Paying for your Economics / Computational assumptions

In a digital computer, wires have one of two states, 0 or 1. This is not natural, however - many possible voltages can be put on the wires, but only a small subset of these possible voltages ever occur inside a digital computer, being those voltage values which can be unambiguously interpreted as either 0 or 1. This is a design goal - the components of a digital computer work in such a way as to maintain the interpretability of the wire voltages, and also to maintain the  interpretability of the transistor physics as logic gates.

This idealization of the computer's voltage states is used to standardize the components and the component interactions. That standard behavior then forms the basis for logical induction, such that we can design circuits which as a whole have too many possible states to exhaustively test, yet can be known to be correct by virtue of the correct interactions between its parts. The whole can be known to be correct because the parts are correct. There are many devices that can be interpretable as logic gates - different implementations of the same idea. Implementations include domino tiles, water channels, game of life, wooden blocks. The reason we choose silicon is because silicon devices maintain interpretability even at high frequency, and can be made very small.

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Economists have theories about how economics processes work, and many of these theories start with assumptions like "no transaction cost" and "no externality". These don't have to be taken as passive observations about reality. Rather, they should be taken as conditions worth bringing about, because of their utility in market processes.

One case which interests me greatly is the government intervention used to create the neutrality of money. Brad Delong describes Keyne's General Theory as trying to make Say's Law true.

No Free Lunch Theorems

http://www.no-free-lunch.org/

"The Difference" has reminded me of No Free Lunch (NFL) theorems. These theorems state that solutions always depend on the problem being solved, and that there is no such thing as a general solution.

I hear this from NFL: logic informs us about reality by resolving contradictions, and you need a source of contradictions to start with. That source would be assumptions. Of course, the wrong assumptions combined with logic would misinform instead of inform, and it isn't obvious what the source of "correct" assumptions is.

A related, interesting note: Occam's razor demands simplicity in assumptions, not the logic.

Book Queue

At the end of January, I got a carton of books:

  • How'd You Score That Gig?: A Guide to the Coolest Jobs-and How to Get Them
  • How to Be Alone: Essays
  • The Snowball: Warren Buffett and the Business of Life
  • The Difference: How the Power of Diversity Creates Better Groups, Firms, Schools, and Societies (New Edition)
  • The Partnership: The Making of Goldman Sachs
  • Life Entrepreneurs: Ordinary People Creating Extraordinary Lives (J-B Warren Bennis Series)

all of which had popped up on some blog or another in my rss stream. I've quickly gone on to dismiss "Life" and "Score" as mindless anecdotal drivel, and am currently reading "Essays" and "Difference", alongside "Matter" by Iain Banks.

I've found "Difference" to contain interesting points, but so far have found it ineffectual in rekindling my waning respect for toy models. The toy model logic in the book is very combinatorial, which to me means that conclusions depend a lot on the particular favor of factorizability assumed. I have continued to be troubled by the idea that modeling is weak as a general approach to understanding because of the sheer number of starting assumptions that is typical. "Essays" is not a book that can be read fast, and I am enjoying "Matter" very very much.

Sci-fi like "Matter" really raises my spirits. That I find such a source of meaning in something I cannot deny is pure escapism is something which I think should trouble me. The first Culture novel I read, "Consider Phlebas", was not that good, and yet I had enjoyed it for the glimpses of the Culture universe it offered. "Matter", on the other hand, is thoroughly enjoyable.