Physics Envy

There are the so-called “hard sciences,” like physics and chemistry. Then there are the “soft sciences,” like psychology, biology, and economics, which have often aspired to build models that are as precise, quantitative, and “hard” as those of physics. The appeal of Newtonian physics these last 400 years has been its simplicity and its ability to derive equations that elegantly express the behavior of the natural world. 

But the allure of physics is much more than its basic equations such as Newton's F = ma or Einstein's E = mc²; it's the capability to predict the future behavior of things. These straightforward equations allow one to predict what will happen tomorrow, based on what we see today. That ability to prognosticate shows us that there is order to the physical universe.

This capacity to predict has a great attraction to soft-science economists and psychologists. If they can boil down their social sciences into similar elegant equations or postulates, they will then achieve what physicists have long done: simply describe how things behave and how they will go in the future.

The problem with economics is that it is nowhere near as mathematically precise as physics. This annoys economists, because every lay person feels qualified to weigh in on economics (thinking they understand this very complex process), as they tend to leave physics and its often complicated equations to the erudite scientists. For example, what happens in the theoretical world of particle physics seems to have little to do with my daily existence (or my ability to understand it), but what happens to the Federal Reserve's interest rate, I can feel in my bank account.

A central issue here is that science is studying the natural world—which is consistent and repeatable—while economics studies the unpredictable, if not sometimes whimsical, behavior of human beings. So in the late 19^th century and into the 20^th, several leading economists tried very hard to give economics a solid mathematical foundation. The school of economics led by Milton Friedman at the University of Chicago helped to put economics on what they believed to be a rational, mathematical basis. This process reached an apogee in the 1990s, when economists like Alan Greenspan (who spent nearly 20 years as the chairman of the Fed) became lionized as the gurus of economic “scientism.”

Instead of realizing the prosperous future that their models predicted, however, things went disastrously wrong. Greenspan's policies—implemented by Bill Clinton—fueled a speculative bubble that badly burst in 2008. So today a number of economists are waking up to the fact that economics is a field that is neither as quantifiable nor predictable as they'd thought. 
 
Furthermore, research shows that people do not make economic decisions based on rational thinking. We are impulsive and many of our choices are driven by our subconscious urges. We are not mathematical in our behavior. Thus, market transactions do not behave as straightforwardly as the laws of nature, in a concise mathematical way.

So physics envy on the part of “soft” scientists has largely been a misplaced attempt to quantify the squishy discipline of economics. This was outlined nicely in a 2010 paper: “Warning: Physics Envy May Be Hazardous to Your Wealth,” by two professors at MIT. It's taken a few years for some economists to accept that their discipline is not precisely mathematical or even very predictable. The authors of this paper point out that, although the attempt to make economics a mathematical science has brought some insights into the market place, “physics envy has also created a false sense of mathematical precision in some cases.” 
 
My former career was in physics, largely because I liked the simplicity and consistency of that hard science. Economists have learned in recent years to give more weight to the erratic choices that we make in the market place. Maybe that might help avoid another Great Recession, as happened in 2008.

Bushmen Benefits

In the 1930s John Maynard Keynes, writing from the perspective of and influenced by the Great Depression, penned an essay titled “The Economic Possibilities for Our Grandchildren.” He was struggling with the financial doldrums of the times, but looked optimistically to the future. He believed in the American democratic and economic processes that he observed at the time, and thought that, due to (1) technological innovation, (2) productivity, and (3) long-term capital growth, the future looked good. America and the world would soon realize what he termed “economic bliss”.

Keynes predicted that his grandchildren would be able to satisfy their material needs by having to work only 15 hours per week. What would we do with all that extra time on our hands? He said it would free us up to pursue rewarding interests such as art, philosophy, music, religion, family, etc. He believed that soon we'd realize a life that would be four-to-eight times richer than that of the 1930s. 
 
On the one hand, Keynes predicted correctly, since our productivity has increased by a factor of four. On the other hand, he was wrong about working hours, as today Americans work longer hours each week than they did in the 1930s. The result is that, instead of turning to leisure, we've turned to accumulating things. We grasp for more.

What happened? One reason we still work long hours is that Keynes and other economists at the time (and over the next half century) assumed that economics is a rational science, which implies that people make rational economic decisions. That assumption has been discredited in the last few decades, as psychologists and sociologists have shown that most of our choices are anything but rational. Neuroscience confirms these findings and has added its own discoveries into the mix. From neuroscience, we now know that people's decisions are impulsive and often made subconsciously, without their even being aware of what factors led to them. The result: we are often slaves to our desires and are thus literally driven to accumulate. To do so, we seem to be willing to labor long hours to get what we want.

Keynes was not crazy, however, as there is a society that long ago learned to curb its cravings and achieve all its needs, with indeed about 15 hours of work each week: the Bushmen peoples of Namibia's Kalahari Desert region. Also called the San peoples, they have populated southern Africa for some 200,000 years as hunter-gatherers. The Bushmen had achieved Keynes's economic promised land long ago, and they did it without having any interest in labor productivity or capital accumulation.

Think about that. The Bushmen (still around today, although they're struggling with the interference of modernity into their lives) are the most successful, long-lasting human civilization in Earth's history! Their culture has prevailed for some 800 times the length of America's existence as a country and 20 times longer than the period of time since humans turned from hunter-gatherers to agriculturists (about 10,000 years ago). I will be looking at the astounding success of the simple-living Bushmen in future blogs.

[Based on the book Affluence without Abundance: The Disappearing World of the Bushmen, by James Suzman, 2017.]