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Competition-Mobius Thought Loop

February 9, 2008

James Case’s Competition: The birth of a new science  caught my eye while I was browsing the stacks in Powell’s Bookstore over the holidays. The Amazon reviews seem to hit most of the book-review points I might try to make so no use in reproducing that here.

Case has an interesting background as a pro baseball pitcher and a professional mathematician. In Competition, he is making the argument that classical economics is in the process of maturing toward a "real" science by embracing experiments and increasingly holding theories to the standard of allowing the possibility they may shown false by successful explanations of new data.  This is something he both observes and documents at the edges of economic academia. And it is also a cause Case promotes.

Here is one additional thought: This discussion is moving along an ironic and amusing thought loop-maybe, an argumentative Mobius Strip?

Starting on one side, Case explains that it is time for a paradigm shift (Kuhn’s kind) in Economics, that data and new analysis abilities are building a compelling argument against the classical economic axioms: Efficient Markets, Gaussian randomness, the tenant that free-agent-self-interest leads to optimizations, free trade always creates domestic benefits (Principle of Comparative Advantage-David Ricardo [1817]–no Wikipedia hits on this), etc. Case is not trying to prove this is happening in one short book; instead he lays out the background science, framing the argument, and citing original works.

Case spends a lot of energy explaining how experiments in actual and simulated competition show that monopoly behaviors (characterized by predatory actions on competitors executed in order to keep markets already taken lucrative) ubiquitous. As you continue to follow the loop, Case goes on to explain some of the ills to society these misconceptions (idealizations) cause.

To show the nature of the resistance, he quotes many criticisms of the "new science" by the classical economists. He catches them ignoring new data, new ideas behind the analysis of competition and real agents (people with partial knowledge, greedy, colluding, etc).

Now in a sense, we seem to be back to where we started.  Case may be overlooking the irony or he may have dulled his sense of absurdity, or he may feel irony is not useful in this discussion.  It seems that he might have dispensed with the straight face and ended arguing that economic classicists will change slowly or not at all because, with regard of their careers as academics and government advisors, the current monopoly, that is, their current economy, is working great.  Why use theory and data to ruin a perfectly good system?

One can imagine a day in the future when some new explanation or technology from the "new science" (empirically falsifiable, complexity, self-organizing complex systems)–or some newer science–is so compelling and valuable that the market decides in its favor over the classical views.  Don’t expect Microsoft to start feeling uneasy that it might be a monopoly and contemplate breaking itself up.  Likewise, why would classical economists give up their central positions to make a few model-generated lines run a little closer to a few experimental data points?

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One Comment leave one →
  1. February 9, 2008 10:22 pm

    Very interesting. Case sounds a little like a flippant dadaist, in the Feyerabendian tradition.

    Like

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