Orthodox Economics

I don't have to tell this crowd that money is a made-up concept, an accounting trick that makes the human social economy of favors and obligations more objective, more public, more transparent. What may be news is that biologists have been thinking this way for several generations now. In fact, it was biologists who invented game theory, which was then generalized by mathematicians and co-opted by economists and other social scientists.   

The resulting model of reality, which I'll call “orthodox economics,” is rotten with errors and false assumptions. One of the biggest is that the economy is an equilibrium system, like a simple acid-base chemical reaction in a closed flask.   

H2O → H+ and OH-   

or more accurately,

 (Wikipedia Commons)

When pure water sits in a flask, some small portion of those molecules spontaneously separate into precisely equal numbers of naked protons (the positively charged particles that are so destructive) and negatively charged hydroxyl ions (also pretty nasty).    

This seems to be how economists think about supply and demand. If one increases, the other eventually has to increase to cancel it out, by definition. Unfortunately for economists, we are not dealing with a closed system: it's more like a leaky rain barrel swarming with mosquito larvae than a sterile stoppered flask. Any real local economy has inputs and outputs that do not have to add up to zero. Even our global economy is ultimately powered by the energy input of the sun (and yes, that means that the overall temperature of the planet can change, but that's a whole other argument). An open system like a body, or an ecosystem, or an economy, never reaches equilibrium unless it dies. There are local steady states, but they are in no way guaranteed to be permanent, or optimal in terms of efficiency or equity or anything else. So it's totally possible and even likely for an economy to have persistent unmet demands (poverty, unemployment, whatever) that don't happen in equilibrium models.   

Well, now the rest of science is finally responding to the misuse of their game theory toys.  Evolutionary biologists David Sloan Wilson and Peter Turchin set up an academic think tank called the Evolution Institute, which has been running academic conferences and publishing academic journal articles on “evolutionary economics” since 2009. The financial collapse inspired a whole lot of economic head-scratching, including this group of business students, who demanded changes to the curriculum they were being taught. What sets this EI group apart is that they founded an online magazine called Evonomics to recruit like minds and to promote their ideas to a wider audience.    

Each Evonomics article takes on some mistake of orthodox economic theory and tries to correct it, using the results from other sciences.  There's a lot of stuff on Homo economicus, the fictional humans who live in economic models – people who always make selfish rational decisions, based on perfectly complete and timely information – people who have very little in common with most of the people I know.  

I mean, seriously, have you ever been on vacation? In the car, on the highway, with your family? Suddenly hungry after hours on the road and trying to decide where to stop and eat? Those are the people I know.  

We are NOT rational.

I did a search of Evonomics with Google (the magazine's internal search button didn't seem to work), and while there are several mentions of Bitcoin and other crypto-currencies, there are currently zero articles on how how they work and what the point of them is. The closest thing I could find is a two-part series by science fiction author David Brin on micropayments, which I found rather useful for contextualizing the technobabble in the Steem white paper. His solution: de-emphasize security for micropayments, which is opposite the direction of the blockchain, as I understand it. I'll be curious to hear what you all think after you read it.   

Verdict: Evonomics is more a resource on general economic questions at this point, but a very interesting one.  

PlotBot doesn't spend its thousand words a month for IGMS on book reviews, but it reads a crapload of books, so maybe we'll do that kind of thing here on SteemIt.