## The Outdated Math and Physics Behind Economics

In Who Cooked Adam Smith’s Dinner, Katrine Marçal traces the roots of mainstream economics and particularly neoliberalism. One of the strands she discusses is the the connection between economics and Newtonian physics. Newton believed that the universe was made up of fundamental particles. To understand complex physical things, you have to break them down into smaller and smaller pieces until you hit the unit of everything, the Lego blocks from which the universe is constructed: the atom and the photon (Newton thought the photon was a particle). From there you can work towards an understanding of the cosmos.

Particles are governed by forces. For Newton, the important force was gravity. The ultimate particle and the ultimate force can be used to explain a lot of the physical phenomena which we can observe with simple tools. Newton’s theory is deterministic: the future is predictable because particles only move in accordance with rigid laws.

In economics, the atom is the individual. The force that sets those atoms into motion is self-interest.

I’ve made passing reference to this before, but Marçal’s book brings it to the forefront. Most of the time when we hear about the history of economics after Smith, we hear about the math stuff, frequently starting with the idea of marginal utility generated by William Stanley Jevons around 1870. Jevons was a mathematician, who set out to create equations for the calculus of pleasure and pain as described by Jeremy Bentham. The subsequent history of economics can be read as a long math exercise using mostly calculus, and linear algebra (matrices) for modeling.

The thing is, math was just being formalized in the 1800s. Riemann completed the formalization of the calculus in 1854 (here’s an interesting history.) Other areas of math were being developed and formalized at that time, and development continues today, with, for example, fractal math. So maybe a good question is why economists stick with 19th Century math. Can’t they find something new that might work better than the obviously lousy models they use today that were incapable of predicting the Great Crash? I mean, how could anyone think it makes sense to model human beings as a large number of identical particles that only interact in monetary transactions and are otherwise unaffected by each other; and all of which are subject only the force of self-interest?

But just as math has advanced, so has physics. One of the changes is that physicists aren’t searching for ultimate particles any more; in fact as we currently understand things, we aren’t even sure the things studied are in some particular place. Physicists now study the relationships between various kinds of forces. They describe elementary particles by the forces through which they interact which in turn are defined in math terms, and terms that are a lot further from calculus than calculus is from addition. The relationships are mediated through the Schrödinger equation; It describes our observation small numbers of what we think today are elementary particles, but it is too hard to solve it for any large group of particles.

But in economics, nothing is complicated. It’s just individuals motivated by self-interest. And that’s a remarkably stupid thing. Has nothing changed in the last 150 years? Is linear algebra, which we learned in my junior year in high school, all these guys have learned from math and physics?

To put this another way, if economists were just cranking up their discipline today, with no theory of our current form of economy, they certainly would not use 19th C. math and physics as models. Would they use 18th C. markets in England and Scotland as their model? Of course not.

Fortunately I’m here to help. I’m happy to let economists continue the work of defining and collecting economic statistics, but it’s time to look for a more plausible theory. And as a starting place, I’ll put up a couple of posts with ideas for a new theory for the 21st C. No need to thank me. Which they won’t.

## Who Cooked Adam Smith’s Dinner?

Who Cooked Adam Smith’s Dinner? is the title of a 2012 (2016 in the US) book by Katrine Marçal, a Swedish journalist. The title question is based on a famous bit from Adam Smith’ The Wealth of Nations*:

It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.

But the butcher, the brewer and the baker did not cook for Smith. That job went to his mother, Margaret Douglas, later joined by his cousin, Jane Dauglas. These women took care of Smith’s household until they died. Smith never mentions their labor.

Marçal explores the impact of Smith’s omission on the study of economics. One thread is the feminist story: much of the crucial work of care is provided through benevolence, not for money, and so it not considered part of the economy or part of the field studied by economists. Marçal points out that when an economist marries his housekeeper, the GDP goes down.

Smith’s omission makes ti possible to make “markets” the center of the study of economics. Eventually theorists dreamed up the silly story of Homo Economicus with his rational calculation of individual advantage as the essential human characteristic. We identify that rationality as masculine as opposed to feminine in the context of male-centered history and culture. In feminist terms, homo economicus is ungendered and dominant; women are the other in every way.

Instead of this stunted theory, Marçal shows that the economy isn’t just about the production of things for the market. A huge part of the work of any society is care for one another. We care for children, for the aged, the sick, the abandoned, the orphan and the widow, those injured in war and those injured in mind. We care for our planet, our air, our parks and our public spaces, our cities, our lakes and rivers. Much of that care has nothing to do with markets. We do it solely out of benevolence, in direct contradiction to Smith.

If economists are ignoring the importance of care in the functioning of an economy, what are they doing? They tell us that they study the allocation of scarce resources. This is from the introductory textbook Economics by Samuelson and Nordhaus, 18th Ed. 2005:

Economics is the study of how societies use scarce resources to produce valuable commodities and distribute them among different people. Id. at 4.

Scarcity and efficiency are the important elements of this definition. Care for the vulnerable must not involve a scarce resource under this definition, probably because everyone blithely assumes that women will do it for free, and there are plenty of women. Importantly, care isn’t controlled by the demands of efficiency. If the baby cries, what does it even mean to talk about efficiency? We do whatever it takes and for as long as it takes. So taking care of each other is excluded from the study of economics from the outset under Samuelson’s definition.

In his textbook Introduction to Macroeconomics, 6th Ed. 2012, N. Gregory Mankiw quotes the 19th C. British economist Alfred Marshall: “Economics is a study of mankind in the ordinary business of life.”. Id. at viii. I’d guess Marshall meant “Malekind”. Mankiw adds that The word economics springs from a Greek word meaning household, and he talks about how households have to make decisions about who goes to work and who cooks, and who gets the extra dessert. Then he drops the idea that cooking dinner is part of the economy. Apparently when Mankiw talks about the ordinary business of life, he means “male business”, not changing poopy diapers or making dinner. It’s funny when you see it from the perspective Marçal demonstrates.

Of course Marçal is right to say that economics ignores a huge chunk of the work necessary to maintain us in the ordinary business of our lives. That doesn’t make it useless, to be sure. Marçal points out the utility of the data and statistics gathered by economists. But it does mean that the models economists are creating are likely to be useless because they purposefully ignore a crucial element of ordinary life. And it means that economics isn’t a plausible basis for thinking about human nature.

The book is informed by feminist theory, but it isn’t theoretical. It is an application of feminist theory to economics. Marçal uses uses words like “gendered”; and she writes:

It’s only woman who has a gender. Man is human. Only one sex exists. The other is a variable, a reflection, complementary. P. 159.

Then she gives concrete examples that make the meanings perfectly clear for people like me who don’t know anything about feminist theory. The result is that I began to leann a little about the theory, and it was much easier than trying to learn it on my own from primary sources**.

Marçal devotes several chapters to eviscerating the economists dream person, Homo Economicus, the ungendered center of their universe, the Man we all must become. These chapters expose the shallow thinking that neoliberal economists like Gary Becker bring to the discussion of human nature. She makes neoliberalism look childish and silly. I particularly liked the discussion of the hidden emotional vulnerabilities of neoliberal Man. We have to coddle Mr. Market, and steady him when he gets the jitters, which happens all the time, and which, of course, requires tons of money.

Marçal writes clear, direct and engaging prose. Like every good book this one clarified several inchoate ideas that have been floating around in my head, and it gave me several new ideas I hope to take up in future posts. I am grateful to my excellent daughter who gave me this book.

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* Here it is in context. I leave for my skeptical readers the pleasure of picking at the holes in this passage.

// In almost every other race of animals, each individual, when it is grown up to maturity, is entirely independent, and in its natural state has occasion for the assistance of no other living creature. But man has almost constant occasion for the help of his brethren, and it is in vain for him to expect it from their benevolence only. He will be more likely to prevail if he can interest their self-love in his favour, and shew them that it is for their own advantage to do for him what he requires of them. Whoever offers to another a bargain of any kind, proposes to do this. Give me that which I want, and you shall have this which you want, is the meaning of every such offer; and it is in this manner that we obtain from one another the far greater part of those good offices which we stand in need of. It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity, but to their self-love, and never talk to them of our own necessities, but of their advantages.//

**Another good book for this purpose is Possession, by A.S. Byatt.