanders: 1914. All his war journalism is excellent, however in this book above all one gets the sense that Conan Doyle wants to tell the story of a few heroic characters but is unable to do so as they keep dying too quickly. Just as the Great War challenged ideas of what military conflict meant, so too did it challenge conventional ideas of heroism and narrative.
9. Neal Stephenson, Snow Crash. For the internet, for the microstates, for the Babylonian-Pentecostal mind control, but most of all for reshaping my idea of what protagonists could be named.
I’ve only even read the last two. Some of the others are on the to-read list, especially GEB.
Do check out the link though, the idea is hilarious.
Using the ideas of all major schools of the philosophy of science, determine the scientific status of economics and its subfields. If economics is not scientific, how could it become so and should it become so.
Just kidding, I would like to get a job.
Find an obscure dataset that has been used only by historians who don’t know statistics. See what can be learned from using statistical methods and economic reasoning. The problem being that economists will think most history-type projects irrelevant, while historians may ignore outsiders on general principle and aren’t on your dissertation committee in an case. The other problem being that actually finding a dataset that 1)hasn’t been really examined; and 2)has the potential to shed much light on an area; is likely to be very time consuming.
It has, however, been done successfully as a dissertation.
Taking everything that psychologists and behavioral economists have learned about how utility actually works, and build a relatively realistic utility function. Then plug this utility into several classical theoretical results and see how they are affected. Of course, economists refrain from using realistic utility functions because of mathematical intractability as much as lack of knowledge about what they look like, so this may be a doomed project. Hard to know for sure without losing a few months of life to it first.
Take some bigass panel datasets like MEPS and AHA. Test every theory about rising U.S. healthcare spending. If you take long enough to write it you can see the effects of the new regulatory regime and subsidies.
If you want to do something really useful, build a dataset about the regulatory regime in each state and use this to analyze the effects of state-level policies. This would be an extremely useful dataset to many researchers, but could also take a very, very long time sifting through state legal codes to build.