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Posts Tagged ‘economics

“If a ‘religion’ is defined to be a system of ideas that contains unprovable statements, then Gödel taught us that mathematics is not only a religion, it is the only religion that can prove itself to be one”*…




In 1931, the Austrian logician Kurt Gödel pulled off arguably one of the most stunning intellectual achievements in history.

Mathematicians of the era sought a solid foundation for mathematics: a set of basic mathematical facts, or axioms, that was both consistent — never leading to contradictions — and complete, serving as the building blocks of all mathematical truths.

But Gödel’s shocking incompleteness theorems, published when he was just 25, crushed that dream. He proved that any set of axioms you could posit as a possible foundation for math will inevitably be incomplete; there will always be true facts about numbers that cannot be proved by those axioms. He also showed that no candidate set of axioms can ever prove its own consistency.

His incompleteness theorems meant there can be no mathematical theory of everything, no unification of what’s provable and what’s true. What mathematicians can prove depends on their starting assumptions, not on any fundamental ground truth from which all answers spring.

In the 89 years since Gödel’s discovery, mathematicians have stumbled upon just the kinds of unanswerable questions his theorems foretold. For example, Gödel himself helped establish that the continuum hypothesis, which concerns the sizes of infinity, is undecidable, as is the halting problem, which asks whether a computer program fed with a random input will run forever or eventually halt. Undecidable questions have even arisen in physics, suggesting that Gödelian incompleteness afflicts not just math, but — in some ill-understood way — reality…

A (relatively) simple explanation of the incompleteness theorem– which destroyed the search for a mathematical theory of everything: “How Gödel’s Proof Works.”

* John D. Barrow, The Artful Universe


As we noodle on the unknowable, we might spare a thought for Vilfredo Federico Damaso Pareto; he died on this date in 1923.  An engineer, sociologist, economist, political scientist, and philosopher, he made several important contributions to economics, sociology, and mathematics.

He introduced the concept of Pareto efficiency and helped develop the field of microeconomics.  He was also the first to discover that income follows a Pareto distribution, which is a power law probability distribution.  The Pareto principle,  named after him, generalized on his observations on wealth distribution to suggest that, in most systems/settings, 80% of the effects come from 20% of the causes– the “80-20 rule.” He was also responsible for popularizing the use of the term “elite” in social analysis.

As Benoit Mandelbrot and Richard L. Hudson observed, “His legacy as an economist was profound. Partly because of him, the field evolved from a branch of moral philosophy as practised by Adam Smith into a data intensive field of scientific research and mathematical equations.”

The future leader of Italian fascism Benito Mussolini, in 1904, when he was a young student, attended some of Pareto’s lectures at the University of Lausanne.  It has been argued that Mussolini’s move away from socialism towards a form of “elitism” may be attributed to Pareto’s ideas.

Mandelbrot summarized Pareto’s notions as follows:

At the bottom of the Wealth curve, he wrote, Men and Women starve and children die young. In the broad middle of the curve all is turmoil and motion: people rising and falling, climbing by talent or luck and falling by alcoholism, tuberculosis and other kinds of unfitness. At the very top sit the elite of the elite, who control wealth and power for a time – until they are unseated through revolution or upheaval by a new aristocratic class. There is no progress in human history. Democracy is a fraud. Human nature is primitive, emotional, unyielding. The smarter, abler, stronger, and shrewder take the lion’s share. The weak starve, lest society become degenerate: One can, Pareto wrote, ‘compare the social body to the human body, which will promptly perish if prevented from eliminating toxins.’ Inflammatory stuff – and it burned Pareto’s reputation… [source]

220px-Vilfredo_Pareto_1870s2 source



“When morality comes up against profit, it is seldom that profit loses”*…


mpact investing


This month marks the anniversary of the U.S. Business Roundtable’s 2019 call for a shift from “shareholder capitalism” toward “stakeholder capitalism.”

Business leaders asked us to imagine a transformed world, but a bat virus in Wuhan had its own ambitious plans — and has, for the time being, transformed the world in quite another way. It has thrust government to the center, pushing business, whatever its approach to capitalism, to the sidelines.

Nobody could reasonably expect business alone to fix the pandemic. Nonetheless, some investors under the banner of “impact investing” argue that business alone will be able to fix the other big problems ailing the global economy, such as climate change or global female literacy, without sacrificing commercial returns. This view has garnered interest from major banks, consultancies, business lobby groups, and even former prime ministers. One of impact investing’s leading champions, Sir Ronald Cohen, believes that it could be the “revolution” that will save capitalism and solve many of the world’s greatest problems.

It is an enticing vision of an enlightened post-pandemic economy, and, as an impact investor and economist, we support its ambitions. However, if we really want to reform capitalism, then impact investing as it is traditionally conceived will not be enough. The pandemic is not a mere anomaly; there are profound limits to what business can do profitably in normal times too. We need to reform the rules that govern how our economy works — and impact investors have a critical role to play [in changing those rules]…

From Harvard Business Review, “Impact Investing Won’t Save Capitalism.”

* Shirley Chisholm


As we endeavor to ensure equitable equities, we might recall that it was on this date (Friday the 13th) in 2013 that Google suffered an outage: all of its services were unavailable for five minutes, including Google Search, YouTube, and Google Drive.  During that brief window, internet traffic around the world dropped by 40 per cent.

Screen Shot 2020-08-06 at 3.49.04 PM source



Written by LW

August 13, 2020 at 1:01 am

“Patents need inventors more than inventors need patents”*…




Patents for invention — temporary monopolies on the use of new technologies — are frequently cited as a key contributor to the British Industrial Revolution. But where did they come from? We typically talk about them as formal institutions, imposed from above by supposedly wise rulers. But their origins, or at least their introduction to England, tell a very different story…

How the 15th century city guilds of Italy paved the way for the creation of patents and intellectual property as we know it: “Age of Invention: The Origin of Patents.”

(Image above: source)

* Kalyan C. Kankanala, Fun IP, Fundamentals of Intellectual Property


As we ruminate on rights, we might recall that it was on this date in 1981 that IBM introduced the IBM Personal Computer, commonly known as the IBM PC, the original version of the IBM PC compatible computer design… a relevant descriptor, as the IBM PC was based on open architecture, and third-party suppliers soon developed to provide peripheral devices, expansion cards, software, and ultimately, IBM compatible computers.  While IBM has gone out of the PC business, it had a substantial influence on the market in standardizing a design for personal computers; “IBM compatible” became an important criterion for sales growth.  Only Apple has been able to develop a significant share of the microcomputer market without compatibility with the IBM architecture (and what it has become).

300px-Bundesarchiv_B_145_Bild-F077948-0006,_Jugend-Computerschule_mit_IBM-PC source


“The speed of communications is wondrous to behold. It is also true that speed can multiply the distribution of information that we know to be untrue”*…




Paywalls are justified, even though they are annoying. It costs money to produce good writing, to run a website, to license photographs. A lot of money, if you want quality. Asking people for a fee to access content is therefore very reasonable. You don’t expect to get a print subscription  to the newspaper gratis, why would a website be different? I try not to grumble about having to pay for online content, because I run a magazine and I know how difficult it is to pay writers what they deserve.

But let us also notice something: the New York Times, the New Yorker, the Washington Post, the New Republic, New York, Harper’s, the New York Review of Books, the Financial Times, and the London Times all have paywalls. Breitbart, Fox News, the Daily Wire, the Federalist, the Washington Examiner, InfoWars: free! You want “Portland Protesters Burn Bibles, American Flags In The Streets,” “The Moral Case Against Mask Mandates And Other COVID Restrictions,” or an article suggesting the National Institutes of Health has admitted 5G phones cause coronavirus—they’re yours. You want the detailed Times reports on neo-Nazis infiltrating German institutions, the reasons contact tracing is failing in U.S. states, or the Trump administration’s undercutting of the USPS’s effectiveness—well, if you’ve clicked around the website a bit you’ll run straight into the paywall. This doesn’t mean the paywall shouldn’t be there. But it does mean that it costs time and money to access a lot of true and important information, while a lot of bullshit is completely free…

The political economy of bullshit– and thoughts on a remedy: “The Truth is Paywalled But the Lies are Free.”

On a related (and somewhat complicating) note, see also “It is possible to compete with the New York Times. Here’s how,” the source of the image above.

* Edward R. Murrow


As we do like Diogenes, we might recall that it was on this date in 1974 that President Richard M. Nixon resigned, as a result of the Watergate scandal— which was itself, of course, in large measure the result of (expensive) investigatory journalism of the highest quality.


Nixon departing the White House after his resignation (source)


“My father taught me to work; he did not teach me to love it.”*…




Over the past few decades, labor force participation has sharply dropped for men ages 20-34. Theories about the root cause range from indolence, to a lack of skills and training, to offshoring, to (perhaps most interestingly) the increasing attractiveness and availability of leisure and media entertainment. In this essay, we propose that the drop in labor participation rate of young men is a result of a combination of factors: (i) a decrease in cost of access to media entertainment leisure, (ii) increases in both the availability and (iii) quality media entertainment leisure, and (iv) a decrease in the marginal signalling utility of (conspicuous) consumption goods for all but the highest earners.

At the macro level, this results in sub-optimal production, as firms are unable to satisfy their demand for labor via the usual mechanism of increasing wages. If you believe that economic productivity and growth are good, this presents a challenge when attempting to design stimulus policy, because subsidies or increases to the minimum wage would yield the same non-result as firms increasing wages. We discuss the potential efficacy of the somewhat radical idea of a tax on human attention or time spent consuming entertainment media as a way to stimulate productivity…

Somewhat radical, indeed…  Economics for the Leisure State: Andrew Kortina (co-founder of Venmo and fin.com; @kortina) and Namrata Patel (Product at Airbnb and former VP, Product + Design at Minted; @namratalpatel) on “Kinky Labor Supply and the Attention Tax.”

* Abraham Lincoln


As we sample soma, we might send inclusively-calculated birthday greetings to Barbara Bergmann; she was born on this date in 1927.  An economist, she was a trailblazer in the development of feminist economics, contributing important work on topics that ranged from childcare and gender issues to poverty and Social Security.  She was co-founder and President of the International Association for Feminist Economics and a trustee of the Economists for Peace and Security.

Bergmann source


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