It is revealed that mainstream economics denies qualitative, historical transformations in the conditions of the world, thereby also denying the unidirectional time of the living condition.
Global warming; the credit crisis; the spike in food prices; surely, these things are qualitative transformations in the conditions of life. At least in regard to the spike in food prices, the eminent economist and New York Times columnist, Paul Krugman (PhD), certainly seems to think so. He concluded a New York Times column with these words: “Cheap food, like cheap oil, may be a thing of the past.” (Oil was included in the picture by Krugman because of the role it plays in modern agriculture through such inputs, among other things, as fuels for agricultural machines and transport.) What is the significance of such a concession from Krugman?
The significance is that it is actually a repudiation of the economic process as conceived by Krugman's own discipline, i.e. mainstream, neoclassical economics. Neoclassical economics views the economic process as an isolated, ahistorical cycle of production and consumption that neither induces qualitative change in the environment in which it is embedded nor is affected by such qualitative change (Georgescu-Roegen 1971: 2). Environment in this context means both the natural and social environment (Frank and Cook 1995: 20, 108-109). The term economists use for negative qualitative transformations of the environment-negative externalities or negative external costs (plainly saying that the effects concerned are external to the theory)-is an overt, if embarrassed, admission of this crucial omission from neoclassical theory.
Why such an omission? The answer has to do with the aspiration of neoclassical economics to achieve a theoretic structure exactly patterned after that of classical mechanics in physics (Georgescu-Roegen 1971: 1, 318). To achieve this aspiration, economists determined at the outset that they would only deal with the application of given means to given ends. The assumption of given means and given ends means the economists do not have to bother with qualitative or evolutionary transformations (Georgescu-Roegen 1971: 320) in economic means, economic ends, and distributive relations in society. To otherwise concern themselves with such qualitative transformations would have embroiled economists with noncomputable particulars (what have been termed qualitative residuals) that do not submit to algorithmic compression or theoretical modeling (Georgescu-Rogen 1971: 101-103) and would have therefore defeated their ambition of achieving the mechanical application of means to ends (unencumbered by moral ambiguities). Analogous assumptions excluding qualitative transformations of context are made in classical mechanics (Barrow 1991: 56).
This aspiration towards a mechanical theoretic structure that excludes any responsibility for qualitative transformations in the conditions of life and the intimate connection of this aspiration with excluding unidirectional, historical time (replacing that time instead with the bi-directional time of mechanics) finds reflection in the favored models in neoclassical economics (Mirowski 1990: 291): “ " models in which things settle down to a unique position independently of initial conditions." ” In other words, the favored models are equilibrium models that exclude (Nicolis and Prigogine 1989: 14, 24) “a historical dimension in the sense of a critical [chance, or contingent, nondeterministic] event that will influence subsequent system behavior.” Instead of the unidirectional time of historical succession, what is purchased is the bi-directional of mechanics.
The consequence is a sanguine outlook on events completely at variance with our experience of events and Krugman's concession quoted above. This sanguine outlook is articulated by the dissenting economic theorist and pioneering biophysical economist, Nicholas Georgescu-Roegen (1972: 3-4) as follows:
The pillar of equilibrium theory is that, if events alter the demand and supply propensities, the economic world always returns to its previous conditions as soon as the events fade out. An inflation, a catastrophic drought, or a stock exchange crash leaves absolutely no mark on the economy. Complete reversibility is the general rule, just as in mechanics.
Neoclassical economics seeks to redress this exclusion of the historical dimension in their models through the incorporation into market prices of pernicious qualitative transformations in the conditions of life through levied Pigouvian taxes calculated through cost-benefit analysis. The reasoning is that the Pigouvian taxes would raise market prices, thus restraining individual market behavior instructed by the bi-directional time of mechanics, from causing, through consumption stresses, pernicious, qualitative, historical transformations in the quality of life at the collective level. Unfortunately for the economists and to our collective woe, the modern theory of nonlinear dynamics tells us that to perform the required cost-benefit analysis would require strictly infinite information. Indeed, it is not clear if even infinite information would suffice (Casti 1994: 287-288).
That corpses do not arise from the grave to live lives in exactly reversed order of the lives they led; that piles of ash do not spontaneously reconstitute themselves to whatever fuel they had been (Georgescu-Roegen 1971: 7); these universal negative observations of human experience would not be contested or denied by most people. Yet, by denying unidirectional, historical time and affirming instead the bi-directional time of mechanics in their equilibrium models, this is effectively what the economists would reverse. Such a view of the world surely cannot lead to policy prescriptions ultimately hospitable to the living condition.
